Savings accounts may be the safest and most popular way to keep and grow your money for both long-term and short-term goals. In fact, 47% of Americans own a savings account, while 35% have more than one savings account.
While there are various types of savings accounts available, traditional savings accounts are typically the first ones that come to mind when you think about opening a savings account. In this article, we’ll reveal what exactly a traditional savings account is and how it works. Plus, we’ll provide some alternatives that may meet your requirements better.
What Is a Traditional Savings Account?
Traditional savings accounts are accounts offered by banks and credit unions that let users deposit and withdraw funds and earn interest on their contributions. While traditional savings accounts pay modest interest rates, they’re safe and reliable, which makes them a good option if you’re looking for a way to save money for short-term goals like a vacation or a home renovation.
A traditional savings account opened at a bank typically includes FDIC insurance of up to $250,000 per depositor, per insured bank, for each account ownership category. This guarantees you’ll get your money back even if the bank fails. If your savings account is with a credit union, the same amount of insurance is provided by the National Credit Union Association (NCUA).
What Is the Typical Minimum Balance for a Traditional Savings Account?
Some traditional savings accounts require a minimum balance to open or maintain the account, but the exact balance amount varies depending on your financial institution. In some cases, the minimum balance is required if you want to earn the highest advertised interest rate and avoid fees. In other cases, your interest rate depends on your balance—the higher the balance, the better the interest rate.
Although the amount you must deposit in a savings account depends on your bank/credit union, the typical minimum balance of a traditional savings account is between $300 and $500 daily, while the fees for not meeting the minimum balance requirement are around $5. However, if you open a high-interest savings account, the minimum daily balance can range from $3,500 to $15,000, with fees between $12 and $30.
Still, there are many savings accounts with no minimum balance requirements. For example, online savings accounts include more favorable interest rates and terms like low or no minimum balance requirements because they don’t have to pay for overhead costs like traditional banks.
Can You Add Balance Regularly to a Traditional Savings Account?
Yes, traditional savings accounts are liquid, meaning money can be withdrawn and deposited at any time. So, you can make deposits whenever you have extra money you want to set aside and grow your savings over time by earning interest on your ongoing contributions.
You can even automate your savings by setting up automatic daily or monthly money transfers from your checking account to your savings account to ensure you don’t forget to fund your savings account.
Traditional Savings Account Pros and Cons
While a regular savings account usually offers a safe and easy way to save and grow your funds over time, it also comes with several drawbacks. Here are the main advantages and disadvantages of traditional savings accounts:
Pros | Cons |
They include federal insurance of up to $250,000 You can make deposits and withdrawals at any time during your bank’s business hours They allow you to earn moderate interest They don’t require a large minimum balance | They offer lower interest rates than other investment options Some accounts impose limits on the amount of withdrawals you can make per month They typically require a minimum balance to avoid paying fees |
Other Types of Savings Accounts

Traditional savings accounts are a good choice if you’re saving for short-term goals. However, if you have long-term goals like buying a house or paying for college, you may want to explore different types of savings accounts that can help you achieve substantial savings more easily. The most popular types of saving accounts besides the traditional ones include:
- High-yield savings accounts
- Money market accounts
- Certificates of deposit (CDs)
- Specialty savings accounts
- Credit building savings account
High-Yield Savings Accounts
If your goal is to maximize your money growth by earning competitive savings rates and paying low fees, you may consider opening a high-yield savings account. These are typically opened at online banks or credit unions, and they offer a higher annual percentage yield (APY) than a traditional savings account. They also include benefits like:
- FDIC or NCUA insurance
- Low or no monthly fees
- Cash liquidity
Money Market Accounts
Money market accounts (MMAs) include the features of both savings and checking accounts, and you can open them at online banks, brick-and-mortar banks, or credit unions. They usually offer higher interest rates than traditional savings accounts, but they also have higher minimum deposit limits.
Like regular savings accounts, MMAs are FDIC-insured, but they differ from other savings accounts because they may include features that let you:
- Write checks
- Use debit cards
- Withdraw funds from ATMs
Certificates of Deposit
Certificates of deposit (CDs) are a good option if you want to earn interest on funds you won’t have to access soon. They allow you to deposit money and leave it in the account for an agreed-upon time—anywhere between 30 days and six months—during which you earn interest on your deposit. Early withdrawals typically result in penalties.
You can find CDs at online and traditional banks, but online banks typically offer better interest rates. Plus, these accounts usually don’t include monthly fees.
Specialty Savings Accounts
Specialty savings accounts are designed to help you save money for a specific goal or to collect funds for a certain individual, such as your child or grandchild. Some popular examples include:
- 529 plans—Accounts designed to help you save money for college
- Roth IRAs—Plans you can use to collect funds for retirement
- Custodial accounts—Savings accounts you can open on your child’s behalf and manage until they reach a legal age
Each of these savings accounts comes with special terms, requirements, and interest rates. Depending on the account you choose, the monthly fees are either low or not included. Some can even be used for more than one purpose. For example, a Roth IRA allows you to withdraw contributions tax-free after funding the account for at least five years and use it for anything you need.
High-Security Savings Account
A high-security savings account is an excellent choice if you want to ensure that your funds are kept safe while earning premium interest rates. Unlike other savings account types, where your funds are vulnerable to unauthorized access or fraud, a high-security savings account keeps your money out of harm’s way, making sure your savings efforts pay off when you need them to.
The only high-security savings account is FortKnox by Austin Capital Bank. While FortKnox places a strong focus on account security and fraud protection, it also offers premium interest rates that allow it to double as a highly profitable savings account.