A savings account is an ideal place to securely store your money while earning interest. For many people, a savings account is among their first bank accounts.
A savings account can be a building block for good financial health, yet not all savings accounts are the same. While your savings account may have been meeting your needs for years, another savings account could offer better opportunities for your financial health.
Accounts differ in the amount of interest they provide on your deposits, and they charge different fees. If you’re ready to move to another savings account, learn how to compare your options to find the right fit for you, as well as how to make the switch.
- A savings account provides a secure place for your money to grow interest as you build an emergency fund or save for long-term financial goals.
- When comparing savings accounts, consider the interest rates and fees as well as your options for accessing the money.
- Savings accounts at online banks may offer higher rates than savings accounts at traditional banks or credit unions.
- Before closing an old savings account, cancel any recurring debits or credits on the account, including direct deposits, transfers, or automatic bill payments.
What To Look for in a Savings Account
A savings account is a deposit account that's designed to safely hold money you don't plan to spend right away.
You can open a savings account at traditional banks, credit unions, and online banking institutions. Savings accounts can pay an Annual Percentage Yield (APY) on deposits and charge fees, both of which are among the key factors to consider when comparing savings account options because they vary from bank to bank.
FDIC coverage insures savings accounts for up to $250,000 per account ownership type, per depositor, per financial institution. So, even if your bank fails, your savings account deposits are protected up to that amount.
Switching banks is not difficult, but it takes a little planning and some careful consideration to find the right savings account for you. Moving to a new savings account could pay off with lower fees, higher interest rates, or better services options.
Banks make money by charging fees for their products and services and savings accounts are no exception. Higher fees can detract from the money you're saving. So check the fee schedule for each savings account you're considering to estimate how much you might pay.
The kinds of fees a savings account may charge include:
- Monthly maintenance fee
- Excess withdrawal fee
- Paper statement fee
- Deposited item return fee
- Inactivity fee
- Wire transfer fee
Monthly maintenance fees are fees you pay simply for having the account. An excess withdrawal fee may apply when you exceed the allowed limit for withdrawals from savings per month. For example, your bank may set a limit of six withdrawals per month and charge you $5 if you go over that amount.
In 2020, the Federal Reserve suspended the six-withdrawal-per-month limit for savings accounts, but banks can still set their own limit and charge a fee.
APY or annual percentage yield reflects the amount of interest you could earn on a savings account balance over the course of a year. The APY is larger than the basic interest rate because it accounts for compounding. Comparing APYs on different savings accounts will help you determine which one may help your money grow faster.
While a higher APY is a benefit, it’s important to understand how it’s applied. Some banks may apply the same APY across all balances. So you might earn 0.01% on all your deposits. Other banks may tier your APY based on your balance. So you might earn 0.05% on the first $2,499 in savings, then earn 0.60% on everything you save above $2,500.
As a general rule of thumb, online banks tend to offer higher APY for savings accounts compared to traditional banks. So it's worth comparing interest rates across different banks.
If you're opening a savings account, you likely have some money to deposit. But the amount you may need to open a savings account can vary from bank to bank.
For instance, you may be able to open a new savings account with no money at one bank while another bank may require an initial deposit of $500. A higher minimum deposit may be required for savings accounts that offer a higher APY.
Convenience and Customer Service
A savings account is meant to hold money for longer-term goals, or money you don't need to use for your regular spending needs. Still, it's important to consider how easily you'll be able to access your money if you need it.
When comparing the services savings accounts provide, first understand your personal needs and then consider these questions:
- Does the bank offer online banking or a mobile app?
- Is mobile check deposit an option?
- Will the account come with an ATM card or debit card?
- Will I be able to set up direct deposit or transfer money between accounts?
- Can I deposit money at a branch or ATM?
- Are there daily, weekly or monthly limits on the amount or number of deposits and withdrawals?
- What type of customer support is available?
Each bank offers different terms and service options. Reviewing how they connect with their customers and how you can connect with your account will help you find the best savings account for you. For example, if you want to be able to access your funds soon after you deposit them, look for a bank that matches your needs with their funds availability policy.
Other Products and Services
A savings account is just one financial tool you may need throughout your life. When searching for how to switch savings accounts, you may want to explore your options for new checking accounts or loans. So as you compare banks, consider what other products or services are available.
