5 Things to Consider When Opening a New Savings Account

As you grow your finances, you'll need someplace to keep them and a savings account is the safest place to do that.

Not just a place to hold onto your money for future payments, the right savings account can also grow your money over time.

When you open up a new savings account it’s important to pay attention to these five factors to make sure you get the most out of your bank.

Interest Rates/APY

As mentioned before, your savings account is a place to grow your money over time. While a savings account won’t have the same potential return as investing in the right stock, every bank has an interest rate that they apply to the money you deposit. This is the amount which the bank will pay you for keeping your money with them.

Not every bank will have the same interest rates, so you have to consider which one has the highest interest rate and then if that will give you the highest annual percentage yield (APY). The APY is a separate percentage based off not just the interest rate, but the frequency at which the interest is earned. This makes the APY a more accurate measure of the profit you will earn on a deposit over the span of a year.

Some banks will also change the interest rate depending on how much money you plan on keeping in your account, so know ahead of time how much money you plan on depositing.

Online Only Versus Traditional

Seemingly everything is moving to have a permanent online presence and banks have been on the forefront of this change. Most banks have their own apps to conveniently access your money from wherever you are. You can deposit checks by phone, you can move money between accounts, and even open new accounts in them.

However, online banking might not be for you if you need access to your cash in a moment’s notice, or just want to deposit into your savings at an actual brick-and-motor location. You will have to make sure that the bank you are using has physical locations near you.

Fees

When you’re looking into a new savings account make sure your potential bank doesn’t have monthly fees that you’re uncomfortable with. Wallethub, an independent personal finance website, has a useful database of savings accounts with interest rates and monthly fees for you to compare. Often times banks will offer similar interest rates, so whether they have monthly fees or not can be a helpful tie breaker.

Each bank will also have different ATM policies when it comes to fees for withdrawals. Take into consideration if the bank you choose has their own ATMs near you, otherwise you will have to pay a fee for using a different ATM each time.

FDIC Insurance

The Federal Deposit Insurance Corporation (FDIC) insures your money, up to $100,000, when you put it into a bank account. Investment companies aren’t covered by the FDIC, whereas the majority of banks are.

Make sure that the institution you choose is insured under the FDIC. Most of them will be, but you don’t want to realize your money was never insured after the fact.

Do you need another savings account?

If you have never opened up a savings account, then do it. A savings account makes sure that your money will be there for you as you accumulate wealth and start making purchases like a new car, or even a house.

If you already have a savings account, then it might potentially be more useful putting your extra money elsewhere. You can force yourself to save for your retirement by contributing to a 401K, or invest in fixed annuities or certificates of deposit that will guarantee you money over a longer period of time. Perhaps even another checking account might be a better deal. Don’t force yourself into another savings account unless your situation calls for it and you’ve considered all the facts.

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