In this illustration, a Capital One Bank debit card is seen during an ATM transaction at a Capital One Cafe in Santa Monica, California, on February 21, 2024. (Photo by PATRICK T. FALLON/AFP via Getty Images)
By Chanelle Bessette | NerdWallet
I’ve been writing about personal finance for seven years, and I’ve picked up a few best practices along the way. These insights come from talking to experts, spending countless hours giving star ratings to dozens of banking products, and reading stories shared with me via email.
Here are five lessons from my work as a retail banking writer that I’d like to share with you.
1. The best bank accounts have high interest rates, no fees and creative perks
When you’re looking to open a new bank account, I always recommend two things: look for high interest rates and no monthly fees or minimum balance fees, as these benefits will help you get the most value out of your money.
Aside from these features, I’ve been really impressed by some of the creative new offerings banks are coming up with for their customers. These include round-up savings programs and overdraft buffers (more on that later). Other features have become a bit more commonplace, such as two-day early direct deposit, ATM fee reimbursement, cash back on debit card spending, and “buckets,” which are sub-accounts within your main savings account that you can set up for different savings goals. If you’re looking to open a new account, be sure to check out these additional benefits.
2. Different types of accounts are designed to help you achieve different goals
This may be common knowledge to some people, but it wasn’t until I became a banking writer that I learned how to effectively use checking accounts, savings accounts, and certificates of deposit for different purposes.
Checking accounts are a place to keep money you’ll spend in the near future, such as bills. Savings accounts are designed to earn you interest and still be available, so they’re great for money you don’t need right away but still want to withdraw. CDs are also good for earning interest, but unless you get a no-penalty CD, you won’t be able to access your money before the term ends without paying a penalty.
With this in mind, you should match the timing of your financial goals to the right account.
3. Maximize your emergency fund with a high-interest savings account
According to a 2024 study by NerdWallet, 84% of Americans experience financial stress. After the cost of food and housing, lack of savings is one of the biggest stressors. Expert opinion on how much you should have in your emergency fund varies, but it’s a good idea to have enough money to survive a possible job loss. Typically, necessary expenses last three to six months.
If that seems out of reach, even $1,000 in savings can help you sleep better at night knowing you can afford a small car repair or an unexpected trip. You want the money to be accessible and earning interest, so a high-yield savings account is the best place to put that money.
4. Banks have created more and better ways to avoid overdraft fees
Not only is the government pushing banks to reduce overdraft costs overall—in January 2024, the Consumer Financial Protection Bureau said their recent efforts had resulted in annual savings of $3.5 billion in overdraft fees for consumers—but there are banks that have already taken the initiative, such as offering buffers on overdraft fees.
These buffers allow customers to put their account into negative territory by up to a certain amount – in some cases up to $200 – without incurring a fee, as long as customers replenish their bank account as quickly as possible, such as through a savings transfer or check deposit. For many people, this small amount of wiggle room can help tide them over until their next paycheck. I think it’s great that some banks have recognized how useful this feature can be for people who have run into financial difficulties.
5. Before you open an account, do your research
You may not want to spend as much time reading the fine print as I did, but you should at least read your terms and conditions once. Make sure you are clear about fees and interest rates, as well as any terms the bank may have. For example, a bank may require you to overcome certain hurdles – like depositing a certain amount of money or making a certain number of direct debit transactions per month – to avoid fees or receive interest. Some of these are manageable, while others may be excessive.
Be sure to research the bank online and see what consumers say about them on review sites; knowledge is power.
Chanelle Bessette writes for NerdWallet. Email: [email protected].
The article “5 Things You Should Know About Banking, From a Banking Journalist” originally appeared on NerdWallet.
