PhotoYears ago most consumers parked spare cash in a passbook savings account at their bank, a place where money could be separated from cash needed for day to day expenses and, where it could earn a little interest as well.

But in an era of rock bottom interest rates and the addition of numerous bank fees, many have come to question whether it makes sense to have a savings account.

It may, under the right circumstances. But it will definitely pay to shop around.

Scaling back options

Many banks – especially the larger national ones – have scaled back their savings account options and the rates they pay. Bank of America has what it calls its basic savings account, as well as a Rewards Money Market Savings account, with higher rates and added benefits. They are fairly typical of the industry standard these days.

The basic account currently pays an interest rate of 0.01% APY. If that sounds very low, it is. If you had $1,000 in an account for one year, you'd earn almost nothing in interest.

While that's definitely on the low end, at least it's something, and safer than sticking your cash in a mattress.

Walling off money

These days, few consumers put money in a savings account to earn interest. Rather, it's a way to wall off the money so it doesn't get spent on other things.

With online banking, it is easy to transfer money from a checking account into savings without having to make a trip to the bank.

Bank of America, along with many other banks, also offers a “Keep the Change” program. If you opt-in, the bank will round up every debit card purchase to the next dollar, transferring small amounts of change into your savings account. It's a fairly painless way to save.

You can also use your savings account for overdraft protection. Should you overdraw your checking account, the bank can transfer money from savings to cover it.

So there are some advantages to having a savings account, even though they don't earn any interest to speak of. And while online banks, like Ally, pay a higher rate on passbook savings, it's still a far cry from the rate paid a couple of decades ago.

Requirements

Of course, there are some requirements to maintain a savings account without incurring fees. For the Bank of America basic account, you must maintain a $300 minimum daily balance, or link to your Bank of America Interest Checking Account, or make combined monthly automatic transfers of $25 or more from your checking account during the preceding billing cycle.

Failure to meet those requirements results in a $5 fee.

Bank of America's Rewards Money Market Savings account pays a slightly higher interest rate – 0.03% to 0.06% – but has steeper requirements, like maintaining a $2,500 minimum daily balance. Failure to meet all the requirements results in a $12 monthly fee.

While a savings account is not going to grow your money in any real sense, it might prevent you from spending it. It's a fact that some consumers need a separate account as a way to exercise financial discipline. And if you can meet all the requirements so that monthly fees are not eating into your savings, that's a perfectly legitimate reason.

Other options

For those who can carefully track their spending and exercise tight discipline, however, a rewards checking account might be a better solution. Some banks will pay a higher interest rate – in some cases over 2% APY – on balances up to $15,000 or so.

By meeting all the requirements – usually a certain number of debit purchases each month and at least one direct deposit – consumers can avoid fees, earn interest, and sometimes receive other benefits, such as having all out of network ATM fees refunded.

No matter what type of account you use, the important thing is to save.


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