From 401ks and IRAs to stashing cash under a mattress or in an old can buried in the backyard, there are many ways to save money. While some are more risky or beneficial than others, a savings account at the bank is a safe option for most people. Unfortunately, all savings accounts are not created equal. Therefore, you will need to understand the pros and cons of each type offered by your and other banks. With this guide, you will learn the elements that make a great savings account.
Higher Interest Rate
If there is one important factor that determines a good savings account from a bad one – it would be the interest rate. Each bank offers a set interest rate for their customers, allowing account holders to earn interest on how much money they have in their savings account. On average, the national interest rate is 0.09% APY.
Even though the national average is suitable, a higher interest can be earned, but it may require opening a different type of savings account or an account at a different bank.
Consider opening an online savings account for the highest interest rate possible, which can be up to 2.00% APY. If you prefer to have an account at your local brick-and-mortar bank, ask if upping your account balance will reward you a higher interest rate percentage.
Most people are astonished that they have to pay bank fees to store their money and this is a logical emotion. A great savings account should have very low or NO fees at all, since you want your savings account to grow over time without unnecessary expenses.
When opening a new account, make sure to read all of the fine print and ask questions specifically about potential fees. Some banks will charge you fees if your account balance has decreased past the minimum requirements. Many banks also charge fees if you withdraw from the account balance multiple times over a period of time.
Before you sign up for an account and deposit your savings, negotiate with the bank to try and cut out all fees. If not, you may want to consider another bank.
Another element of a great savings account is the ease of transferring money. Not only should it be easy to transfer money from your checking account to the savings account, but it should also be easy to transfer money out of savings into your checking.
It is important to remember that your account balances are your money, meaning the bank does not own the money. You should be able to take and deposit when and if you please without any unnecessary stress of financial obligations.
Automatic transfers are ideal as well, but not something all banks offer. Setting up your checking account to automatically withdraw money and deposit into the savings account will make it easier to save, so look for this option before opening an account with a particular bank.
Finally, you need to only open accounts that are protected with FDIC insurance. This type of insurance is different from insurance that you would need to pay for. FDIC is offered by the federal government, protecting you and your funds in case of an unexpected problem, such as the bank going out of business.
FDIC insurance protects traditional bank accounts including checking, savings, money market, and CDs, but it does not offer coverage for stocks, bonds, annuities, and life insurance policies.
Knowing your options is key before opening a savings account. By finding a bank account that offers these essentials, you can open a smart, valuable, and effective savings account.Share