In the old days, choosing a bank wasn’t that difficult. You simply picked the bank closest to where you lived or worked. You got to know the tellers and managers, and you kept your savings and checking accounts there. When it was time to buy a home, you may have even applied for your mortgage there, too.
Times have changed. Although banks would love to keep more customers in house, many of us go to one bank for our checking account, another for savings, and two or three more for our credit cards and other loans. Such is the reality of a competitive marketplace.
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➤Checking accounts
Your primary banking relationship is most likely where we keep our checking account. It’s the bank or credit union we interact with most often: Depositing paychecks, paying bills, and withdrawing cash. You want this kind of account to be:
Convenient
Can you easily get cash — either at branches or via free ATMs?
Can you make deposits — at branches or remotely with an app?
Free
Does the bank or credit union offer free checking without a minimum balance?
Does the bank charge you to use other banks’ ATMs?
Does it offer a network of free ATMs or reimbursements for using other ATMs?
As you search for a free checking account, you may find the need to compromise: the banks that are most convenient (lots of branches and advanced technology) may be the ones with fees. Smaller banks and credit unions may have fewer locations but can often offer more rewarding accounts and more personal service.
➤Savings accounts
As you get savvier with your money, you’ll come to realize that your local bank or credit union — while great for your checking account — isn’t the best place to keep your savings. That’s because:
Special online-only banks can pay up to 10 times more interest on savings accounts than local banks.
If you keep your savings alongside your checking account it can be tempting — and far too easy — to dip into your savings more often than you should.
➤Certificates of Deposit (CDs)
Finally, certificates of deposit, or CDs can offer a better interest rate on your savings if you’re willing to commit your money for a set term, as withdrawing it early will require paying a penalty and forfeiting some or all of your interest. You can open many CDs online even if you don’t have other accounts with that bank.
➤Banking tips and important questions to ask
Before you open a new bank account, take time to understand the account you’re opening.
Ask for a schedule of fees:
Ask a customer service rep about any you don’t understand.
Take note of any requirements to get the accounts benefits (that may be a minimum balance, a minimum number of debit card transactions each month, or that you must use direct deposit and online billpay at least once a month).
On checking accounts, decide whether you want overdraft protection:
This service that will allow your debit card to work even if you have insufficient funds in your account, but at a high price — up to $39 per transaction. It may be embarrassing to get your card declined now and then, but it can save you hundreds a year if you tend to let your bank balance get low frequently.
Use different accounts for different purpose:
Although more bank accounts means more paperwork and another password to remember, using two or more bank accounts to segregate your money can actually make managing money easier because you’ll always know what money is available to spend and what money is set aside.
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