Bank Checking Accounts
Things taken for granted, such as bank checking accounts usually have a long history behind them and these types of banking transactions and services are no exception. Some people believe that a form of checking actually existed as early as 400 B.C. but the form which is more familiar today showed up in Holland around 1500 A.D. In the United States, businessmen near Boston put up their own land as collateral and began writing checks against the mortgaged property in the 1700s. So something seemingly quite modern has a long and storied past, including banks sending messengers all over New England presenting checks to other banks to be cashed. If a person looks at the description of a bank checking account in most of these institutions' literature, the length might be a paragraph long, but there are many things to ponder when opening one of these very convenient and important personal finance needs. Consider first the types of checking accounts that are available.
Most consumers in America consider the financial institution where they have their checking account as their "real" bank, not where a car loan is secured or other major loan such as a mortgage might be administered. The money from checking account fees is a large income producer for banks, so they often give away pretty nice gifts as an incentive to open an account and keep it open for a certain amount of time. So because customer retention and their needs are so varied, lending institutions have begun offering a number of different types of bank checking accounts such as a basic, free, interest-bearing, student, joint and money market accounts. It can become very difficult not to think that money (mammon in the Bible) is the most important thing a person can pursue. Jesus gave a warning and also some good news about all of this when He said, "No man can serve two masters: for either he will hate the one and love the other, or else he will hold on to the one and despise the other. Ye cannot serve God and mammon. But seek first the kingdom of God and his righteousness and all these things shall be added unto you." (Matthew 6:24, 33)
The basic account is a no frills, limited number of checks per month account and fees will be paid if more checks are written than the limit allowed. Free bank checking accounts mean no service charges for activity transacted, but it doesn't mean the absence of overdraft charges. Interest-bearing types of check plans means that there is a minimum monthly balance of a certain amount to be kept in the account at all times and if not, there is often a penalty assessed. Well look, they call it a fee, but let's call the "fee" what it is, a penalty! Joint plans are usually used by husbands and wives for equal access to bank checking accounts and online plans allow busy people, including a lot of students, who never want to step inside a bank, do all of their transactions over the Internet. But typically with an online account, if you step into the financial institution and talk to a teller, Zap! You will be assessed a penalty, er, fee.
For the bank checking accounts neophyte, there is some stark news about having the responsibility of bank checking accounts. Many people have had the horrifying experience of opening a notice from their bank and seen the words insufficient funds and perhaps two hundred dollars or more in penalties for bouncing three checks. Bounced checks are called overdrafts, and here is the sobering news: they affect a person's credit score. In fact, the report of them can remain on a person's credit history report for seven years. And these what can seem to be very minor issues between you and the bank can perhaps become a factor three years later when a person is trying to rent an apartment or get a car loan or a mortgage. See? These aren't fees like the bank loves to call them. They are PENALTIES.
In addition to having to watch for overdrafts on bank checking accounts users of the bank services need to keep in mind that eighty percent of all banks in the country use two major reporting companies, ChexSystems and Telecheck to record complaints from banks about abuse of various banking services by customers. These two companies, act as clearinghouses for these complaints, then provide these reports to other banking institutions all over the country. Just like catching the ire of the big three credit agencies, being on the bad side of these two banking agencies can actually freeze someone from getting another checking privilege from any of the 80% of lending institutions across the country. And finding the other 20% of banks not using them can be tricky. There are eight million people in the country with this very predicament, but thank goodness, there is a great alternative.
These opportunities for alternative checking accounts are provided with online banks. From direct deposit to ATM and debit card privileges and all online banking services, bad credit bank checking accounts are offered to customers who have ticked off the brick and mortar lenders. Make no mistake, there are also fees with the online bankers, and penalties in some cases, but they are not associated with the two reporting agencies. The downside to this alternative is the need for routine access to a computer with Internet capability. Often those who must use this alternative method of banking are more economically challenged and thus the computer ownership and Internet maintenance becomes an issue.
