Prime Rate Credit

We all hate to pay them, some more than others, myself included admittedly. What am I talking about? Those darn ATM fees that eat up a couple bucks, and sometims up to three to four dollars at some ATM’s, for the privelege of accessing and withdrawing money that belongs to you anyways. It’s kind of the way that a lot of banks are making money when you withdraw your money, but they would never own up to that. Instead they say that is covers administrative and maintenance costs for your account, the machines that dispense the money, and keeping tabs on your account balances properly.

But we all know that’s something that needs to happen anyways, so I personally take those excuses with a grain of proverbial salt. I’ve seen the recent ATM fees go up as high as five bucks, which if it were me, unless I were in dire need of that money, I probably would not pay based on the sheer principal alone that it’s a rip off to pay five bucks, which equates to a perfectly good meal at a fast food restaurant, just to withdraw my money.

Then there are the fees that you have to pay to use an ATM that isn’t actually owned by your bank. For example, my sister is in town from California right now, and just for her to withdraw money from an ATM that was within her network, but owned by my bank and not hers, which is a small town bank from where she lives, she was charged a 3.50 fee for withdrawing her money.

This one is particularly baffling because I’m not really sure why they put that extra fee on when it’s “outside your network” or from another bank. Sometimes your bank may actually charge two separate fees, one from them for using the ATM, and another one if that particular ATM is out of their “network”.

It’s really highway robbery if you think about it, considering banking fees are also going up just for your monthly maintenance fees as well. Heck, I pay six dollars on one account every month, and ten on another, just for them to keep my account going. I think these fees are really getting out of hand, but they can get away with it because you “need” them, and you need checking accounts and savings accounts often times to establish credit. Bummer.

Fears about the safety of individual savings and nest eggs rose with the faltering of Bear Stearns Cos., an investment bank. The Bear Stearns Co. had to sell, at a drastically reduced rate from just several days prior, to J. P. Morgan Chase and Co. for just $2.00 a share.

In a ripple effect, concerns have grown that the problems on Wall Street could effect commercial banks and their individual depositors. The response to this concern is that bank accounts for individuals are backed by the FDIC. The Federal Deposit Insurance Corp. covers up to $100,000.

The coverage by the FDIC includes trusts, IRAs, certificates of deposit and savings and checking accounts. For accounts, such as retirement accounts, the coverage can be as high as $250,000. Customers of brokerages are similarly protected by a different agency.

The Federal Security Investment Protection Corp. protects the assets of investors at the brokerage firms. So, if your brokerage failed, you would still be covered. Some wonder what the limits of coverage would be by the FDIC if banks failed collectively. In 1991,502 banks failed in three years and the FDIC’s reserve ratio slid as low as negative 0.25%. The FDIC still covered all depositors at failed banks.

Last year, the FDIC was following 76 problem institutions compared with 1991 when that number was 1,430. So 76 banks are relatively easier for the FDIC to cover.

Well, my inspiration for writing this particular post here is that this just happened to me days ago, literally. I have a checking account with a prominent bank, whose name I won’t mention here. I’ve had the checking account since I was in college and it was the only show in town, so I was basically forced to sign up for a checking account there so I could pay my rent with checks, among other necessities that only checks could buy back then (yes, there was no such thing as a debit card back then).

So, I’ve had this account for a good 15 years, and I’ve never had an incident that resulted in overdrafting as far as I can remember. So, about one year ago, I opened a separate business account. I pay all of my business expenses with the business checking account, and still pay for all of my personal effects with my personal checking account with said bank.

Well, things got a little confusing for me last week due to a flurry of activity in my life, and I accidentally paid for a credit card balance with my personal checking account instead of my business checking account, which is with a totally different bank. I didn’t have enough funds in my personal account to cover the charge, so therefore I was hit with massive overdraft fees.

I wouldn’t have minded so much, except I have questioned whether I could get overdraft protection before and was told “no” and wasn’t really offered the best customer service as to how to get it on the account. So, I was agitated, and I wrote to the bank asking them to remove the charges. Actually I threatened to leave and find another bank, which is what I full well meant to do.

