Your Banking and Savings Guide
1. Money deposited in a bank account is secure.
One of the safest places to store your money is a bank. In the event of the 2008 financial crisis, the level of insurance on bank accounts was increased by the federal government- it is currently at $250,000 per investor.
2. You pay for the advantages of a bank account.
Compared to mutual fund companies and brokerages who offer check-writing privileges, banks usually pay a lower rate on interest-bearing accounts. Also, bank charges can be high- an account cost can easily sum up to $200 or maybe even more unless you maintain the minimum required balance for the deposit.
3. Your earnings from a bank can be consumed by inflation.
Even when the rate of inflation is low, the annual increase in the cost of goods and services generally outruns what banks offer on interest-bearing accounts.
4. Not all interest rates are made equivalent to each other.
To calculate interest, banks often use different methods. To analyze and compare how much returns you’ll earn from diverse accounts in a year, request for each account’s ‘annual percentage yield’. Banks normally quote both APYs (Annual Percentage Yield) and interest rates. However, only the calculation of APYs is consistent everywhere.
5. You can find better rates
Certificates of deposit (CDs) offer you some of the best assured rates on your deposits and are also insured up to $250,000 for each CD. However, the catch is that you have to lock your deposits for a minimum of three months to five years or maybe more. In the instance that the interest rates fall before the expiry date of the CD, the bank has to give you the rate it quoted initially. If the interest rates increase, you will be stuck with the initial rates i.e. the lower rate.
Moreover, money market and online bank accounts can be enticing options, too. They are capable of paying more than banking accounts and you need not lock your money for a specific duration of time.
6. ATM fees can take a considerable slice out of your budget.
Although automated teller machines are a highly convenient option, they are increasingly becoming a pricey one. On an average, your bank charges you a fee of $2.00 to use another institution’s ATM. That’s above the fee that you will have to pay to the other institution for using their ATM.
7. Getting the best deal takes time and effort.
If you just walk into a car dealer’s show room and plop your money down, you aren’t going to get a brilliant deal on a car. Similarly, you are not going to get a good banking deal you compare and analyze different offers and inquire about price reduction. For example, if you are a shareholder or if you directly deposit your paycheck, the bank may offer you free checking.
8. Use the Internet to search for bank services.
You can use the internet to evaluate and compare yields, minimum deposits and fee requirements nationally. Many sites permit you to search and compare the lowest costs and highest yields on banking, loans, savings and deposit rates.
9. Bill-paying becomes easier with online banking.
The monthly trouble of paying your bills can be avoided though electronic bill-paying. And if you combine your online banking service with a personal-finance management plan, you will be able to draw a link between your banking and your budgeting and financial planning. But be caution of vendors who warn consumers of hikes in prices only in the fine print of a bill.
10. You can avail of banking facilities without going through a bank.
Many financial institutions offer accounts that are similar to bank services. The most common ones are: Mutual fund company money market funds, brokerage cash-management accounts, and credit union accounts.