Finding the right savings account these days isn’t as easy as it used to be. It seems the days are gone in which you could just walk into the local bank, tell them you wanted to open a savings account, plunk your money down, and leave happy with a good interest rate and a free toaster.
At most banks, you now you have the choice of a variety of savings account options, must watch for hidden fees lurking around every corner, and can’t even be sure your bank will be around when you wake up the next morning. And while you might try your best to be selective regarding your bank, and read all the forms regarding the account options, you still might not be happy with the account once you’ve chosen it. Therefore, be wary, open a savings account with your eyes open, and consider the following pitfalls when choosing a savings account.
1. Choosing the First Bank You Find
If you’re truly looking for great savings rates from a reliable bank, you’ll likely have to do a bit of shopping around first. By doing your homework online, reading customer reviews, calling the bank directly, and understanding the terms and conditions regarding various accounts before you sign up for anything, you can save time and costly mistakes.
2. Low Interest Rates
Be on the lookout for poor rates offered by your own bank – always shop around! To ensure you are getting the best deal, consider visiting websites like Bankrate in the USA, Money Supermarket (UK) or Money Compare (AUS) and similar sites where you can compare various banks around the country or online. Websites such as these can give you an idea of which banks are most competitive, and what average rates are looking like in and around the area in which you live. Don’t jump the gun just yet though. Avoiding a poor savings rate isn’t the only pitfall to avoid during your search for a great savings account.
3. Minimum Balances
Having a minimum balance can be costly if you aren’t aware of the associated fees or don’t keep a close eye on your savings account. Ensure that you understand the minimum level of money you must keep in your savings account to keep it over the low balance level and avoid fees. Many of the higher limit savings accounts offer better interest rates, but if you go under that minimum balance level, you may be charged a fee or your interest rate could drop dramatically.
4. Fee Structure and Restrictions
Minimum balance fees aren’t the only charges banks might hit you with regarding your savings account. Costs for cashier’s checks, wire transfers, and other special account services like obtaining a paper statement, can eat up any profits you might be making from your bank accounts. In fact, such fees can greatly reduce or completely negate the interest amounts you are earning on your savings account if you aren’t careful. You must also watch out for penalties regarding the number of transactions allowed on your savings account each month.
5. Bank Accessibility
While the location of your bank might not seem like a big deal when considering where to open your savings account, it can make a difference. If you are not comfortable doing your banking online, driving across town to do business with your bank can cost you more in gas than you are making on savings interest. But the physical location of your bank is not the only issue when it comes to accessibility. When banking online or by phone you must also consider the availability of customer service representatives and similar factors. Being tied up on the phone or having issues with a bank’s website can be costly in time as well as money.
It is imperative that your investment is protected by the government. This however does not mean it won’t be a pain to try to get the money from your savings account if your bank fails, but placing your hard earned savings in a bank that doesn’t participate in a government backed protection scheme is just silly after what happened in the credit crunch.
About Your Author
Kris works as a writer for Money Compare, an Australian money comparison website that offers a broad selection of products including a choice of online saving accounts and term deposit accounts that help people save some more money. Apart from his work, Kris enjoys sports and reading books and other blogs online.