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How to 'right-size' your bank accounts

September 03, 2013

| MoneyRates.com Senior Financial Analyst, CFA

How do you get the best deal on checking and savings accounts? There are many factors to consider, but one often-overlooked variable may be critical in determining which bank is right for you: your account's size.

While banks may advertise account characteristics in general terms, they often have different interest rates and fees for different sizes of accounts. When you are shopping for a checking or savings account, you may find it beneficial to "right-size" your accounts -- or adjusting your balances to take advantage of certain perks.

Right-sizing savings accounts

The importance of right-sizing your savings account can be seen when you look at the different interest rates banks offer for differently sized accounts.

Traditionally, customers might have been able to get a better interest rate for so-called jumbo deposits: accounts in excess of $100,000. However, a look at the broad national averages published by the FDIC shows that these days, there is no difference between overall savings account rates and those for accounts with more than $100,000.

However, a closer look at data compiled for the MoneyRates.com America's Best Rates survey found that size does matter -- it's just that the distinctions seem to be at a level lower than $100,000. For the second quarter of 2013, the average savings account rate at the $5,000 account tier was 0.095 percent. At the $10,000 account tier, it was nearly 10 basis points higher, at 0.192 percent. Moving to the $25,000 rate tier brought only an incremental advantage of less than a full basis point, with an average rate of 0.199 percent. For savings accounts, the sweet spot seems to be $10,000.

Therefore, consolidate savings to meet that $10,000 rate tier if you can. In any case, always know what the rate tiers are, so you'll know what it would take to get a better rate. Finally, when comparing rates on savings accounts, make sure you are comparing rates that apply to the amount you have available for deposit.

Right-sizing checking accounts

When it comes to checking accounts, the key is knowing what balance will qualify you for free checking. While only about 30 percent of checking accounts are free of monthly maintenance fees, the vast majority of them will waive that fee if you meet a certain minimum balance requirement. However, the size of that minimum balance requirement varies greatly from bank to bank.

For example, if you are a relatively small depositor, you may want to shy away from large banks. The most recent MoneyRates.com Bank Fees Survey found that industry-wide, the average balance necessary to qualify for free checking is $4,693.46. However, at banks with $10 billion or more in deposits, that jumps to $7,735.31.

For customers with very small checking account balances though, online banks might be the best bet. There, the average necessary to qualify for free checking is $289.47.

In short, size does matter in the banking world, and knowing precisely how it matters can help you get the best deal on your checking and savings accounts.

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