If you’ve been getting the feeling that those pop-up banking booths are everywhere on college and university campuses lately, you’re not seeing things. Banks prey upon college students. Why? Because they’re potential new customers who are still building brand loyalty and forming their financial identities. Just don’t give in to the pressure: as with Biology 101, you need to do your homework before signing up for an account with any of them.
There are three main types of banks to park your money these days: credit unions, regular banks and online banks. If you want a real human to interact with, then you likely want to go with a regular bank or credit union. The main difference here is that, unlike a regional or national bank, a credit union is owned by its members. It’s basically the mom-and-pop version of the national banks. Instead of trusting your money to a huge national bank, you’re pooling your money with your neighbors. You don’t get all of the same bells and whistles as with a national bank, but you might get better interest rates and loans: after all, the lenders at these community banks know where you’re coming from.
If you don’t crave one-on-one interaction, then online banking is a great option for you. They don’t have the overhead of brick-and-mortar banks and can thus pass those savings on to you in the form of better rates.
Once you choose the type of bank that’s right for you, look into these five things to narrow down it down to your final choice:
- Hunt down the highest APY (Annual Percentage Yield). Unlike the interest rate on your credit card, which you want to be low so you can pay it back faster, you want APY to be high for your savings so you can accumulate the greatest amount of compound interest (i.e., more money in the bank!). Online banks tend to have the highest APY rates because they have lower overhead costs than traditional banks. The most popular ones are CapitolOne360 and Ally.
- Look into special promotions. Some banks offer bonuses for new customers, like $100 cash back if you deposit a certain amount into your savings. Others even offer things like concert tickets or an entry to win a new car.
- Find out how tech-tastic they are. Do they offer online banking or mobile options like a check depositing app? Most big banks have the basics, but if you’re into gadgets, you might be into a bank that has the latest and greatest.
- Think ahead and know the process for shutting down an account. You never know why you might need to close an account, so you should know what to expect. Some banks make you pay an early termination fee if you close the account between 90 and 180 days of opening it.
- Double-check that the bank is insured. In case something happens to the bank, you want to make sure your money is safe. The Federal Deposit Insurance Corporation (FDIC)*= insures banks, and the National Credit Union Share Insurance Fund (NCUSIF) insures credit unions.
Bonus tip: Get a savings account at a totally different bank from the one where you have your regular checking account so that you’ll be less tempted to transfer money from your savings to your checking just because it’s easy.