Are you struggling to save money? Do you think you’d be enticed to set aside more from your income if you’d get better interest rates than the ones being offered by basic deposit accounts?
This article discusses what special savings accounts are and why they may be a good fit for those looking to grow their savings faster.
What is special savings account?
A special savings account is a cross between a savings account and time deposit. They offer interest that is higher compared to plain vanilla deposit account and competitive with time deposit products. Additionally, they may generally require higher initial deposit, maintaining balance, and minimum balance to earn interest.
Moreover, they share similar features with either one to the point that major banks interchange the categories that they are considered on their website (either under savings account or time deposit). For one, most of them come with a passbook as a record of transaction, and which can be considered certificate of deposit in some banks.
Two, like a time deposit account, they may have lock-in periods, also called terms, which describe the length of time that the money is held by the bank. When the time lapses the special savings accounts are said to mature. The terms can range between 30 days and 360 days. A few do not have terms, but they discourage withdrawals or limit them to a certain number of instances in every month or every three months.
Interest of special savings accounts
The interest is either declared or not declared. When declared, the interest income is fixed upon account opening. When it is not declared, it may be determined either by the prevailing market rate or quoted from the Treasury. In which case, the rate varies and is repriced (that is, the interest that the account is eligible to earn changes) from month to month.
The interest is paid as often as what is stated in the terms and conditions state. Some variants credit the interest as often as every month, every quarter, etc. It can be paid out to a separate settlement account, or it can be released along with the principal amount on maturity date.
Most of the special savings accounts reviewed in this article follow a tiered interest schedule. A tiered schedule gives out higher rate income when you select a longer term and when you deposit a higher amount. Meaning, the growth of savings is quicker if you let the deposit stay with the bank for a longer time and when you save up higher amounts.
A select number of them offers a bonus interest when the maximum number of withdrawals is observed within a specific period. In fact, one variant provides monthly and quarterly bonuses. On the other hand, when the number of recommended instances of withdrawal is exceeded, the account receives the base rate only, the bonus rates are waived, and/or the rate might be lowered and equal to what is given to basic savings accounts.
How do special savings accounts work?
A few banks do not have lock-in periods. Instead, they encourage depositors to save up and avoid getting their money in different ways, such as waiving bonus rates and other means as described above.
When there is a fixed term involved, there may be consequences when the account is pre-terminated. For instance, some banks charge a closure fee when it is closed within 30 days from opening. Others will pass on paying the documentary stamp tax to the depositor. Still, a few others will pay only the lower regular savings interest.
What is a special savings account recommended for?
Given the features as mentioned above, for whom are special savings accounts suitable? To sum up, they come with a passbook or certificate of deposit. Deposits may be held for a minimum length of time. Thus, although they may be liquid, access to funds may not be as easy as when owning an ATM-based account.
Hence, firstly, they may appeal to people who would like to separate their everyday ATM accounts from their other deposits. These deposit accounts may be intended for some purposes, such as building up an emergency fund or saving for a financial goal.
Secondly, they may be suitable for people who would like to get started in developing the habit of saving. The fact that access to the funds is by going through the teller means that getting your money back isn’t as easy as getting it through an ATM card. Thus, they can be a great tool in discouraging impulse spending.
Thirdly, they fit to those who would like to get higher interest. They can grow their savings more quickly.
Fourthly, they can be recommended for people who would want to have flexibility in managing their deposits. They can get in and out by picking short terms or going with special savings accounts that do not have lock-in periods.
Lastly, they are a good banking solution for people who prefer to deal with the bank in person and comfortable with keeping a passbook.
Advantages of special savings accounts
What are the benefits of having a special savings account?
One, the deposit is insured by the Philippine Deposit Insurance Corporation. The amount insured is ₱500,000 of all deposits made in the bank per account-holder.
Two, the interest is higher than what is provided to plain vanilla basic bank account.
Three, interest income may be higher. When it comes with a tiered schedule, the potential interest can be higher when the term selected is long and the deposit is high.