Bank Cd Interest RatesTraditionally, bank CD interest rates have provided a solid, reliable way to earn extra income on money not needed for a set length of time. Ranging in length from six months to over five years, certificate of deposit accounts, or CDs, do not yield the highest financial return like other types of investments, but they are one of the safest ways to invest at a very low risk. Consumers that have money they don't want to risk in the stock market and won't need for awhile, can invest in these special deposits to save for short or mid-term goals like college, a down payment on a house, or even Christmas. Bank CD interest rates are generally higher than traditional savings accounts, but the money will be locked up for the duration of the term. Banks can use this money to balance assets and loans that haven't been repaid.
Certificates of deposit accounts are generally opened with a bank or lending institution. However, some brokers and independent salesmen known as deposit brokers offer these accounts on behalf of banks at higher returns than typical bank CD interest rates. Traditionally, CD accounts are opened for a fixed sum of money for a pre-determined length of time at the interest rate when the amount was deposited. Once the account matures, investors receive their principle and the accrued interest. If an individual decides to withdraw funds earlier, he may be charged with hefty penalty fees. Today, banks offer many other options. Bump up accounts give investors the opportunity to swap their current interest rate for a higher one that is available for the same term. Liquid accounts allow depositors to withdraw part of the principal with no penalty. Callable accounts are usually long-term and include a clause giving the bank permission to call the account back after a fixed period of time. Usually this is done when interest rates fall to reinvest the money at a lower rate. Money invested in deposit accounts are usually federally insured through the bank, making them a low risk investment.
Bank CD interest rates vary among financial institutions, which pay returns at regular intervals - usually monthly or bi-annually. Interest is set according to the annual percentage rate (APR) at the beginning of the term and can be based on a fixed or variable percentage. Annual percentage yield (APY), what is earned over the term of the account, can be calculated by the bank or by using one of many online APY calculators. Returns are usually rolled back into the principal to earn more interest to be compounded in the months ahead, but some institutions will cut a check or transfer the earnings into another account. Typically, longer account terms will yield higher percentages of return. Certificate rates also depend on the APR set by one of several national or international interest rate indexes. As rates rise in other areas, certificate accounts will rise as well. Some banks will also promote special higher return offers to win new business. Credit unions are also known to average better-than-average rates. Online banks can offer some incredible deals but customers are usually required to open new savings or checking accounts that pay low returns or high balances to maintain. In a credit-challenged economy, financial institutions often increase bank CD interest rates to gain access to more money and stay afloat.
One of the draws of a certificate of deposit account is its safety. Customers who open accounts with banks insured by the FDIC are protected if the institution fails. The FDIC recently increased federal deposit insurance from a maximum of $100,000 to $250,000 per institution, protecting customers' investments. The agency also changed the rules to allow financial institutions acquiring failed banks to overrule rates set prior to the takeover. Under a new contract, the institution will still make payments on bank CD interest rates, but at a reduced percentage until maturity. Even with the up and downs of the economy, certificate of deposit accounts remain the safest, most stable method of investment. "And thou shalt be secure, because there is hope; yea, thou shalt dig about thee, and thou shalt take thy rest in safety." (Job 11:18)
Before investing in a CD, individuals must make some careful decisions. The first step is to decide on how much to invest and for how long. Shop around for the best rates. Check newspapers, mailings, and websites. Carefully read all the disclosure statements about the account, including the fine print. Find out what the bank CD interest rates are, how often it will be compounded, when the account matures, and if there are any penalties for early withdrawal. Get a disclosure statement with all the information in writing to keep on file. If going with a broker, check out the firm. Deposit brokers do not have to get licensed or certified and are not regulated by state or federal governments. Know where they will open accounts. If it is with an institution that a consumer already uses, the investment could be pushed above the maximum amount insured by the FDIC, leaving a portion of the investment at risk.
No matter how appealing bank CD interest rates might be, it must make sense for the investor in his or her financial plan. High-yield, long-term deposits with a maturity date of 15 to 20 years may be a great investment for young adults in their 20s who want to diversify their investments, but not a good idea for individuals nearing retirement. For some, certificates of deposits are a great way to earn a little extra money. For others willing to take the extra risk, the return may not be high enough. Every person need be comfortable with the investments they make.