How to choose the right savings account

Savings accounts come in a variety of flavors, differing by interest rates, fees, liquidity and digital innovation. If you’re looking to open a savings account, you’ll want to consider all of these different elements, which we’ll explore below.

Here are six questions to ask yourself that can help you settle on the right savings account.

1. Do you prioritize branch access or high APYs?

There’s usually a trade-off between branch access and high yields on savings products. If you’re looking to get the highest annual percentage yields (APYs) on your savings, you’ll want to explore online, high-yield bank accounts. Because they don’t have the cost of running physical branches, online banks can offer a higher payout on customers’ savings.

Online savings accounts could be a good fit for those who are comfortable using digital services, want high yields and prefer the convenience of doing all their banking from home on the computer. Though online banks don’t run branches, they still typically offer ATM access through partnerships with large ATM networks.

On the other hand, traditional banks with branches give you the opportunity to interact face-to-face with bank employees. Traditional banks also tend to offer a wider range of products and services, including loans, credit cards and financial advisory services, and they may also allow you to manage the account online. However, their savings products will likely have much lower APYs than what you’d get at an online-only bank.

2. Are there any fees/minimum balance requirements?

While there may be fewer fees to worry about with a savings account than a checking account, many savings accounts charge a monthly fee. A monthly fee shouldn’t deter you immediately, though. What’s important is that you can meet the requirements to avoid incurring the fee.

Some of the ways you can usually avoid a monthly fee are by:

• Sustaining the minimum balance requirement
• Setting up automatic transfers
• Linking to a checking account with the same financial institution

If you already have a checking account with the same bank, linking it to a savings account is a simple way to avoid the monthly fee. But it might not be a good idea to open a checking account just for the sake of getting the fee waived, since checking accounts often come with their own fees.

Meeting the minimum balance requirement is one of the easiest ways to avoid getting charged a monthly fee. Look for an account that has a minimum balance requirement you know you’ll be able to comfortably afford.

3. Do you want to link to a checking account?

While linking a checking and savings account at the same bank can help you waive the monthly fee, the accounts don’t necessarily have to be at the same bank for you to link them.

One of the benefits of linking your savings account to an external checking account is easy transfers. You can transfer money between the accounts without having to pay a lofty wire transfer fee, and sometimes you can even set up automatic transfers between the two. It also simply makes it more convenient to see both accounts in one place.

Check to see if the bank or credit union allows you to link to an external account.

4. How liquid do you need your savings to be?

Savings accounts have historically been limited to a maximum of six withdrawals per month. This is because of a federal requirement known as Regulation D, which classified savings accounts as nontransaction accounts. In April 2020, however, the regulation was lifted, allowing banks to choose how many withdrawals they’d allow on savings accounts.

Most banks still impose a limit on how many transactions you can make against a savings account, and if you exceed this limit, you’ll incur a fee. At Bank of America, for example, there’s a $10 fee per withdrawal if you make more than six withdrawals in a statement cycle.

If you want a savings account with more liquidity, there are some that have few or no limits on how many transactions you can make. For example, Ally Bank is refunding all fees charged for excessive savings withdrawals. It states, however, that this is a temporary lift on the limit.

5. Are you interested in innovative fintech options?

In addition to banks and credit unions, it might be worth exploring fintechs as options for where to open a savings account. The name “fintech” combines the terms “finance” and “technology.”

Fintech companies that offer banking products are often called neobanks or challenger banks. They aren’t chartered, but they usually partner with chartered banks to hold customers’ deposits and guarantee insurance. Some of the benefits of opening a savings account at a neobank include:

• Easy mobile and online access to banking services
• Low or no fees and minimum balance requirements
• Automated savings tools
• Free spending and saving analysis tools

Many neobanks also have a focus on different social and environmental causes. For example, Aspiration, a popular neobank, is committed to sustainability and promises to never use deposits to fund fossil fuel projects. It also allows you to donate 10 percent of any fees incurred to various nonprofit organizations.

Neobanks aren’t a good option for those who value in-person banking services, since these companies are digital-centric. It’s also important to make sure that the fintech partners with an FDIC-insured institution, so you can still have the backing of federal coverage.

6. Do you want a banking app that helps you save?

While many banks — including traditional and online banks — offer mobile banking apps, some of these apps stand out over others. Some apps offer unique features that can help you save, and this might be something worth considering when choosing a savings account.

For example, a bank’s app might come with tools to analyze your checking account and automatically transfer an amount it deems appropriate into savings. There are different ways you can customize automated savings, too, such as setting a specified percentage of your paycheck to be saved or adding different goals to be saved toward.

It’s not only strictly online banks that offer innovative mobile banking apps. Huntington Bank and Fifth Third Bank, for example, are two brick-and-mortar banks that Bankrate has found to offer first-rate savings features in their mobile apps.

Bottom line

It’s important to explore and compare different savings account options, rather than settling on an account simply because it’s at a familiar institution. When it comes to APYs, especially, there’s a large discrepancy between the average rate and the highest rates available on the market.

You might also want to consider stashing your savings at a neobank to take advantage of unique, digital savings tools. Just make sure that your money will be protected by FDIC insurance.