What Is a Preferred Savings Account?
Uncover what a preferred savings account is and how it can elevate your savings strategy. Understand its features, benefits, and how it compares to other options.
A preferred savings account provides an enhanced banking experience, often tailored for individuals with substantial financial relationships with a particular institution. These accounts offer benefits beyond conventional savings accounts, catering to those seeking to maximize their savings potential and access higher service levels.
Understanding Preferred Savings Accounts
A preferred savings account is a deposit account designed to reward customers for their loyalty and the volume of assets they hold with a financial institution. These accounts feature a higher Annual Percentage Yield (APY) compared to standard savings options, allowing funds to grow more efficiently. Some preferred accounts may also implement tiered interest rates, where larger balances qualify for progressively higher earnings.
Beyond interest rates, preferred savings account holders benefit from reduced or waived fees, such as monthly maintenance charges or transaction fees. Financial institutions may also provide relationship benefits, which can include access to dedicated customer service representatives, personalized financial advisory services, or preferential rates on other banking products like loans or investments.
Eligibility for these accounts involves maintaining a significant minimum balance, which can range from a few thousand dollars up to several million, depending on the institution. Alternatively, some banks determine eligibility based on the total combined assets a customer holds across various accounts, including checking, savings, and investment accounts. Certain preferred programs may require specific actions like setting up direct deposits or linking to an associated brokerage account to qualify for benefits. Deposits in these accounts are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per depositor, per FDIC-insured bank, per ownership category.
Distinguishing Preferred Savings Accounts
Preferred savings accounts differ from other deposit products due to their features and requirements. Compared to standard savings accounts, preferred accounts offer higher Annual Percentage Yields (APYs), providing a greater return on deposited funds. While standard savings accounts have lower or no minimum balance requirements and fewer fees, preferred accounts demand higher balances but compensate with fee waivers and a broader suite of services. Both account types provide easy access to funds, though preferred accounts may impose transaction limits.
Money market accounts (MMAs) share similarities with preferred savings accounts, offering competitive interest rates that surpass those of traditional savings accounts. However, a key distinction lies in accessibility; MMAs include checking-like features such as debit cards and check-writing capabilities, which are not available or are limited with preferred savings accounts. MMAs may also carry higher minimum balance requirements than standard savings.
Certificates of Deposit (CDs) represent another distinct savings option. CDs provide fixed interest rates that can be higher than those found in preferred savings accounts, especially for longer terms. The primary difference is liquidity: preferred savings accounts offer flexible access to funds without penalty, whereas CDs require money to be locked in for a fixed term. Withdrawing funds from a CD before its maturity date incurs penalties, making them suitable for longer-term savings goals.
Choosing and Opening a Preferred Savings Account
Selecting a preferred savings account involves evaluating several factors to align with individual financial objectives. Analyze the Annual Percentage Yield (APY) offered, recognizing that higher balances correspond with more favorable rates. Understanding the account’s fee structure is also important, including any monthly maintenance fees and how these can be waived, such as by maintaining a specific minimum balance or linking other accounts.
Review the eligibility criteria, as preferred accounts require higher minimum balances or a certain total relationship value across all accounts with the institution. Considering the value of any relationship benefits, like access to financial advisors or integrated banking services, can help determine if the account offers sufficient advantages for your banking needs.
Accounts can be opened online through the financial institution’s website or in person at a branch location. Required information for opening an account includes personal identification, such as a government-issued ID, Social Security number, and current contact details. An initial deposit is necessary to activate the account. For preferred status, it may be necessary to link existing checking or investment accounts held with the same institution to meet the program’s relationship requirements.