In terms of financial assets, your bank account is arguably one of the most important. Ultimately, it is where your money is stored securely and accessible when needed. But are you utilizing your bank account to its full potential?
You can do this in several different ways, and in this blog post, we’ll share some of our favorites.
Choose the right bank account.
What is the first step to maximizing your bank account? Choose the right one.
Before opening a bank account, you should compare the features and fees of the different types. When choosing a bank account, you should consider the following factors:
- Account fees. Bank accounts typically have monthly fees, so it’s important to find one with a low fee or none at all.
- Interest rates. You should choose an account that offers a high-interest rate if you plan to keep a large amount of money in it.
- ATM access. You should choose an account that offers free ATM withdrawals if you frequently use ATMs.
- Online banking. Online banking is available through most bank accounts, but some accounts are more advanced than others. You’ll want an account that offers the features you need if you plan to use online banking frequently.
After considering all these factors, you can start comparing bank accounts to find the best one for you.
Put your savings into a high-interest account.
Why should you switch to a high-yield savings account? You can earn more interest.
With high-yield savings accounts, you earn higher interest rates, and your money grows even faster thanks to compound interest, which rewards you for making money in the first place. In other words, you will get a higher return on your money when you earn a higher annual percentage yield (APY).
According to the Federal Deposit Insurance Corporation (FDIC), the average annual percentage yield on savings accounts is just 0.42%. Those rates are over 12 times lower than the 5-plus percent annual percentage yield and around 6% annual percentage yield that the highest-yield savings account offers. Consequently, banks are paying out higher annual percentage yields, or APYs, to their customers as the Federal Reserve continues to raise interest rates.
An online bank is an excellent place to find high-interest savings accounts. It is rare for online banks to charge monthly fees since they do not need to maintain branches. Additionally, they typically charge much higher rates than traditional banks do.
However, it’s important to keep in mind that high-yield savings accounts have variable interest rates. In other words, the rate may change at any moment
Sign up for banking alerts.
You can usually set up alerts to receive messages about account activity with online and mobile accounts. Alerts may provide you with the information you need to keep an eye on potential fraud or bank activity.
Your bank may allow you to customize notifications for unusual transactions, low balances, or high spending. As a result, you will be able to customize when and what notifications you receive.
Benefit from bank bonuses.
It is not uncommon for banks to offer bonuses to new customers. In addition to cash bonuses, gift cards, and travel rewards can also be offered.
Whenever you are choosing a bank account, choose one that offers a bonus. You should, however, carefully read the fine print before opening an account. You might need to keep a certain amount of money in your account for a certain period of time in order to qualify for some bonuses.
As an example, Consumers Credit Union (CCU) offers a Rewards Checking account that offers a 5% annual percentage yield on balances up to $10,000. You must, however, fulfill all the requirements listed below if you want to earn that yield:
- Enroll in electronic statements
- Each month, make at least 12 debit card purchases
- A total of $1,000 or more is deposited or credited to the account in direct deposits, mobile check deposits, or ACH transfers during the statement cycle
- You must spend at least $1,000 per month on your CCU Visa credit card
Using a rewards checking account can be beneficial, but make sure you can meet the requirements for earning the higher interest rate. If you don’t, you may earn less interest than you would if you had a standard savings account.
Utilize rewards programs.
Did you know that some bank accounts offer reward opportunities that allow you to earn points or cash back on purchases? By using rewards checking, you can earn points for spending without accruing credit card debt or paying interest.
As an example, the Axos Bank CashBack Checking account offers 1% cash back on debit card purchases. This account is perfect for those who want the perks of a credit card without the debt. As compared to other rewards debit cards, you can earn up to $2,000 in cash back per month.
Furthermore, Axos Bank CashBack Checking comes with no monthly maintenance fees and can be opened with $50 or less. Also, you can use any ATM worldwide free of charge, since unlimited ATM fees are reimbursed.
To earn 1% cash back on purchases, however, you’ll need to meet quite a few requirements, so make sure you can meet them before signing up.
Avoid overdraft fees.
Overdraft fees are charged by your bank when you go overdrawn. Overdraft fees vary by bank, but they usually cost $35 per transaction.
In any case, these fees can add up quickly, so avoiding them is the best course of action.
Avoiding overdraft fees is as easy as following these steps:
- Set up overdraft protection. If you overdraw your savings account, your bank can transfer money from your checking account to your savings account. You can avoid overdraft fees by transferring money from one account to another, but there will be an interest charge.
- Monitor your account balance. Keep an eye on your account balance so you’re aware of how much money you have available. Alternatively, you can contact your bank or check your online banking account.
- Use a budgeting app. Tracking your spending with a budgeting app will help you avoid overdrawing your account.
Consider certificates of deposit.
A certificate of deposit (CD) typically pays a higher interest rate than a savings account. CDs, however, have less flexibility when it comes to withdrawing money.
Funds put into a CD are locked in for a set length of time called the term. A one-year CD, for instance, requires that you leave the money there for a year. As such, you will be charged an early withdrawal penalty if you withdraw your deposit before the term ends.
With CDs, you can lock in your rate of interest when you open them. It doesn’t matter what happens to market rates. You’ll still earn the same rate. Conversely, if rates rise, you’ll have to earn the lower rate until the CD matures.
Your CD money can either be withdrawn or rolled into a new CD at the end of the term. After rolling the balance into a new CD, you cannot withdraw penalty-free until that CD matures.
Set up a CD ladder.
A CD ladder involves dividing your money among multiple certificates of deposit (CDs), each with a different maturity date. The longer-term CDs earn a higher interest rate while allowing you to access some of your money regularly.
