Erin El Issa, Nerdwallet
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According to a new Nerdwallet survey, there are a lot of misconceptions about banks. A survey of more than 2,000 US adults conducted online by Harris’ polls found that some Americans believe in general myths about bank security, interest rates, fees, and where to save money due to financial goals. But understanding the basics of where you keep your money can prevent these myths from spending you money.
Myth #1: Online Banking is Not Safe
Research shows that over a third (36%) of Americans mistakenly believe that online-only bank accounts are less secure than brick and mortar bank accounts. This misconception is likely to be held by young Americans. 50% of GenZers (ages 18-28) and 43% of millennials (ages 29-44) believe in this myth.
Online FDIC insurance banks need to implement appropriate security measures designed to be as secure as possible banks. That said, like any other online activity, it remains important to take precautions on your side. This includes enabling multifactor authentication. This involves creating and storing strong, unique passwords using a password manager, rather than recording them in a Public Wi-Fi account.
Myth #2: Money for Interim Financial Goals Should Invest
Research shows that more than two in five Americans (43%) believe that money for their savings targets should be invested in the stock market. The average annual stock market return is higher than the average savings account interest rate. This is true. However, the market is not always rising. Also, if your savings goal is inflexible in time, you may lose money during that period, rather than seeing growth.
Instead, medium-term savings targets, such as dream vacations and down payments for home purchases for the next five years, should be saved with a high-yield savings account, money market account, or certificate of deposit (CD). (Note that CDs must leave money on them for a certain period, usually for at least three months, and generally do not allow continuous deposits.) Returns may be lower than stock market “wins”, but these are safer bets in the short term.
Myth #3: Bank interest rates move as debt rates do
The survey found that over three-quarters of Americans (78%) believe that when interest rates on debt rise and fall, bank interest rates rise and fall. It’s not completely wrong, but this isn’t necessarily true either. If you do, it’s an ambiguous myth.
The target federal funding rate set by the Federal Open Market Committee is the interest rates banks pay each other to borrow or lend money overnight. These higher or lower costs can be passed on to the consumer, with debts being more or less cheaper, and interest is either higher or lower. In other words, if the Fed rises, it means that not only is the interest rate on savings accounts high, but also the interest rate on credit cards.
But it becomes vague here. All interest rates on financial instruments will not move simultaneously or at a rate following the Fed’s announcement. Banks could lower savings account fees fairly quickly when federal funds fall, but mortgage rates could be stable or increase in the short term. There are other additional factors at these rates. So technically, yes, a decline in the Fed rate could mean a decline in interest rates across financial instruments, but in different timing and size.
Myth #4: Having a bank account means paying fees
Research shows that it is not possible to avoid charges when you have a bank account. However, the fees are inevitable. Most charges can be avoided by choosing the right bank and knowing the rules.
Some common bank fees are monthly maintenance, overdraft and ATM fees. Each of these can be avoided by finding a bank that doesn’t charge them or taking the necessary steps to avoid them.
Details may vary from bank to bank, but you can avoid monthly maintenance fees by maintaining the minimum balance required for your account or by setting up a direct deposit. If these requirements are not possible, many online banks will not charge these fees at all.
Overdraft fees may be charged if you spend more than what is available in your account, but can be avoided in a number of different ways. You can choose to opt out of overdraft protection. This means that if there is not enough funds, the transaction will be denied. Alternatively, if you connect your check account with a savings account and charge what is available in the check, a savings account can cover the difference. Another option is to set up a bank balance alert. Therefore, you will be notified whether your balance is below a certain amount.
ATM fees can be avoided using ATMs belonging to the bank or otherwise being within the network. (The bank’s app or website has tools to find ATMs in your network locally.) Check your bank’s fee policy. Additionally, some banks will refund fees charged by out-of-network ATMs.
The complete research method is available in the original article published on Nerdwallet.
Erin El Issa writes for Nald Wallet. Email: erin@nerdwallet.com.
The truth about these four common bank myths originally appeared in Nerdwallet.
Original issue: May 29, 2025, 2:25pm EDT
