How to Choose The Right Savings Account
So you want to open a savings account, but don’t know where to start? Well done, you’ve come to the right place. Choosing the right savings account boils down to deciphering which account will give you the highest interest rates and the lowest fees for what you want to save.
It’s not complicated, but you’ll want to make the best choice for your goals. In this article, we’ll tell you the steps you need to take to work out which savings account would be best for you.
What type of account?
First, you’ll want to decide which category of savings account suits you best.
Regular savings accounts usually have no minimum balance requirement, but their interest rates are typically the lowest available.
High-interest savings accounts, as the name suggests, have higher rates than the standard accounts. But these accounts come with strict minimum balance requirements which have the potential to outweigh the benefits of the high interest.
If you’re lucky enough to have a very large amount of money to store, then jumbo accounts are worth considering. They usually require a minimum balance of $100,000, but their interest rates are the highest available.
What sort of bank?
Once you’ve decided which sort of account you want, what type of bank would suit your needs best?
Do you want a traditional, bricks and mortar institution like a bank or credit union? Or would you consider one of the online institutions? Each have their benefits and drawbacks.
While these days there’s little distinction between banks and credit unions in terms of convenience, there are still key differences. The main one being that a bank’s purpose is to turn a profit for its shareholders, whereas a credit union is owned by their members and it aims to keep fees down and interest rates high.
Credit unions usually require a small monthly fee, and while anyone can join a bank, a credit union often restricts its membership to those who meet their criteria. These criteria could be that you work for a specific company or are a member of a certain organization, among others.
Online banks are a great option if you’re okay with never being able to visit in person. Provided they have a good network of ATMs and you’re able to make deposits via mobile check, then they’re worth consideration. Thanks to their lower overheads, online banks often offer the highest interest rates.
Compare rates and fees
Once you’ve chosen the type of account you want, it’s time to compare rates across different companies. It’s best to use a comparison website like comparethemarket or moneysupermarket for this so that you can get a good view of what’s available.
Be sure that you fully understand any fees and charges that apply to an account. Often, the accounts with the most attractive interest rates also come with the biggest fees when any of the account’s terms are breached (such as letting your balance fall below the minimum). So, ensure that you take the terms and conditions like monthly maintenance fees and other charges into account.
Watch out for ‘bait and switch’
Competition amongst banks for new customers is fierce, so banks will often offer introductory rates to attract new customers. Sometimes, however, the high-interest rate that lures customers in might only last for a short while before being dropped. Sometimes, a bank may offer a great interest rate, but with additional fees or limits to how you can access your funds. Be sure that you thoroughly read the small print.
Are your debts getting in the way of being able to save? Don’t worry, you’re not alone. The good news is, there’s a way out. CreditAnswers is a debt relief company dedicated to helping people just like you break the debt cycle and take back control of their finances. If you’re interested in learning how you could become debt-free in as little as 24-36 months, get in touch with us for a no-obligation consultation.