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Money Market Account or Savings Account?

Although you won’t find them at as many banks as you will savings accounts, money market accounts are definitely an option at many of them. If you glance at both briefly, there are some similarities, including that both pay interest and offer liquidity, as well as both being protected by the FDIC, and similar check writing rules.

On the other hand, money market accounts almost always pay a higher interest rate, making them a more attractive option for most savers.

The simple truth is that, when it comes to what they can do with funds that are being saved in a savings account, most financial institutions are extremely limited. That’s one of the reasons that their interest rates on savings accounts are so low. On the other hand, money market accounts offer them a good bit more flexibility, including being able to invest that money into certificates of deposits (CDs), and other safe investments like government bonds. Because of this, most banks are able to offer interest rates on their money market accounts that are higher than savings accounts, so that they can attract savers to put their money in the former rather than the latter.

Although the differences between the two are not extremely significant, one major difference between a savings account and a money market account is that there are restrictions on how often withdrawals can be made. For example, some financial institutions will have a one-week waiting period for taking money out of your money market account, so if you take money out of your savings account regularly when you need it, a money market account might not be a good idea. On the other hand, if you want to make more money in interest and can let your money sit for a longer period of time, a money market account will definitely earn more money for you.

Now, to be sure, neither a savings account or a money market account offers a great interest rate. For example, a savings account probably will offer somewhere around .5% while money market, even though it doubles that, will usually only offer around 1% in interest. That’s not very much and, if you have a significant amount of money, and you won’t need to access it for a long period of time, there are other investment options that will definitely give you better interest rates.

Also, be sure that you don’t confuse a money market deposit accounts with money market funds, especially because money market funds are covered by the FDIC and are quite different from traditional demand deposit accounts.

Banking Tips to Help You Save Money at any Bank – Part 2

Welcome back for Part 2.  We have lots more great info, tips and advice for you today so let’s get right to it shall we.

Never be afraid to complain to your bank if they deserve it. The fact is, nobody likes to hear from a dissatisfied customer but they would rather hear that you’re not happy and try to fix your problem then watch your fanny as the door hits it on the way out. If you talk to someone at your bank about a problem you’re having and they don’t take care of it to your satisfaction don’t hesitate to ask for the help of a manager or supervisor. If things really get out of hand you can always contact the federal bank regulator in your state for help.

Speaking of not being afraid to complain, don’t be afraid to ask your bank for a break if you need one. If you just bounced a check by accident, you think that you mortgage application fees are too high or you’re having problems repaying a loan talk to them and see if they’re willing to cut you some slack and/or possibly lower your rates.  If you’ve always kept your accounts in good standing you may be surprised at what your bank is willing to do for you.

Make a habit out of reading your statements every month.  If you don’t you may miss a new charge, mistake, fee or something else that’s costing you money.  Plus if there are unauthorized charges you’ll spot them in time to possibly do something about them. This is vital as many states have laws that say you need to do this within a reasonable time period.

Always read the fine print as this will prevent stress, anger and frustration down the road. Banks are in the business of making money and will do whatever they can to make more.  Even so-called ‘free’ accounts can have certain fees attached, credit card fees that were great when you signed up can be increased and minimum balances may affect what you need to pay.  Read everything so that you don’t get any unpleasant surprises.

This is vital but few people do it well; keep good bank records.  Documents, receipts and anything paper should be help onto until the charges are confirmed by your bank.  Once they are you can toss them but make sure you shred them so that the information can’t be used by an identity thief.

And there you have them; a number of excellent tips, ideas and some good advice that you can use when dealing with any bank.  We hope you liked this 2 Part series and invite you back for more great info sometime very soon.

Banking Tips to Help You Save Money at any Bank – Part 1

Banking today can be quite an expensive proposition.  Banks are in the business of making money and will charge fees for everything they can get away with.  If you’re keen on keeping as much of your money as possible then you need to take a look at the Tips and Advice below that we’ve put together.  They will save you time and energy too so take a look and then use them to keep those fees at bay.

Once a year you should sit down with your banker and ask them to go over your accounts and make sure that they are the best ones to fit your needs.  The fact is, as time progresses your financial situation changes and so do your banking needs.  If your bank has changed their services or offers new ones that you don’t know about you may be wasting your money or not getting as big a return as you should.  The only way to know is if you ask and so ask you should.

Speaking of asking what’s new at your bank, every 3 or 4 years you should do a full comparison of your bank to some others and see if you’re truly getting the best deals, best rates and best interest that you could and should be getting. Comparing your money market accounts, ATM cards, checking and savings accounts as well as any other services that you use is vitally important to make sure you get what you deserve.  Plus just the notice that you’re comparing banks might make yours a little more willing to negotiate with you.

Setting up direct deposit is recommended by experts over paper checks.  It’s safer, easier, more convenient and instantaneous too. Having no delays means that you won’t have to worry about having your money right away, no checks can get lost or stolen and, in some cases, you may even get a break from your bank for doing it.

Speaking of direct deposit there is also automatic payments.  If you want to make sure that you don’t forget a mortgage or car payment you can direct your bank to do it for you on a specific day every month. Banking electronically makes sense in many other ways also.  It can save you time, energy, gas and stress.

Find someone at your bank that you trust and go to them when you have concerns, problems or need help in any way.  That way they get used to you and you to them.  This will make you ‘friends’ and friends are always looking out for ways to help.  Remember, bankers are people too.

If you liked these Tips come on back soon for Part 2 where we’ll give you even more.  See you soon!


Banking Tips for the 20-something Adult

If you’ve recently graduated from college you may have already received your first paycheck and with it got your first checking account fee.  The thing is, as a student oftentimes you’ll be able to get a free checking account. That’s what the banks lure you in with and, once they have you, they will start to tack on all sorts of fees that you may miss because you’re not used to seeing them.  With that in mind we’ve put together a short list of the things that you need to be aware of when you first start banking in your 20’s.