Four, bonus interest rates may be given. This is true on some accounts that may not have a lock-in period, but they encourage their clients to save up and avoid withdrawing their money on a whim.
Five, there is flexibility in terms of receiving the interest. It can be paid out to a settlement account (a separate bank account) or it can be redeemed upon maturity.
Six, you can pick many options in terms of the lock-in period. The terms can range from 30 days to as long as 360 days.
Seven, upon maturity, you are given the option to redeem your principal plus interest or you can have the account automatically roll-over to a new term.
Eight, the deposit almost always comes with a passbook. The booklet contains the record of all transactions.
Lastly, it is a liquid financial instrument. Withdrawal of money simply requires a visit at the nearest bank’s branch.
What are the downsides in keeping a special savings accounts?
- All interest earnings are subject to the withholding tax of 20%.
- A closure fee may be charged when the account is closed within 30 days from opening.
- Bonus interests may be waived when, within a specific period of time, a withdrawal occurs or when the number of withdrawal exceeds the specific instances as stated on the terms and conditions.
- Pre-terminating the account may only give the base rate.
- Pre-terminating the account may impact interest, which could be the same rate given to basic deposit.
- Documentary stamp tax may be passed on to clients when account is pre-terminated.
- The monetary following requirements may be higher: initial deposit, maintaining balance, and balance to earn interest.
How to open a special savings account
What should you do to open a special savings account? It is as easy as opening any other bank account.
The first thing that you need to do is determine your banking needs. What are your financial goals? Why do you need to save up? You may also need to pick whether you want to hold a passbook or certificate of deposit.
Then you can pick what specific account will address your needs. The later sections will discuss some of the major banks and their offerings. You may want to think about such factors like convenience, location, customer service. Hence, you may want to drop by the branch if it is safe to do so. Read the terms and conditions whenever you’re able to make the time.
Afterwards, you can prepare the documentary and monetary requirements. You may be asked to present at least one valid identification card, a 1×1 picture, proof of address, proof of income, etc. Check too the opening balance, etc.
Next, go to the bank of your choice. Some may allow account opening to be done completely online.
How much can you earn from special savings account?
The interest rates vary according to the offers made by the bank and to the specific details of the account. The table below shows the growth of a deposit of ₱100,000 in ten years in varying rates, from 0.25% to 3.00%. Taxes are taken into account.
There are several things you need to bear in mind. One, these are estimates. Actual returns vary. The difference may lie with how the compounding is done, specifically how often the interest is credited to the account. Two, it is assumed that the initial deposit remains intact for the duration of the term, meaning no withdrawals are made.
AUB Preferred Peso Savings Plus
The Asia United Bank’s Preferred Peso Savings Plus allows initial deposit of ₱100,000. The minimum term is as short as 30 days. The bank doesn’t charge an early closure fee if the account is terminated within 30 days from opening. However, during pre-termination the interest to be given to the account will be based on prevailing savings rate.
Depositors are given access to the account by visiting the branch. Access is also available via mobile and internet banking, which may require enrollment.
DBP Special Savings Account
The Special Savings Account from Development Bank of the Philippines is described as “high yield peso fixed term deposit.” The available terms that you can choose from: 30-59, 60-89, 90-179, and 180-365 days. The minimum deposit is only ₱10,000. According to the bank, the interest rate is determined by the rate as quoted from Bureau of the Treasury.
East West SuperSaver
We decided to include East West SuperSaver although its website doesn’t explicitly state that it is a special savings account. It comes with both a passbook and ATM card, so the fund access can be made via over the counter, ATMs in the country and abroad, internet banking, online shops, and physical stores that accept Visa.
Clients can get started with an initial deposit of ₱500,000, which is also the required maintaining balance and balance to earn interest. The account follows a tiered interest schedule. The interest increases when the deposit reaches ₱1 million. Its one advantage is that it doesn’t have any minimum term. Instead, it earns bonus interest when no withdrawal is done within 30 days.
