The best savings account can help an individual develop good money savings habits. This is particularly important because, according to a survey done by Bankrate, approximately 50% of Americans save less than 5% of their income and 18% have no savings at all. Only about 25% of Americans save 10% or more of their earnings. With that in mind, here are three tips for finding the right savings account:
Although this is a no brainer, it is tricky to choose the right savings account if one does not know the tricks financial institutions use to attract unsuspecting consumers. To start with, some banks quote high rates that really appeal to consumers. However, they limit the number of times that clients can withdraw money from their accounts. For instance, a bank may allow only four withdrawals annually from high-interest savings accounts. In addition, some savings accounts come with variable interest rates meaning that rates can change at the discretion of your bank. As such, it is advisable to read the fine print carefully to find out whether the savings account you are eying has similar restrictions. At the same time, one should consider money withdrawal/transfer restrictions.
According to the US government’s Code of Federal Regulations (CFR), savings account owners are permitted six withdrawals or outgoing money transfers per month. As such, people who exceed six withdrawals/transfers within a month may be penalized for the additional transactions. What’s more, some banks even close the savings accounts of people who rack up multiple withdrawal/transfer violations within a given period.
Before opening a savings account, a person shop around and compare the financial products offered by various banks. This includes comparing features such as interest rates, withdrawal limits, accessibility via mobile app, minimum balance limit, and financial transaction fees. Remember to compare products from traditional banks as well as credit unions.
According to data from the Consumer Federation, monthly savings account fees vary widely meaning you should investigate this aspect exhaustively. In fact, a survey done by the Consumer Federation found that about 50% of banks slap consumers with penalties for violating minimum balance requirements. Furthermore, traditional banks are more likely than credit unions to penalize clients whose savings accounts remain inactive for extended periods. For these reasons, one should evaluate these fees carefully to avoid surprises.
To find the best savings account, an individual should evaluate savings account products based on factors such as monthly fees, interest rates, and money withdrawal/transfer limitations. Finally, it is wise to shop around and compare offerings from different financial institutions.