Not every account is created equal when it comes to deciding where to put your hard-earned savings. Some come with amazing interest rates and the convenience of digital access, and others operate silently and erode your balance with monthly charges.
There are a lot of banks, credit unions, and online choices out there, so it may seem challenging to figure out which one fits best. Here are some tips to compare savings accounts, so that you can maximize your returns.
Make Sure Your Money’s Protected
Federal insurance is one of the first things to check before you even begin to compare interest rates or account features. Make sure to select a bank insured by the FDIC (Federal Deposit Insurance Corporation) or a credit union insured by the NCUA (National Credit Union Administration). This insurance covers your deposits in case of the collapse of the bank or credit union.
Compare APYs
The APY (Annual Percentage Yield) defines the amount of interest your savings earn in the long run – and it is the secret of getting the most out of your money. Typically, the rates of high-yield savings accounts or money market accounts are much better than those of traditional savings accounts.
For instance, platforms like SoFi have become popular partly because of how transparent they are about returns. Many people often wonder how does SoFi calculate interest? It’s typically based on your average daily balance, compounded monthly, which means the higher your balance, the more you’ll earn passively without lifting a finger.
Consider Accessibility and Convenience
A good savings account shouldn’t make you jump through hoops to use your money. Think about how you’ll deposit and withdraw funds.
If you’re mostly digital, prioritize:
- A strong mobile app with easy transfers
- Online deposits through checks or direct deposits
- Instant notifications and account insights
However, when you still use cash regularly, you will want to have access to ATMs that have no fees around. This is where it can be convenient to select a bank that has a broad network (or reimbursement of ATM fees).
Watch Out for Transaction Limits and Penalties
Even though savings accounts are designed for, well, saving, there might be times when you need to make multiple withdrawals. Most banks impose withdrawal limits, and exceeding them can lead to excessive withdrawal fees.
Usually, after the sixth withdrawal in a billing cycle, you’ll get hit with a small penalty — sometimes $5 or more per transaction. So, when comparing accounts, look for ones that are a bit more flexible or clearly outline their withdrawal policy.
Evaluate Deposit Options and Automation
Saving isn’t a one-time event — it’s an ongoing habit. That’s why it’s important to check how easy it is to deposit money into your savings account. Does the bank support automatic transfers or direct deposits from your paycheck? Can you easily move funds from your checking account online?
The smoother this process is, the more likely you’ll stick to your savings goals. Online banks often make automation seamless, which helps you grow your balance consistently without much thought.