5 Key Numbers to Know About Savings Accounts

You don’t have to be a numbers person to have a healthy bank account. But when it comes to savings, knowing a few key figures can help you maximize your options. Here are five numbers that can help you determine if a savings account is ideal — or if it could cost you.

1. Minimum amount to open

Some banks require a minimum deposit to establish an account. The minimum requirement is typically $25 to $100, according to the Consumer Financial Protection Bureau, though there are accounts with a $1,000 or even $5,000 minimum. But if you have to save up just to open a particular savings account, that account might not be right for you. And there are plenty of savings accounts with no minimum to open.

To really benefit from savings, including having an adequate reserve for emergencies, you’ll want an account where you can easily manage the opening deposit so you can start making regular deposits and saving.

2. Interest rate

The interest rate is how much money your money earns while it sits in a savings account. For savings accounts, the interest you earn over a one-year period is often expressed as the annual percentage yield, or APY. So if you have $1,000 in an account and the interest rate is 5%, your money would earn $50 in interest. Over time, the interest earned in savings accounts also earns interest, something known as compound interest.

These days, many savings accounts earn low rates. According to the Federal Deposit Insurance Corp., the national average rate for savings is only 0.43%. But some of the best accounts have yields that are many times higher, with low (or no) minimum deposits.

Look for financial institutions that offer high interest rates compared with their competitors. The higher the interest rate, the faster your balance can grow.

3. Monthly fee

The monthly service fee is an important number to watch because it can work against your savings goals. Some financial institutions charge this fee, typically around $5 a month, for having a savings account open at their bank. But if you’re paying $5 a month, you’re paying $60 a year — money that you could be saving.

Some financial institutions may waive the fee for customers if they meet certain requirements, such as signing up for automatic deposits or keeping their balance above a certain amount (see #4 on this list). But many of the best savings accounts don’t charge these fees at all.

If you choose an account that has a monthly service fee, go for one whose fee you can easily waive.

4. Minimum amount to avoid a monthly fee

Many banks that charge a monthly fee will waive it if you keep a minimum balance throughout the month. A typical minimum daily balance — for a bank that has one — is $300. If you don't want to have to keep track of a minimum daily balance, avoid the cost (and potential hassle) by simply putting your money in a savings account that does not charge a monthly fee.

5. Excess withdrawal limit

This is a fee that some banks and credit unions charge if you have too many withdrawals from your savings account each month. The transactions, known as convenient withdrawals, include online transfers, overdraft protection transfers and phone-initiated transfers.

A bank or credit union may charge a fee if you make more than six of these withdrawals in a month, typically around $5 to $10 for each excess transaction. The restriction was previously in place because of federal regulations. But in April 2020, the Federal Reserve gave institutions the ability to eliminate this limit and “allow their customers to make an unlimited number of convenient transfers and withdrawals from their savings.”

Many banks still charge this fee, however, so you'll want to check with your financial institution about its policy.