Revealing Banking Tips To Save HUNDREDS (Best Savings Account) | NerdWallet

I'm Nikita Turk. I'm Spencer Tierney. And today, we're answering your banking questions on Reddit. There was a lot of questions about choosing a financial institution, so let's just hop right to it. Moving to online banking, is it good to have at least one brick-and-mortar account? I'm planning on consolidating some brick-and-mortar accounts to online accounts. Is it good to keep open at least one brick-and-mortar account to do transfers? I plan to buy a house in the next couple of years and don't know if it's worth keeping a brick-and-mortar checking account open. Yes. So I think if you need a few banking services, the answer is yes. I think wire transfers, currency exchange, cash and check services, those are a lot more widespread at brick-and-mortar banks, and also in-person help. So if you need any of those, definitely stick with a brick-and-mortar. You can have your digital banking, but just, you know, you can have both, basically. Right. That's how, like, when I switched to an online bank and got paid in cash for something, I'm like, what do I do? What do I do with this money? All right. Next one. Is it bad to keep almost no money in a checking account? Yeah. It's kind of like riding a bike with lopsided wheels. Like, you can, for sure. But why, exactly? Like, your checking account is intended for transactions. It is sort of where you have checks, debit card purchases, ATM withdrawals, online transfers. For some savings accounts, there are limits of six withdrawals per month. So stick with checking if you can. Right. And if you're out in the middle of the night and you need cash, you're in a bind, how are you going to get it? Yeah. Don't make it hard on yourself. All right. Let's do one more choosing a financial institution question. I need help choosing a bank. How do you choose a bank? I could have a long answer, so I'll try to keep it short. I think of it in terms of three things. So choose your bank account or which ones you want. Choose which banking institution. And choose what combination of features you want. So for the first, I would say, like, do you need checking and savings, just checking or just savings? Some banks only have one or the other. So just, you know, you should know in advance. Also, if you need joint accounts, if you're going to share. So all those options are available, but not everywhere. And then two, choosing your bank, banking institution. There are actually a variety, not just banks. There's the national banks, there's the small banks, there's the credit unions, which are non-profit. And then there's, you know, neobanks, which are like fintech banking, so they're not actual banks usually. And then there's also, yeah, you're just smaller banks. So within all those, if you want like big ATMs and big branch branches, that's, you know, National Bank. But credit unions and community banks are better for like relationship banking and maybe more of a neighborhood vibe, especially if you just want to bank local. And then the neobank is better for like online technology, but as well as like free checking. And then online banks better for higher savings. So there's a lot of different like ways you can dice that. Right. And if you had to explain in one sentence, if I put you on the test, how do I pick a bank? And just like one sentence, like what are the main things that I should look for? Yeah, I would say like look for monthly fees and or the lack of look for like you have all the services you need. So whether that means check checks and cash and in person or not. And also, yeah, really just think about like rates if you can, because we're in a high rate environment. We might not be soon. Who knows? Regardless of what rate environment you're in, you want to try to get a high rate if you can on your savings. I love that. Everybody's banking needs are different, too. So. Oh, yeah. Keep those things in mind. One of the biggest things to confirm when you're choosing a financial institution is that it is insured with the FDIC if it's a bank and the NCUA if it is a credit union. This will ensure up to 250K of your funds are protected should the bank ever go bankrupt. There are also banking fintechs that offer accounts with FDIC insurance by partnering with a bank. Once you've verified that your money would be safe, choose a bank that won't cost you monthly fees, has the services you need and most aligns with your values. So now let's dig a little deeper into savings accounts, because there's a lot of questions there. Interest rates are kind of kind of good right now. Yeah. Surprise. Right. Let's talk about it. Why bank interest rates on savings accounts didn't go up after the last Fed interest hike. So how do Fed rate increases impact savings accounts? Yeah. So there's not a direct line necessarily, but generally speaking, a Federal Reserve will like raise their Fed rates and the Fed rate will usually be the queue to banks and credit unions to raise their savings account rates and maybe CD rates as well. This is not like a oh, this happened. So this must happen. Banks are businesses. They will choose whether that makes sense for them. They ideally will want more deposits than to fund more loans and investments. So that's like the main thing that they have as a tool, raising that interest rate. If they don't need deposits, they might not do that right now. Here's a good