How to Choose a Bank Account: Crucial Considerations

Banks offer a great amount of deposit accounts, and knowing which one is best for your financial situation can be difficult. We broke down some of the most common accounts offered by banks -- checking, savings, money market, and certificate of deposit (CD) accounts -- going over why you might want to choose one over the others. Once you narrow down your search, you should use the benchmark figures we provide below to decide between different offerings of a single account type.

When deciding which bank account is best for you, consider the following factors:

If you…

Consider Choosing...
Need to access your money frequentlyChecking Accounts
Have high volumes of savingsSavings Accounts
Plan to leave your money untouchedMoney Market Accounts, CDs

Why You Might Want to Open a Checking Account

Checking accounts are designed to give customers the greatest convenience and accessibility. Customers are permitted to access the money within these types of accounts at all times. While some banks will offer special rewards checking accounts that earn slight interest, the majority of these types of accounts are non-interest earning. Therefore, if you have high volumes of savings, it’s not advised to leave the bulk of your savings in a checking account as you will be forgoing a lot of potential interest that could be earned should your money be stored in a different type of account. While your money is accessible at all times, most banks will still charge you fees if your balance falls below a certain threshold. If you are a student, look for banks with special student-specific checking accounts. Many of these waive minimum balance requirements and monthly fees.

Another major benefit of checking accounts worth mentioning is access to checks. Individuals with checking accounts can order checks -- however, these usually come with a fee.

Checking Account Considerations:

  • Many rewards checking accounts offer interest from a range of 0.01%-0.03%
  • Standard monthly checking account fees range from $5-$15 dollars
  • Rewards checking account monthly fees typically range from $25-$35.

Why You May Choose to Open a Savings Accounts

Savings accounts are designed for long-term money storage. The funds in your savings account are also fairly easy to access, just not to the same extent as money in your checking account. After all, per FDIC regulations, savings accounts are generally limited to six transactions per month. However, unlike most checking accounts, savings accounts bear interest. Each bank will offer slight variations in interest rates. While the interest rates on standard savings accounts currently hover around 0.01% at brick-and-mortar banks, most banks offer higher rates to customers who have larger quantities of cash stored. The interest rates on these high level savings accounts typically vary much more than the interest rates on standard accounts. Be sure to examine the rates of different savings tiers closely. Furthermore, for even higher interest rates, look into online banks which typically offer more competitive interest rates on standard savings accounts.

Savings Account Considerations:

  • The average interest rate on standards savings accounts is around 0.01%
  • High-yield savings accounts are typically tiered from $10,000-$100,000+ with rates ranging from 0.03% up to 0.20%
  • Standard savings accounts have monthly fees around $5
  • High-yield savings account have monthly fees around $15

Choosing a Money Market Account

Money Market accounts generally earn an even higher interest rate than basic savings accounts. Like savings accounts, they are generally limited to six withdrawals per month as well. This combined with the higher minimum balance and deposit requirements generally makes the money in MMAs even less accessible. The interest rates offered on Money Market accounts across different banks are fairly varied, affecting the amount of money you may earn at each bank. Keep in mind that in some cases, there may be a ceiling on money market interest rates once you reach a certain deposit amount. Online-only banks typically only offer one type of money market account with a flat interest rate. However, this rate can be even more competitive than the rates on premium brick and mortar MMAs.

Money Market Account Considerations:

  • National average interest rate for MMAs with balances $100k is 0.11%
  • Average interest rates for online MMAs is 0.85%

When You Might Want a Certificate of Deposit

CD Accounts are great for individuals that have extra money that they have no immediate use for. They typically offer some of the highest interest rates of any deposit account, meaning you can grow your money fastest through them. However, these higher rates come with the caveat that the money in these accounts are locked away for the given term period. Generally, the longer the term length and the more money you deposit, the higher your interest rate will be. If you break your term agreements and withdraw money early, you will most likely be penalized a certain number of months’ of interest.

CD Considerations:

  • Average range of rates for 1 year CD’s: 0.05%-0.20%
  • Average range of rates for 2 year CD’s: 0.10%-0.30%
  • Average range of rates for 3 year CD’s: 0.20%-0.45%

Why You Might Want to Open Multiple Accounts with One Bank

Banks often reward customers that hold multiple accounts with them. One of the most common examples are increased interest rates for having a linked checking and savings accounts. Having a linked money market and checking accounts can also lead to a boosted interest rate. These interest rates vary depending on the bank and the amount of money on deposit.

Multiple Product Holder Considerations:

  • Linked checking and savings accounts typically have a range of interest rates from 0.03%-0.20%
  • Linked checking and money market accounts typically have a range of interest rates from 0.03% - 0.40%

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