Withdrawal limits and penalties
All savings accounts are limited to six withdrawals or transfers per month by Regulation D. After that, it’s up to the bank to decide how much it’ll charge you per transaction. The bank can also close your account or convert it to a checking account if you make excessive withdrawals or transfers. Other penalties to consider when opening a savings account include:
- Minimum balance fee
- Overdraft fee
- Extended overdraft fee
- Return-item fee
- Account inactivity fee
- Early account closing fee
Is it better to save with a bank or a credit union?
While there are some compelling reasons why it’s better to go with a credit union over a bank — lower fees, higher interest on investments, more personalized service — the choice is ultimately up to you. With banks, the money in your savings account is FDIC-insured up to $250,000. Credit unions have similar insurance through the NCUA. Before you invest, verify that your institution is a member of either of these two entities.
If you’re simply trying to get the best rate, there’s really no reason not to go with either a bank or a credit union. But you’ll also want to look at the minimum amount needed to open the account (and make sure you have that to invest), and you’ll want to make sure you meet any requirements needed to join the credit union. In some cases, you may need to shell out $10 to $30 to join an organization and become a member.
Pro tip: Do the math, and make sure it’s worth it based on the return you’ll be getting. Sometimes, after you subtract the membership fee, the amount you’re making will be less than what you could have made at an institution with no fees but a lower rate.
Is it better to open a savings account with a brick-and-mortar or online institution?
Having a personal relationship with your banker has its benefits. Therefore, if you have the option between two financial institutions, everything being equal, choose the brick-and-mortar option. However, all things are rarely equal. In fact, in many cases, you’re going to get some of the best rates from online-only institutions. Don’t let that be an impediment. In most cases, you’ll have plenty of online options for accessing your account and your money.
And if you go with a credit union, consider shared banking as an option — you essentially do your banking at a credit union near you as if it were your financial institution, but keep your accounts with the other credit union.
How often do rates change on savings accounts?
The Federal Open Market Committee holds eight meetings each year to discuss economic conditions and adjusts interest rates accordingly. If and when the committee adjust rates, financial institutions may follow with an adjustment to their savings account rates, but it’s not necessarily going to happen quickly.
Banks and credit unions also use savings rates to attract customers. That’s why you’ll see special and limited-time offers that sometimes beat the highest rates available — lenders are courting your business.
Before you commit, ask about the regular rate to get an idea of what you might earn after the promo period ends.