A savings account may sound plain vanilla, but they come in many different flavors.
So when choosing a place to stash your savings, it pays to shop around. Fees, minimum balances and interest rates vary widely -- and nearly all of the 14,000-plus U.S. banks and credit unions offer these accounts, according to a report released last year by the Consumer Federation of America.
In a low-interest world where yields rarely exceed 0.05 percent, every little bit of interest helps, according to Bankrate.com. That low yield may be one reason the U.S. savings rate is still low -- a measly 3.9 percent in December, according to the Federal Reserve Bank of St. Louis.
Yet, savings accounts are essential ways to fund unexpected expenses like dental bills or car repairs, the Consumer Federation report says. So, any savings feature that helps you save more money is a must-have, says Kelley Long, a member of the National CPA Financial Literacy Commission under the American Institute of CPAs, or AICPA.
She counsels savers to start with small amounts of money, say $20, and increase the amount by $5 every three months. The rule of thumb is to save 10 percent of your income, she says. Experts advise savers to keep these seven tips in mind to find the best savings account.
Make savings transfers automatic
Automatic transfers are the only effective way to save money over time, says Steve Brobeck, executive director of the Consumer Federation of America. "Most people don't have the time or discipline to make regular contributions to savings on their own," he says.
As a free service, many banks will transfer a fixed amount of money -- as low as $25 -- from your checking to your savings every month. And 16 of the large banks sweeten the pot by waiving monthly fees for automatic savers, according to the Consumer Federation.
Some banks even offer auto-saver incentives, such as higher interest rates or cash bonuses. For example, Georgia-based SunTrust pays a 1 percent, one-time bonus on its Live Solid Savings account for people who make monthly transfers. U.S. Bank, which is headquartered in Minnesota, offers auto-savers a $50 bonus once you save $1,000. However, the main incentive is having monthly fees waived, Brobeck says.
Use mobile check deposits
Once an unknown, mobile deposits are quickly becoming must-have features. And 64 percent of the top 25 banks now offer these handy deposits, according to Javelin Strategy and Research. Many credit unions also offer them. The lure is simplicity. You merely snap a picture of a check with your smartphone and deposit it using your bank's downloadable mobile banking app.
These mobile deposits can help you add money to a savings account right away. "You may not be near a bank branch to deposit a check," adds Greg McBride, CFA, senior financial analyst at Bankrate.com.
Avoid monthly fees
Monthly savings account fees can vary widely, according to the Consumer Federation. But they can quickly add up. About 30 percent of banks surveyed charge $2 or less monthly, while 35 percent charge at least $5.
"Make sure you understand any fees that come with the account," says Clare Levison, a Virginia-based CPA and member of AICPA's Financial Literacy Commission. "Those fees can eat away at your interest rate."
One frequent fee to avoid: the minimum balance penalty. Half the banks surveyed by the Consumer Federation set savings account minimums at $200 to $300. Big banks were the most likely to charge fees for dipping below that amount.
Conversely, credit unions had much lower minimum balance requirements, usually only $25, the Consumer Federation says. "If you don't have much money, consider a savings account at a credit union," Brobeck says.
Many banks also charge another more unexpected fee for inactivity. This happens when a person doesn't make any deposits or withdrawals over time. If there are no emergency withdrawals, you may be whacked with inactivity fees, so it pays to note them, Brobeck says.
Being able to easily access your money through online transfers, ATM withdrawals or bank tellers is a must-have savings feature, McBride says. The reason: You may need that money quickly for emergencies.
However, federal regulations limit savings withdrawals to six per month. To be sure, some banks permit even fewer withdrawals and add fees, too. For example, one community bank only allows three withdrawals per month. After that, they're $10 apiece.
So, when looking for a savings account, ask about your bank's withdrawal policy, too, Brobeck says.
Seek out competitive rates
Given today's low interest rates, it pays to shop around for an account, Levison says. Only 4 percent of banks surveyed by the Consumer Federation paid more than 0.25 percent on basic savings accounts. Money markets usually pay higher rates, but they also have higher minimum balances and fees.
Online banks are one place to look, Levison says. Some banks like Ally Bank and GE Capital Bank had online savings accounts that recently yielded top rates of 0.87 percent or more, according to Bankrate. "Every little bit helps," Levison says, adding that credit unions also fall in the higher-rate-paying category.
Big banks typically pay lower interest rates, Brobeck says. For example, one megabank's savings account recently yielded 0.01 percent and had $4 monthly service charges.
Look for deposit insurance
Federal deposit insurance is a must-have, says McBride. That insurance means your money is protected up to $250,000 per account if your bank fails. Some of the highest-paying accounts, including United Kingdom-based Barclays' online savings account that recently yielded 0.9 percent, are insured by the Federal Deposit Insurance Corp., according to Bankrate. So you don't have to sacrifice yield for safety.
Opt for online savings
More banks are offering free online tools for the savings challenged. "These tools are important," Levison says. "They help keep you on track."
For example, Buffalo, N.Y.-based First Niagara Bank has an online savings growth calculator, which estimates the future value of your savings based on your contributions. And Wells Fargo has the My Savings Plan online tool that lets you label your goals and track your progress.
Copyright 2014, Bankrate Inc.