by Christy Bieber | March 25, 2019
A savings account is a great place to park money you'll need in the short term. Savings accounts typically pay more in interest than checking accounts but still make it easy to access your money when you need it. And, you have a plethora of options for financial institutions to open a savings account, so there's a savings account out there that's right for almost everyone.
Thanks to the rise of Internet-only banks, you're not restricted to opening a savings account only with financial institutions that have a brick-and-mortar location. In fact, online savings accounts have become extremely popular because these accounts typically offer higher interest and better terms than local and national banks.
There are some downsides to online-only accounts. You won't have a branch to go to if you need to get help, and you'll need to deposit funds either electronically or by mailing in checks. But, for many, these tradeoffs are worth it to get the higher interest rate. You'll need to decide if you're willing to give up access to a local office in order to boost the returns you get on your invested money.
Next, you'll need to calculate how much money you have to put into your savings account. You need to know this for two reasons.
One reason is that some banks have minimum deposit requirements when opening your account or to avoid monthly maintenance fees. If you don't have enough money to make the required initial deposit, or if your account balance would be too low and you'd be charged fees because of it, you'd want to choose a different bank.
Another reason to know how much you plan to invest is that some savings accounts pay you more in interest once your balance exceeds a certain level. If you're comparing interest rates but wouldn't qualify for a bank's best rate because your balance is too low, you need to know this when shopping around.
Once you know what kind of savings account you're looking for and how much you can contribute, you can shop around to find an account you're eligible for that will offer you the most competitive rates. Some of the key things to look for when you comparison shop among different banks include:
Make sure you look at the big picture when you look at different accounts. If one financial institution would pay you more interest but charge you a higher monthly fee, do the math to see if the fee would be worth paying. Unless the added interest you earn exceeds the fee, you'd be better off with a different account that doesn't charge.
Don't assume the terms each financial institution advertises are always the terms you get. Read the fine print and see if the rate is a teaser rate or is one you're eligible for only if your balance exceeds a certain threshold. And, look carefully for restrictions on withdrawals that are overly restrictive or for surprise fees other banks don't charge.
You don't want to face unexpected expenses or surprise limits that make your account difficult to use, so check the details thoroughly before you sign up.
Finally, don't assume the account you open is always going to be the right one. Savings accounts change their terms all the time, and new financial institutions enter the marketplace and make competitive offers.
If you want to get the best rates and terms, you should keep abreast of what your financial institution -- and others -- are doing. If you find a better deal, don't be afraid to move your cash since the process of doing so is quick and simple.
Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts can earn you more than 12x the national average savings account rate. Click here to uncover the best-in-class picks that landed a spot on our shortlist of the best savings accounts for 2021.
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