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If you’re sticking with the same savings account you’ve always had, your money might be suffering.
Around one in five Americans are earning 3% or more on their short-term savings, according to a recent Bankrate survey. The best high-yield savings accounts earn close to 5% interest. That means almost 80% of people aren’t taking advantage of higher rates.
Leaving your current bank may seem very easy. Ending a long-term relationship can be hard. But, if you think there’s something better out there, you may want to consider moving on. Here are five key features you should look for in your next savings account.
1. High interest rates
You don’t have to do all the work when it comes to saving. The higher the interest rate, the faster your money will grow.
Imagine having $10,000 in a savings account with a 0.5% interest rate versus a 5% interest rate. Over a year, the difference in earnings would be $50 versus $500.
You’ll probably not find those 5% rates at many big national banks or those with physical branches.
“The largest banks compete on branch access and range of services, but less-heralded banks compete on rates,” says Ted Rossman, senior industry analyst at Bankrate.
Many online banks often offer higher interest rates compared to traditional brick-and-mortar banks. That’s because they have lower overhead costs and can pass on the savings to their customers. The best online banks include Ally Bank, Chime, and SoFi.
You don’t have to move all your money to a new bank or credit union to take advantage of today’s competitive rates.
“You can link your existing checking account to one of these high-yield accounts and avoid having to reset all your direct deposit and bill payment information,” says Rossman.
2. Low – or better yet, no – fees
High fees can eat into your savings, reducing the overall growth of your account. Even if you’re earning a competitive interest rate, hefty fees can negate the benefits. You can keep more of your hard-earned money by choosing an account with low (or no) fees.
Some savings accounts come with monthly charges, but many offer ways to waive those fees. See if you can meet those requirements by setting up direct deposit or maintaining a minimum balance.
But it may be time to move on if you can’t avoid those fees. By selecting a fee-free account, you won’t have to worry about following specific rules or meeting certain requirements. Here are four savings accounts that charge no fees.
3. Easy accessibility
Sure, it’s a savings account, but that doesn’t mean you’ll never need to access your money. Life is full of unexpected events, and having easy access to your savings can be crucial during emergencies. Whether it’s a medical expense, car repair, or sudden job loss, you’ll want to withdraw your money without paying fees or waiting days for a transfer to go through.
“Most of us are using less cash, but when you need some cash, you need to know your plan,” says Rossman.
An account with easy accessibility means you can manage your savings conveniently. This includes viewing your account balance, making deposits or withdrawals, and performing transactions online.
Some savings accounts have penalties for making early withdrawals. Review the account terms and conditions to understand any limitations around accessing your funds.
4. FDIC insurance
You protect your car, your home, and your health with insurance. The same goes for your savings.
The difference is that you don’t have to pay for a policy. Most reputable banks offer FDIC insurance (or NCUA insurance for credit unions). FDIC insurance protects your deposits up to $250,000 per person per account. This means that your deposits are safe and protected even if the bank fails, giving you peace of mind.
But not all balances are FDIC insured, including the balance in your PayPal, Venmo, or CashApp, says Rossman. If you’re keeping money in an account that seems like a bank but isn’t really a bank, you should know the risk.
“Not everyone’s balance is protected,” he says. “Your money may be better protected in a small online bank you’ve never heard of than with a well-recognized P2P brand.”
5. Bonus features that help you save
A savings account should do more than accept your deposits. As technology continues to reshape how you can manage your money, think about how new features and tools can help you save better.
Some banks like Ally and SoFi offer the option to split your savings into different categories so you can work toward multiple goals – like saving for a down payment and spring break vacation – at the same time. Other banks have savings apps that track your expenses, set savings targets, and monitor your progress over time. They provide an overview of your financial health and help you stay on track with your savings goals.
Some savings accounts offer automation features that make saving easier. This includes automatic transfers and round-up features. Some banks even offer welcome cash bonuses after you open an account.
The bottom line
If your current bank account doesn’t offer these five features, it may be time to make the switch.
Remember to consider your personal financial goals and preferences when choosing a savings account. By keeping these five features in mind, you can select an account that aligns with your needs and helps you reach your savings goals.
Opinions expressed are author’s alone, not those of any bank, credit card issuer, or other entity. This content has not been reviewed, approved, or otherwise endorsed by any of the entities included in the post.