Before taking your money to the nearest bank to start a savings account, you might want to look into its interest rates at first. It’s usually the banks that operate primarily online have the highest APY and lower fees. The national average is around 0.9%, but if you take the time to compare savings account rates online, you’ll very likely find a good bank with around 2% APY. With this kind of rate, a balance of $5,000 would mean an extra $100 per year.
Why do banks pay interest to customers with savings accounts? Well, they do need money to operate since they are banks, so they reward customers who let them keep their money for a long period of time. You can access that money in the case that there is an emergency. However, some banks have limits on how many withdrawals you make from your savings accounts within a certain time frame, usually a month or year.
While earning interest is the main reason people choose to create savings accounts, there is also the benefit of being better able to manage money and provide more financial security for your family. Also, if you have a checking account, opening up the savings can serve as a backup.
Compare Savings Account Rates and Minimum Deposit
When you compare savings account rates, you’ll need to check the account’s minimum deposit requirements and balance requirements as well. Will you be required to put in a certain amount of money in order to qualify for the APY? With some banks there is an introductory APY that is only for a short period of time, after which you’ll be required to continue making deposits of a certain amount of money in order to continue enjoying that APY. Otherwise, it will go down. Some online banks might even charge you a fee if the monthly balance falls below a particular amount.
What about having multiple savings accounts? There is no rule that says you have to have just one account. It could be a solid financial strategy to open a few different ones with different banks with a smaller amount rather than put a large amount in a single bank if it would mean you could earn more in interest. Of course, it’s going to take some research, evaluation, and calculation to determine this.
It’s ultimately up to you whether you want to keep the process as simple as possible or want to try a strategy that will earn you the most interest back when you compare savings account rates. If there is one bank worth starting with, it’s CIT Bank. It offers excellent customer service, charges no unnecessary fees, and has a daily compounding interest to maximum customers’ earning potential – especially for those with a “Savings Builder” account.