Check your mailbox. You’ll probably find at least one flyer from a bank trying to get you to open an account, park money in a certificate of deposit, sign up for a credit card or take out a loan. But which bank products make sense for you?
The answer depends on what you want to do with your money. Follow these tips to cut through the noise and find the bank products that match your goals and help put you in control of your finances.
Your goal: Manage routine expenses
Product: Checking account
If you already have a bank account, you likely already have a checking account. Before opening a new bank account, ask about options with no monthly fee, no minimum balance and a large ATM network.
Your goal: Build an emergency fund
Product: Savings account
Generally accepted wisdom says that you should accumulate three to six months worth of living expenses in case you lose your job or experience a medical emergency. Questions to ask when opening a savings account include what rate of interest your money will earn, the fees or penalties and convenience features like online transfers and account management and automatic bill pay.
Your goal: Improve your credit score
Product: Credit card
If you pay off your balance every month, a credit card can be an easy way to build credit history — and maybe earn a little cash back or other rewards along the way. If you think you’ll occasionally carry a balance, it’s important to find a card with a low interest rate. Otherwise, it makes sense to seek out benefits that fit your lifestyle, such as travel insurance, purchase protection or extra cash back on groceries.
Your goal: Save for a down payment
Product: Certificate of deposit (CD)
A CD typically pays a bit more in interest than a savings account. In exchange, you agree to lock up your money for a fixed term (usually anywhere between three months and five years). If you know you want to purchase a home in three years, you can put money in a three-year CD now, followed by a two-year CD next year and a one-year CD the year after. When the CDs all mature, you’ll have one accumulated sum to put down on a house.
Your goal: Make a major purchase
When it’s time to buy a new vehicle or home, most people need to take out a loan. Personal loans or home equity loans can also be useful for financing a major project, such as a home renovation. When it comes to vehicle loans, start shopping for rates and terms before you even step on a dealership lot. Finding a competitive rate can help you negotiate more strategically before you purchase a vehicle. In addition, watch out for any hidden catches such as early repayment fees.
Your goal: Bank on the go
Ask for a demo of any bank-related apps so you can find out if your tech-related needs are met. Those might include electronic deposit of checks or the ability to transfer money between banks or different accounts.