What to Look For in a Savings Account

April 10, 2024 by First Federal Bank

savings-1Finding a savings account sounds simple enough — after all, you’re just looking for a safe place to store and grow your money. However, to make the most of your savings, it’s important to keep an eye out for a good interest rate along with hidden fees, balance requirements, and other factors that can complicate your financial management. Here’s a look at what to consider when choosing a savings account:
Interest rate
If you’re looking to grow your money over time, be sure to keep an eye on interest rates when choosing your savings account. The Annual Percentage Yield or APY describes how much your money will grow per year in the account. To give yourself an idea of what you should expect, Bankrate contributor Rene Bennett suggests searching online to inform yourself of the national average rate, so you can make a fair comparison between financial institutions.
Online and branch-accessible accounts
When choosing an account, consider how you like to access your money — do you enjoy the convenience of managing your finances through an app, or do you like to visit a brick-and-mortar institution and speak to a teller? Bennett explains online-only savings accounts tend to offer higher interest yields and cash access via select ATMs, but you won’t be able to speak with a representative face-to-face. On the other hand, branch-accessible savings accounts tend to have lower yields since they have to pay for retail locations.
Account fees
Fees can eat into your savings and interest earnings, so be sure to read the fine print before you choose an account. Many savings accounts have a minimum balance requirement, which you’ll have to maintain in order to avoid fees. According to Bennett, you may also find accounts that require you to link a checking account within the same financial institution, or you may have to set up automatic transfers to enjoy fee-free service. Depending on your financial plans, some of these requirements may not be drawbacks — but knowing all the terms and conditions before you sign on the dotted line can prevent you from getting blindsided by nickel-and-dime charges over time.
Be aware of short-term promotional rates
When you’re shopping for rates, it can be easy to get suckered in by a big, flashy APY or an offer of bonus cash. However, comb through the fine print to see if that attractive rate sticks with the account, or only applies to the first few months of service. You may also have to fulfill additional criteria to collect bonus money, such as opening a line of credit, setting up a direct deposit, or signing up for a checking account. Also, make sure you want to be with the financial institution for the long haul — Kiplinger contributor Lisa Gerstner explains some institutions will rescind those attractive bonuses if you close the account within six months of opening it.
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Categories: Personal Banking, Financial Education

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