I Want to Set Up a Savings or Checking Account

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Explore your banking options: large commercial institution, online bank, community bank or credit union.

There’s no one perfect bank for anyone, but keep these guidelines in mind to help you find the best one for you.

First, consider how comfortable you are with online banking. Online banks, which don’t need to pay the costs of running brick-and-mortar branches, can pass those savings on to their customers in the form of lower fees and higher interest rates (technically called Annual Percentage YieldsAn Annual Percentage Yield is essentially the rate at which the account accrues compounding interest over the course of the year. As of early 2012, average APYs on savings accounts are running low—less than 1% in some cases—but historically they’ve been much higher.). If you don’t think you’ll need to sit down with a a banking representative and you don’t need the ability to walk into a branch and exit with a cashier’s check, we recommend an online bank.

If you think you need a physical bank, look into small banks near you, or credit unionsA credit union is a member-owned, not-for profit cooperative that gives its members a direct say on its business model. This is why fees are generally lower and interest rates are higher than large commercial institutions, which answer to a board of investors. for which you are eligible. (Read more about credit unions here.) These financial institutions tend to offer higher APYs and lower fees than larger commercial banks. If you decide to go with a community bank or a credit union that you haven’t heard of before, and you’re wondering about its customer service, visit the Better Business Bureau website to see if a bank you are considering has received any major and/or recent complaints on file.

However, if you’re anticipating moving or also need wealth management services, you may want to open an account at a big commercial bank that has more national and even international branches and ATM machines, and which may offer more services than just savings and checking accounts. The BBB also provides information on specific branches, which can prove helpful if you’re trying to vet a large commercial institution at a local level.

Browse and compare accounts on Savingsaccounts.com and/or Bankrate.com.

On these websites, you can shop for accounts at different financial institutions based on the interest rates and benefits they currently offer. Savingsaccounts.com focuses solely on online savings accounts, but both sites list:

  • Traditional savings accounts: A savings account that promises to hold your funds secure and provides modest interest on your money. It usually does not allow you to write checks or pay for transactions with that money, and often limits the number of withdrawals you can make on the account within a month.
  • Certificates of deposits: A certificate of deposit is an investment that may provide higher returns than a regular savings account but requires you to lock your money up for a set amount of time, usually between three months and five years (you’ll pay a penalty if you take the money out earlier). As of early 2012, interest rates in CDs are only negligibly higher than in savings accounts and money market accounts, so we don’t recommend locking up your money just to snag a slightly higher interest rate that could be easily wiped out by the early withdrawal fee.
  • Money market accounts: A money market account pays a higher rate of interest, often in exchange for larger deposits (usually at least $500, though many online banks have no minimum) and a limited number of transactions per month. Some of these accounts also come with the ability to write a check from them, unlike traditional savings accounts.

When conducting your search, try to keep your checking and savings accounts at separate banks since keeping them separate will make it harder to transfer money from savings to checking and will help you save.

Map out how close a bank’s branches or ATMs are to your home and office.

While narrowing down your choices, look for banks that have branches or ATMs near you. Out-of-network ATM fees generally run between $2 and $3 a withdrawal. Sometimes you can get hit by a fee from your bank and the ATM network you are using, leading to a double charge. As such, it’s a good idea to make sure the financial institution you are considering has branches or ATM kiosks in your area.

Look for these features in a checking account.

These are the most important criteria you should consider when deciding between checking accounts:

  • Free checking with no strings attached
  • No minimum balance so you can keep as much as possible in your savings account
  • No penalties and no fees for transferring between checking and savings
  • No or low ATM fees
  • A minimum opening balance you can afford
  • The highest interest rate you can get

Many banks offer free checking as long as you set up direct deposit into the account, and online banks often reimburse customers for ATM fees. Beware of fees for cash advances and to stop payments on checks. To find out what other fees the account might be subject to, ask your bank or look at the deposit account agreement on the bank’s website. Another perk on a checking account is a debit card that offers rewards on purchases. But many banks have been abandoning their debit card rewards programs due to new federal laws limiting how much banks can charge merchants when customers swipe their debit cards. However, some online banks still offer these types of products. PerkStreet Financial, for instance, lets its customers earn up to 2% back on their debit card purchases.

Look for these features in a savings account.

These are the most important criteria you should consider when evaluating savings accounts:

  • A high APY
  • The ability to subdivide your savings into separate accounts for your emergency fund and shorter-term goals
  • No fees for making transfers to checking
  • A minimum opening balance you can afford

When looking at interest rates, keep in mind that they fluctuate, so if the interest rate on your account drops a month after you’ve opened it, just keep calm and carry on. We recommend sub-accounts, which are popular at online banks such as ING, Ally and SmartyPig, because they can help you budget and save for specific spending categories or purchases. For example, if you have $15,000 in your savings account, you can put $2,000 in a travel account and $13,000 in emergency fund. Some banks such as Bank of America and other regional banks are also rolling out a new feature that rounds every debit card purchase up to the nearest dollar, putting the extra change into a savings account for you. This feature is good for people who feel like they can never save anything, but it won’t make as great an impact for people who are already saving.

