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How to Compare Savings Accounts to Find the Best Fit for You

Struggling to make sense of fees, balance requirements and interest rates across savings accounts? Here's how to find the right one.

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Saving money is the foundation of financial success. If you can learn how to stash away your cash, such as a portion of your paycheck, you’ll establish a habit that will help you build your finances, so you have money saved for a rainy day, an emergency or to be able to put a down payment on a lifetime expense such as a home. However, your financial well-being isn’t simply about knowing how to save -- it’s about knowing where to put all your cash. 

Right now, most Americans aren’t making the smartest decisions with their savings accounts. According to recent research from CNET’s sister site Bankrate, around 80% of savers are earning subpar interest on their deposits -- that includes 16% of savers who aren’t earning any interest whatsoever. That’s a big misstep, considering that savings rates have soared over the past year. 

If you’re looking for a new place to store your hard-earned dollars, read on to know how to compare savings accounts to find the best pick for your personal finance goals. 

Savings and CD rates are changing rapidly across banks and accounts. Experts recommend comparing rates before opening an account to get the best APY possible. Enter your information below to get CNET’s partners’ best rate for your area.

How to choose the right savings account

Before you start delving into account details, make sure that the savings account is from a bank that’s federally insured by the Federal Deposit Insurance Corporation or by the National Credit Union Administration. Such insurance will keep your savings -- up to $250,000 per person, per financial institution, for each account owner category -- in the unlikely event of an institutional failure. Once you know that crucial piece of the puzzle, follow these five steps to find a savings account that will fit your needs and help you grow your money.

  1. Look at the monthly fees and minimum balance requirements. Here’s a simple rule to get you started: Don’t pay to park your money. Some savings accounts charge hefty fees, anywhere between $10 and $25 a month. In many cases, they can be waived in exchange for maintaining a minimum balance. If, however, you’re willing to extend your search to some lesser-known or local institutions, you can find low balance requirements or none at all. In fact, seven of the 11 CNET’s picks for the best savings accounts have no minimum deposit.
  2. Explore the deposit capabilities. Depositing money needs to be easy. After all, regular contributions are what will help grow your savings. Look at the bank’s mobile app and online offerings to see how convenient it is to put money into a savings account. If you use cash on a regular basis, you’ll need to find a bank or credit union with a network of fee-free ATMs. However, if you deal with direct deposits and the occasional check, you don’t need to worry about paper bills. 
  3. Look for high-tech tools. Outside of physically depositing money, be sure to compare new tech features from a bank or credit union that can help you budget better and help you identify opportunities to save more. Some banks and credit unions more than others have the ability to invest more in new technologies.
  4. Review excessive transaction fees. In addition to being able to put money in, you may need to take money out. Most banks and credit unions will charge an excessive transaction fee, which usually kicks in after the sixth withdrawal in a statement cycle. While you should be limiting withdrawals from a savings account, make sure that the fee structure of your bank or credit union won’t eat into your savings.
  5. Compare APYs. The higher the APY -- which stands for annual percentage yield -- the more money you’ll earn. Some online banks have upped the APY on their savings accounts into the 5% range, while most big banks still pay nominal, yet lackluster, rates of around 0.01% APY. 
  6. Compare relationship benefits for your other financial needs. If you’re planning to buy a new car or a new house, be sure to look at a bank’s benefits for existing customers. In some cases, you may be able to score some extra savings on these other products simply by opening a savings account. 

Things to avoid when choosing a savings account

Choosing a new savings account can be a bit confusing. Don’t let the maze of different interest rates, fee structures and minimum balance requirements cloud your thinking. Be sure to avoid these common mistakes.

