Key takeaways
- When shopping for a savings account, prioritize features important to you, such as high yields, low fees and digital tools, including automated savings tools and spending insights.
- Online banks typically offer higher APYs but no in-person service, whereas traditional banks commonly provide branches but lower yields.
- Consider minimum balance requirements and monthly fees when choosing an account. Look for accounts that make these fees easy to avoid.
- Ensure your savings are federally insured, so your money is protected by up to $250,000 per depositor, per institution, in case of bank failure.
These days, the best savings accounts come with plenty of perks such as high yields, low or no fees, no minimum balance requirements and robust digital banking features.
Not all banks provide each of these benefits, however, so it’s vital to shop around for the right savings account for your needs. Here are six questions to ask yourself that can help you find that account.
1. Do you prioritize branch access or high APYs?
When choosing between online banks and traditional banks, there’s often a trade-off between earning high annual percentage yields (APYs) and having access to physical branches.
Online banks typically offer the most competitive interest rates because they have lower overhead costs compared to brick-and-mortar institutions. The best online savings accounts consistently offer APYs well above the national average.
Online banks could be a good fit if you’re comfortable banking digitally, want to maximize your earnings and prefer the convenience of doing their banking from anywhere. Online banks typically offer ATM access through partnerships with large ATM networks.
Read more: Bankrate’s picks for the best online banks.
On the other hand, traditional banks with branches give you the opportunity to interact face-to-face with bank employees. These banks often offer access to a wider range of products like loans, credit cards and financial advisory services. However, their savings accounts will likely have much lower APYs than their online-only competitors.
Open a high-yield savings account at an online bank and link it to the checking account where you have branch access Nothing about your day-to-day financial routine changes. You’re just moving your savings to a place where it will be welcomed with open arms and higher yields.
— Greg McBride
CFA, Bankrate chief financial analyst
2. Are there any fees or minimum balance requirements?
While savings accounts may have fewer fees than checking accounts, it’s still important to review the fee schedule before opening an account. Some banks charge monthly maintenance fees if you don’t meet certain requirements like maintaining a minimum balance.
For instance, Chase and Wells Fargo both have savings accounts that charge $5 monthly fees to those who don’t meet certain requirements.
The good news is that many fees are avoidable. Look for accounts that waive the monthly fee if you:
- Keep your balance above a certain threshold
- Set up automatic transfers or direct deposits
- Linking your savings to a checking account with the same financial institution
Online banks, such as Ally Bank and Marcus by Goldman Sachs, are known for offering fee-free accounts with no or low minimum balance requirements. But if a savings account does have a monthly fee, make sure you can comfortably meet the criteria to avoid it.
For instance, the Chase and Wells Fargo savings accounts will waive the $5 monthly fees if you maintain a minimum daily balance of $300.
3. Do you want to link to a checking account?
While linking a checking and savings account at the same bank can help you waive the monthly fee, the accounts don’t necessarily have to be at the same bank for you to link them.
The benefits of linking your savings account to an external checking account are flexibility and accessibility. You can transfer money between the accounts without having to pay a lofty wire transfer fee, and sometimes you can even set up automatic transfers between the two.
Read more: 4 ways to transfer money from one bank to another
Check the bank’s policies regarding linking external accounts, as well as the time it takes to complete transfers, as this can vary by institution. Also note whether the checking and savings accounts must be at the same bank in order to have the monthly savings fee waived.
4. How liquid do you need your savings to be?
Savings accounts were historically limited to six “convenient” withdrawals per month due to the federal Regulation D requirement. However, this rule was lifted in April 2020, allowing banks to decide how many withdrawals to allow from savings.
While some banks have eliminated withdrawal limits altogether, many banks still impose a six-per-month threshold, charging a fee for each transaction over that amount. At PNC Bank, for example, there’s a $3 fee per withdrawal if you make more than six withdrawals from a savings account in a statement cycle.
If you think you’ll need more frequent access to your savings, look for accounts with higher or no withdrawal limits to ensure you have enough. For example, Citizens Bank does not limit transactions, including withdrawals, from its savings account.
5. Are you interested in banking with a fintech?
In addition to traditional banks and credit unions, don’t overlook fintech companies, or neobanks, when shopping for a savings account. These digital disruptors often partner with chartered banks to provide FDIC-insured accounts with unique benefits like:
- Easy mobile and online access to banking services
- Low or no fees and minimum balance requirements
- Automated savings tools
- Free spending and saving analysis tools
Many neobanks also have a focus on different social and environmental causes. For example, Aspiration, a popular neobank, is committed to sustainability and promises to never use deposits to fund fossil fuel projects. It also allows you to round up debit purchases, with the difference going toward the planting of trees.
Other popular neobanks include Chime, Current and Varo. While these fintechs don’t offer in-person banking, they can be a good fit if you prioritize innovative digital features and competitive rates.
6. Do you plan to use a banking app?
While many banks — including traditional and online banks — offer mobile banking apps, some of these apps stand out over others. Some apps offer unique features that can help you save, and this might be something worth considering when choosing a savings account.
For example, a bank’s app might come with tools to analyze your checking account and automatically transfer an amount it deems appropriate into savings. There are different ways you can customize automated savings, too, such as setting a specified percentage of your paycheck to be saved or adding different goals to be saved toward.
It’s not only strictly online banks that offer innovative mobile banking apps. Huntington Bank and Fifth Third Bank, for example, are two brick-and-mortar banks offer features such as automated savings tools in their mobile apps.
Money tip:
The easiest and most effective way to save more money is to set it and forget it. Establish automated transfers from checking to savings each pay period and you’ll be pleasantly surprised how quickly your savings will grow.
Bottom line
With so many options available, it pays to shop around rather than settling for an account at the most convenient or familiar bank. Consider your top priorities, like a high APY, easy ATM access or helpful savings tools, then compare accounts from online banks, traditional institutions, credit unions and fintechs to find the best fit.
Don’t forget to check that your account is federally insured by the FDIC or NCUA, which protects your money up to $250,000 per depositor in case of bank failure. Member FDIC banks and NCUA credit unions provide the same level of protection.
Read the full article here
