What is a Traditional Savings Account? The Pros and Cons & Where to Start

By Sara


Last Updated: August 23, 2022


Having a savings account can help you reach your short-term and long-term financial goals.

To better understand savings, it's important to understand what type of saving accounts there are, from traditional to CDs. Traditional savings accounts are the bread and butter of saving accounts - it's the most simple and popular type of savings account. 



What is a traditional savings account? 

A traditional savings account is an account at a traditional bank.

Local and national banks will have a traditional savings account that can be opened up in a physical bank or online. Most traditional savings accounts have lower interest rates but are a safe and reliable place to save your money for short-term goals.

There are limits to how many times you can withdraw from this account in a month to ensure that you use this account like a savings account and not a checking account.

Think of a savings account like a piggy bank - you want to fill up your piggy bank and not tough the money in it if possible. It's easy to fill up a piggy bank, but taking money out of the little slots can be difficult. 



Things to consider when looking for a traditional savings account. 

When you are looking for a traditional savings account, there are a few things to consider, like choosing between a local or national bank, interest rates, minimum deposit, withdrawal limits, and fees. 


The first choice to make is if you want to use a local or national bank.

Local banks will have a lower minimum deposit, lower fees, and lower interest rates. Some local banks only require $50 to open a savings account but may have fees. Certain local banks have deals that if you open with $200, then all fees are waived.

The average interest rate at a local bank is about .05%, which is on the lower end of the national average. Since interest rates are lower for a traditional savings account, this lower interest rate may not be a huge factor because having no fees may be more advantageous. 

National banks will have a high minimum deposit, higher fees, and higher interest rates. Most larger banks require at least $100 to open a savings account, which is already more than the minimum for a local bank.

Most national banks will waive fees for six months if you have less than a certain amount to waive the fees, and most will waive fees if you have at least $500 in your savings account.

The majority of national banks are on the higher end of the national average at about 0.01%. If you prefer to use a national bank, make sure to have enough money if your account to avoid the fees that could be associated with this account. 

Local and national banks will have a similar withdrawal limit of about six monthly withdrawals. This is a standard amount and something to plan for because you don't want to pay a fee for your 7th withdrawal. However, this limit prevents you from using this account like a checking account. 



Because traditional savings accounts are with local and national banks, you can easily withdraw your money.

Your money will be more liquid this way because you can physically go to the bank, request your money, and they will give you your cash.

You want your savings to be something that you can easily access if you have an emergency, so having it at a physical location can give you that quick access. 

If you prefer to use one bank for all of your banking needs, having a traditional savings account will allow you to use this same bank for other accounts like a checking account and even open up lines of credit. It makes it convenient and easy to use one bank for your finances. 



One drawback of a traditional savings account is that the interest rates a typically very low for this account.

Therefore, you should not expect your money to grow in this account. You might earn a few cents on your money, but that is all you can expect. The national average interest rate for a traditional savings account is 0.13%. 



Final Thoughts 

A traditional savings account is a great place to save the money that you are playing to use soon.

It should not be used as a place for long-term storage because the interest rates are so low. You will not earn much money on your account with the national interest rate average of .01%. This is a great place to keep short-term savings or budget for your irregular expenses.

Choosing between a local and national bank can impact your interest rate, any fees that you owe, and your minimum deposit required to open the account or waive any fees. 

Photo by Karolina Grabowska



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