  1. Opening a new savings account based on a sign-up bonus. Banks want new customers, and some of them will offer sign-up bonuses for opening a new savings account. Getting an extra few hundred bucks on the spot is a great benefit, but this shouldn’t be your primary motivation. A savings account is for the long term. Don’t worry about the instant gratification of seeing that sign-up bonus land in your account, but rather focus on the features of the savings account that will make a meaningful impact on your finances.
  2. Automatically opening a savings account at the same place as your checking account. While it can be convenient to have your checking account and savings account under the same roof, it’s not necessary. Cast a wide net across various banks and credit unions in your search for the right savings account for your needs. Consider, for example, online-only banks where interest rates tend to be much higher and fees tend to be much lower.
  3. Focusing solely on the APY. Sure, the amount you can earn from interest should be one of the most important factors when shopping for a savings account, but don’t let a supersized interest rate distract you from other considerations. If, for example, you open a savings account with a 5.00% APY and a $5,000 monthly minimum account balance, but then have trouble hitting that monthly minimum, you’ll likely be slapped with a service fee.
  4. Putting too much money in your savings account. Scoring a high savings rate in a savings account is great. But to make the most from growing your savings, you should consider diversifying your money in various investments, depending on your age and your risk tolerance. This can include so-called safe investments such as CDs and mutual funds to riskier, higher-interest earring options such as high-yielding stocks. Most experts agree that the stock market delivers an average annualized return of 10% over time (the key phrase here is “over time” as the market can fluctuate wildly over the short term), so you’ll need to be strategic about how much is in your savings account and how much of it you want to put in other, potentially riskier investments.

Types of savings accounts

As you compare your options, it’s important to remember that there are different types of savings accounts that offer different structures and benefits.

  • Standard savings account: The most common type of savings account is the most straightforward. You’ll find standard savings accounts at just about every financial institution. Such account features as fees, minimum deposits and interest rates vary widely, so be sure to carefully evaluate these features and read the fine print for their terms. 
  • High-yield savings account: As the name suggests, you’ll earn a much higher yield with this account than you would with a standard savings account, which is currently more than 10 times the FDIC’s national savings average of 0.42% APY. Rates still vary, though, so start by combing through the best high-yield savings accounts to find an account that will meet your financial needs while delivering the greatest earning potential. 
  • Certificates of deposit: CDs are savings accounts that pay interest for a set period of time. The key difference from a savings account is that the interest rate is fixed, so rates won’t be prone to fluctuating as they would with savings accounts during the CD’s term. However, taking money out of a CD isn’t as convenient as it is with other savings accounts. Traditional CDs come with early withdrawal penalties, so be sure you’re comfortable locking up your money for the duration of the CD’s term. 
  • Money market account: Generally speaking, money market accounts are a cross between a savings and a checking account. Some MMAs come with a debit card and/or offer check-writing privileges, so you can use them easily for making payments. While the top-yielding money market accounts pay competitive rates, it’s important to note that even though you can make payments from these accounts, many still have excessive transaction fees.

How to open a savings account

Once you find a savings account that meets your criteria, it’s time to open it. In most cases, that process can happen online, but some institutions may require that you open an account in person at a bank branch. Before you click on any buttons to submit an application online, or set up an appointment to talk to a banker, gather your personal documents including your government-issued ID (typically a driver’s license) and Social Security information (you’ll need to share your address and birthdate as well). Also, have the account name and routing numbers of a checking account that can help you make an initial deposit into the new savings account.

The bottom line

As you work to develop a strategy to save money for the future, you don’t have to put all of your savings in a simple savings account at the bank where you have your checking account. Cast a wide net and find a savings account that best meets your financial needs and can pay you more interest and charge you fewer fees to put yourself on a path to greater financial success. Once you open a savings account, it may make sense to have multiple savings accounts to help you attain your financial goals.

David McMillin writes about credit cards, mortgages, banking, taxes and travel. Based in Chicago, he writes with one objective in mind: Help readers figure out how to save more and stress less. He is also a musician, which means he has spent a lot of time worrying about money. He applies the lessons he's learned from that financial balancing act to offer practical advice for personal spending decisions.
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