What is Linked Savings Account?
410 reads · Last updated: December 5, 2024
A linked savings account is a savings account that is connected to another account such as a checking or negotiable order of withdrawal (NOW) account. Generally, linked savings accounts are held at the same bank as the customer's other accounts, making it easier to transfer funds between accounts.
Definition
A linked savings account is a savings account that is connected to other accounts, such as a checking account or a negotiable order of withdrawal (NOW) account. Typically, a linked savings account is held at the same bank as the customer's other accounts, facilitating easy transfer of funds between accounts.
Origin
The concept of linked savings accounts developed with the diversification of banking services and the increasing demand for convenient financial management by customers. The earliest forms of linked accounts can be traced back to the mid-20th century when banks began offering more flexible account management options.
Categories and Features
Linked savings accounts are primarily divided into two categories: automatic transfer accounts and manual transfer accounts. Automatic transfer accounts allow customers to set rules for automatic fund transfers between accounts, often used to avoid overdrafts or maintain minimum balances. Manual transfer accounts require customers to actively transfer funds. The main advantage of both is increased flexibility and convenience in fund management, but they may also lead to insufficient monitoring of account activities by customers.
Case Studies
Case Study 1: A customer at a major bank links their savings account to their checking account to automatically transfer funds when the checking account balance is low, avoiding overdraft fees. Case Study 2: Customer B uses a linked savings account to manage daily expenses and savings goals, manually transferring excess funds from the checking account to the savings account.
Common Issues
Common issues investors might face when using linked savings accounts include insufficient monitoring of account activities, which can lead to unexpected fund transfers. Additionally, some banks may charge fees for automatic transfers, so customers should carefully read the account terms.