Some products or services you might review for better deals than your current holdings include:
- Checking accounts
- Savings accounts
- Money market accounts
- Certificate of deposit accounts
- Credit cards
- Personal loans
- Student loans
- Car loans
- Mortgage loans
- Business loans
- Retirement and investment accounts
- Wealth management services
Using one bank for multiple products or services has the advantage of convenience as your accounts are held at one location. Some banks may offer better terms when you have more than one product with them. So, considering your entire financial picture along with your need for a savings account can help you narrow down the list of choices in financial institutions.
How To Open a Savings Account With a New Bank
If you've found a savings account you’d like, the next step is getting your new account set up. There are a few key steps you'll need to complete to open your account.
Apply for a New Savings Account
Many banks make it easy to open a new savings account just by completing an application and giving the bank some basic information. You can usually complete an application online or in a branch location.
You’ll likely need to provide personal information like your:
- Date of birth
- Social Security number
- Phone number
- Email address
If you're opening a joint savings account with someone, you'll also need to provide their information. The bank may ask you to upload a copy of a government-issued ID to verify your identity and you may be subject to a ChexSystems check. ChexSystems is a consumer reporting agency that collects data relating to negative activity for bank accounts, such as bounced checks or unpaid overdrafts.
Opening a new savings account typically doesn't trigger a hard credit check
Fund Your New Account
Once your new savings account is approved, which may be instantaneous if you're applying online, you can fund your account.
If you submitted an application online you'll need to provide a routing number and bank account number for where your initial deposit will be coming from. This allows the new bank to schedule an ACH transfer to move the money from your old account.
Meanwhile, if you're opening a savings account in person, you may be able to make your initial deposit with cash or a check.
The entire process of switching savings accounts should only take one or two business days. However, you may have to wait for one to two weeks to receive all your documents or any ATM cards in the mail.
Transferring Funds and Closing the Old Account
If you've funded your account, the next step is moving the remainder of your account balance over. How you do this can depend on where you opened your new savings account.
If you opened a new savings account, you could move your entire balance from your old savings account via ACH transfer. To do this, you'd have to link the accounts first, then schedule the transfer from your original savings account to your new account.
You could transfer funds from your old savings account to your new one using a certified check if you're moving money between traditional banks or credit unions. You'd have to go to a branch and request a certified check for the amount you want to withdraw. Your bank may charge you a fee for this check.
You could then physically take the check to your new bank (or mail it) for deposit into your new savings account.
Reroute Automatic Transactions
If you plan to close your old savings account you'll want to transfer over any automatic transactions to your new account. That may include:
- Direct deposit of your paychecks
- Direct deposit of government benefits or tax refunds
- Automatic bill payments
- Recurring deposits from a checking account
If you had banking alerts set up with your old account, you'll probably want to set those up again with your new bank. You should be able to do this through online banking or your bank's mobile app.
It's important to make sure you get all of your automatic deposits and payments transferred over. Any new transactions that post to your old account could trigger overdraft fees if there's no money to cover them.
Close the Old Account
Once you've transferred over all deposits or recurring payments from your old savings account, you can ask the bank to close it. Although you may want to keep your old account open for a few months to monitor it for any automatic transactions you may have missed.
You may need to call the bank to make a request to close your savings account. Be sure to ask for written verification that it's closed. Keep in mind that your bank may then deactivate your online or mobile banking logins.
Frequently Asked Questions (FAQs)
How hard is it to switch banks?
Switching banks is fairly easy if you plan ahead. Many financial institutions attempt to make changing accounts easier by offering a "switch kit" that includes a step-by-step guide for how to switch banks.
Can you change a savings account to a checking account?
Once you open a savings account, it typically remains a savings account unless you switch banks and move the funds into a checking account instead. A savings account can be converted to checking automatically if the bank no longer offers the account or if you're making excessive withdrawals in violation of the bank's policies.
How long does it take for SSI payments to switch to a new bank?
If you change your direct deposit information for Supplemental Security Income (SSI) payments, it can take 30 to 60 days for this change to take effect. You can change your direct deposit bank account information by visiting the Social Security Administration website.