A savings account is a great way to save for something you want or need. It could help you save for a new car, a vacation, a college education, or something else. You can also use your savings account as an emergency fund to take care of unexpected expenses.
Opening a savings account is a simple process that can be done in person, online, or by phone. A credit check isn’t required to open a savings account, but a special review of your banking activity may be done to check for previous issues. Read on for the full answer to your question, Does opening a savings account affect credit score?
What Are the Benefits of Opening a Savings Account?
A savings account is a special account at a bank or credit union where you can safely store your money and earn interest. Depending on the financial institution, you may be required to maintain a small minimum balance, although some institutions may not have any minimum balance requirements. Here are a few benefits to consider.
An important benefit of keeping your money in a savings account is that it will be insured by either the Federal Deposit Insurance Corporation (FDIC) if your money is in a bank, or the National Credit Union Administration (NCUA) if your money is in a credit union. Both government organizations insure accounts for up to $250,000.
Savings accounts are considered low-risk investments because your money is safely kept in an account and the government insures the funds. They may be safer than other investments that sometimes experience market value changes such as stocks, commodities, cryptocurrencies, and others.
Another important benefit of keeping your money in a savings account is that you will earn interest on your savings. The financial institution pays you interest because it uses the money to fund loans for other people. That doesn’t mean your money is locked up, however. You can withdraw it anytime you like.
The interest you earn on your savings is usually compounded daily and paid monthly. This means the balance in your account can grow over time from the compounding of interest where you earn interest on previously earned interest.
Will Opening a Savings Account Impact My Credit Score?
A credit check will not be done when you open a savings account. This means your credit score isn’t needed and won’t be impacted. However, the financial institution may review your banking history through a system known as ChexSystems.
A ChexSystems report shows your previous checking and savings account activity. It will show if you have had any overdrafts, or bounced checks, or if there has been any fraudulent activity on your account. A review of your ChexSystems report does not affect your credit score.
Other financial activities may require a credit check, such as applying for a mortgage, personal loan, or credit card.
Soft Credit Inquiry vs. Hard Inquiry
Credit checks are also known as credit inquiries. There are two different types of credit inquiries—hard and soft—and they impact your credit in different ways.
A hard credit check is done when you apply for a loan of some kind. Hard credit checks cause a temporary decline in your credit score that lasts up to 12 months. Your credit score recovers after you make timely payments on the loan or credit card.
Soft credit checks are done for things other than applying for credit—like applying for a job, renting an apartment, or if you’re pre-approved for a credit card. Soft credit checks do not affect your credit score.
How Do You Open a Savings Account?
The process to open a savings account is simple and can be completed in one visit. Many financial institutions also give you the option of opening an account online or by phone. A savings account can be established with the following steps.
1. Gather the Required Documents
Making sure you have all of the necessary documents and information you will need before applying may help to prevent delays. The faster you can open a savings account, the sooner your money can start earning interest. Documents and information you will need include:
- Date of birth
- Proof of address
- Social Security number
- Government-issued ID
2. Choose a Joint or Individual Account
The type of savings account you choose will determine who has access to it. If you only need an account for yourself, select an individual account. If you want someone else to be able to contribute to the account and withdraw money from it, select a joint account.
3. Apply for an Account
You will need to provide the information mentioned in Step 1 to the financial institution to open the account. You will then need to read the disclosure document and accept the terms and conditions. Depending on the institution, your account may be approved within 1-5 business days.
4. Fund Your New Account
There are several ways you can fund your new account. You can write a check or have money transferred through a wire transfer from another institution. If you have a checking account with the institution you are opening the savings account with, the funds can be transferred from your checking account to your savings account.
5. Set Up Direct Deposit (Optional)
By setting up direct deposit, you may be able to direct a certain percentage of your income to your savings account each month. The easiest way to do this is to have money automatically transferred from your checking account to your savings account. This could help you effortlessly grow your savings.
Savings Accounts with Baton Rouge Telco
If you would like to open a savings account, Baton Rouge Telco offers a savings account with no minimum balance fees and no monthly fees. We also offer overdraft protection for just $5 per transfer. Accounts are insured by NCUA for up to $250,000.
But maybe you’re still wondering, does opening a savings account affect your credit score? The simple answer is no. Setting up a savings account with Baton Rouge Telco is easy. For just $5, you can become a credit union member, which makes you one of its owners. After establishing your membership, you can open an account.
In addition to offering a traditional savings account, we also offer a Money Market Account that offers a higher interest rate. These accounts are ideal for earning interest on large balances. Unlike Certificates of Deposit, where your money is locked in, you can withdraw funds from your Money Market Account. Click below to learn more!