If you're only using your bank to make deposits and withdrawals, you could be missing out on other perks and rewards opportunities your account has to offer. Bank accounts may provide several useful benefits that can help you manage your money, earn a higher return on savings and more. Here's how to ensure you're making the most out of your bank account.
1. Maximize Your Savings Yield
If you keep all of your money stashed in a checking account, you could be missing out on interest earnings. Checking accounts often pay no interest, and if they do, the interest could be practically zero. If your bank offers savings accounts, opening one and regularly contributing to it is a way to earn a better return on the cash you don't need for everyday bills and expenses.
As of May 2023, the average interest checking account earns just 0.07%. In comparison, some high-yield savings accounts offer an annual percentage yield (APY) of 3% to 4%. Let's say you put $5,000 into a savings account that earns an APY of 4%. At the end of the year, that savings might earn $204 in interest even if you don't make any additional contributions. Meanwhile, $5,000 kept in a checking account with an average APY of 0.07% would earn just $3.50.
Find High-Yield Savings Accounts
2. Use Banking Alerts
Online and mobile accounts often come with bank alerts you can set up to get messages about account activity. Notifications could give you a heads-up of potential fraud or bank activity that needs your attention.
Depending on your bank, you may be able to customize notifications to trigger when you have unusual transactions, your account dips below a certain balance or you spend a certain amount. This way, you can be selective on what notifications you get and when.
3. Make Use of Rewards Programs
You might be surprised to learn that some bank accounts offer reward opportunities that pay you points or cash back when you make account purchases. Using rewards checking is a way to get an incentive for spending without having to worry about potentially racking up a credit card balance or dealing with interest charges.
4. Understand Banking Fees (and How to Avoid Them)
Ideally, you want to get the most value from your bank account while paying the least amount of fees possible. Bank accounts can have different usage fees when you request certified checks or wire transfers, but one recurring charge to watch out for is the monthly maintenance fee.
Bank account maintenance fees, often ranging from $10 to $15, are common. However, some accounts will waive the fee if you meet certain conditions, like having a minimum daily balance or number of monthly direct deposits. Double-check account terms to see what moves you can make to avoid fees. And if you aren't able to meet those conditions, consider shopping around for a new account without maintenance charges. Many banks and credit unions offer accounts with no monthly fees.
5. Review Overdraft Penalties and Overdraft Protection Options
Overdraft penalties are fees charged if you make a transaction that takes your bank account balance into the negative. While some major banks have announced they no longer charge overdraft fees, others still charge them. A fee of around $35 per transaction could result if your bank account balance can't cover a purchase.
Even if your bank charges overdraft fees, there may be ways to get around them. First, bringing your balance above zero right away may get the fee waived. Some banks offer a grace period where you get a "fee break" if you make a deposit to cover the overdraft amount within a day or two. You could also choose to opt out of overdraft protection for debit card purchases. If you do, debit card transactions that overdraw your account may simply be declined with no fee.
6. Take Advantage of Borrower Discounts
It's always a good idea to shop with your bank or credit union first when you need to borrow money. That's because financial institutions may provide loyalty discounts and better loan interest rates to existing customers.
For example, US Bank customers with an open checking account may qualify for a credit toward mortgage closing costs when buying a home. Bank of America Preferred Rewards customers who maintain a combined balance of $20,000 to $50,000 in accounts may qualify for a 0.25% rate discount on car loans and a 0.125% rate discount on home equity lines of credit (HELOCs).
7. Look Into Financial Advising and Asset Management
Beyond banking services, financial institutions may have a financial planning and wealth management side of the business where you can work with an advisor one-on-one. If you're not sure of the best way to save for college or retirement, an advisor at your bank may be able to guide you in the right direction. However, investment services can come with advisory and brokerage fees you should understand before signing up.
The Bottom Line
Think of bank accounts as more than just a piggy bank. Various banking features can help you manage your cash and earn a high yield on savings all while keeping fees to a minimum. If your bank is light on perks and heavy on fees, it could be time to shop around for a cheaper account with more features. Comparing account fees, APYs, minimum balance requirements and perks can help you find a better home for your cash.
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