#006 | The 8 Qualities of a Great Bank Account
An essential checklist for choosing your next bank
Hey friends,
As a weak foundation will compromise the structure of a house, a poor bank account can compromise your financial health.
A bank account isn’t just a place to stash money - it’s an asset that can provide you with another source of income, cut unnecessary fees, and streamline your money management. A win-win-win scenario.
Unfortunately, many people stick with their old accounts, even if they’re suboptimal.
Maybe it’s the familiarity of the account or the hassle of change, but your old bank account may be costing you more than you realize.
Small differences in interest rates and fee structures can significantly impact your money over the long term.
Even if your bank account is okay, why settle for a good one when you can have a great one?
If you’ve ever considered upgrading your bank account, today’s newsletter will provide you with a checklist of all the features you need.
1. FDIC-Insured
The Federal Deposit Insurance Corporation (FDIC) guarantees the safety of deposits in the event of a bank failure.
Banks with FDIC insurance protect deposits up to $250k per depositor, per FDIC-insured bank, per ownership category.
This provides customers with peace of mind and assurance that their money is secure.
2. Competitive APY
When you deposit money into a bank account, the bank doesn’t just hold onto it.
They lend a portion of your deposits to borrowers (as mortgages, business loans, etc.) and invest the rest in various financial instruments.
It’s crucial to understand that your deposited funds are essentially an asset for the bank, and as such, the bank should pay you interest in exchange for the capital you provide them.
An Annual Percentage Yield (APY) measures the annual interest earned on savings balances, including compound interest.
APY rates are variable and go up and down depending on the federal funds rate, which is set by the Federal Reserve Bank. At the time of writing this, the top HYSAs yield ~5%.
A competitive APY allows your money to work for you and offsets the negative effects of inflation on your purchasing power.
3. Fee Friendly
Fee-friendly accounts minimize or waive common banking fees, such as monthly maintenance fees, minimum balance requirements, ATM fees, or overdraft charges.
Your account should eliminate unnecessary costs and allow you to retain more of your hard-earned money.
Every penny saved counts. Over time, the small fees that go unnoticed can accumulate into significant sums.
4. Tools to Simplify Your Finances
Many modern banks offer automation tools like scheduled transfers, bill pay, and round-ups.
Another feature that’s been helpful to me in recent years is “savings buckets”. These allow you to organize your savings without opening multiple accounts.
Automate your finances to remove the risk of missing bills, or even worse, forgetting to pay yourself first.
5. Mobile Check Deposit
For obvious reasons, mobile check deposit is another feature that can save you time and money. Don’t waste your gas driving to the bank.
6. Excellent Customer Service
Your bank should prioritize excellent customer service and provide timely, helpful, and personalized assistance.
This is especially important if you choose a digital bank - nothing is worse than having an issue and being placed in a 2-hour queue.
7. Fraud Protection
Robust fraud protection safeguards your accounts from unauthorized access, identity theft, or fraudulent activities.
8. Known and Respected Reputation
Banks with a known and respected reputation have established trust over time through reliability and integrity.
Ideally, you want a bank that has a history of financial stability, ethical practices, and positive customer experiences.
Read reviews and avoid banks that are frequently in the news for the wrong reasons.
Conclusion
As you work to optimize your financial life, a great bank account is one of the tools that you will need in your arsenal.
They have the ability to accelerate your wealth-building, simplify your finances, and provide you with a clear picture of your income and expenses.
Reply to this email or let me know in the comments if you’re interested in learning more about my favorite accounts 👀
That’s all for today - thank you for taking the time to read!
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