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- I made a big money mistake in my 20s: keeping my cash in a typical bank savings account with a low interest rate.
- I was nervous about changing banks, though, so I asked a financial advisor to help me figure out the best account for me.
- He advised looking at accounts fees and features, and ensuring that transfers to other financial institutions are possible.
- See Business Insider’s picks for the best high-yield savings accounts »
One of the biggest mistakes I made in my 20s was keeping my cash at a bank with an interest rate that was so low it’s now laughable. My money wasn’t growing year after year in those accounts when it could have been making hundreds or even a thousand or so dollars every year.
A big reason I didn’t move my money to a different bank sooner was I felt nervous about picking a new bank and making a transfer. While I knew it was something I had to do (because an interest rate of just 0.01% wasn’t going to cut it anymore) it was a big decision I wanted to be smart about.
As I did my research and made a list of banks I was considering, I had the chance to speak to financial planner R.J. Weiss, who gave me four big things to think about.
Know your account fees
Make sure you read the fine print. Weiss says that while some banks might tempt you with high interest rates, account fees can easily eliminate gains from having an above-average yield.
After doing research on my own, I made a list of five banks I wanted to consider moving my money to because of their interest rate offerings. But then I examined all the fees and noticed that some charged a monthly fee of $15 to $25 if you don’t keep a certain amount of cash in your account (a minimum balance) and decided to cross those off my list. I wanted a bank that didn’t have those kinds of fees.
I ended up going with Ally, a bank that had no monthly maintenance fees at all.
Compare all the features
The next thing Weiss advises is to see how your other financial accounts (like a checking account, for example) can benefit from you switching to a high-yield savings account.
“As an example, does the bank have an ATM card where you get 100% of fees reimbursed?” says Weiss. “Often, having a good amount of cash sitting in one bank can open up account options that are not highly advertised.”
After talking to Weiss, one of my must-haves was finding a bank that let me withdraw cash from any ATM without having to pay the fees. That would save me around $50 a year and was a big perk.
Understand transfer policies
A big thing that didn’t cross my mind before I spoke to Weiss were the transfer policies of the high-yield savings accounts I was considering
Says Weiss, “For example, is there a limit on how much you can transfer to your checking account per day? How long does it take on average?”
This was something I looked into before picking my new bank and even called each of the banks I was considering to make sure I was clear on how much I could transfer daily (since, as a small-business owner, I often have deposits to make) and how long it will take for the cash to hit my account.
Ensure automatic transfers are a possibility
To help streamline my finances and make everything easier, Weiss mentioned that I should make sure the bank I chose allows for automatic transfers to other financial institutions.
“While most checking accounts have this feature, automatic transfers can help you accomplish investing strategies, like dollar-cost averaging into the market,” says Weiss. With dollar-cost averaging, you automate the same amount of money into your brokerage account every month.
All of this advice allowed me to make a good decision. It can be stressful to pick a new bank, especially when you’ve kept your cash at the same place for so many years.
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