Understanding Checking and Savings Accounts

There's More to Bank Accounts Than Meets the Eye

Understanding Checking and Savings Accounts
February 11, 2014

Consumers today have greater access and choice when it comes to banking than ever before. Because the majority of your routine financial transactions will pass through your checking and savings accounts, selecting the best offers to meet your needs is important. Finding the right institution for your checking and savings account may take some time, but because you will use these accounts on such a regular basis, it’s worth the investment to compare offers.

When choosing a bank, community bank or credit union, you will need to compare fees on accounts, ATM usage and overdrafts, interest rates paid on savings, rewards and identity theft protection benefits. While some of these fees may seem insignificant, they can add up over time. Additional factors that may influence your decision include the overall customer service experience, availability of additional financial offerings, and having physical locations (both banking and ATM) near you.


If your budget is extremely tight, consider opening an account at your employer’s bank, especially if direct deposit is not available. This will ensure that funds become available to you more quickly. Obviously, if you are earning interest on your account, the sooner and longer those funds are in your account, the more interest you will earn.

Location is another key factor. With Internet banking on the rise, many local branches are closing, and because online institutions have far fewer (or no) local branches, they are able to pass those cost savings on to you. If having a physical branch near you is a requirement, that will limit your selection. If you tend to do all of your banking electronically, then having a top-notch mobile banking application and website for a variety of transactions might influence your choice. Fortunately, most brick and mortar institutions also offer online tools that help you manage your money, so you can track your spending and saving more effectively.

Customer service, brand recognition and trust, though less tangible, can be very important for many consumers. Having physical locations and ATMs in your neighborhood may increase your comfort with a specific institution over one that is online-only.


Your bank may charge any combination of monthly maintenance fees, ATM and overdraft fees. Other costs might include paper checks and paper statements. Monthly maintenance fees are typically small ($5 per month), and some institutions waive monthly maintenance fees if you forgo receiving monthly paper statements and just receive your statements electronically.

If you travel frequently or use ATMs on a regular basis, you might prefer an institution with a large network of affiliated ATMs or partner retailers. Because most online banks have a limited network of ATMs, many will reimburse up to a certain dollar amount of ATM fees per month. You can also avoid ATMs altogether by selecting the “cash back” option during a transaction.

When you overdraw your account, banks today will typically cover the transaction through overdraft protection features, but then charge you a fee (around $30) per transaction. Some institutions, instead of a flat fee per transaction, will charge you a percentage of the transaction(s). Be sure to research these fees and how they are assessed. While you may be able to find better offers from two different institutions for your checking and savings accounts, having both linked together at the same institution may help you avoid overdraft fees altogether. For example, if you overdraw your checking account, you will not be charged an overdraft fee if the funds are available through your savings account.

Transactions and balances

Account offers come with sets of parameters. Read the fine print on the offer to learn about the minimums and maximums your account will permit, plus any fees associated with not staying within those parameters. Examples include:
  • Minimum cash deposit needed to open your account
  • Minimum/maximum number of point-of-sale purchases per month
  • Number of checks you may write or deposit
  • Minimum balance, minimum daily balance, minimum combined balance, average monthly balance
  • Number of online payments per month (such as utilities)

Interest rates

While not the most lucrative investments, interest earning or interest-bearing checking and savings accounts can be beneficial. Interest rates are frequently tiered based on the balance of your account. They range from lower annual percentage yields (APY), between 0.05% and .5%, to higher-end accounts earning up to one-half point more. However, if you do not meet certain account balance minimums, you might fall into a lower tier, meaning you will earn less interest. Some financial institutions will even reduce the interest rate on your mortgage if you hold your mortgage, checking and savings accounts all at that same institution. This benefit could potentially result in long-term savings and might be worth sacrificing other features such as lower fees or a slightly higher interest rate on your checking or savings account.

Rewards programs

Affinity programs, in addition to other account features and benefits, make the account offer more attractive by offering cash back on purchases, funds deposited into your savings account or points earned for purchasing within a network of retail partners that can be cashed in for gift cards or other prizes. If you currently have a way to analyze your spending habits, it is worthwhile to compare rewards programs to determine exactly what you would be getting. Would you earn more through a higher-interest earning account, or through the rewards program? Would the rewards program help to reduce your money expenses (cash back, discount on gas)? It be might be worth considering getting a rewards credit card which could earn you cash back and loyalty points in exchange for spending.

Identity theft protection

As data breaches are making headlines, financial institutions are responding by bundling identity theft protection benefits into their account offers, in addition to FDIC protection. Identity theft is an extremely difficult issue to address. Your identity, credit ratings and history affect your present and future ability to make significant purchases and investments. Explore how much coverage you need and compare pricing with insurance companies to ensure that the amount covered as an account benefit will meet your needs. If you would like to monitor your credit to prevent identity theft and see your credit reports and scores, check out our credit monitoring service.

Finally, be sure to consider your banking habits and history — and what you might be willing to change or sacrifice in order to get better interest rates and reduced fees. Take a realistic approach when it comes to your monthly cash flow needs and set reasonable expectations with regard to balance requirements for interest-earning accounts. Finally, read the fine print to gain a thorough understanding of all of the various fees and parameters of the offer and make sure they align with your financial needs and lifestyle.

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