Having a savings account makes planning for emergencies and future purchases easier and provides some extra earnings, thanks to interest. You can get the benefit of security for your cash along with the convenience that comes with easy access to your money and online banking.
However, you'll want to know how to find the right option and gather all the information you'll need before you go to the bank to open the account. This guide will help you do everything from researching banks and account options to putting your new savings account to use.
Exploring Savings Account Basics
While they all have the same purpose of securely storing money and providing interest, savings accounts come in traditional and nontraditional forms that you should know about so you can differentiate between them.
The typical savings account usually has a low minimum initial deposit, if required, and suits those who want to add and remove money from the account without worrying about a minimum savings term. The catch is that the bank can charge you for excessive withdrawals through some convenient means like online transfers, checks and electronic bill payments. This kind of account differs from a checking account in that it's not meant to spend money from regularly.
On the other hand, you can find certificate of deposit accounts that often require high deposits and penalize you if you take money out before a set length of time. Made for those who still want more interest but also flexibility, a money market savings account usually also needs a bigger initial deposit but can work more like a checking account. It also comes with a debit card.
Finding the Right Institution
Before you dive further into different savings account products, it helps to start looking into financial institutions and finding one that fits your needs and preferences. If you already have a checking account at a local bank, choosing the same place for your savings account can offer convenience and familiarity with the banking staff who help you.
On the other hand, if you have no bank yet or feel unhappy with your current one, then you can start exploring other options within your community.
You can open a savings account at both traditional banks and credit unions, but these different financial institutions have their own pros and cons. For example, credit unions may provide great service, charge lower fees and offer higher interest rates, but you have to meet certain criteria to become a member. Traditional banks can offer better convenience with more locations and technology features for banking, but you may get lower interest rates and higher fees. You will also want to check that the bank is listed as "member FDIC," which means it has FDIC insurance.
Researching Savings Account Products
Although a banking representative will likely explain different savings account types and features when you visit the branch to open an account, you should consider doing some initial research online so that you know which account fits your needs and preferences. You may find the bank offers different tiers of savings accounts for consumers, and account terms like interest rates, fees, bonuses and limits can vary by product.
For example, your bank may offer a regular basic savings account with little-to-no monthly fee, initial deposit or balance requirement for people just getting started. However, these accounts may come with very low interest rates and not reward you for maintaining a larger balance later. On the other hand, premium savings accounts may have higher fees and interest rates but allow you to waive some of the fees if you have other accounts or meet minimum balance requirements.
Choosing the Best Savings Account
Choosing the right savings account can take some work, especially if you're feeling unsure about banks and their account options. To make things easier, a banking representative can help you with the decision, as they can discuss your financial goals with you and compare product options. In the meantime, see if there is an FAQ page asyou can consider these questions to know what to look for when doing your research:
- What is the initial deposit required? If you've saved cash for a while, an initial deposit requirement may not be an issue. It's not uncommon to see banks asking for at least a $25 to $100 deposit to open a basic savings account. Banks that don't require an initial deposit exist, so consider expanding your options if this is an important feature.
- What fees are there? When saving money, you'll likely want to avoid monthly maintenance fees and other banking feed and services charges in the process, so check the terms of the savings account to see what you'll have to pay and how often. You'll most often see a monthly monthly maintenance fee to maintain the account, but annual fees, transaction fees and service charges can apply, too. If you're interested in an account that normally has fees, ask the banking representative if they could waive them with certain account activities on your part, such as maintaining a balance the is higher than the minimum balance requirement.
- What's the interest rate? Bankrate mentions that you'll most often just get a 0.1 percent return with a regular savings account at most banks. However, some savings accounts offer higher rates with a higher annual pecentage yield (APY) if you keep a high account balance or opt for a premium account. You can search specifically for high-yield savings accounts or focus on credit unions that can offer more attractive interest rates.
- What kind of saver is the account designed for? Whether you're a new saver or someone who's ready to deposit a large amount of cash, savings accounts vary depending on their intended customer. Introductory products can have more appealing terms with lower fees as long as you're OK with a low interest rate. However, consider taking a deeper look into premium accounts if the higher return and extra features outweigh any higher fees.
