What Is a Linked Savings Account?

A linked savings account is a savings account that is connected to another account such as a checking or negotiable order of withdrawal (NOW) account. Generally, linked savings accounts are held at the same bank as the customer's other accounts, making it easier to transfer funds between accounts.

How Linked Savings Accounts Work

When a customer opens a linked savings account, the bank or financial institution connects it by account number to a new or existing checking or NOW account in the system. Since these accounts make it easier to transfer money, they're convenient for people who want to accumulate savings.

Linked accounts are sometimes called packaged accounts. The balances on both linked accounts are generally reported on a single consolidated statement, making it easier for customers to keep track of their money. Linked savings accounts also allow customers to keep the majority of their funds in a savings account, which may earn more interest, moving money into the checking or NOW account as needed. Some packaged or linked accounts may also offer incentives such as lower fees or free checking.

Special Considerations

Other types of accounts, such as a certificate of deposit (CD), can also be linked to your other bank accounts. Banks may encourage you to link up multiple accounts (and continue to deposit money into those accounts) by offering special benefits such as a higher interest rate.

There are instances, however, where linking accounts could lead to additional fees. For example, one benefit of linking your savings and checking account is overdraft protection. If your checking account balance goes too low, some banks will automatically transfer money from your savings account into your checking account to protect you from incurring overdraft fees. However, this service often comes with its own fee. Plus, if you trigger that sort of transfer too frequently, your savings account could fall below the minimum balance, which could cause other fees to kick in.

If you find that the ideal checking and savings accounts for your needs aren't available at the same bank, you may also be able to link accounts from different banks. This can work well if you're looking to hold your extra cash in a high-yield savings account that may not be available at the bank where you do your checking.

Look for an option to link external accounts. You'll need to provide more information to get this done, and transfers may take longer to go through. There are also sometimes limits on the number of external transfers you can make each month.

Benefits of Linked Savings Accounts

Banks may want to incentivize linked savings accounts so that they can hold a larger share of your business for a longer amount of time. This could mean higher rates for you, especially if you're able to maintain a higher balance. Plus, having your accounts in one place—with transfers available quickly and easily—simplifies money management.