Banking can be complicated. There are thousands of banks, and once you select a one, disclosures and fine print can confuse even the most experienced consumer. And then there’s the rates and fees of the various accounts, which come in more permutations than Starbucks lattes.
That’s why we compiled these tips to help you save money, earn more money and save you time.
1. Re-evaluate your bank
The average U.S. adult has had the same primary checking account for around 16 years, according to a 2017 survey conducted for Bankrate and Money. A lot has changed over that time – from new players in the industry to technological advances.
Yet, the J.D. Power 2019 U.S. Retail Banking Satisfaction Study recently found that only 4 percent of customers switched banks in the past year.
“Just don’t fall asleep at the switch,” says Greg McBride, CFA, Bankrate chief financial analyst. “The marketplace is constantly changing with new offers, innovative products and features that might put more money in your pocket or make your life easier. Or both. So it pays to have your antenna up and be on the lookout for something that is a better deal or works better for your financial lifestyle.”
Have a close look at the fees you’re paying and whether you can avoid them. If your bank requires a lofty minimum balance, for example, see if there are online checking accounts that may have lower minimums to sidestep maintenance fees. These banks may even offer you a certain number of fee-free ATM withdrawals, plus large ATM networks convenient to where you live and work.
2. Don’t assume your bank’s giving you the best rate
There have been nine rate hikes by the Federal Reserve since December 2015. These increases have significantly raised the annual percentage yields (APYs) on savings accounts, money market accounts and CDs.
You may really like your bank. And they may appreciate you as a customer. But that doesn’t necessarily translate into them giving you a competitive APY.
“Part of it is people just assume that their bank is going to do, I’ll say, right by them so to speak and give them what they should be getting,” says Elizabeth Buffardi, a certified financial planner at Crescendo Financial Planners in Oak Brook, Illinois.
In 2019, it’s easy to obtain at least a yield of 2.00 percent APY on a savings account or money market account. You can compare rates on savings accounts and money market accounts on Bankrate to find the right account for you.
3. Don’t let a high rate fool you
Check the fine print to see how long that rate will last. A promotional or introductory rate may be competitive rate, but it may only last for a few months or a year. After that is when you must be vigilant – especially if the APY after that is significantly different. APY includes the effect of compounding during a 365-day period. Compare interest rates and APYs when shopping for savings accounts and money market accounts. If the rate is a little lower than the APY, that generally means the bank is offering a consistent standard APY, though most savings account and money market accounts are variable.
If you see the opposite – where the interest rate is drastically higher than the APY, that means you’re likely looking at a promotional rate that’s for less than a year. While that promotional rate may be fixed for a certain amount of time, unlike typical APYs, it’s usually better to choose a financial institution that has a consistently competitive APY over a bank that’s going to lower its APY and force you to move your money to a higher-yielding account, or hope you don’t notice and keep your cash parked at a low yield.
4. Strategically plan your bank interactions
As long as it’s not something urgent, try to plan your visit to a branch. If you’re going there for a mortgage, make sure that a mortgage specialist will be there when you go. Calling ahead and making an appointment – if the bank allows it – might save you time and make it a better experience. Check to see if whatever transaction you were going to the bank for is available online.
Also, when calling a bank’s customer service phone number for non-urgent matters, try during off-peak hours. This could be late at night or early in the morning – before the typical nine-to-five day starts. This may help reduce the wait time.
5. Communicate if you plan to close an account
Don’t assume that your bank account will automatically close if you zero out the balance. If you’re closing a bank account, communicate with your bank to see how this should be done. Also, compile your automatic monthly bills pays – if applicable – and get them moved over to the new account, before closing the old one. The same applies if you receive Social Security or a pension. Get these moved over to your new bank account before closing out the old one.
Finally, the result of Automated Clearing House (ACH) debits withdrawing money from an account that you thought would close with a zero balance may lead to overdraft charges and maintenance fees. If unpaid, it could lead to the account being sent to collections and negatively influencing your credit or getting flagged in ChexSystems, which many banks use to screen customers.
6. Utilize a CD for longer-term savings
Savings accounts and money market accounts can help you earn a yield of 2.00 percent APY. But a two-year CD may make sense if you have longer-term money that you want to grow and won’t be withdrawing soon. A 2.65 percent APY on a two-year CD should be attainable. But you might have a higher minimum balance requirement than you would have with a savings account. Also, if you withdraw the money before the end of the CD term you may incur an early withdrawal penalty – which may take a bite out of any interest that you earned. If in doubt, put your money in a liquid account – such as a savings account or a money market instead.
7. Closing a savings or money market account too soon could cost you
Unlike a CD, savings accounts and money market accounts are liquid accounts. While the latter two have certain withdrawal limitations – under Regulation D you can only make six withdrawals or transfers per month – you generally are able to withdraw from them. Some withdrawals, such from a branch and ATM, don’t count against this limit. But those types of savings deposit accounts may have early closeout fees. Generally, if these exist, they’re only if you close the savings or money market account during the first six months. Some checking accounts may also have this fee.
8. Get the best of both worlds to maximize your APY
In 2019, having a brick-and-mortar bank is relevant for certain banking transactions. For instance, a large cash withdrawal or deposit may need to be done in a branch. If your brick-and-mortar bank isn’t offering a competitive yield on your savings – or if you have money collecting dust in your non-interest-bearing checking account, a high-yield online savings account is the perfect complement to a branch account.
9. Don’t forget about that card you never use
There’s nothing wrong with a credit card or debit card sitting in your wallet unused, assuming it doesn’t have a high annual fee. The former you may not want to close since it could affect your credit utilization ratio – the percentage of credit used compared with the amount of credit available. That could lower your FICO. But some banks will close your credit card if it isn’t used often enough.
When it comes to a debit card, you simply might not use an ATM too often in today’s society – where cash-only transactions aren’t as common and paying with cash or a debit card means missing out on credit card cash back and points. But not using either card often enough may cause a financial institution to close it. To prevent this, a strategy might be having an auto insurance payment, a gym membership or some other recurring charge post on the card you don’t plan to use often.
When it comes to a debit card, if you make a withdrawal or purchase once every couple of months, you should be OK. The concern with a debit card closing is that if you have an emergency where you need cash, you won’t be able to withdraw money because the card’s been deactivated.
10. The same goes for your bank account
It’s possible that a bank will close your bank account if you aren’t using it often enough and your balance is below a certain amount. Or a bank may charge a dormant account fee if there isn’t any activity during a certain time period. Check with your bank for its policy. But a good rule of thumb is to use your account at least once every couple of months. Keep in mind that small, recurring deposits into a savings account add up over time.
If you think you had a bank account in the past that you lost track of, it may have been sent to your state as abandoned or unclaimed property. An account is escheated – which is the process of a financial institution turning over unclaimed or abandoned property – when it’s inactive for three years in New York, according to the New York Department of Financial Services. Check with your state, on its official site, for its abandoned property policies. Always give your bank an up-to-date address so it can contact you if your account becomes inactive or dormant.
If your money is sitting in an old account collecting dust, it may be in an outdated account that has a yield that isn’t keeping up with inflation. This money also could be incurring a dormant or inactive fee at some banks.
11. Let your bank know when you’re traveling
When on vacation, a declined credit card, debit card or ATM card transaction is the last thing you need. Each bank may have different policies, but you may want to err on the side of caution and let your bank know you’re traveling to avoid having a credit card, debit card or ATM transaction declined.
Your bank may have an option on the app to report this or you may be able to send a secured message or call your bank to relay your travel dates and destinations. Carrying a little emergency cash in your wallet, may be a traveling strategy to consider – assuming you safeguard this cash.