Opening a savings account is like trying on a new outfit for most people. You know you need one, so you head to your local bank or credit union and start shopping around. But with multiple types of accounts that come with different features and benefits, you might have difficulty finding the best one for you.
Fortunately, you can use some resources that help explain the differences between the various savings accounts available. Here are five things you should know before opening a savings account.
Withdrawal Limits
Depending on the type of savings account, these limitations can vary, though they nearly always have a penalty for any early withdrawals. If you are looking for a savings account that you can access without penalty, open a savings account online.
Online savings accounts typically have higher interest rates than traditional ones but also have withdrawal limitations. Be sure to check withdrawal limitations before choosing an account.
Fees
As with all products, you must ensure that you are aware of any fees associated with the account. And this is especially important with a savings account since most banks charge a fee if your account balance is too low. If you are choosing a savings account that charges a monthly fee, make sure you can offset that fee by earning enough interest to make up the difference. According to the experts at SoFi, “Banking with SoFi has no account fees and no service charges—and we’re working hard to keep it that way.^ There are no fees on overdraft, account open, minimum balance, dormant account or regular maintenance.”
Minimum Balance Requirements
Many savings accounts have a minimum balance requirement to keep the account fee-free. If you cannot meet the minimum balance requirement, you will be charged a fee for having an account that doesn’t have enough money in it.
If you can’t meet the minimum balance requirement, consider another type of account, such as an online or a market savings account.
Types of Accounts
The most common types of savings accounts are traditional savings accounts, money market accounts, and high-yield savings accounts. Traditional savings accounts are the most common type, and most banks and credit unions offer them.
The interest rate on traditional savings accounts is usually very low, so it’s a good idea to research and find the best savings account for your needs.
Interest Rates
An important thing to note about savings accounts is that the interest you earn on your money is typically low. This is because banks want to encourage people to save money and keep it in the bank, which they lend to others.
However, savings accounts such as online savings accounts can earn you a higher interest rate. They have a slightly higher interest rate than traditional savings accounts, which is one reason you should consider them.
Opening a savings account is an essential step for anyone who wants to start saving for the future. These accounts are a great way to put away the money you don’t plan on using in the near future so you can earn interest from it.
To make sure that you choose the best savings account, it’s important to understand the different features of each account and how they can affect your savings. By knowing what you are looking for, you can more easily find the best savings account for your needs.