Land Bank of the Philippines Easy Savings Plus (ESP)
Land Bank’s Easy Savings Plus (ESP) is available to clients who are 7 years of age and older. It provides interest based on the prevailing market rate, and it follows a tiered schedule where interest can be higher based on the average daily balance. The minimum opening balance, minimum monthly average daily balance (MADB) and balance to earn interest is ₱20,000. Aside from that, the passbook records various banking transactions.
In addition, a closing fee of ₱300 is charged when the account is closed within 30 days. When pre-terminated, the account is charged with the documentary stamp tax. Two withdrawals are allowed per month, a service fee of ₱100 per month when withdrawals exceed that number.
Maybank Flexi Rate Deposit
Maybank Philippines Flexi Rate Deposit is a special savings account that provides higher interest rate the longer the term you select and the higher your balance is on the account. The required initial deposit is ₱50,000, and terms that you can choose from are minimum of 31 days and maximum of 359 days. The interest can be paid out to a settlement account, or it can be released when the account matures. Take note that the documentary stamped tax is waived upon maturity, although clients who pre-terminate the account will have to pay for it.
Philippine Bank of Communications Passbook Time Deposit
PBCOM’s Passbook Time Deposit is technically a time deposit and yet its certificate of deposit comes in the form of a passbook. Thus, we included it under the category of special savings account. The minimum deposit is ₱50,000.
There are many terms to choose from: 30, 60, 90, 120, 180, or 360 days. Additionally, it follows tiered interest. The higher the deposit and the longer the term, the higher the potential interest one can earn. The interest can be paid out to a settlement account every month, providing liquidity.
The account comes with a corporate variant. Access to the funds is available via online portal.
PNBig Savings Account
PNBig Savings Account is offered by the Philippine National Bank. Its tiered interest rates depend on the term and the deposit on the account. When it is opened, the depositor is given a passbook. The initial deposit required is ₱25,000. Available terms can be as short as 30 days or as long as 360 days. Moreover, the interest is compounded and paid out when it matures.
Robinsons Bank Peso Special Saving Account
Robinsons Bank Peso Special Savings Account is categorized under time deposit on the bank’s website. The principal amount that is required to get started is ₱25,000. The interest income follows a tiered schedule, which is higher on longer terms and higher deposit balance. The proof of ownership is a certificate of time deposit. More importantly, the interest is credited when it matures.
Security Bank High Interest Savings Accounts
Security Bank offers several savings accounts with high interest such as:
- Money Builder
- Premium Build-Up
The table below shows a comparison of these accounts.
|eSecure||Build-Up||Premium Build-Up||Money Builder|
|Interest||up to 0.30%||0.15%||0.50%||0.10%|
|Balance to earn interest||5,000||10,000||50,000||10,000|
|Instant Account Opening||Yes||Yes||Yes||Yes|
|EMV Everyday Mastercard||x||Issued upon request||Issued upon request||Yes|
|Free OTC Transaction||x||Yes||Yes||If enrolled to Gold|
|Free interbranch transaction||x||Yes||Yes||Yes|
The Regular Build Up Savings Account and Premium Build Up Savings Account are designed to those who would want to have higher interest income. The withdrawal limit is up to three times in every three months, while deposits are unlimited. What’s good about these two is the fact that you can always access your money with no lock-in period.
eSecure Online Savings Account is exclusive to Peso Casa account-holders. They can get higher interest, request for an application online, and open up to 10 accounts. It follows tiered interest, which is capped at the base rate when withdrawal is more than one within a month.
The Money Builder Savings Account is a savings account for individuals and institutions. It gives a base interest, plus additional monthly and quarterly interests when there are no withdrawals done within the specified periods. What’s more is that it doesn’t have any lock-in period, so it can be suitable for people looking for high-yield accounts with lots of liquidity.
Sterling Bank of Asia Solo Plus Savings Account
Sterling Bank Solo Plus Savings Account has a tiered interest schedules that lets you earn more when you save up more. The terns available can be as short as 30 days to as long as 360 days. The minimum placement is ₱500,000, with a Solo Savings Plus Passbook as proof of ownership and time deposit certificate that provides details of the principal, rate, tenor, and date of maturity.Tags