How Safe Really Are Savings Accounts?

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Savings accounts are a popular choice for saving money. Now find out if they're all they're cracked up to be in terms of security.

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The savings account has long been one of the most popular ways to save and protect money. If you're like most consumers, then you probably have a checking account that you use for paying bills and a savings account for the rest of your money.

When it's your money at stake, it's natural to wonder how safe savings accounts really are. The answer should put to rest any doubts you have about putting your money in the bank.

How safe are savings accounts?

Savings accounts are one of the most secure places you can put your money. To be fair, the security of a savings account will depend in part on how well you protect your debit card and how strong your password is for your online banking account. But even if a thief got hold of your debit card or was able to access your account online, the Electronic Funds Transfer Act would protect you.

If your debit card is lost or stolen, the Electronic Funds Transfer Act limits your liability for unauthorized transactions to:

  • $0 if you notify your bank right away, before any fraudulent transactions are made.
  • $50 if you notify your bank within two business days.
  • $500 if you notify the bank after two business days but within 60 business days.

For unauthorized transactions that aren't the result of a lost or stolen debit card (for example, someone hacking your account and making a transfer), you won't be liable whatsoever as long as you report the unauthorized transactions within 60 business days.

However, in both of the situations above, you have unlimited liability for unauthorized transactions if you don't report them within 60 business days. You just need to keep an eye on your account and notify your bank right away if your debit card is lost or stolen, and you'll be safe.

Worried about what will happen if your bank bites the dust? Nearly all major banks are insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000 per account, so you're covered up to that amount. If you have more than $250,000 in savings, you could divide it among multiple accounts with the best banks or choose an account that provides greater insurance coverage.

Comparing savings accounts to other financial products

Now let's look at how savings accounts compare to other financial products in terms of security.

Checking accounts: Just like savings accounts, checking accounts are covered by the Electronic Funds Transfer Act and can be FDIC-insured. The only difference is that debit card transactions generally go through checking accounts, not savings accounts, although debit cards can often be used to withdraw money at an ATM from either a checking or savings account.

This means if a thief gets your debit card, your checking account is more vulnerable than your savings account.

Credit cards: Credit cards have even better security than debit cards, making them ideal as your everyday payment method. Your maximum liability for unauthorized credit card transactions is $50, and that's only if your card is lost or stolen and you don't report the loss until after an unauthorized transaction is made.

If you still have your credit card and there's an unauthorized transaction made from someone who has the card number, you have zero liability. Many card issuers have zero-liability policies anyway, meaning you'll never be on the hook for unauthorized transactions.

Certificates of deposit (CDs): The Electronic Funds Transfer Act and FDIC cover CDs, giving them the same protections you'd get with a savings account.

Protecting your savings

Thanks to consumer protections and the FDIC, the money in your savings account is safe and secure. In the event of an unauthorized transaction, the bank will reimburse your funds, provided you report it in time.

Of course, it's best to avoid unauthorized transactions in the first place. That's in large part your responsibility, because how you protect your savings account will make a significant difference in how secure it is.

Here's how you can drastically reduce your risk of fraud:

  • Choose a strong password for your online banking. Consider using two-step authentication for additional security.
  • Keep track of your debit card and don't let anyone else use it.
  • Monitor your savings account regularly. You may want to set up account alerts for any activity.
  • Notify your bank immediately if your debit card is lost or stolen or if you notice any unauthorized transactions.