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What is a savings account?
Savings accounts make it easy for you to save your money in a bank while earning interest with APY (annual percentage yield). APY is basically the bank paying you money for keeping your money with them. It should be noted that the APY percentage amount varies from bank to bank and you should always do your research on their APY beforehand. Always check if they have a monthly limit you need to meet because you do not want to be charged an overdraft fee or get penalized for a below minimum balance.
Personally I like to have 3 separate savings accounts. I have one with my local credit union, one with a nationwide bank, and one with a High-Yield Savings Account.
Why did I choose to have 3 separate banks?
Local Credit Union
-I can visit the bank in person
-atms are easily accessible in my county
-they have better APY percentages than my checking account
-no fee or limit on withdrawing my savings money
I started a savings account with my local credit union at the age of 15 after I got my first job. Local credit unions can have great rates and tend to have less fees than my other two banks.
Nationwide Bank: Chase
-I can visit the bank in person
-ATMs are easily accessible nationwide
-they usually have opening account promotions/bonuses
Personally, I moved around a lot because my college was in a different state. For this reason, it was extremely beneficial for me to sign up with Chase because the bank is easily accessible from Washington to California.
Having a nationwide bank allowed me to be able to go to my bank’s ATM and withdraw or deposit my money without an extra fee and came in handy when I needed some extra cash in College. Some banks will waive the fee for ATM machines outside of your bank, but my local credit union did not.
Online High-Yield Savings Account: HSBC and Ally
-have higher APY*(annual percentage yield) than both Nationwide and Local Credit Unions
-Limited to withdraw only 6 times or less in a month (anything more, you would get charged an overdraft fee)
-perfect bank for an emergency fund
The first high-yield savings account I created was with HSBC, but I honestly prefer Ally more. Ally’s system was a lot easier to use and allowed me to separate my account for the various emergency funds I needed while keeping the same APY rate for the total amount of money in my account.
I recommend that everyone creates a High-Yield Savings account as an emergency fund because you never know what the future holds and if you will be in need of some quick cash. The standard is to have at least 6 months worth of savings that you could use if you were unemployed or needed extra cash for a car repair, ect.
Remember that you might have a monthly limit on what you can withdraw in your savings account without paying a fee, so always double check with your bank.
Look Out for APY Rates and Fees
Personally, I use my local credit union savings account as a checking account because the APY is higher than my checking account and my bank does not charge a fee for having more than 6 withdrawals every month.
I do this because I can earn more interest on my money there than my checking account that earns 0. This is not for everyone though, so make sure to check in with your local and nationwide banks to check their APY rates and other fees they might have for you.
Some banks charge a fee if your money does not hit a certain limit, for example my bank charges a fee if I do not have $25.00 in my savings account at all times. Be weary of those overdraft fees as well! My bank charges overdraft fees if I do not have enough money in my bank to pay for the amount I was charged.
For example, If I was charged $50.00 on my credit card and I set it to automatically be deducted from my savings account each month, but my savings account only has $49.00, I will be charged $35.00 and none of my money will be used to pay off the credit card because it was rejected with an overdraft fee.
It's hard to be poor because that charge hurts the bank account and doesn’t even help pay your bills. It’s almost like a cycle of debt.
What is a Checking Account?
Checking accounts make it easy for you to access your money in a bank and some can earn interest with APY, but checking accounts usually have a lower APY than a typical savings account.
I say usually because my parents actually earn more money in their checkings account than their savings account. Their bank has a deal that if they use their debit card 10 times a month, they get a 2.0% APY in their checking account, which is higher than their 0.05% APY in their savings account.
Always check if they have a monthly limit you need to meet because you do not want to be charged an overdraft fee or get penalized for a below minimum balance.
Checking Account Summary
-are best for spending money (no extra fee for withdrawing more than 6 times a month)*as long as you have money in the account to pay for these withdrawals
-commonly used for everyday transactions such as purchases, bill payments and ATM withdrawals
-typically earn less interest — or none
-great checking accounts typically will have no monthly fees
Fees and Sign Up Bonuses
You can always try to bargain with your bank to waive them because oftentimes they do really just want your business.
Some banks also have free access to nationwide ATM networks, just ask! And always look for sign-up bonuses when you are trying to start a savings or checking account, because some banks will give you a bonus of $250 for keeping a certain limit of money in your account for a set period of time.
An example of this, is when I started my bank account with Chase and opened a checking account because of their opening promotion. I had to keep $1,500 dollars in the bank for 6 months in that account, and at the end of that waiting period they would reward me with the sign-up bonus of $250. It literally is free money if you play your cards right and follow all the fine print rules.
RECAP of Savings Vs Checking Account
Always be on the lookout for accounts that include both high interest rates, no monthly service fees, and sign up bonuses.
Monthly service fees for a checking or savings account can add up and make you lose money rather than make it, so try to avoid any maintenance fees if you can.
Do not forget to pay off all of your bills and to make sure that you have enough money in your accounts to do so, because you do not want to be in more debt with an overdraft fee.
A lot of accounts offer free checking and savings, and some of them have competitive rates with sign-up bonuses, just always make sure to check in with what your bank has to offer!
Until next time, keep saving money! 😁
-Dominique Mohler
DISCLAIMER: I am not a financial advisor, this is information I have learned from my own experiences and research.
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