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Ask an Nerd: How Can I Set-Up My Bank Accounts?
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Ask an expert: How Do I set up my Bank Accounts?
The right combination of bank accounts can help improve your financial management through the use of various perks.
by Spencer Tierney Senior Writer | Certificates of Deposit and ethical banking, as well as banking deposits Spencer Tierney is a consumer banking writer for NerdWallet. He has written about finances for individuals since the year 2013 with a focus on certificates of deposit and other banking-related topics. The work he has written for him was featured in The Washington Post, USA Today, The Associated Press and the Los Angeles Times, among other publications. He is located in Berkeley, California.
Updated Dec 9, 2022
Written by 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 over the past two decades, most recently working for U.S. News & World Report. She was responsible for projects such as the U.S. News education rankings as well as the Best States rankings. Sara has been featured in SiriusXM Business Radio and iHeartMedia's WHO Newsradio and has been mentioned on The Salt Lake Tribune, The St. Paul (Minnesota) Pioneer Press and other outlets. Sara is located close to Washington, D.C.
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The first homes of a banking relationship are your checking and savings accounts. However, just like you arrange your home in a different way or move into a new home, the way you organize your bank accounts may require changes in time.
If this is you and still have accounts at the same bank as your parents, maybe enough has changed in your life to consider if a new bank is better suited to your needs.
Let's find the appropriate kind of bank and the best combo of accounts and tools for you.
Which accounts in the bank are best for me?
It's probably not necessary to think too hard on this one. Checking accounts are used for spendingmoney, while savings accounts are meant to be used for saving funds and earning interest.
However, you may require additional or special accounts, so make sure to ask:
Do I intend to share finances with someone? If yes, then you may need joint accounts.
Do I need to have to save money that isn't accessible? Certificates of deposit are a kind of savings account which can do exactly that, and will earn you a guarantee.
Do I want a higher savings rate or lower fees? Online banks provide and typically, with low fees and low opening minimums. The best rates are above 3 percent. These options might be supplemental to your primary account.
>> COMPARE:
Savings Cash Management CD Checking Money Market
Member FDIC
Savings and SoFi Checking
The APY is 4.00% SoFi members with direct deposit can get up to 4.00 per cent annual percentage yield (APY) on savings balances (including Vaults) and 1.20% APY on checking balances. There is no minimum amount of direct deposit that is required to be eligible for 4.00 percent APY on savings. Members without direct deposit will receive 1.20 percent APY on their total account balances in checking and savings (including vaults). Interest rates are variable and subject to change at any time. The rates listed were last updated on 03/17/2023. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet
Min. balance required for APY $0
Member FDIC
Marcus is a product of Goldman Sachs Online Savings Account
APY 3.75 percent 3.75% APY (annual percentage yield) with a minimum balance of $0 to earn the APY stated. Accounts must have an active balance in order to remain open. APY current as of 02/14/2023.
Min. balance to APY $0
Member FDIC
CIT Bank Platinum Savings
APY 4.75 percent
Min. balance required for APY $5,000
They combine the features and services that are that are similar to checking, savings and/or investment accounts in one package. Cash management accounts are typically provided by non-bank financial institutions.
They combine the services and features similar to checking, savings and investment accounts in one account. These accounts for managing cash are generally provided by non-bank financial institutions.
on the website of Wealthfront.
Cash Account at Wealthfront
APY 4.30%
Min. balance required for APY $1
on Betterment's website
Betterment Cash Reserve - Paid non-client promotion
APY 4.20 Percentage of annual percentage yield (variable) is as of 03/27/2023.
Min. balance required for APY $0
CDs (certificates of deposit) are a type of savings account that comes with a fixed rate and term typically, they have higher interest rates than regular savings accounts.
CDs (certificates of deposit) are a form of savings account with the option of a fixed rate and time, and usually have higher rates of interest than standard savings accounts.
Member FDIC
Marcus is a Goldman Sachs High-Yield 10-Month CD
APY 5.05 5 % 5.05% APY (annual percentage yield) as of 03/28/2023. Special Offer Expires 09/15/2023.
The term is 10 months
CIT Bank CDs with no Penalty
APY 4.80 percent
The term is 11 months
Checking accounts can be used to deposit cash on a daily basis and for withdrawals.
Checking accounts can be used to deposit cash on a daily basis and for withdrawals.
The deposits are FDIC Insured
Current Account
APY N/A
Monthly fee $0
Chime Checking Account
APR N/A
Monthly fee $0
Member FDIC
Axos Bank(r) Rewards Checking
APY 3.30% Your annual percentage yield can be as high as 3.30% based on the following combined rate-rewards: direct deposits (not including transfers between banks from another account) that total more than $1500 every month earn 0.40%. A direct deposit that is eligible for a qualifying amount is required to satisfy the remaining eligibility requirements for interest rates. Ten (10) transactions at the point of sale per month using Your Rewards Visa(r) debit card for ordinary purchases that have at least $3 for each transaction, or registering for Account Aggregation/Personal Finance Manager (PFM) will earn 0.30 percent. Maintaining an average daily balance of at least $2,500 per month in the Axos self-directed trading Invest Account will yield 1.00%; maintaining an average of at least $2,500 a month on an Axos Managed Portfolio Invest account earns 1.00 percent; and making a monthly payment to an open Axos Bank consumer loan (commercial or business loans excluded) through a transfers from Rewards checking account will earn a maximum of 0.60 percent.
