No matter what the goal, savings accounts offer a safe haven to help depositors start a college fund for their newborn or grow an emergency fund as financial protection. But some depositors with an unattended account may be doing more harm to their savings mission than good. More banks are using savings account fees as a way to generate revenue, and if you’re not careful, your savings account could be hit with fees that wipe out any interest earnings offered.
With the national average savings account rate at just 0.07% APY, according to the FDIC, finding high-yield savings accounts from banks with no fees is crucial in ensuring you are earning a positive return.
Have You Heard of These Savings Account Fees?
While depositing money into a savings account is still beneficial in many ways, account holders simply need to keep a pulse on the terms and conditions presented by their banks, such as an addition or increase in existing savings account fees.
Searching through the scores of banks with free savings accounts can only get depositors so far, since there are multiple kinds of savings account fees across different financial institutions.
Just because a savings account is listed as free doesn’t mean there aren’t fees lurking behind the curtain. However, by staying in the know about the types of fees charged by your bank or credit union, you’ll save yourself from potentially hundreds of lost dollars.
Here are a few common savings account fees that go unnoticed:
These fees are also referred to as “service fees.” When depositors open a savings account, some institutions apply a monthly maintenance charge of anywhere from $2-$10. What is this savings account fee for, you ask? Unlike the other fees on the list, this fee isn’t imposed to penalize you for any wrongdoing on your part — instead, it serves as a fee that exists simply because your account exists.
Technically, you can reason that service fees help to pay for the bank’s behind-the-scenes personnel handling your account and other overhead expenses. But with the abundance of financial institutions that flaunt their zero-fee high-yield savings accounts, it’s easy to avoid this costly and recurring charge.
Low Balance Fees
Even so-called free savings account offers enact low balance fees. Customers who do not maintain the minimum balance requirement in their account each day are, at times, not only ineligible for earning interest, but also get slapped with low balance fees of up to $10.
As long as depositors closely monitor their savings accounts, keeping this savings fee at bay is possible.
You can thank the Federal Reserve for this savings account fee. The Fed’s Regulation D requires that banks keep a certain amount of funds on hand, and limits the number of free withdrawals or transfers customers make from their savings account to a third-party entity to six occurrences.
To ensure that Regulation D is met, banks and credit union charge savings account fees for each additional withdrawal beyond the maximum allowance.
It can be annoying to feel pressured into saving money, especially if you’d prefer to reserve the right to prioritize your finances as opposed to allowing your bank to handle the task (and penalize you for it). Evading inactivity fees isn’t too vexing — adding small $25 monthly automatic transfers or setting up direct deposit into the account is usually sufficient enough to avoid getting charged. Even a withdrawal may be enough to count as “activity” on the account.
Closing Account Fees
Some banks give customers a slap on the wrist for closing a savings account with little advanced notice. For those who are unfamiliar with what constitutes adequate notice, a one-month notification may seem like ample time give your bank a heads-up. However, some financial institutions require up to six months notice before closing an account. Anything short of that requirement may result in a closing account fee of anywhere from $25-50.
This is just a handful of the potential savings account fees you can run into when managing your account. Different institutions inflict different charges on customers, and some amounts can vary, but finding banks with no fees is a smarter approach than trying to dodge a barrage of fees.
Best Banks with Free Savings Accounts
Avoiding as many of the savings account fees listed above helps to improve consumers’ financial outlook. Most of the charges appear innocent enough — $2 here, $10 there — these fees quickly add up putting your savings at dire risk of a negative return, or worse, a negative balance.
Go Banking Rates identified a few of the banks currently offering free savings accounts, so that unnecessary fees can be kept at a minimum:
- Ally Bank High Interest Savings Account: Ally allows customers to bank without the burden of monthly maintenance fees or minimum balances to keep. Another perk? No minimum opening deposit requirements to start either.
- American Express High-Yield Savings Account: No maintenance fees and no minimum balances to maintain, coupled with a high 0.90% APY rate make the AmEx High-Yield Savings Account a no-brainer.
- Alliant Credit Union High-Yield Savings: The non-existent service fee and no minimum balance to keep in the account makes saving money easier — plus, all it takes to open an account is a small $5 deposit.
- ING Direct Orange Savings Account: ING Direct, another online bank, makes the list with one of the best free savings account opportunities available. There are no minimum balance fees, no activity requirements and no closing fees.
Most financial institutions have one fee or another associated with their savings account products, but typically banks with no fees can be found in the form of online banks. Since they have fewer overhead costs, the savings get passed onto customers.
Another great place to seek out low to zero fees and higher-than-average savings account rates is at your local credit union. Most are non-profit cooperatives that are owned and operated by their own members, so the benefits and savings trickle down generously to their members.
There is never a good reason to suffer an attack of non-stop fees from your bank that not only dings the interest you’ve earned, but also risks you losing your principal balance in the process.