A savings account can be a great way to stash away your cash and earn interest. It’s certainly a better option than putting your extra money in a buried coffee can in the front yard or its bank equivalent, the interest-free checking account.

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But what a lot of people do not realize is that a savings account can actually end up costing you money while earning a negligible interest rate. The fees associated with having the savings account more than cancel out the money you’re making off the savings account, so your account is actually getting smaller with each passing month. A coffee can isn’t looking too bad now.

I’ve experienced this firsthand. The first savings account I ever opened was with Bank of America, earning a whopping 0.01 percent on my money. They also neglected to tell me that I needed to maintain a minimum balance or I’d be charged a monthly fee. When I studied my account statement’s details a few months later though I noticed I was incurring regular fees. By opening what I thought was a “savings” account I was losing money every month. I was able to transfer in enough money to stop the fees, but my assumptions had cost me money it would take years of interest to reclaim.

Of course, I could have prevented this by reading the savings account fine print. But the truth was at the time I didn’t think my bank would advise me to make a decision that would only cost me money while providing zero benefits. Naive, I know.

When opening a savings account, there are several little tricks banks use to keep you from noticing discrepancies. Savings accounts can be a good virtually risk-free place to sock away cash until you figure out what else to do with it. But you need to make sure you’re not going to get blindsided by hidden fees or other costs.

Here’s a few things to look out for to keep you actually saving and not losing:

1. Minimum Balance

One of the most common requirements to maintain a savings account without incurring costly fees is the minimum balance. Most of them don’t point out that if you don’t meet the minimum threshold, your savings account will actually just be a drain on you every month.

Three of the Big Four banks need at least a $300 balance, while Citi requires a $500 balance to avoid fees. This can be sidestepped by also taking out a checking account at the same institution and linking the accounts. But it’s usually more advantageous to your banking at more than just one institution. Instead, if you want to start small it makes sense to look to banks that don’t require a minimum balance.

2. Withdrawal Limit

You have a savings account for the ostensible reason of saving money. But we all know reality creeps in when you’re not expecting it, and you’ll end up needing to dip in once in awhile. Or once a month, Or several times a month. We’re not here to judge, okay?

What you might not have read in the fine print is that too many withdrawals in a month can cost you. Make more than three withdrawals in a month from your Bank of America savings account and they’ll start charging you every time you try to take out another one — $3.00 a pop, to be exact.

How long would it take to make up the difference? If you have $10,000 in a BOA savings account it will take three years to make that money back.

Comparably, Ally Bank doesn’t charge for the first six withdrawals a month. However, after that you’ll get hit with a sizable $10 per withdrawal fee. However, it should be mentioned that it is federal law to limit savings accounts to six “convenient” withdrawals a month.

3. Overdraft “Protection”

Overdraft fees are big business for banks. According to the Consumer Financial Protection Bureau, 61 percent of bank’s profits associated with checking accounts come from overdraft fees. The banks, in turn, often offer a way for you to use your savings accounts to “protect” you from these fees. But the reality is they don’t complete protect you, and only lessen the burn.

The way overdraft protection works is that it links your savings account to your checking, and will automatically transfer funds to cover should you accidentally overdraft your checking. Sounds like a nice enough feature, and it makes sense. After all, you had the money… just not in the right account. Anything to stave off that dreaded $35 overdraft fee.

Problem is, this service often isn’t free. You’re being protected from overdraft, to be sure, but you’re still paying something for the service. At BOA, for instance, the transfer fee is $10 per overdraft, while pulling the needed money out of your savings. So while you are paying less than normal, you’re still being charged.

4. Linked Accounts

If you don’t hit the minimum balances, some institutions will charge you if you don’t have another account at the same bank, like a checking account. This can limit your options when it comes to diversifying your banking.

Try to find banks that don’t require you to have multiple accounts to avoid paying monthly “maintenance fees” (AKA what they charge you because they feel like it.) Again, those fees can, and usually do, far exceed the monetary benefit you’ll get from a savings account.

5. Adjustable Rates

You might be willing to put up with the occasional fee if you have a big chunk of change in your savings account and that tasty interest rate makes it worth your while. However, that interest rate you signed up for might not be the one you’re getting a year, six months, or even three months down the road. And then your savings account choice might not look like as nearly a good of a choice anymore.

This is commonly called a teaser rate or an introductory rate, and the difference between what you get going in and what it changes to can be drastic, with your interest payments at times being cut nearly in half.

To be sure, a lot of banks won’t be completely forthright about how much you’ll be charged for certain services. If you’re thinking about banking somewhere, read the savings account fine print.

Or better yet, talk to somebody. Describe exactly what you’re looking for, exactly what you’re planning on depositing, and exactly how much that will cost you. If it doesn’t work out for your situation, don’t take it. But if it does, then congratulations, you’ve found a safe place to put your money that will only grow in value with time.

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  • Dolly Riviera

    Learned this the hard way. I was not aware that I had to keep a minimum balance in order not to incur any fees. I left Citi because of this. I now bank with Ally using their Money Market Savings. They have no minimum balance or any monthly fees.

    • Angelo_Frank

      Good move Dolly. You are getting way more interest than you were at Citi. Just be aware of the withdrawal limits on money market accounts.