Banking
A good rule to follow when choosing a bank is to shop around. Generally the most important thing to look for in a bank in the interest they pay out to your deposits. Second, pay close attention to the fees. If you get a quarter-percent more on your savings account, but have to pay $20 a month in various fees for services another bank does for free, its unlikely the quarter-point will make up for the difference. And last, look for the services available, and make sure the ones you'll need or already use are available and free or have low fees associated with it.
Banks are able to charge very different amounts for fees and interest because people usually don't shop around. Think about the last time you drove out of your way because you heard a gas station was 2 or 3 cents cheaper than any place else. Now try to remember the last time you drove out of your way to get a great rate on a CD. For many people, the open an account with one bank and keep it most of their life. They build relationships and connections with the people working at the branch, and these people put great value on that. For those who have direct deposit and pay bills online, and step into a branch only to dispute a fee they don't think should be charged, relationships at a bank have little importance to them.
In fact, if you rarely enter a bank branch and pay most of your bills online, an online bank might be best for you. Online banks generally offer much better rates than traditional banks with branches. Typically banks that offer the best rates in the nation are internet-based banks. Do a search for online banks to see what is out there.
Checking Account
Checking accounts allow you to write checks against the money that is in that account. When looking for a checking account, look for free checking, unlimited check writing, and a good interest rate. If you want a debit/ATM card, see if they offer it and if it would cost you anything. Some banks have started offering cash back if use a debit card, and others will reimburse all ATM fees charged by other banks. Also, look into the minimum required balance on the account. Some will stop paying interest if the balance falls below a certain level, and some will even start charging fees if it falls below that level.
Savings Account
Savings accounts have pretty consistent rules associated with them. Most limit you to six deposits a month before fees are charged. The primary points to look for in a savings account is the interest rate and any fees that are charged.
Money Market Accounts
Money market accounts generally have the best qualities of both savings and checking accounts. Money markets offer higher interest rates than checking and some savings accounts (some recently as high as 5%) and the ability to write checks or have ATM/Debit cards. Money markets tend to require fairly high balances ($2000 or more in some cases). Money markets are the best place to store money saved for an emergency cash cushion or if you will be needing the cash in a year or less.
CDs
CDs, or Certificates of Deposit, are good places to store money you know you'll need in a fixed amount of time, generally within a year or two. In return for a promise not to touch the money for a certain agreed-to amount of time, banks will offer you a higher interest rate than checking accounts and usually savings or money market accounts are offering. Penalties apply for early withdrawals, usually 90-days worth of interest. When getting a CD, shop around for the best rates, as some banks will offer, for a limited time, very high interest rates on their CDs. CDs typically have minimum required balances, which can be anywhere from $500 to $100,000, depending on the CD.
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