Comparing Bank Interest Rates

Did you know that banks are required by law to give us certain information with potential customers? They have to tell you the annual percentage yield and interest rates, what fees they will charge you, and other features that you will have access to. Mistakes can happen and some banks may neglect to tell you or may explain it in such a way that you do not fully understand.

It is important that you receive all of this information before you open a bank account and read over it thoroughly. When you ask for this information the bank will also need to supply you with information concerning what type of consumer deposit they will provide and what the law will require the fees and interest rates to be.

As you read through all of this information you want to be looking for specific things and you need to understand exactly what it means. To help make this easier we have provided some information that will show you what to look for and what questions need to be answered.

Interest Rates

The interest rate is the money that the bank will pay you for using their funds. This is a percentage that a personal or business account will earn if funds are kept on deposit for an entire year. Keep in mind that it will not show the effect of any compounding interest. You need to know what the interest rate is, whether or not the bank is permitted to charge you after the account is open, and if there are varying levels of interest based upon your balance.

Interest Compounding

This is the frequency in which the interest is earned when it has been added to the principal. This is what will allow you to earn interest on a particular amount and on the principal. The more the interest is compounded the more the annual percentage will give you. You need to know how often the interest will be compounded.

Annual Percentage Yield

This is the rate that will reflect on the amount of interest that you are earning on a deposit based on what happens in a year. You need to know what the minimum balance is required in order to start getting interest.