Ways to bank smarter: Simple tips and tricks to increase your wealth
Banking can be complicated, with thousands of banks to choose from that each offer an exhaustive set of disclosures and fine print. And then there’s the rates and fees, all of which need to be considered carefully before you sign on the dotted line.
But these tips and tricks can help you bank smarter — so you can earn more money and save time.
1. Reevaluate your bank — The average U.S. adult has had the same primary checking account for about 17 years, according to a 2021 Bankrate survey. Customers often stick with the same bank if it doesn’t charge them fees or if they feel it would be a hassle to switch banks, the survey found.
“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.”
Take a 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 high-yield checking accounts with lower minimums to sidestep maintenance fees. These banks also typically offer fee-free ATM withdrawals, plus large ATM networks convenient to home and work.
Bankrate’s best banks of 2022 can help you find the right bank for you.
2. Don’t assume your bank is giving you the best rate — You may feel your bank appreciates you as a customer, but that doesn’t necessarily mean it’s paying a competitive annual percentage yield (APY) on your funds.
“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.
The Federal Reserve hiked rates twice in spring of 2022, after keeping them at near zero for two years. The rising interest rates have caused some banks to increase yields on their savings accounts and certificates of deposit (CDs), making it a good time to shop around for the best rates. You can find online banks with deposit accounts that pay rates many times the national average.
3. Don’t let a high rate fool you — An account’s APY is the rate you’ll earn per year if the interest is compounded. The APY for savings and interest-bearing checking accounts is often variable, while the APY for most CDs is fixed.
When shopping for an account with the highest APY, read the fine print to see how long the rate you’re being offered lasts. A promotional or introductory rate may be competitive, but could only last for a few months or a year. Also check whether a certain minimum balance is required in order to receive a given APY.
4. Consider a CD for a higher APY — Today’s savings accounts and money market accounts can earn a yield of up to about 1.15 percent and 1.23 percent, respectively. You might be able to find a better rate with a CD if you’re comfortable with locking in your money for a set term.
One-year CDs currently pay up to about 1.8 percent on a one-year CD, while two-year CDs pay about 2.5 percent and five-year CDs about 2.85 percent.
Keep in mind a CD might have a higher minimum balance requirement than a savings account. Also, withdrawing the money before the end of the CD term may incur a penalty, which can take a bite out of any interest you earned and possibly some principal, too. If in doubt, put your money in a liquid savings or money market account instead.
5. Strategically plan your bank interactions
— Planning your visit to a branch for nonurgent matters, rather than just dropping by, can help ensure you’ll receive the help you need. If you’re applying for a mortgage, for example, knowing that a mortgage specialist will be there when you go can save time. Another time-saving option is making transactions online, when possible.
When calling a bank’s customer service number for routine matters, try during off-peak hours to help reduce the wait time.
6. Communicate if you plan to close an account
— Don’t assume your bank account will automatically close an account if you zero out the balance. Contact the bank to see that the account is closed properly. Also, it helps to move any automatic bill payments over to a new account before closing the old one. The same applies to payments you receive such as direct deposit, Social Security or a pension.
Not closing an account with a zero balance could result in overdraft charges if automatic bill payments haven’t been stopped, which ultimately can hurt your credit and make it more difficult to open other accounts.
7. Closing an account too soon could cost you — Reasons for closing a bank account include moving to a new location, switching to an online bank or finding better rates or a sign-up bonus elsewhere. It pays to know whether there’s a penalty for closing your current account, however.
Some banks will charge you a fee if you close an account soon after establishing it. For instance, both Key Bank and Regions Bank charge a $25 early closure fee if you close your account within 180 days of opening it.
Read the fine print if you wish to close an account soon after opening it. You might decide to avoid an account closure fee by waiting until the designated time frame ends while opening a new account elsewhere in the meantime.