Once you’ve narrowed down your choices, check to make sure the banks are all FDIC or NCUSIF-insured.

This insurance is important because it protects your money should the financial institution run into money woes later on. The Federal Deposit Insurance CorporationThe FDIC will insure your money up to $250,000 per account per person. Joint accounts will be insured up to $500,000, so if you hold an individual and joint account at the same bank, up to $750,000 of your money will be insured. (But if you hold two individual accounts at the same bank, only $250,000 will be insured.) Those who need more coverage should open another account at a different bank or a joint account at the same bank. backs bank deposits, while the National Credit Union Insurance Fund backs participating credit unions. You can check whether your bank is insured on the FDIC’s website and find out which credit unions are covered on the National Credit Union Association’s site.

Learn about the bank’s overdraft protection policies.

Overdraft protection is a service offered by banks to pay for your charges when your bank account is too low to cover them. This service is provided in a variety of ways. Most banks elect to use their own money to cover the charges or allow customers to link their debit cards to other accounts they have, such as a savings account or credit card, to cover unwitting overdrafts. Other banks offer to extend a line of credit to the customer that can be utilized whenever an overdraft occurs.

While they differ in the details, all types of overdraft coverage are accompanied by a fee, whether it’s a flat fee or an interest rate-based fee. Other fees can be incurred if you don’t shore up the accompanying account or credit line.

Luckily, federal law mandates that banks ask their customers to opt in to overdraft protection for ATM and one-time debit card transactions instead of enrolling them by default. You should pass on this option and be denied overdrafts in lieu of being charged. However, banks are still legally permitted to charge overdraft fees if a customer bounces a check or links a recurring debit card charge, like a monthly gym membership, to their checking account. Ask your bank of choice when it will approve an overdraft charge and how much the transaction will cost so you are clear on how these fees can be avoided.

Inquire about new account bonuses.

Many financial institutions intermittently offer bonuses of $100 or more to new customers who deposit a certain amount of funds into a new checking or savings account. These bonuses may be advertised on a bank’s website, but it doesn’t hurt to ask the banker if a promotion is available when you don’t see one publicized. Some banks also offer sign-on bonuses for friend referrals, though these are generally less lucrative.

Check to see if the account entitles you to a better deal on other banking products.

Often, banks offer better interest rates on a car loan or mortgage when a customer has a checking or savings account with them. They also may offer better rewards on a credit card. Ask a bank if these benefits are associated with their checking or savings accounts. It could save you some money on an existing loan or prove useful in the future when you are in the market for one.

Assess a bank’s online capabilities … especially if you’re tech-savvy.

Tech is taking over at most financial institutions, but you should still check to see if a bank is up to date with its offerings. Ask a banker what she or he offers in terms of online bill pay, paperless statements, budgeting tools and mobile payment options. You should have your banker sign you up for many of these services at the time of opening the account.

Find out if there are fees or limitations that apply to closing the account.

Many banks charge early closing account fees, typically around $30, if you close the account between 90 and 180 days of opening it. Other banks may require you to visit a branch to close the account. It’s a good idea to ask what restrictions apply to these closures so you don’t wind up losing money or time should you need to switch banks due to unforeseen circumstances.

Open the account!

Different banks may have different requirements depending on the account you’d like to open, but the following items are pretty standard:

  • Proof of age: You’ll need to prove your age when opening a bank account. A driver’s license or state-issued ID card that shows your birthdate are common options.
  • Proof of residence: If you’re opening the account in person, bring in a copy of a utility bill that has your mailing address printed on it. This is used to verify your address and ensure you are who you say you are. If you’re opening an account online, you’ll just need to type in your address.
  • Proof of legal status: To show that you’re a U.S. citizen, have either your Social Security card or U.S. passport available to prove your status.
  • Your initial deposit: Most banks require that you provide them with the minimum deposit required upon opening an account.
  • Available time: Unlike a casual trip to the bank to withdraw money, opening a new account takes some time. Banks need to carry out standard paperwork and conduct approvals, so plan to spend 30-60 minutes with the service representative.

If you’re opening an online savings account, the bank may make some small deposits into your checking account and have you verify the amounts deposited. That way, it can confirm your identity and match the savings account to your checking account.

Once the account is open, fund it with at least the minimum balance required, and you’re all set!