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BANKING & CREDIT -
Banking (continued)
2. People use bank savings accounts, money market funds and certificates of deposit (CD’s) to invest funds not required for immediate use. Consider the following:
a. Bank savings accounts and money market funds (particularly those offered by large banks) are usually handy, but normally pay a very low rate of interest. Generally, try to keep only the minimal amount of funds in these accounts that is necessary for emergency expenses. Also, it pays to shop around for these types of accounts to see what interest rates are available. Interest rates can vary significantly.
b. Certificates of deposit (CD’s) are more commonly used to invest money that is not required for a period of time. These are purchased from the bank for a stated interest rate return for a fixed period of time. Rates of return can vary substantially from bank to bank, and lengths of maturity for the CD. When an existing CD comes due, or if you have additional funds to put in CD’s, it pays to shop around at that point in time to see what rates are available. Rates are generally published in the paper or available over web sites on the Internet, such as Bankrate.com or Bankaholic.com. Or call up several banks to check.
3. Credit unions are a popular alternative to banks and often offer services at lower cost, and investment products, such as CD’s, at a higher rate of interest. If you have access to a credit union check it out and see if it is the best deal.
4. Internet-
5. Some people are using investment companies, like Charles Schwab, for their checking needs, in addition to investment needs. Often you can get a free checking account, as well as free use of an ATM card wherever you use it.
6. Whatever type of financial institution or company you use for your banking and “safe money” investment needs, make sure the institution or company is insured. Regular banks are insured by the Federal Deposit Insurance Corporation (FDIC) and credit unions are insured by the National Credit Union Administration (NCUA). Investment companies may also have some accounts that are insured. The FDIC and NCUA insures the total amount of deposits you have in the bank or credit union for up to $250,000. If your total is over $250,000 (including CD’s) you may bear the remainder of the risk over $250,000 if the institution should fail. However, if your funds are split among more than one insured institution, you will receive $250,000 coverage at each institution. Also, some products now offered by banks, such as money market mutual funds, annuities, etc. are not insured by the FDIC. Check the insured status of your investments.
7. Banks and credit unions are often used as a source of funds for home mortgages, home equity lines of credit, car loans, small business loans, etc.
a. Saving on home mortgages is discussed under the “Buying A Home” heading in the “Life’s Major Events” section, while auto loans are discussed under the “Buying New Vehicles” heading in the “Transportation” section.
b. When looking for home equity lines of credit or small business loans, banks and credit unions can often be very competitive. But check around at many different banks and credit unions. Loans at these institutions vary considerably with respect to both annual percentage rates and loan origination fees. Qualification guidelines for loan acceptance also differ considerably. Just because one bank turned you down, or offered only a high interest rate and fees, does not mean other banks will not offer you reasonable terms. And do not be afraid to tell a bank that you cannot accept their offer due to its cost. Ask them to consider a better interest rate and lower fees. Banks are in a competitive business, and many will improve their first offer to get your business.
c. When negotiating a home equity line, pay attention to the terms of the loan. This is particularly true with respect to whether the interest rate is fixed or variable (most are variable) and under what conditions the rate varies. Lately, banks have also been canceling home equity lines or reducing the available line of credit, even if the borrower’s credit is perfect. So be sure to check whether the terms of the credit line allow a bank to do this and under what conditions. You do not want to be in a position of taking out a line of credit, using the money and then having the loan recalled.
d. And when looking for loans (particularly home equity loans), do not forget the
Internet. There can be some great loan deals from legitimate Internet-
8. Whatever you do, do not use a “payday loan service” or “check cashing service” to cash your payroll checks or to take out a loan. And do not get an advance income tax refund from your tax preparation service or any other company. The interest rates and fees charged by these services, on an annualized basis, are very high.
9. Make sure you check to see if you or a relative has unclaimed property in
one or more states where you have had a residence. These assets consist of forgotten
bank deposits and stock, un-
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