How to Compare Different Types of Accounts
Things can get a little overwhelming when deciding which checking, savings or money market account is best for your specific situation. The good news is that, with all the options, finding an account that fits just about every type of need, is easier than ever.
Start by thinking about how you are going to be using the account. If, for example, you are going to be using the account for day to day spending needs, then you can mark money market accounts and most types of savings accounts off the list.
As another example, if you want to be able to go into a local branch and speak with someone in person, then you can cross online banks, which can offer higher returns, off the list and focus on brick and mortar banks with branches local to you.
If you are going to need to go to the ATM a lot for withdrawals, you want to make sure there is a convenient ATM which is owned by your bank nearby, as the bank fees that you are charged when using other bank’s ATM’s are generally high and can add up quickly.
Lastly, in order to earn the advertised rate of return, some accounts require things like minimum balances, which you want to make sure you are going to be able to meet, before adding them to the list.
Once you know the features you desire in your account, you are able to better narrow down the accounts that are out there based on yield. Most accounts (including all the accounts advertised on this site) advertise the average percentage yield (APY), which is the interest rate you will earn on the account, including any compounding.Once you make sure you are looking at the APY, then this part is as simple as looking for the highest APY available.
One important thing to keep in mind is that the APY on checking (if any), savings and money market accounts are variable, and set by the institution where your account is held. With this in mind, you want to make sure that when finding a high rate that the rate will remain consistently high over the life of the account.
Before making your final decision, you want to make sure that you understand what fees are going to be associated with the account. Below is a list covering the types of fees that you will often run across when comparing accounts:
Monthly Fee: Some accounts charge a monthly fee simply for maintaining the account. Sometimes when a bank charges account holders a monthly fee, it can be avoided by setting up direct deposit with that account.
Minimum Balance Fee: Some accounts charge a monthly fee if you drop below a specified minimum balance.
Non Sufficient Funds Fee (NSF): Many accounts charge a fee if you write a check or use your debit card for an amount , which is above the amount you have in your account.
ATM Fees: When using your debit card to make an ATM withdrawal at an ATM which is not owned by the bank where your account is held, you will almost always be charged a fee by the bank who owns that ATM.
Although less common, sometimes the bank where your account is held will also charge you a fee for using an ATM that is not owned by that bank. In these cases you are actually paying two fees for using the ATM, the fee that is charged by the bank which owns the ATM, and your bank as well.
Often times, in order to earn and keep your business, financial institutions will offer certain incentives such as money for opening your account or moving your account from a competitor. Some institutions also offer a special introductory APY for the first few months which is higher than the rate offered to existing clients.
As a result of new regulation which lowers the fees that banking institutions can charge merchants when customers pay using their debit card, many banks have stopped offering rewards based on money spent using debit cards. Because of this, generally an analysis of debit card reward programs is not normally necessary.