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Ask an expert: How Do I set up my Bank Accounts?
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(image: https://i.pinimg.com/originals/73/89/25/7389256bfefa44d02357770f468c525a.png)Ask an expert: How Do I Set-Up My Bank Accounts?
A good mix of bank accounts can help you improve your financial management through the use of various perks.
by Spencer Tierney Senior Writer | Certificates of Deposit ethics, ethical banking, bank deposits Spencer Tierney is a consumer banking writer at NerdWallet. He has been writing about finances for individuals since the year 2013, with a focus on certificates of deposit, as well as other banking issues. He has had his work covered in The Washington Post, USA Today, The Associated Press and the Los Angeles Times, among others. The location of his work is Berkeley, California.
Updated Dec 9, 2022
Editor: Sara Clarke Assistant Assigning Editor | Banking Sara Clarke is a Banking editor at NerdWallet. She has worked as an editor as well as a project director in the newsrooms for over two years, including most recently in U.S. News & World Report. She was responsible for projects such as U.S. News's U.S. News education rankings and rankings for the Best States rankings. Sara has been featured on SiriusXM Business Radio and iHeartMedia's WHO Newsradio and has been quoted in The Salt Lake Tribune, The St. Paul (Minnesota) Pioneer Press and other outlets. She is based close to Washington, D.C.
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The first homes of an bank relationship are your checking and savings accounts. However, just like you organize your home differently or even move to a new home, the way you organize your bank accounts could require adjustments over time.
If you're like me and have accounts at the same bank that your parents used to use, maybe something has happened in your life to consider if a new bank would better fit your needs.
Let's determine both the right type of bank and best combination of accounts and tools to suit your needs.
Which bank accounts are for me?
You probably don't need to think too hard on this question. Checking accounts are used for expenditure, while savings accounts are used to save cash as well as earning interest.
However, you may require additional or special accounts, so make sure to ask:
Do I have plans to share my finances with someone else? If yes, then you may need joint accounts.
Do you want to put to save money that isn't accessible? Certificates of deposit are a kind of savings account that do just that, and they will earn you a percentage of guaranteed interest.
Do I want a higher saving rate, or less costs? Online banks offer and , usually with minimal fees and low opening minimums. The most favorable rates are higher than 3%. These accounts could be an addition to your primary account.
>> COMPARE:
Credit Card for Savings and Cash Management. Money Market
Member FDIC
Savings and SoFi Checking
APR 4.00 percent SoFi customers with direct deposit are eligible to get up to 4.00 percent per year in annual percentage yield (APY) on savings balances (including Vaults) and 1.20% APY on checking balances. There is no minimum direct deposit amount required to qualify for the 4.00% APY for savings. Customers who do not deposit direct deposits will earn 1.20 percent APY on their total account balances in checking and savings (including vaults). Rates of interest are subject to change and can change at any point. These rates are current as of 03/17/2023. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet
Min. balance to APY $0
Member FDIC
Marcus from Goldman Sachs Online Savings Account
APY 3.75% 3.75% Annual percentage yield (annual percentage yield) with a minimum balance of $0 to earn stated APY. Accounts must have an open balance in order to stay open. APY valid as of 02/14/2023.
Min. balance for APY $0
Member FDIC
CIT Bank Platinum Savings
APY 4.75%
Min. balance required for APY $5,000
The cash accounts offer features and services that are similar to savings, checking and/or investment accounts in one account. These accounts for managing cash are generally provided by non-bank financial institutions.
These cash accounts combine features and services that are similar to checking, savings and investment accounts in one product. Cash management accounts are typically provided by non-bank financial institutions.
on the Wealthfront website.
Wealthfront Cash Account
APY 4.30%
Min. balance to APY $1
on the Betterment website.
Betterment Cash Reserve - Paid non-client promotion
APY 4.20 Percentage of annual percent yield (variable) is at 03/27/2023.
Min. balance for APY $0
CDs (certificates of deposit) are a kind of savings account that comes with a fixed rate and term typically, they have higher rates of interest than traditional savings accounts.
CDs (certificates of deposit) are a kind of savings account with a fixed rate and term, and usually have higher interest rates than traditional savings accounts.
Member FDIC
Marcus from Goldman Sachs High-Yield 10-Month CD
APY 5.05 5 % 5.05 percent APY (annual percentage yield) as on 03/28/2023. Special Offer Ends 09/15/2023.
The term is 10 months
CIT Bank CD with no penalty
APY 4.80%
Term : 11 months
Checking accounts can be used to deposit cash on a daily basis and for withdrawals.
Checking accounts are used to make daily cash deposits as well as withdrawals.
Deposits are FDIC Insured
Current Account
APY N/A
Monthly fee of $0
Chime Checking Account
APR N/A
Monthly fee of $0
Member FDIC
Axos Bank(r) Rewards Checking
APY 3.30% Your annual percentage yield can be up to 3.30% depending on the following combination rate-rewards: direct deposits (not including intra-bank transfers from an account) with a total of $1,500 or more every month earn 0.40 percent. A direct deposit that is eligible for a qualifying amount is required to satisfy the remaining eligibility requirements for interest rates. Ten (10) points of sale transactions per month , using Your Rewards Visa(r) Debit Card to make normal everyday purchases with a minimum of $3 per transaction, or enrolling in Account Aggregation/Personal Financial Manager (PFM) will earn 0.30%; maintaining an annual average of $2,500 per month for Axos Managed Portfolio Invest account will earn 1.00%. Axos self-directed trading Invest account earns 1.00 percent; and maintaining an average of at least $2,500 on an Axos managed Portfolio Invest account will earn 1.00 percent; and making a monthly payment towards an active Axos Consumer Bank loan (commercial or business loans excluded) through a transfer from your Rewards Checking account can earn the maximum amount of 0.60 percent.
