Your checking and savings accounts are the starter homes for a banking relationship. Your checking and savings accounts are the starter homes of a banking relationship. However, you may organize your home differently or move to a different place. Over time, your organization of your bank accounts might need to change.
Are you like me, and still have accounts with the same bank that your parents had? Maybe enough has changed in life for you to think about a new bank.
Let’s find the best type of bank for you and the best combination of accounts and tools.
What bank accounts can I open?
This one is easy enough to overlook. Savings accounts can be used to save money and earn interest.
You might need additional accounts or specialized accounts. So ask yourself:
Are you looking to share your finances with someone else? You might be interested in joint accounts if you have this intention.
Is it time to save some money? Certificates-of-Deposit are a type savings account that can do exactly that. They can guarantee you a high rate of return.
Are you looking for a higher savings rate? Or lower fees? Many online banks offer high-yield savings account and high-yield CDs with low fees and opening minimums. Rates above 3% are the best. These options may be used to supplement your primary account.
How many banks accounts should I have?
It all depends.
Derek Brainard, AccessLex Institute’s national director of financial education, says that the ideal number is “the minimum amount of accounts required to meet your goals and support your family.” “Two is the minimum amount, but many people go above that for organization’s sake span>
Multi-deposit accounts can help you budget. You can use an online version to the envelope system. This involves depositing cash in envelopes that are designated for bills or specific goals. You can instead have a savings or checking account for each goal, as well as a checking account to cover different types of expenses. This is more convenient than cash withdrawals from ATMs and the use of envelopes.
This setup might not work for everyone.
Sage Financial Solutions is a San Francisco-based non-profit founded by Saundra Davis. Davis has eight bank accounts. These include personal and business checking accounts as well as a savings account to pay for periodic expenses. There is also a savings account that can be used for emergency purposes (commonly known simply as an emergency fund).
She says, “How we manage money should reflect how we live our lives.”
Which bank is right for me?
It all depends on your bank, but it is possible to not be aware of all options available when selecting a bank. Let’s look at a few different types of banks.
Bank vs. credit union
Both offer similar accounts but credit unions and banks are both for-profit businesses. Credit unions, on the other hand, are not-for profit cooperatives that require members based on geographic or other factors. The biggest banks tend to have the most advanced technology for online banking. Credit unions may have lower fees and offer better rates for savings and loans.
Brick-and-mortar vs. online bank
Traditional or brick-and mortar banks have a network of ATMs and branches. In-person support is available to help with urgent issues. Specialty services such as cashier checks or legal documents signing with a notary are also available. Online banks are often lacking in the services and locations they offer, but can offer higher savings rates and lower fees than traditional banks.
Banking at a brokerage
If you are looking for convenience, a brokerage or investment company can handle both investing and banking. The bank account equivalent of a firm is often a cash management account. This account usually insures funds above the $250,000 federal deposit insurance limit per account. This insurance allows you to get your funds back in the event of a bank going bankrupt.
It is possible to have your money at multiple institutions, which can be a benefit for you. My parents have the same bank as me, but I use my cash to quickly pay off my credit card bills. I opened a high yield savings account in 2015 that came with a sign up bonus. Later, I liked the bank’s debit card account with no foreign transaction fees.
While I may be able to switch to fully online banking, what if I still need to visit a branch? I have access to different benefits and services by keeping both banks.
Which bank tools should you use?
Many banks have features that can help with account management. These include alerts to help you manage your money and detect fraud. You also get automatic transfers to transfer some of your monthly income to savings.
Brainard says that automatic transfers have the main benefit of automating your decision to save frequently. To avoid having to transfer money back and forth, ensure that your checking balance is adequate for monthly bills.
Although automatic transfers are great, Zelle’s peer-to-peer payments platform Zelle offers a unique use case. It is different from my other transfer apps Venmo or Cash App. Zelle is integrated in many bank apps including my two banks. I have been able send almost instant transfers between my Zelle accounts. This is much better than waiting for the transfer to take between one and three business days.
Like other apps like Venmo and Zelle, however, Zelle’s biggest risk is that you can’t cancel a transaction once it’s been sent. Even if funds are sent to the wrong person.
Transaction alerts can be used to help budget and detect fraud. They are sent via email or text message. Notifications may include alerts about deposits and withdrawals exceeding a certain amount, or balances dropping below a specified threshold. In case of an error, I keep credit card transaction alerts on nearly all purchases.
When is it time to reevaluate my bank setup?
Dana Twight is a certified financial planner and the owner of Twight Financial Education in Seattle. She recommends that you evaluate your banking system every two to three year. Your needs can change as your income fluctuates.
There may be other reasons to change banks or accounts.
A major life event. Opening joint accounts might be necessary for getting married. Adopting or having a child may require you to open new accounts. You might be able to open a mortgage, start a business, or get loans at a lower rate from your current bank by opening a credit union or bank.
Your bank is not meeting your needs. Banks might begin charging fees for accounts.
You want to support an institution that is based on your values.
Davis states that “Banking with a Black bank is important to my, but they don’t have the same infrastructure and backbone as a large bank.” “I am aware that I have to pay a monthly fee to put my money there. It matters to me. ”