Read the Fine Print on Savings Accounts to Avoid Monthy Account Fees
Thinking about opening a new savings account or did you forget about a savings account you had? Besides searching for the best savings rates when opening an account, you should also read the fine print which can contain fees, especially for inactive accounts. These days you won't get rich earning interest on a savings account but you also don't want your savings account to cost you money either.
Most banks and credit unions have a minimum monthly balance to earn a particular rate of interest. Once the account falls below a certain dollar amount, the interest rate can be lowered or eliminated entirely. The highest current savings rates available are around 1.00 which are actually below the current rate of inflation of 1.7 percent.
Since your savings isn't keeping up with inflation as it is, once you tack on monthly account fees you may actually start to lose money on your account. While the monthly fees are small, usually $5 or $10 a month, they can quickly add up. Most savers don't realize they are paying a fee because they receive statements they don't even review.
While interest rates on savings accounts are low, these accounts are still a very important way most that Americans are able to save, in particular low to moderate income families (LMI). The Consumer Federation of America (CFA) released a report showing that nearly half of all families (49%) had a “traditional” (or basic) savings account with a median balance of $2,400.
More than one-third of all LMI families (37%) had one of these accounts with a median balance of $800. Stephen Brobeck, CFA's Executive Director, and author of the report said the following:
Bank savings accounts remain the most useful way for most lower-income families to save for a rainy day, but some of these accounts are far more pro-consumer than others. Bank regulators could play a critical role in improving access to these accounts and eliminating unfair practices.
It pays to shop around not only for the best savings account rates but also the best savings accounts overall. You can easily compare rates but comparing fees on accounts takes more work and you'll have to actually find and read the fine print. Start by making a list of the highest interest rates offered by banks and credit unions.
Then working from your list, go to each bank and credit union's website on the list and note the monthly fees on the account. You can generally get higher rates from credit unions than banks but some banks do offer higher rates. Some banks also offer incentives to earn higher rates if savers meet special conditions.
These conditions can include setting up automatic monthly transfers from a bank checking to savings account or tying the account to a transnational account to make a certain number of ATM transactions per month. Some banks are also offering higher online savings rates then they do with their traditional "brick and mortar" savings accounts.
The best way to save any money in a savings account is to have a certain percentage of your paycheck (or any other form of income) placed directly into a savings account. Treat the deposit like a bill that has to be paid each and every month. Over the course of a few years, you can easily save thousands or tens of thousands of dollars without even noticing any difference in your finances.
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