Linked Savings Account

A linked savings account is any type of bank savings account that is linked by account number to a checking or negotiable order of withdrawal (NOW) account. These are offered for the convenience of the customer, who can keep the majority of the funds in the savings account and move money over into the demand account as needed. This can also qualify the customer for reduced service charges or free checking.

Linked accounts are sometimes called packaged accounts. The balances on both this account and the checking or NOW accounts are generally reported on a single consolidated statement. This arrangement also often allows the customer to receive a higher rate of interest in the savings account on the bulk of the money.

Other types of accounts, such as a certificate of deposit or debit card, can also be connected to a savings account under a linked account. With the combination of accounts, there can be new guidelines and rules for the account holder. For example, a bank may set a minimum balance where the interest rate is elevated higher than the yield from a traditional savings account. The intent under such terms is to encourage the account holder to continue to put funds into the linked accounts.

Conversely, the terms of a linked savings account might apply the higher interest rate only toward funds under a certain amount, as a way to attract new customers.

Account holders could face higher costs with linked accounts. If a debit card, for example, is linked to a savings account, using the debit card as frequently and to the same degree as cash could rapidly drain the account of funding. Should the account fall below the minimum balance, fees may be triggered. Furthermore, the transactions themselves may incur fees.

The way a linked savings account is structured may be more to the advantage of the institution. The terms could drive customers to keep their funds in the account on a long-term basis, with costs and penalties that are triggered against withdrawals. This can mean customers who are in the habit of accessing funds from one type of account may not be readily aware of the fees they may incur by continuing with such behavior with linked accounts. As a result, customers who do not need regular access to their assets (which will, in effect, be tied up) may be the most likely to benefit from establishing linked savings accounts.