However, I was very pleasantly surprised that they removed all but one of the overdraft fees. I guess my patronage does mean something, and to me, that meant a lot, so I stuck with the bank and will still stick with the bank. Oh, and I’ll be careful what accounts I’m paying business vs. personal expenses with too. Lesson is, I learned a very valuable lesson from all of this!

Health care costs and health insurance rates are spiraling upward and out of control. Even with insurance, a series of the usual screening tests can end up costing a lot of money out of your own pocket after deductibles and the percentage uncovered by your insurance provider. One of the ways to get a handle on this situation is to investigate some of the alternatives to the traditional payments made for the usual health care policy.

One of the newer choices that is becoming more popular is the health savings account. Probably, the biggest advantage to the health savings account is the tax benefits. Contributions made by the employee are tax exempt from federal income tax and, in most states, from state income tax. Whatever amount your employer contributes is also tax exempt.

You may contribute as much as 100% of your annual deductible, provided you do not exceed the annual contribution limits set by the IRS. When you need to use the health savings account funds for health care costs, distributions are tax-free as long as the amount is used for “qualified medical expenses.

People who are qualified for a health savings account are individuals covered by a high deductible health plan, not enrolled in Medicare, not covered by any other insurance and not claimed by another as a dependent on their tax return. A health savings account is an individually owned account and is intended for use together with a high deductible health plan.

The money in a health savings account is your own and balances roll over from year to year. If you leave your job, the money in your health savings account stays and if you opt for a high deductible health plan with your new employer, you can continue contributing to your account. Even if you don’t use that option, you can still use these funds for qualified medical expenses, but can no longer contribute.

A health savings account can be opened as a checking account, a money market or as certificates of deposit. Interest is accumulated on all of these types of accounts and minimum opening deposits vary with the type you choose to open and which bank you choose. Be certain of any fees that may apply and what your balance needs to be to avoid them.

This is an option that is worth researching for the tax benefits and because the funds stay with you and remain your own even with a shift in employment.

In the event that you are a young adult looking for your first bank or if you are already established with a bank, but are disillusioned with your present bank for some reason, what do you look for when selecting a bank? Probably, the first item to look at is the location. Is there a branch near your home and near to where you work? Make sure it is geographically convenient for you. Also consider what hours and days they are open and how that will fit your schedule.

While shopping for convenience, find out their availability of technological advances. Consider the ease of their online banking services and their security of these services. Does the bank have online bill paying available?

Find out the loan services and interest rates that would apply. Compare these services for different types of loans that you might need in the near future. When looking for a bank, find out if they have customer service representatives you can talk to about different financial situations. Make sure you can talk to and ask questions from a live person, not just an automated tape recording.

Look at the savings options offered to you. You want to see a variety of plans such as certificates of deposit, traditional savings, IRA’s in both the traditional and Roth. Find out the interest rates and time frames involved for each type of plan. Again, you want to see and talk to customer service representatives for an explanation of these services.

Another important area to look at is the different types of checking accounts they have to offer. See if there is any kind of overdraft protection available and what types of fees apply. Research and determine if there is an interest bearing checking account if you have a sum of funds you want to keep liquid yet need to earn interest on.

Ask about debit cards, prepaid credit cards to avoid hefty balances and finance charges if you’ve had credit card problems in the past, and ATM cards and find out if there are any service fees that apply on using these. Call around and stop in and visit your potential bank in advance to selecting which bank is the right one for you.

Well, yes, and I wouldn’t blame anyone who chooses a credit union over a traditional, corporate-backed bank these days either, since the banking fees, including service fees, atm fees, and overdraft fees tends to be in the ridiculous amount are lately! I recently read that a lot of people are choosing to give up their regular banking and checking accounts in favor of smaller credit unions, which often give a much better break when it comes to not only banking fees, but also small loans.

I actually had a friend that bought a car years back who belonged to a credit union through her dad’s job, and she ended up using the credit union to secure financing for the car instead of going through the dealership’s in-house financing (much to their chagrin of course), and got a great deal on financing for the vehicle because of it, whereas with the traditional bank loan being offered by the dealer, she would have been paying a lot more in interest and fees.

I didn’t really understand why she went to the trouble at the time, because we all know how much easier it can be to go with an in-house banker, but now I do see why - she ended up saving hundreds, if not thousands of dollars in interest just by going with the smaller outfit to finance.

