Archives for October 2013

There’s No Interest

Interest rates are shockingly, disastrously low right now. The simple idea is that the Federal Reserve Bank is making access to credit easy for banks, businesses, and shoppers. The goal is to stimulate the economy and encourage spending. Put your money to work by buying that big home and truck! Meanwhile, savers are being punished with puny rates in their bank accounts. It’s yet another tip of the hat to cultural consumerism, as saving seems worthless.

As bank consumers we can’t change the prime rate of interest, but we can position ourselves to get the best interest rate available. At any one time, you likely have a sizable amount of liquidity (cash) in your checking accounts. The smart thing is to make that money work for you (important, since I’m losing 6.8% a month due to student loans).

Fees, Failure, And More Fees

Today’s checking accounts are bloated with fees, minimum open/maintenance requirements, and various stipulations. Quite simply, your checking account sucks. The simple answer: You need to switch. On top of that, it shouldn’t take more than a few hours.

Banks are caught between two epochs. The first is one in which customers walk in and have a relationship with a banker. The real estate, building fees, maintenance costs, etc. – all the niceties are passed onto the customer. That brilliant lobby, friendly greeter, and coffee on the side are all paid for by your idle money and loans. The second is one where customers are in control. No longer are they attached to a singular location. People can move freely around the city, state, country, and globe – never worrying about withdrawing from an in-network ATM or going to a brick and mortar location to deposit a check. In recent years, this market has been dominated by online banks.

Online Banks Are Your Solution

If you’re still stuck in the first version and getting paid 0% interest in your checking account, it’s time to switch. The following are five simple reasons to switch to an online bank:

1. It’s in your interest

While your current bank may pay out as little as 0% interest, online banks regularly pay about .40%. If you carry large balances within your checking account, you can expect even greater rates (at Ally Bank, they pay .75%).

2. They’re at your service

Most banks are open during traditional work hours, which makes no sense whatsoever. Online banks are always available – 24/7 – online and by phone. Oftentimes, you can also use chat features and email. They’re made to work around your schedule. With an app or scanner, you can deposit checks whenever you have the time (~5 mins).

3. No minimums – ever

To have the privilege of holding your money, traditional banks reward you by charging fees for not maintaining certain balances. With online accounts, there are no minimums to open accounts and you don’t usually have to maintain $1,000 a month (or more). These fees, minimums, and penalties only hurt those with lower incomes or can’t balance budgets. By storing your money in online accounts, you vote for a fairer bank for everyone.

4. No more ATM fees

There’s no need to be afraid of that ATM. That $4 fee that the bank charges to give you money out of network is unfair. If you bank without borders, you can withdraw without restrictions. Online banks know that withdrawing your funds is important, and some actually refund your ATM fees at the end of the month.

5. No ridiculous account management fees

Even when a bank gives us all the terms and conditions, there can be confusing stipulations and requirements that end up dinging you every month. Nearly everything is free or without fees when you’re online. Like credit unions, they have a direct interest in making you happy and stealing customers from the bigger banks.

My Recommendation: Ally Bank

I’ve said it before and I’ll say it again: It’s time to switch. One question remains: Which online bank should you choose?

There are plenty to choose from, but the best checking account – at this time – is by Ally Bank.

The interest rates are higher, the customer service is friendly and prompt, and I’ve never once received a fee in all my years there.

Check them out here: http://www.ally.com (This a non-affiliate link)

This week can be different. You can decide to save without sacrificing much. These are little, everyday decisions that we may not think twice about, but add up to a lot over the course of a year. The following are 10 ways you can save more money:

1. Go to the public library.

That new book costs $20 on Amazon. Your local library probably will have it available in a couple weeks for free. It’s the worth the wait. There’s plenty more worthwhile reading material besides that new, got-to-have-it bestseller.

2. Brew coffee at home.

Buying coffee on the go or as a regular part of your day adds up. If I bought a tall, black coffee at Starbucks everyday for a year, I’d see $692 less in my bank account. More importantly, that money saved could be gaining interest or used to pay off debt. Brew your own coffee and save a huge chunk of change.

3. Pack a lunch for work.

Lunch doesn’t have to be expensive. By packing a lunch, you’ll be saving a boatload of cash at the end of the year.

4. Drink water when you go out to eat.

Soda, alcohol, and juices all cost an arm and a leg at restaurants. Drinking water will usually save you about $2 a meal. That little savings can add up quick.

5. Look on Craigslist for free or low-priced furniture.

Craigslist is a wonderfully simple way to get furniture, devices, and appliances at dirt-cheap costs or for free. It’s worth a look before you buy new.

6. Walk, bus to work.

Cars are a money-sucking parasite. I should know. Take the bus – better yet, walk – to school or work. This could save you thousands of dollars a year.

7. Shop for groceries once a week.

Supermarkets are prime places to spend discretionary funds on things you don’t absolutely need. Reduce the amount of times you visit, and you’ll see a nice savings in gas used and extra items.

8. Use a rewards credit card for non-discretionary purchases (i.e., supermarket and gas station).

If you’re going to be making the purchase either way, make sure you’re making the most cash back possible. The best deals are usually with cash back and/or rewards credit cards.

9. Create a list of things you “want” and decide after 30 days if they’re still worth the cost.

In the moment, it can be hard to figure out what are must-haves. Given some time and reflection, you may realize that brand new gadget or appliance isn’t really work X amount of dollars. Make a list of wants and see if you still feel that need after a month.

10. Cancel magazine, TV, and digital subscriptions.

This is easy. Just call up every discretionary company you pay money to a monthly basis and say, “I’m done.” If you’re a hefty magazine and TV subscriber, this will net you at least a couple hundred this month.