- How's the customer service? You'll need to deal with the bank whenever you have questions or want to conduct transactions online and in person, so make sure the customer service is up to par. Also, consider availability so that you don't get stuck without access to your account for an extended time if something goes wrong.
- How easily can you do transactions? Ideally, you'll want a savings account at a bank convenient to your home and workplace so that you can stop by and conduct transactions or just ask questions. Also, consider ATM availability to find a bank with machines near places you go often.
- Do limits apply to transactions? When you're researching savings accounts, you probably assume you can add and remove money at any time. While true, banks can limit transaction amounts and charge fees for transfers, ATM withdrawals, checks and even mobile app transactions, especially if you've already had six during the billing cycle. So, check the bank's policies before moving forward.
- Is the money safe? Generally, you can expect your money to be safe (up to $250,000 for each depositor of the account) as long as you use a bank with Federal Deposit Insurance Corporation insurance, also noted at "FDIC insured." However, also check about the bank's fraud protection features and security options for your online banking account.
- What other features and services do you get? For convenience, look for other savings account features like online banking and bill pay, 24/7 deposit capabilities, grade periods, overdraft protection and account alerts via email or text.
Preparing to Visit the Bank
Whether you choose a traditional bank or a credit union to open your savings account, don't head out the door until you have everything you need for a successful application. Specifically, you must decide whether you'll have additional account owners, such as a spouse, and make sure you have all the required personal information and documentation for everybody. This includes full names, contact information and Social Security numbers for each owner. You'll also need to have a photo ID, such as a passport or driver's license, handy.
Think about how you plan to make your initial deposit, if the institution requires one. If you already have another account at that bank, you may not need anything since you could do a transfer to the new account. Other funding options include bringing cash, writing a check from another account or using a debit card. Check with the institution beforehand though because options can vary.
Lastly, beware of any extra documents needed for new credit union accounts. Often, this will include a utility bill or other document verifying your residence in the community. If the credit union requires having a specific employer or affiliation, bring documentation verifying your employment or membership.
Applying at the Bank
When you're ready, you and any joint account owner should head to the bank during its business hours and bring the documentation and information mentioned. To save time, you might consider requesting an appointment. Once you arrive, speak to someone at the counter and mention that you want to open a savings account. Depending on the bank's procedures, you may get handwritten forms to fill out, complete the application on a kiosk or provide information to a banker who will fill it out and ask for details and signatures as needed.
In any case, you'll usually provide the following for each account owner: legal name, date of birth, address, phone number, Social Security number, employer information and email address. The application will likely ask for the type of account ownership (such as joint vs individual), your intended account activities, type of account wanted and any desire to use other items like ATM cards, overdraft protection and direct deposit. You can also set up account beneficiaries and will need to provide detailed information for those people.
You can expect to read account agreement documents and have each account holder sign and date the application to certify you agree to those conditions and have provided correct information. You'll show photo identification for the bank to verify you and other owners. Then you'll complete additional documents that record each owner's signature for withdrawal purposes and gather tax information, as you'll report the interest earned on your next tax return. And of course, you'll make your initial deposit.
Getting Your Account Set Up
After you've finished all the application steps with the banking representative, you should know quickly whether your savings account application went successfully. If the bank couldn't create your account, they should provide more details on why. The issue could be something as small as forgetting to remove a credit freeze you had placed a long time ago, but it could also come from bounced checks at other banks or a very poor credit history. Resolving those issues can help you have a successful application later.
With your savings account approved and set up, you should get your account number and possibly an ATM card. You can use your account information to sign up for online banking, deposit and withdraw money at the branch and ATMs and access account details through phone banking. You may receive further documents about your new account either online or via mail. If you use online or mobile banking, consider looking into security options to keep your money safer.
Now, you can put your new savings account to work for your financial plans, whether that means stashing away cash for an emergency fund, a future trip or something else. You can check with the bank to learn about any special savings programs or incentives or get help with making the best use of your account.
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Ashley Donohoe has written about business and technology topics since 2010. Having a Master of Business Administration degree, bookkeeping certification and experience running a small business and doing tax returns, she is knowledgeable about the tax issues individuals and businesses face. Other places featuring her business writing include Zacks, JobHero, LoveToKnow, Bizfluent, Chron and Study.com.