Not all bank accounts are equal. If you don't know what to look for in a bank account, you could be taken advantage of and not even realize it. Whether you open a bank account at an online bank, credit union, or your local branch, know what to look for before committing and moving your hard-earned money there.
Opening a checking or savings account requires a bit of due diligence if you want to save money on fees, earn interest, and make the most of your new bank account.
Know the Monthly Fees
The phrase "free checking" is so commonly advertised these days that you might believe that most bank accounts don't charge monthly fees. Believe it or not, most banks do charge fees for their bank accounts – and it catches many people off guard when they get their first statement.
If you aren't sure if you pay a fee, check your bank statements – you might be in for a surprise. If you see a line item similar to 'monthly maintenance fee,' you're losing money.
Checking account fees are the most common, but savings accounts often charge monthly fees as well.
Why? That's one way banks make money. They charge you for not meeting the minimum balance requirement or not getting your paycheck sent by direct deposit. Many account holders don't meet the requirements and pay a monthly fee because of it.
So how do you avoid bank fees? Take your business to a bank that doesn't charge them!
Read the fine print and see what your bank charges. Most offer one or more ways to avoid their monthly fee. Make sure you can meet the requirement before opening an account. If you can't, it might be time to find a better bank.
For example, if the bank requires a $5,000 average daily balance to avoid the monthly fee, and your balance is nowhere near that, it's time to look elsewhere. Plenty of banks don't have checking account fees or minimum balance requirements – and would be happy to have your business.
Know the Interest Rates
With the Fed lowering rates to next to nothing, don't expect to earn much interest on your bank accounts, but even a little interest is better than none.
Many banks offer tiered interest rates (especially online banks). You earn minimal interest for low balances, a higher rate for slightly higher balances, and the top tier for the highest balances. Make looking at interest rates at the top of your list when wondering what to look for in a bank account because it helps your money grow.
Online banks usually offer more competitive interest rates, but always read the fine print and know the requirements you must meet to earn the highest interest rates.
Watch for ATM Fees
Being charged to access your own money seems, in principle, completely unfair, but banks do commonly charge ATM fees for both checking and savings accounts. The amount of the fee, or whether you pay one at all, varies from one bank to the next, so don't assume you're stuck paying one.
These days, people are using cash less often, but you'll want to pay attention to these fees if you frequently use ATMs. Generally speaking, the bank won't charge you as long as you use an ATM they own, but that isn't always the case.
If you withdraw cash from an ATM outside of their network, odds are you'll pay two fees: to your own bank AND to the bank whose ATM you use. That's a lot of fees to access your own money.
Before you open an account, ask which branches are included in the ATM network and look at a map to see where you could access your money. If their ATMs aren't conveniently located, you'll likely end up paying ATM fees.
Make Sure the Bank is Insured
Unless you know what you're doing, you shouldn't deposit money to any bank account that isn't FDIC insured. The Federal Deposit Insurance Corporation insures every depositor up to $250,000. FDIC insurance guarantees that if the bank closed, you wouldn't lose your money. Without FDIC insurance (or a National Credit Union Share Insurance Fund), you could lose the entire amount deposited in your bank or credit union account.
These days, having an easy-to-use mobile app is expected of any bank account. Most banks today offer some online access, but no two banks are the same. If you prefer mobile deposits, for example, you need a bank with a robust mobile app. But if you prefer to do online banking and use a bank's Bill Pay service, you should focus on its online offerings.
Again, make sure you're aware of the account fees the bank charges for any of these services. Don't assume they are free – those account fees can sneak up on you and eat away at your funds before you realize it.
Look for Bonuses and Account Offers
Banks spend a lot of money on acquiring new customers, and for this reason, many banks offer a sign-up bonus to entice you to switch banks.
Why not earn a little bonus when you open an account? Look online to find the best deals – many banks offer a prepaid Visa card bonus or a deposit to your bank account just for signing up.
Make sure you read the fine print, so you know how to get the deal. For example, some banks require you to deposit a certain amount within the first month or so, while others require you to make a certain number of ATM purchases within a specified period.
Do you Know What to Look for in a Bank Account?
Figure out what is most important to you when considering what to look for in a bank account. For some, the monthly fee is the most important, yet for others, it may be the ATM fees or the bank's features.
Comparison shop (this is easy to do online) and find the bank that meets your needs. With a large number of online banks available today, it's easier than ever to find a bank that meets your banking needs.