Tip – Know all of the fees that are associated with your specific account.  There will be certain fees that you will be able to avoid but if you don’t know them you won’t be able to avoid them.  The best thing to do is sit down with a rep at your bank and ask. They are obliged to tell you and give you all the info necessary.

Tip – Remember that you purchasing habits are being watched. Today every move you make is being followed electronically.  What this means is that your debit and credit card purchases are being analyzed by lenders and they can (and will) use this information to determine what your rates should be and if you should be allowed to get more credit or not. If you’re prone to making silly financial mistakes do them with cash instead.

Tip – Avoid transfer fees as much as possible. Any bank you use wants you to keep your money in 1 place – their bank. If you transfer it they’re going to charge you fees to do so and they can sometimes be pretty exorbitant.  Better to budget yourself well and avoid them.

Tip – Start saving NOW.  Yes, you’ve probably heard it already from mom and dad and any other responsible adult but the fact is that there will come a day when you’ll need money but won’t want (or be able to) work anymore.  The earlier you start saving for retirement the easier it’s going to be once you arrive there.  Yes it won’t be for a few years but even still you should have a substantial amount of money saved for emergencies.  Shoot for 10 to 15% of your pay but do something to get started NOW like having a specific amount deposited directly into your savings account every week.

Finally, keep a vigilant eye on your account(s) online and check the balance against your receipts often. Banks make mistakes and if you catch them you may save yourself a lot of hassle and headaches. Plus if youmake one it’s better that you catch it before you overdraw your account and get smacked with fees.

Money Sucking Financial Products

Financial scams, frauds, and outright criminal activity are easy to spot. Of course, the phrase “there’s a sucker born every minute” didn’t hit our lexicon without good reason. For the most part, we’re wise enough to see through—or at least be skeptical of—too good to be true financial products.

But there are financial products which aren’t outright fraudulent or illegal that can be just as harmful as the bad stuff. Products many of us see everyday and take for granted.

MoneySmartLife recently examined a few of these products. According to the article,

…not all the financial innovations have been positive; there have been some products and services created that can be a major drag on your net worth and even on your quality of life.

First up is payday loans. These storefronts have become so ubiquitous that I make it a game to count how many I can find while driving through a town or city.

These “lenders” use loopholes in state laws to get around maximum interest regulations. Your payday loan could cost you 100% to 500% depending on how deep in the trap you get caught.

Let’s say you borrowed the $400 for the refrigerator and they charged you a $20 fee. You write a check for $420 to be cashed 10 days from now. Even if you paid off the loan after 10 days you’ve paid $20 for 10 day loan on $400. That’s an annual percentage rate of 196%!

In a previous life, I owned a computer service company. I occasionally did work for one of these loan companies. What amazed me most was that they didn’t try to hide the exorbitant rates they charged. Rate sheets were plastered all over the walls in the waiting area. The first time I saw one, I thought it was a joke. I chuckled out loud to a disapproving look from the owner.

Next up are interest only mortgages.

Think about these scenarios that might lead you towards an interest-only loan:

1. You can’t afford a regular mortgage today, but some day your income will go up and you’ll be able to refinance into a standard 15 or 30-year mortgage that includes principle payments that will eventually lead to you owning the home.

2. You will never be able to afford the house, instead you rely on any gains from price appreciation from the price your purchased the house at.

Both of these could potentially result in you never putting a dime toward actually owning the home! Doesn’t sound like a good idea to me.

Another pitfall is that these mortgages “automagically” convert to a fixed rate after a predetermined number of years (3 and 5 years being typical) along with the principal payment. But what happens when the market sours, you lose your job, and you can’t sell your home? Hmm. That sounds a little familiar.

Read the rest of MoneySmartLife’s money sucking financial innovations and healthy alternatives.

Survey is in – HMO Good Congress Bad

Uttering the three letters H-M-O gives me the creeps. Nameless, faceless bodies that tell me which medical specialists I can see and which ones I’ll have to fork out a few extra dollars for. But, HMOs fair much better when compared to another nameless, faceless body…Congress.

In a recent article by Daniel Indiviglio of The Atlantic, he shares the latest results of a confidence survey recently completed by Gallup.

The results? People have more confidence in banks, big business, and their HMOs than in Congress. Here are the full results:

Read the full story at Gallup.

Free Checking – Headed Into Hibernation?

We assume free checking is and will always be, well, free. But that age may be ending, at least for some customers. Which banks might be going “freeless”? According to the New York Times:

Wells Fargo: As of July 1, the bank is no longer offering its “free checking,” or no monthly fee, account product to new customers. Instead, new customers will either have to pay a monthly service fee or meet certain requirements like a minimum balance requirement to have the fee waived (the change does not affect customers who had the account before July 1).

Citibank: Last November, the bank announced it was removing certain waivers from its EZ Checking and Access Checking packages.

Fifth Third Bank: Discontinued sales of free checking to new customers last September, though existing holders of the account weren’t affected.

Bank of America: The bank is testing new pricing models but spokesmen wouldn’t go into details.

Seems like bigger banks are starting the trend. Will local and community banks follow? Will free checking end entirely? Only time will tell.

Read the rest of the article.

Credit Unions – An Overview

I’ve only been a credit union member once. I enjoyed it until they closed down my checking account for overdrawing it too many times. Completely my fault, of course.

But, credit unions had a stigma in my mind after that. But I have a friend who swears he’ll never go back to a bank after having been a credit union member. He’s not alone. Credit unions are popular and seem to be growing more so each year.

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