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Ask a Nerd: How Should 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 you manage your money better by taking advantage of different advantages.
by Spencer Tierney Senior Writer | Certificates of Deposit, ethical banking, banking deposit accounts Spencer Tierney is a consumer banking writer at NerdWallet. He has covered the personal financial sector since with a focus on certificate of deposit, as well as other banking subjects. The work he has written for him was featured in The Washington Post, USA Today, The Associated Press and the Los Angeles Times, among others. He is located in Berkeley, California.
Updated on Dec 9, 2022
Written by Sara Clarke Assistant Assigning Editor | Banking Sara Clarke is a Banking editor at NerdWallet. She has been an editor, as well as project coordinator in various newsrooms for over two decades, with the most recent working for U.S. News & World Report. She was in charge of projects like The U.S. News education rankings as well as The Best States rankings. Sara has appeared on SiriusXM Business Radio and iHeartMedia's WHO Newsradio and has been quoted on The Salt Lake Tribune, The St. Paul (Minnesota) Pioneer Press and other media outlets. She lives close to Washington, D.C.
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The starter homes of an bank relationship are your checking and savings accounts. But just as you might arrange your home in a different way or even move to a new home the way you arrange your bank accounts could require changes as time passes.
If you're anything like me and have accounts with the same bank that your parents used to use Perhaps something has happened in your life that you need to consider if a new bank will better suit your needs.
Let's determine both the right kind of bank as well as the most effective combination of tools and accounts for you.
Which accounts in the bank are best for me?
It's probably not necessary to think too hard on this issue. Checking accounts are for expenditure, while savings accounts are used to save money as well as earning interest.
However, you may require additional or special accounts, so ask yourself:
Do I intend to share my finances with someone? If so, you might want joint accounts.
Do you want to put some savings out of reach? Certificates of deposit are a type of savings account that do exactly that, and will earn you a guaranteed rate.
Do I need a higher rates of savings or even lower charges? Banks online offer generally, with no fees and low opening minimums. The best rates are above 3 percent. These accounts could be an addition to your primary account.
>> COMPARE:
Saves CD Management Checking Money Market
Member FDIC
Savings and SoFi Checking
APY 4.00 percent SoFi customers who have direct deposit are eligible to get up to 4.00% per year in annual percentage yield (APY) on savings balances (including Vaults) and 1.20% APY on checking balances. No minimum direct deposit amount required to qualify for the 4.00% APY for savings. Customers who do not deposit direct deposits will receive 1.20 percent APY on their total account balances , including checking and savings (including Vaults). Interest rates are variable and subject to 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 by Goldman Sachs Online Savings Account
APY 3.75 percent 3.75% APY (annual percent yield) with no minimum balance to earn stated APY. Accounts must have an open balance in order to stay open. APY current as of 02/14/2023.
Min. balance for APY $0
Member FDIC
CIT Bank Platinum Savings
APY 4.75%
Min. balance for APY $5,000
They combine the features and services that are that are similar to checking, savings or investment accounts into one package. The cash management account is typically offered by non-bank financial institutions.
These cash accounts combine features and services that are similar to savings, checking and/or investment accounts in one package. These accounts for managing cash are generally provided by non-bank financial institutions.
on Wealthfront's website
The Wealthfront Cash Account
APY 4.30%
Min. balance for APY $1
on the Betterment website.
Betterment Cash Reserve - Paid non-client promotion
APY 4.20 Percentage of annual percentage yield (variable) is at 03/27/2023.
Min. balance for APY $0
CDs (certificates of deposit) are a type of savings account that comes with an interest rate fixed and a term generally, and have higher interest rates than regular savings accounts.
CDs (certificates of deposit) are a type of savings account that has an interest rate fixed and a term generally, they offer higher rates of interest than traditional savings accounts.
Member FDIC
Marcus from Goldman Sachs High-Yield 10-Month CD
APY 5.05 5 % 5.05 5 % APY (annual percentage yield) as on 03/28/2023. Special Offer Ends 09/15/2023.
Ten months of term
CIT Bank No-Penalty CD
APY 4.80 percent
Term : 11 months
Checking accounts are utilized to deposit cash on a daily basis and for withdrawals.
Checking accounts are used to deposit cash on a daily basis and for withdrawals.
They are FDIC Insured
Current Account
APY N/A
Monthly fee $0
Chime Checking Account
APY N/A
Monthly fee of $0
Member FDIC
Axos Bank(r) Rewards Checking
APY 3.30% Your annual percentage yield may be up to 3.30% according to the following rate of rewards: direct deposits (not including inter-bank transfers from an account) with a total of $1,500 or more each month will earn 0.40 percent. A qualifying direct deposit is required for the remaining interest rate qualifications to apply. Ten (10) transactions at the point of sale per month using the Rewards Checking Visa(r) Debit Card to make ordinary purchases that have at least $3 for each transaction, or by enrolling in Account Aggregation/Personal Financial Manager (PFM) will earn 0.30%; maintaining an average balance per day of at least $2,500 in the Axos self-directed trading Invest account earns 1.00%; maintaining the average balance per day of $2,500 on an Axos Managed Portfolio Invest account will earn 1.00%; and making monthly payments to an open Axos bank consumer loan (commercial as well as business loans exempted) by the Rewards Checking Account earns the maximum amount of 0.60%.
