Savings accounts are a safe way to store your money thanks to FDIC and NCUA insurance — and you can grow that money over time thanks to interest.
There are numerous savings account options available through banks across the globe, so you might be wondering how to choose a savings account. Here are some factors you might not have considered.
How to Choose a Savings Account: Ask These 8 Questions
Before rushing to open an account at the first bank you see, ask yourself these questions.
1. Do You Need Brick-and-Mortar Locations?
Online banking is growing in popularity, and it’s easy to see why: Because of low overhead, online savings accounts can offer annual percentage yields (APYs) in the 2% to 3% range, while most traditional brick-and-mortar banks have much lower interest rates. The national average is at an unimpressive 0.09%, which would be much lower if you took online savings account rates out of the equation.
However, traditional banks offer easier access to funds and in-person support for those stressful moments where you need to talk to a real human being face to face.
2. Is a Credit Union a Better Fit?
Your community likely has at least one credit union offering savings accounts. Though credit unions have specific eligibility requirements for joining, you can likely find a way to join.
Many credit unions offer higher APYs for savings accounts and also pay dividends to their members. Not sure if a credit union is right for you? Use our guide to credit unions vs. banks to make the call.
3. How Often Do You Need to Make Cash Deposits?
The 21st century is becoming increasingly cashless, but many of us still deal in physical dollars, whether it’s from birthday cards, you’re paid in tips or you’re having a garage sale.
If you want to easily deposit cash into your savings account, choose a bank with several branches in your city or with a large ATM network. Many online savings accounts offer an ATM network to make cash deposits possible, but a big-name brick-and-mortar bank offers greater convenience.
4. How Much Do You Plan to Keep in the Account?
Savings accounts are crucial for building an emergency fund (experts typically recommend somewhere around three to six months of expenses) and for specific savings goals like a down payment on a house or car, vacation expenses, a wedding or renovations.
Compared with other saving and investment options with much higher interest rates, savings accounts make access to your funds relatively easy and without penalty.
If you intend to keep a fair amount of money in your savings account, choose an account with a high APY. If you don’t plan to touch it too often, you can be less concerned with ease of access and instead focus solely on the account with the highest interest rate.
However, if you plan to deposit tens of thousands of dollars into your account, consider instead a money market account, which will typically pay a higher APY than a traditional savings account.
Once you have reached your target savings goals, you’re probably better off investing your money. Your money will be less accessible (and may come with penalties for early withdrawal if your funds are in a retirement account), but the return on your investment will usually be much higher.
5. How Often Do You Transfer Funds?
Federal law limits the number of withdrawals from a savings account each month to six. Some savings accounts observe this hard limit, while some permit excess withdrawals for a fee. A select few waive any fees as part of their account benefits, allowing you theoretically unlimited withdrawals.
If you think you might need to occasionally dip into your savings more than six times in a month, find an account that has some leniency on withdrawals.
However, remember that savings accounts are not meant to operate like checking accounts. If you’re treating your savings account like a checking account, you’re better off choosing a high-yield checking account, so you can avoid withdrawal limits and get easier access to funds.
6. Do You Want to Have Your Checking and Savings Account at the Same Place?
If you already have a checking account with a specific bank, it may be in your best interest to open a savings account there as well. This is the most convenient way to transfer money from your checking account directly into the savings account — or vice versa. However, most banks do have a process for connecting external accounts with other banks to ease the process of transferring funds.
So why would you possibly not keep your checking and savings at the same bank? Some banks offer checking accounts with higher APYs and better features, and others have more competitive savings accounts.
If you can handle the minor inconvenience of separate banks, you should search out the best savings account that meets your needs, regardless of where you bank for checking.
7. What Rewards Can You Get for Opening a New Account?
Before you throw out today’s junk mail, take a minute to see what offers banks are sending you for opening an account. You might be surprised to see how many cash bonuses banks offer for opening a new savings account. You can also browse these rewards online.
So should you choose a savings account based on a promotional offer? That depends: If you’ve narrowed down your search to a few banks and would be happy with any of them, go with the one offering the best sign-on bonus.
8. What Do the Reviews Say?
When in doubt, read the online reviews to determine which bank offers the best customer service for its savings account, which bank has the fewest reported issues and which bank has the best mobile app. You can go directly to the App Store or Google Play to read what people think of banking on their phones with that specific bank.
But don’t forget about social media. Crowdsource opinions on banks from friends and family, who can share positive — or negative — experiences with the savings accounts you’re considering.
Ready to ditch your current savings account for a better option? Here are our favorite savings accounts.
Timothy Moore leads a team of editors and graphic designers at a market research company as his full-time gig. As a freelance writer, he writes about personal finance, careers, education, pet care, travel and the automotive industry. His work has been featured on Debt.com, The Ladders, Glassdoor and The News Wheel.