What to Look For in a Savings Account


Choosing a savings bank account is an important step toward financial responsibility and security, and though a savings account is one of the oldest and most traditional financial products in the United States, there are so many different types to choose from today that finding the perfect one can be a difficult task. The following are some of the things you should look for in a savings account.

Few or No Fees

The very best savings account have very few or no fees. If the account you are using to save your money is charging you more than what you are making on interest—which is not likely to be much—then those monthly payments can really put a dent in your savings over time.

Choosing a savings bank account is an important step toward financial responsibility and security, and though a savings account is one of the oldest and most traditional financial products in the United States, there are so many different types to choose from today that finding the perfect one can be a difficult task. “Monthly savings account fees can vary widely, according to the Consumer Federation. But they can quickly add up. About 30 percent of banks surveyed charge $2 or less monthly, while 35 percent charge at least $5,” writes Constance Gustke in a March 2014 article for Bankrate.com.

Some fees may be acceptable if they are easily avoidable. For instance, some banks may charge you if the money in the account does not meet a minimum balance or if the account has been inactive for too long. If the minimum requirements are easy to meet, you may never even have to worry about these fees.

Liquidity

When choosing a savings account, you should look for one that makes it easy to access your money, whether it is for an emergency or for that big expenditure you were saving for. Federal regulation limits savings withdrawal to six per month, but some banks may limit it to even fewer withdrawals and add fees on top. The key is to find the right balance.

“You should have access to the money via online transfer, ATM or teller withdrawal. While you don’t want such easy access that you’re tempted to use your savings every month, you also want to be able to access that money in a real emergency,” writes Laura Shin in a June 2014 article for Forbes.com.

Furthermore, try to find a bank that does not charge you for withdrawing money and that either has a large network of ATMs or reimburses you for fees imposed by other banks.

Competitive Rates

Most savings accounts today offer very low interest rates. “Only 4 percent of banks surveyed by the Consumer Federation paid more than 0.25 percent on basic savings accounts,” says Gustke. “Given today’s low interest rates, it pays to shop around for an account.”

Generally, bigger banks pay lower interest rates. However, this should be leveraged against the strength of their balance sheet. The financial crisis of 2007 and 2008 reminded us that banks can fail and highlighted the importance of choosing a strong bank. “There is absolutely no reason to put your money in a bank, or open a savings account with an institution, that doesn’t have a rock-solid balance sheet,” writes Joshua Kennon in a September 2016 article for TheBalance.com, advising to look for banks with a Tier 1 capital ratio of less than 10 percent.

Online and Mobile Access

More and more banks are offering free online tools to help facilitate personal finance management. For those who live their lives on the go, access to online and mobile tools can be the difference between a good and bad savings account.

“You should also be able to check up on your account, pay bills and make deposits electronically, both at your computer and on the go,” Shin writes.

Finding the perfect savings account can be tricky. In some cases you may have to compromise one bonus for another you value even more. Ultimately, it is worth the time spent shopping around to find your ideal match.

 

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