Monthly fee $0
The money market accounts have rates similar to savings accounts. They also have certain checking features.
Money market accounts pay rates that are similar to savings accounts and have some checking features.
Member FDIC
The Discover Bank Money Market Account
APY 3.50%
Min. balance to APY $1
How many banks should I open?
The short answer is: It depends.
The ideal number is "the fewest accounts necessary to achieve your objectives and support your household," says Derek Brainard, national director of financial education for the nonprofit AccessLex Institute. "Two is the bare minimum, but lots of people exceed this for organization's sake."
Multiple deposit accounts might help you budget by effectively making use of an online version of the , which traditionally involves putting money into envelopes that are earmarked for specific goals or bills. Instead, you could set up an account with savings for each goal , or a checking account to cover different kinds of expenditures, which could be much more convenient in comparison to ATM cash withdrawals and using envelopes.
But this set-up might not be suitable for everyone.
"Do multiple accounts give you peace of mind or cause anxiety?" says Saundra Davis who is the executive director and founder at Sage Financial Solutions, a San Francisco Bay Area-based non-profit. Davis has eight bank accounts, including business and personal checking accounts, a savings account for periodic expenses and an emergency savings account (commonly called an ).
"How we live our lives should be reflected in how we manage our money," she says.
What's the most suitable type of bank to me?
It's also a matter of personal preference, however you might not have the options you have . Let's look at a few types of banking institutions.
Bank vs. credit union
Both have similar accounts, but banks are for-profit businesses while credit unions are cooperatives that are not for profit that require membership based on geography or other factors. The largest banks, in particular ones, typically have more modern technology for online banking. But you might have lower fees and better rates in loans and savings, on average at the credit union.
Brick-and-mortar vs. online bank
A traditional or brick-and-mortar bank is a network of ATMs and branches as well as in-person support to address urgent issues or for specific services like cashier's checks or signing legal documents using an official notary. While an online banking institution typically doesn't have physical locations or services, it can provide far higher rates on savings accounts, and have lower fees than a traditional bank.
A brokerage can offer banking
A brokerage firm or investment firm is able to manage banking as well as investing if you want the convenience. A company's bank account equivalent is often an insurance policy that typically covers money that is beyond the federal maximum of deposit insurance of $250,000. This insurance enables you to get funds back if a bank goes bankrupt.
Combining types
You may be able to have your money at more than one institution in fact, you might benefit from it. I have one of the traditional banks, the same one as my parents', but I use the cash to pay my credit card bills quickly. The year 2015 was the first time I created a high-yield savings account which offered a sign-up offer, and later ended up enjoying the bank's checking account for its debit card with no foreign transaction charges.
I might switch to be completely online, but what if I require an in-person service that I don't need yet -- such as paying a check that is over my online bank's limit for mobile check deposit, or talking to an officer from the bank's lending department at a branch while applying for a loan? In keeping both banks, I get access to various advantages and services.
What tools for banks should I utilize?
A lot of banks have options that can aid in managing your account, such as alerts to help you budget or detect fraud. You can also make automatic transfers to transfer some of your monthly income from checking to savings regularly.
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 reduces cash flow flexibility." Make sure that your account balance is enough to cover monthly bills , so you don't have to make back-and-forth transfers.
Although automatic transfers do aren't a bad thing but I've discovered that the peer-to-peer payment system Zelle offers a benefit unlike the other transfer apps Venmo and Cash App don't. Since Zelle is integrated in a number of banking apps which includes all of mine, I joined in both accounts Zelle Accounts (one for each bank) and have been able to make nearly instant transfers to both of the two accounts. This is better than waiting for the one to three business days that I used to do to make these transfers.
As with similar apps like Venmo However Zelle's biggest risk is that you generally cannot cancel a transfer after it's been sent, even if you transfer funds to the incorrect person.
Transaction alerts are a different tool which can assist you in budgeting or detect fraud, and they're delivered via email or texts. A few of the most common alerts are withdrawals or deposits that exceed a certain amount, balances that drop below a set threshold, and future payment reminders. I have alerts about transactions on my credit card for virtually every purchase in case I find one I didn't make.
How often should I review my banking setup?
Dana Twight, certified financial planner and founder of the Seattle-based firm Twight Financial Education, recommends evaluating your banking setup every two to three years. When your income changes, your needs may change.
Other reasons to change banks or accounts may include:
Having a major life moment. Getting married might mean opening joint accounts. Likewise, having or adopting children can require the opening of new accounts. If you are looking to get a mortgage or start your own business could lead you to a new bank or credit union with cheaper loans than the one you have with your current bank.
A bank no longer satisfying your requirements. The bank may begin to charge fees to your account, or the customer service isn't assisting you in resolving important issues.
Looking to give back to an institution based on your values. Certain credit unions and banks, such as or banks, play a vital role in their communities , and they are advocates for social changes.
"Banking through a black-owned bank is important to me, but they don't have the same backbone and infrastructure that a large bank does," Davis says. "I realize that I have to pay a monthly fee to keep my money there and do that because it matters to me."
About the author: Spencer Tierney is a writer and NerdWallet's official authority on deposit certificates. He has had his work featured by USA Today and the Los Angeles Times.
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