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By Suze Orman
Your checking and savings accounts are the centerpiece of your financial life.
You likely are paid via a direct deposit into your checking account. And setting up automatic bill pay from your checking account is a smart way to make sure you always pay bills on time, which is a key to building a solid credit score.
A savings account is how you defend against life’s unexpected curveballs. Having cash to cover unplanned expenses—a big ticket car repair, the hefty deductible on your health insurance plan etc.—is what can make it possible to avoid using a credit card, that then charges you an insanely high interest rate.
Yet these key financial accounts can also end up costing you plenty. Many charge monthly maintenance fees, or zing you with penalty fees. According to a CFPB report, banks collected more than $15 billion in overdraft fees in 2019.
Here’s my guide on how to make sure you are the smartest saver, with a checking account and savings account that delivers all the features you need at no cost.
Before I get into the nitty gritty of both types of accounts, I want to make sure you only consider a financial institution that offers federal insurance. Most do, but it’s crucial to confirm.
Federal insurance means that if anything were ever to happen to that financial institution, the federal government guarantees you won’t lose a penny of money in checking and savings accounts, up to a limit. The basic limit is $250,000 per person per bank or credit union. (There are also ways you may qualify to have even more covered by federal insurance.)
I want to be clear, it is extremely rare for banks or credit unions to run into financial trouble. But it’s so easy to keep your money somewhere that is covered by federal insurance, you would be nuts to go without it.
It’s super easy to confirm your money will be safe. For banks, all you need to do is look for the FDIC insured logo once you log in to your account, or on the front door if you are making an in-person visit. That’s the acronym for the Federal Deposit Insurance Corporation, which is the government agency that oversees the protection of your bank accounts. For credit unions you want to look for the NCUA logo. That stands for the National Credit Union Administration, which is the federal agency that provides the same protection for deposit accounts at credit unions.
There are two broad types of checking accounts: ones that pay interest on your balance, and ones that don’t.
One of the best features you should take full advantage of is getting text or email alerts. Having an alert for any debits over a certain limit is a great way to keep an eye out for potential identity theft. If you tend to run your account low in between paychecks, I sure hope you will set up a balance alert. That way if your balance is running very low, you may be able to cut out any non-essential spending to avoid an overdraft.
Most banks and credit unions will charge $30 or more when you have an overdraft. But not all. While my hope is that you are able to manage your finances in a way that never puts you at risk of an overdraft, I want you to be aware there are some financial institutions that don’t charge for overdrafts. It’s a short, but growing list. And Alliant is on it.
Some banks charge a monthly fee of $5 or more if you don’t maintain a minimum balance, which is typically at least a few hundred dollars. That’s $60 a year you don’t have to spend. Choose a savings account where you will always be eligible for free savings and don’t need to have a hefty balance. Plenty of options exist.
In an emergency where you need cash ASAP, will the transfer to your checking account take 1 day or 3 days? It’s important to know ahead of time what to expect.
As the Federal Reserve increases its Federal Funds rate, we might begin to see savings rates climb a bit. That’s an argument for choosing to save somewhere that pays a competitive interest rate like the Ultimate Opportunity Savings account.
Alliant has partnered with Suze Orman to offer a high-rate savings account and bonus for new members. Start your savings journey today!
Suze Orman is the author of 10 consecutive New York Times bestsellers, a two-time Emmy award winner, and your go-to for honest answers on everything finance. She is the most recognized personal finance expert in America today and host of the Women & Money (and Everyone Smart Enough to Listen) podcast. Suze is excited to be a contributor for Money Mentor.
Suze and Alliant teamed up to help Alliant members make the most of their life by teaching them to make the most of their money. New Alliant members are also eligible for The Ultimate Opportunity Savings Account.
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