Some credit unions may even offer credit cards or lines of credit - it really depends on the size and financial stability of that particular credit union, but if you have a credit union offered through your place of work or some other organization you belong to, you may want to strongly consider a membership since being a member has great benefits usually. Of course, it does depend on the credit union itself, but typically that is why credit unions are appealing.

In this day and age of simplified automation and pure laziness - well, maybe lack of time is how we’ll put it, automated banking and savings services have really burned a pioneering path in to the new age of financial ease in savings, deposits, investments and more. Automated deposits into most kinds of accounts helps people to keep track of their finances better, and many times is a cheaper way than manually depositing checks and other deposits, since some banks actually will charge you to walk in and use a teller rather than use some automated option.

The cool thing is, that now, even if your employer does not currently offer a direct deposit option for your paychecks, many times you can authorize a bank of credit union to automatically debit and credit your account for you. Look at how easy it is to sign up for services like Key Bill Pay, which is Key Banks bill payment offer, where the bank sets it up so you do not have to even think about paying your bills, because the bank knows your due dates, and does it automatically for you.

These types of automated and direct deposits and debits have helped thousands of people manage their accounts more effectively and accurately, and not to mention may have even saved them late fees they may have incurred if they were left to figure out their bills themselves every month and may have missed a deadline or two along the way. Haven’t we all done that before? Also, you save money on stamps, and save yourself from having to trudge to the post office or out to your mailbox in the dead cold of winter! Sounds like a win/win to me!

College graduates nowadays are coming out of school with a lot of financial baggage in the form of student loans out the ying yang, and many times they start a job at the bottom of the totem pole and have a hard time even scraping by paying their existing bills, let alone putting away money in any kind of savings account.

Many times college grads nowadays are carrying twice or thrice the load that college students 20 years ago or more were carrying, because the rate of college tuition has skyrocketed as of late.

The first thing a college graduate student should do is start their 401k, this is the most important savings account a new worker can have, and it actually many times pays you to have one of these accounts since many times corporate and private employers will match your contributions up to a certain point.

Not only that, you are getting a nice little tax savings by having a 401k, in other words, your taxable income is reduced AND you’re saving money.

As far as actual savings accounts, if there is anything left over to stash away, you may want to stay away from savings accounts unless they offer a considerable return (interest) on your money. Otherwise, you are just letting your money stagnate.

We’ve all heard the jokes about opening up a new savings or checking account and the cheapo “free gift” that you get for putting your trust and thousands of investable dollars with a particular banking or financial firm. How many times have you heard the free toaster thing, or the free mousepad, or free $25 CD or whatever this gimmick might be?

Well, many times the freebies that banks and financial institutions offer to get your business aren’t really all that great. Consider the fact that savings accounts, when compared to a money market account, offer a couple percentage points LESS than a money market account when it comes to interest.

Do you know how much a few percentage points of interest can mean when you’re talking about saving money for the long term? Thousands of dollars! And that’s not all, think about the principle of compound interest, where your money actually builds and builds on itself until it starts to actually compound on itself, which means it’s almost like you started off with a higher sum of money.

The thing is, savings accounts really do not make your money “work for you”. Are they liquid? Sure. Are they the most easily accessible form of liquid cash? Probably. Yes, they are good for emergency funds, but if you are looking to actually get a return on your money in the long term, please look into getting a money market!

I always thought money market accounts were kind of a waste of my time - and money, and that my money could possibly be working harder for me in some other sort of fund or investment, but I still needed the liquidity of something like a money market - something I could “cash out on” fast if I needed to, or something that would be minimally painful to get my money out when I needed it.

Well, I was wrong about money markets. My Paypal money market fund, of all things, is performing pretty darn well for being a relatively low interest yielding fund.

It’s up to almost 5% interest earned right now, and that is not half bad for an account that would just be basically “sitting there” doing nothing and accumulating no interest virtually if it were in a regular savings bank account or a checking account.

If you’re interested in putting your money in something that yields a little more interest build up than a traditional savings or checking account, and you need your money to be available for withdrawal quickly, I recommend you look into a money market account - maybe try Paypal or Sharebuilder, the two that I have my money in. They are both performing to my pleasant surprise better than I thought they would!