Savings accounts are a safe way to keep your money safe with FDIC and NCUA insurance – and interest allows you to grow that money over time.
Numerous savings account options are available through banks around the world. So you may be wondering how to choose a savings account. Here are some factors that you may not have considered.
How to Choose a Savings Account: Ask These 8 Questions
Before you quickly open an account with the first bank you see, ask yourself these questions.
1. Do you need stationary locations?
Online banking is growing in popularity and it’s easy to see why: Because of the low overhead, online savings accounts can offer annual percentage returns (APYs) in the 2% to 3% range, while most traditional brick and mortar banks have much lower ones Interest rates. The national average is a nondescript 0.09%, which would be much lower if you removed online savings account rates from the equation.
However, traditional banks offer easier access to funds and personal support for those stressful moments when you need to speak face-to-face with a real person.
Which bank you use is more important than you might think. Find out where to keep your money (and more!) In The Penny Hoarder Daily.
2. Does a credit union fit better?
Your community likely has at least one credit union that offers savings accounts. Although credit unions have certain eligibility requirements to join, you can likely find a way to join.
Many credit unions offer higher APYs for savings accounts and also pay dividends to their members. Not sure if a credit union is right for you? Use our guide to credit unions versus banks to make the call.
3. How often do you have to make cash deposits?
The 21st century is becoming increasingly cashless, but many of us are still trading in physical dollars, whether it’s birthday cards, getting paid with tips, or having a flea market.
If you want to easily add cash to your savings account, choose a bank with multiple branches in your city or with a large network of ATMs. Many online savings accounts offer an ATM network to allow cash deposits, but a well-known stationary bank offers more convenience.
4. How much do you plan to keep in the account?
Savings accounts are critical for building an emergency fund (experts typically recommend spending three to six months) and for specific savings goals like a down payment on a house or car, vacation expenses, a wedding, or renovations.
Compared to other savings and investment options with much higher interest rates, savings accounts make access to your funds relatively easy and without penalty.
If you plan to keep a reasonable amount of money in your savings account, choose an account with a high APY. If you don’t plan on touching it too often, you may be less concerned about easy access and instead focus solely on the account with the highest interest rate.
However, if you plan to deposit tens of thousands of dollars into your account, consider a money market account instead, which typically pays a higher APY than a traditional savings account.
Once you have achieved your savings goals, it is probably better to invest your money. Your money will be less accessible (and may have early withdrawal penalties if your money is in a retirement account), but the return on your investment is usually much higher.
5. How often do you transfer money?
Federal law limits the number of monthly withdrawals from a savings account to six. Some savings accounts adhere to this fixed limit, while others allow excessive withdrawals for a fee. A few forego fees as part of their account benefits, so you can theoretically withdraw unlimited amounts.
If you find that you occasionally need to dip into your savings more than six times a month, find an account that has some leniency with withdrawals.
Remember, however, that savings accounts are not meant to work like checking accounts. If you treat your savings account like a checking account, it is better to choose a high yield checking account so that you can avoid withdrawal limits and make it easier to access funds.
6. Would you like to have your current and savings account in the same place?
If you already have a checking account with a certain bank, it may be in your interest to open a savings account there too. This is the most convenient way to transfer money from your checking account directly to your savings account – or vice versa. However, most banks have some method of linking external accounts with other banks to make transferring funds easier.
Why shouldn’t you possibly keep your checks and savings with the same bank? Some banks offer checking accounts with higher APYs and better features, while others have more competitive savings accounts.
If you can handle the minor inconvenience of individual banks, regardless of where you have the bank for verification, you should find the best savings account that suits your needs.
FROM THE BANKING FORUM
Filing for Bankruptcy on 8/22/20 @ 8:29 PM
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7. What rewards do you get for opening a new account?
Before you throw away today’s junk mail, take a minute to see what offers banks are sending you to open an account. You will be surprised at how many cash rewards banks offer for opening a new savings account. You can also browse these rewards online.
So should you choose a savings account based on a promotional offer? It depends: When you’ve narrowed your search to a few banks and are happy with one of those banks, choose the bank with the best sign-up bonus.
8. What do the reviews say?
When in doubt, read the online reviews to determine which bank has the best customer service for their savings account, which bank has the fewest reported issues, and which bank has the best mobile app. You can go straight to the App Store or Google Play to see what people think of betting on their phones with that particular bank.
Don’t forget about social media though. Crowdsource opinions on banks from friends and family members who may share positive or negative experiences with the savings accounts you are considering.
Are you ready to ditch your current savings account for a better option? Here are our favorite savings accounts.
Timothy Moore leads a team of editors and graphic designers for a market research firm as his full-time appearance. As a freelance writer, he writes on personal finance, careers, education, animal care, travel, and the automotive industry. His work has been published on Debt.com, The Ladders, Glassdoor, and The News Wheel.