Monthly fee of $0
The money market accounts have rates that are similar to savings accounts, and come with certain features for checking.
The money market accounts have rates similar to savings accounts and have certain checking features.
Member FDIC
The Discover Bank Money Market Account
APY 3.50%
Min. balance to APY $1
How many accounts in my bank should I have?
The quick answer is: It all depends.
The ideal number is "the minimum number of accounts required to achieve your goals and to support your family," says Derek Brainard who is the head of the national department for financial education at the nonprofit AccessLex Institute. "Two is the minimum, however a lot of people exceed this for the sake of organization."
Multiple deposit accounts might help you budget by effectively making use of an online version of , which traditionally involves putting cash in envelopes designated for specific bills or goals. Instead, you could have a savings account for each goal or a checking account for different types of expenses, which might be way more convenient as compared to ATM cash withdrawals and using envelopes.
But this setup may not be the best for all.
"Do your multiple accounts provide reassurance or give you anxiety?" says Saundra Davis the founder and executive director for Sage Financial Solutions, a San Francisco Bay Area-based non-profit. Davis owns eight accounts with banks. These include business and personal checking accounts, a savings account for periodic expenses and an emergency savings account (commonly known as an ).
"How we live our lives must be evident in how we manage our finances," she says.
What's the right type of bank to me?
It's also a matter of personal preference, however you might not have all your options when . Let's go over the various types of banking institutions.
Bank vs. credit union
Both have similar accounts, but banks are not for-profit companies while credit unions are not-for-profit cooperatives which require membership based on the location of their headquarters or other variables. Banks, especially the biggest ones, typically have more modern technologies for banking online. You may also have lower fees and better rate for loans and savings, on average, at the credit union.
Brick-and-mortar vs. online bank
A traditional or brick-and-mortar bank has a network of ATMs and branches, as well as in-person support to address urgent issues or to use specialty services, such as cashier's checks , or for the signing of legal documents with an official notary. While an online banking institution typically lacks locations and the accompanying services, it may offer much higher rates on savings accounts and fewer fees than a traditional bank.
A brokerage can offer banking
A brokerage firm or investment firm can handle banking as well as investing if you want that convenience. The firm's bank account equivalent is often one that is usually insured to cover money that is beyond the Federal deposit insurance limit of $250,000 per account. This insurance lets you receive funds back in the event that the bank fails.
Combining types
You may be able to have your money at more than one institution and, in actuality you could benefit from it. I have an old-fashioned bank similar to that of my parents, however I keep cash in there mostly to pay my credit card bills promptly. The year 2015 was the first time I created an account with a high yield that offered a sign-up bonus I later discovered that I liking the same bank's checking account to use its debit card, which has no foreign transaction fees.
I might switch to be completely web-based, but what if I require an in-person service I've not yet needed -- such as the cashing of a check in excess of the limit set by my online bank for mobile check deposits, or talking to the bank's lending representative at a branch when applying for a future loan? In keeping both banks, I get access to a variety of benefits and services.
What tools for banks should I use?
A lot of banks have options that can aid in the management of your accounts, such as alerts that aid in budgeting or detecting fraud. You can also make automatic transfers to transfer some of your monthly earnings from checking accounts to savings on a regular basis.
The primary benefit of automatic transfers is to automate your good decision to save frequently, according to Brainard. "The one drawback is that it reduces cash flow flexibility." Therefore, make sure that your account balance is enough to pay monthly bills , so you don't have to make back-and-forth transfers.
While automatic transfers have their place, I've realized that the peer-to-peer payments system Zelle has a use case that the other transfer applications Venmo and Cash App don't. Since Zelle is embedded in many banks' apps, including both of my banks, I joined in both accounts Zelle account (one for each bank) and have been able to send nearly instant transfers for free between the two accounts. This is better than waiting for the between one and three days I used to do to transfer funds.
As with similar apps like Venmo, though Zelle's biggest disadvantage is that you cannot cancel a transfer after it's been sent, even if you transfer funds to the incorrect person.
Transaction alerts are a different tool that can help you budget or spot fraud. they're delivered via email or texts. Some common alerts include deposits or withdrawals above an amount, balances that drop below a threshold, and upcoming payment reminders. I have alerts on transactions with my credit card for nearly every purchase just in case I find one I didn't make.
When should I reevaluate my banking configuration?
Dana Twight, certified financial planner and owner of the Seattle-based firm Twight Financial Education, recommends evaluating your banking setup every 2 to 3 years. When your income changes or your expenses change, it could be time to review your financial needs.
Other reasons to change accounts or banks may be:
Having a major life occasion. The wedding ceremony could lead to opening joint accounts, and adopting or having the birth of a child could mean the opening of new accounts. If you are looking to get a mortgage or start your own business could lead you to a new financial institution or credit union with cheaper loans than your current bank.
The bank is no longer satisfying your requirements. The bank could begin charging fees on your account, or customer service doesn't help you solve serious issues.
Do you want to help an institution based on your beliefs. Some banks and credit unions like banks, play crucial roles in their communities and advocate for social change.
"Banking with a Black-owned bank is essential to me, but they do not have the same backing and the infrastructure that a major bank has," Davis says. "I realize that I have to pay a monthly fee to keep my money there and I do it because it is important for me."
The author's bio: Spencer Tierney is a writer and NerdWallet's official authority on deposit certificates. The work of Spencer Tierney has been featured in USA Today and the Los Angeles Times.
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