You can build a CD ladder by following these steps:
- Determine how much money you want to invest and how long of a ladder you want to create. CD ladders typically last three to five years.
- Choose the maturity dates for your CDs. Your maturity dates can be distributed evenly, or you can emphasize certain years based on your financial situation.
- Open CDs at a bank or online bank. Choose a bank by comparing the interest rates on CDs with different maturities.
- Invest equal amounts of money in each CD. Over time, you will earn a consistent interest rate.
- As CDs mature, reinvest the proceeds into new CDs with longer maturity dates. Increasing your average interest rate and growing your savings will help you save more.
A simple CD ladder looks like this:
- $5,000 in a 1-year CD
- $5,000 in a 2-year CD
- $5,000 in a 3-year CD
The maturity of one of your CDs occurs each year. Once it matures, it can be reinvested in another CD with a longer maturity date or withdrawn for other purposes.
You can earn a higher interest rate on your savings with CD ladders while still having regular access to your money. Also, the FDIC insures CDs to a maximum of $250,000 per depositor, so you don’t have to worry about losing your money.
Get a discount as a borrower.
When borrowing money, it’s best to consult your bank or credit union first. The reason for this is that financial institutions may offer loyalty discounts to existing customers and lower interest rates on loans.
For instance, US Bank customers who have an open checking account may qualify for a credit toward the closing costs of a mortgage. The Bank of America Preferred Rewards program offers a 0.25% rate discount on auto loans and a 0.125% rate discount on home equity lines of credit (HELOCs) for customers with combined balances of $20,000 to $50,000.
Take a look at money market accounts.
Unlike savings and checking accounts, money market accounts offer a combination of features. Generally, they offer check-writing privileges and debit cards that you can use to withdraw funds, though some restrictions apply. They can pay higher interest rates than high-yield savings accounts.
In contrast to savings accounts, money market accounts usually charge higher fees and require higher minimum balances. Additionally, no guarantee exists that your bank’s money market account offers better interest rates than its savings account.
Make use of features such as bill pay and direct deposit.
Remote or direct deposit can be combined with bill pay to simplify managing finances.
- With bill pay, you can pay your bills electronically from your bank account. Your bank’s website or mobile app, or a third-party bill payment service, may be used to pay bills. Your biller’s name, address, and account number will be required to set up bill pay. Afterward, recurring or one-time payments can be scheduled.
- Paychecks and other payments can be deposited directly into your bank account through remote deposit or direct deposit. You can do this through your employer or payroll provider. Employers or payroll providers will need your bank account information to set up direct deposit.
When you use your bill pay service with remote or direct deposit, you can pay your bills directly from your paycheck. As a result, you will never forget to pay a bill or have to write a check.
Using remote deposit or bill pay in conjunction with bill pay can have the following benefits:
- Convenience. Everything can be handled from one place, and no checks or bills need to be mailed.
- Security. A payment made electronically is more secure than one made with a paper check, and it is less likely to be lost or stolen.
- Accuracy. The chances of an electronic payment being processed incorrectly are lower.
- Time savings. There’s no need to write checks and mail them, and you won’t forget to pay bills.
It is highly recommended that you consider using bill pay, remote deposit, and direct deposit if you do not already do so. By using these features, you can simplify your life and manage your finances more efficiently.
Consider financial advice and asset management.
In addition to providing banking services, financial institutions may also offer financial planning and wealth management services. For example, you can speak with an advisor at your bank if you’re not sure how to save for college or retirement.
It is important to understand before signing up for investment services that advisory and brokerage fees may apply.
Take ownership of your accounts.
In most situations, neither your bank nor anyone else is looking out for your best interests. “Take ownership of your account and become familiar with the features your account offers,” advises Eric Rosenberg in a previous Due article.
To achieve long-term financial success, you must become familiar with your money’s sources and destinations.
What is the best type of bank account for me?
Choosing the right bank account for you depends on your financial goals and needs. Generally, a checking account is a good option if you want an account that holds your money safely and makes it easy to access.
In case you want to save for a specific goal, like a down payment on a house or retirement, a savings account would be a better choice. In addition to checking and savings accounts, some banks offer hybrid accounts.
How can I avoid bank fees?
You can avoid bank fees in a number of ways. If you set up direct deposit or maintain a certain minimum balance, most banks waive monthly service fees. ATM fees can also be avoided if you use the ATMs on your bank’s network or withdraw cash when making purchases.
It is also important that you read the fee schedule of your bank carefully so that you are aware of all the potential fees you may incur.
How can I earn interest on my money?
If you deposit your money in a savings account or CD, you can earn interest on it. CDs usually offer higher interest rates than savings accounts, but they are less flexible. If you keep your money in a CD for a given period of time, you will receive a higher interest rate.
What are some other tips for maximizing my bank account?
To maximize your bank account, follow these tips:
- Set up a budget. You can track your spending and make sure you aren’t overspending with a budget.
- Automate your savings. Each month, set up an automatic transfer from your checking account to your savings account. As a result, you will save money without even thinking about it.
- Review your bank statements regularly. Keep a close eye on your bank statements for any unauthorized charges or fees.
How can I protect my bank account from fraud?
If you want to protect your bank account from fraud like identity theft, you can take the following steps:
- Keep your account information confidential. Never give anyone your account number, PIN, or Social Security number unless you are absolutely certain that they are legit.
- Be careful about what links you click on and what attachments you open. Scammers often use phishing emails to steal personal information from you.
- Use strong passwords and change them regularly. You should use passwords that are at least 12 characters long and include uppercase, lowercase, and symbol characters.
- Enable two-factor authentication on your bank account. By requiring you to enter both your password and a code from your phone, you add another layer of security.