Monthly fee: $0
Money market accounts pay rates similar to savings accounts, and come with certain checking features.
Market accounts for money pay interest rates similar to savings accounts, and come with some features for checking.
Member FDIC
Discover Bank Money Market Account
APY 3.50%
Min. balance for APY $1
How many banks should I open?
The quick answer is: It depends.
The ideal number is "the most minimal number of accounts needed to achieve your goals and sustain your household," says Derek Brainard the National director for financial education for the non-profit AccessLex Institute. "Two is the minimum, but a lot of people exceed that just for sheer organization's sake."
Multiple deposit accounts might help you budget by effectively using the internet version of the tradition of placing cash into envelopes earmarked to be used for specific expenses or goals. Instead, you can have a savings account for each goal or a checking account to cover different kinds of expenditures, which could be way better as compared to ATM cash withdrawals and using envelopes.
But this set-up might not be the best for all.
"Do multiple accounts give you peace of mind or cause anxiety?" says Saundra Davis, founder and executive director of Sage Financial Solutions, a San Francisco Bay Area-based nonprofit. Davis owns eight accounts with banks, including business and personal checking accounts as well as a savings account for regular expenses, and a savings account for emergencies (commonly known as an ).
"How we manage our lives must be evident in how we manage our money," she says.
What's the best type of bank to me?
This also depends, but you might not have the various options available to you . Let's go over some of the types of banks and institutions.
Bank vs. credit union
Both have similar accounts, but banks are for-profit businesses while credit unions are cooperatives for not-for-profit purposes that require membership based on geographical location or other aspects. Banks, particularly the largest are more likely to offer cutting-edge technology for online banking. But you might find lower fees and better rate for loans or savings generally, at the credit union.
Brick-and-mortar vs. online bank
A brick-and-mortar or traditional bank is a network of ATMs and branches as well as in-person assistance for urgent problems or use specific services like cashier's checks , or for signing legal documents using a notary. While an online bank typically doesn't have physical locations or services, it is able to offer significantly higher rates for savings accounts and lower charges than a traditional bank.
A brokerage can offer banking
A brokerage firm or investment firm can manage both banking and investing, if you're looking for that convenience. A company's bank account equivalent is often a that usually insures funds beyond the federal deposit insurance limit of $250,000 per account. This insurance lets you recover funds if banks go bankrupt.
Combining types
You could have your cash in more than one bank in fact it could be beneficial to you from it. I have a traditional bank, the same one as my parents', but I use the cash to pay my credit card bills quickly. In 2015, I opened an investment account with high yields with a sign-up bonus I later discovered that I liking the same bank's checking accounts for debit cards with no foreign transaction fees.
I might switch to be completely web-based, but what if I need to go in person for a service I've not yet needed -- such as paying a check that is over the limit set by my online bank for mobile deposit or talking with an officer from the bank's lending department at a branch while applying for a future loan? In keeping both banks, I get access to various perks and services.
What tools for banks should I use?
Many banks offer options that can aid in the management of your accounts, such as alerts that assist you in planning your budget or to detect fraud as well as automatic transfers that transfer a portion of your monthly income from checking accounts to savings on a regular basis.
The main benefit of an automatic transfer is that it automates your smart decision to save frequently, according to Brainard. "The one drawback is that it restricts your cash flow." Make sure your checking balance is enough to cover monthly bills to avoid back-and-forth transfers.
Although automatic transfers do have their place, I've realized that the peer-to peer payments system Zelle offers a benefit that my other transfer apps Venmo as well as Cash App don't. Since Zelle is integrated in a number of banks' apps which includes all of mine, I joined both in my Zelle account (one per bank) and I've been able to make nearly instant transfers for free between them. This beats waiting the up to 3 business days that I used to do to make these transfers.
Like similar apps like Venmo however, Zelle's main danger is that you can't cancel a transfer once it's sent -- even if you send funds to the wrong person.
Transaction alerts are another tool that can help you budget or detect fraud, and they're delivered via email or texts. The most frequent alerts are for withdrawals or deposits that exceed the amount of a certain amount, or the balance drops below a certain threshold, and upcoming payment reminders. I've set up alerts on transactions with my credit card for nearly every purchase just to be sure I can spot a purchase I didn't complete.
When should I reevaluate my banking configuration?
Dana Twight, certified financial planner and founder of the Seattle-based firm Twight Financial Education, recommends reviewing your bank's setup every two to three years. If your income fluctuates, your needs may change.
Other reasons to switch accounts or banks could be:
Having a major life occasion. Getting married might mean opening joint accounts. Likewise, having or adopting a child can mean the opening of new accounts. If you are looking to get a mortgage or start a business may lead you to an alternative institution, such as a credit union or bank with lower loans than your current bank.
A bank that isn't meeting your needs. The bank could begin charging fees on an account, or the customer service doesn't help you solve important problems.
Looking to give back to an institution based on your ideals. Some banks and credit unions, such as or banks, play crucial roles in their communities and advocate for social transformation.
"Banking through a black-owned bank is essential to me, but they don't have the same backbone and the infrastructure that a major bank does," Davis says. "I am aware that I have to pay a fee every month to put my money in there and do that because it's important to me."
Author bio Spencer Tierney is a writer and NerdWallet's official authority on certificates of deposit. His work has been highlighted by USA Today and the Los Angeles Times.
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