one. What's the catch with high yield savings accounts? Why would you not use it? It's like a CD where it's guaranteed high returns, but provides the liquidity that a normal bank account does, too. Why isn't everyone in the entire world all in on these as their default bank? This is a lot of enthusiasm that I agree with. Honestly, high yield savings do make a lot of sense for a lot of people. I think the only real downside compared to a regular savings account is that you usually have to go to online bank or online credit union. So you might have to just give up branch access and in-person support if that's OK with you. The other things that are downsides are normal savings account downsides. So you're looking at maybe six withdrawals per month is the limit. And then also variable rates. So, yes, rates are great right now. They will not always be great. And that is can change at any time for a bank to decide to decide to change their rate. And there's not usually a warning, right? Oh, no. Oh, by the way, sometimes they email you if the rate goes up, but they're probably not going to email you if the rate goes up. There's no steadfast rule on how many savings accounts to have, but you might have a few if you like saving in different buckets, such as your emergency fund, your periodic expenses and another account for your wants. So since we're talking about high yield savings accounts, this feels like a great time to talk about CDs versus high yield savings accounts because both have great interest rates. But there are differences. Oh, yeah. I love this. This question. What is the point of CD? I love that too, actually, but it's just straight to the point. I would say CDs can offer you some of the highest rates on a bank account. So you're looking at a fixed rate over time, usually three months to five years as a CD term, and you have to give up that money. So that's like where it kind of feels like a weird submental account. You're not going to always need it. But if you have some savings that's not going to be needed for a few years, this is great opportunity for that. And with the high rates, honestly, they're looking really good right now. So if you needed to walk up money for like a down payment on a house or something else that you might not need right away, like three years, five years down the road, it would be a great place to kind of park it. Yeah, definitely. And I think like, you know, you can't have contributions after the first initial deposit. So that's just one thing to be aware of. And usually you can't withdraw early without paying a penalty. So it really locks in your money. Right. Well, there you go. Certificates of deposit. There is a point. Thank God. All right. Now let's get to the like the nitty gritty. What is better, a CD or a high yield savings account? Yeah, the competition. Oh, well, I would say it's almost a little bit like apples to oranges. They are both types of savings accounts in the broad sense. But you're looking at savings accounts as your everyday accounts. You're going to add money over time. You're going to take money out. It's a little bit more liquid. CD, you put that money in once and then you just let it go until the term ends. And so it's really intended for those like savings goals where you just need to build at a high rate that's like fixed over time and you don't need to take money out or put money in. Right. So it's kind of hard to compare those two because you would use them for two fairly different purposes. Exactly. And you might not even use a CD for like years, decades, where a savings account hopefully opened up that when you started. With the current national average yield for savings accounts, interest rates sitting at only point twenty four percent, high yield savings accounts and certificates of deposits are both good options for scoring significantly higher rates. The best place to deposit your cash will typically depend on when you need to access the money. CDs can offer slightly higher interest rates than savings accounts, but you won't have access to the money for a fixed period of time, such as three months to five years. CDs can be best for a subset of your savings for future big ticket items such as a home down payment or a car with savings accounts. You can access your money at nearly any time, but interest rates are subject to change. And those are your Reddit questions. Spencer, at the end of the day, what should people keep in mind when they're looking to choose a new financial institution? You really want to make sure you're not paying to have your money at a bank. So check an account with no monthly fees or you can avoid those fees. No ATM fees. So you can get cash for free and no overdraft fees. And then on savings accounts, make sure you can get a high rate. Now is a great time. And yeah, good luck with your banking. Yeah. Just say no to fees. Spencer, thank you so much for hanging out with me, going down the Reddit rabbit hole with me. Oh, anytime, Nikita. Always a good time. If you guys have any questions you want us to answer on a future episode, make sure you drop them down in the comments below. Until then, bye. I'm Nikita Turk and you're watching Control Finance. Thanks for hanging out with us today. If you want to learn more about certificates of deposits, CDs, because we touched on those very briefly, Spencer actually did a great series on them right here on YouTube. So be sure to check those out.