Choosing a Savings Account
Sometimes it just seems like there are too many options. That's not the case with savings accounts. There are a few variations, but not a lot, so choosing the account best-suited to your needs isn't too difficult. When you go account shopping, you'll want to keep in mind the following 'sketches' of common accounts, as well as their primary factors: interest rate, access, and fees.
- Basic Savings Accounts. A bland sort of account. Many people choose it because it's middle of the lane; it doesn't require too much and doesn't give too much. It's a place to store money. Like most savings accounts, basic savers pay you interest, but not at the highest rate. These may have a minimum deposit requirement, and if you don't keep that amount of money in your account at all times, you may stop accruing interest. You may not get rich with these accounts, but at least you won't have to keep your money under your mattress.
- Money Market Accounts. These guys are looking for a more specialized clientele than their Basic friends. They collect slightly more interest, but in return they almost certainly have a minimum balance and they may have limits on the number of transactions you can conduct weekly, and surpassing that limit can result in fees. The high-ish interest rates make this a good place for keeping large amounts of money for a short time—for example, when you're saving up for a big purchase.
- High Yield Accounts. The elder sibling of the other accounts, high yielders emphasize both the ups and downs of money market accounts and basic savings accounts. They have the highest interest rate (as much as two percent higher than basic savers), but they often place severe restrictions on account activity and generally don't issue ATM cards. If you need to interact with your money more than a few times a month, a high yield account may not be for you.
There are other types of savings accounts you can choose from, but these three are the most common. Research whatever account you're looking at so you don't get locked into a tangled trap of fees. One last tip: for many savings accounts, the interest rate goes up or down depending on your balance. This can be true for all types of accounts, so check with your specific institution.
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