High Interest Checking Account
Ever look at an advertisement for a high interest checking account? While waiting in the bank you may have seen pictures of the carefree individuals who have chosen to open one of these interest bearing checking accounts. They are often shown frolicking in a vacation paradise or driving an expensive automobile. Yet the more one looks into the matter, the more one wonders just who is being taken for the ride. High deposit requirements and larger fees, (not to mention inflation) may steal away most of the advertised benefits of this type of checking arrangement. As James 4:13-14 says, "Go to now, ye that say, To day or to morrow we will go into such a city and continue there a year, and buy and sell, and get gain: whereas ye know not what shall be on the morrow..." Realizing the temporary nature of earthly riches, people still want to be good stewards of the finances they have received. How can that goal be best accomplished?
Take time to think about your personal financial needs. There are a great variety of financial instruments which are available. Consider fees and services which are especially relevant. Some banks give special considerations to present customers, or to those willing to arrange for direct deposit of paychecks, pension or government benefits. It is easy to get overwhelmed with the wide variety of choices available, yet an hour or so spent investigating these products can result in significant gains in the level of services or benefits the account includes. Shop for a high interest checking account as you would any other product or service, comparing cost and benefits.
Basic checking accounts can be opened, which do not have many services beyond check writing. These arrangements usually do not pay interest, and may charge a fee for writing checks beyond the number allowed by the bank. Most depositors do not keep extensive funds in their checking accounts, opting instead for holding savings in money markets or certificates of deposit, which yield higher interest. However, if a person needs to write checks and keep a significant amount of money in a checking account, interest bearing checking accounts can be an option. This way, the money can at least earn some return instead of providing the bank with a free loan. The interest is very low in most interest bearing checking accounts. There are some high interest checking accounts, but banks that offer this service usually require the client to deposit significant funds in order to realize the higher yield. Additionally, these accounts are assessed high service fees for instances of insufficient funds. For these reasons, most people choose to deposit funds in other financial instruments where the interest rate is better, the fees are lower, and the funds are more readily available.
With a high interest checking account, more services are offered. However, these may come with increased cost. There is generally no limit to the number of checks one can write. The interest rate which is obtained depends upon the amount of money left on deposit. Most banks charge a significant fee if the balance falls below the agreed-upon level. By way of comparison, money market arrangements usually offer a slightly higher interest rate, yet may require a higher minimum balance as well. The money market usually offers a limited check writing feature.
An interesting option which is still developing is the on line bank. Without the costs associated with a so-called 'brick-and-mortar' bank, they are able to pass the savings on to their customers. On line banks tend to offer a high interest checking account with the best rates. Another attractive feature is that often there are no terms requiring large initial deposits. It is simple to get quite a list of these banks with an Internet search. In a recent search, several were displayed which offered a 3% return or more, with only a $1 minimum deposit required to open the account. Higher rates were also available for reasonable deposits.
Research restrictions and fees carefully. Some banks do not have their own automated teller machines (ATMs). If a customer uses ATMs frequently, fees can add up quickly, as they may come from both the on line bank and the facility which provides the ATM. Some on line banks provide refunds of these fees as a way to attract customers. Other companies offer services related to on line banking, such as full service on line bill payment. In this service, the customer changes the billing address to the company address. The company receives the bills, and posts them on the customer's page. The customer then pays the bill on line. If electronic payments are not acceptable to the creditor, the company will even send a paper check. This is a useful option if one travels often.
The only apparent drawback to on line banking seemed to be in the area of settling disputes. When a customer has a problem, it is better to have the option of speaking to someone face to face. However, especially when one is mainly seeking to have check-writing services while earning some return in interest bearing checking accounts, it is likely that disputes will not pose a real liability. If one can earn a higher rate without tying up major finances, a person would likely be willing to take a chance and try an on line bank. Finally, be sure that the bank is insured by the Federal Deposit Insurance Corporation (FDIC). That way funds up to $100,000 will be as secure as possible.
Highest Savings Account RatesInternet banks usually advertise the best interest rates for savings on the worldwide web. Savvy depositors are surfing financial home pages to net the highest savings account rates which require the lowest minimum deposits and the shortest withdrawal terms. Increasingly, more banks and other financial institutions are opening cyberspace shops to service a new generation of online account holders seeking high-yield alternatives to low-interest passbook accounts. High yield money market accounts (MMAs), certificates of deposit (CDs), and online savings accounts (OSAs) are a few products offered by virtual banks to compete for liquid assets and make saving money pay off big for consumers. And when consumers save, everyone wins. Banks, credit unions, investment companies, and S&Ls all depend on cash deposits to earn added revenue and afford investment opportunities both at home and abroad. And the more financial institutions circulate liquid assets, the more stimulated and strengthened local and global economies become. Greater investment returns enable banks, credit unions, mutual funds, and investment companies to offer the highest savings account rates to depositors due to increased cash flow and lower interest expenses.
Whether savers choose to deposit funds online, at a physical bank, or at home in a pickle jar, saving money just makes good common sense. Unemployment, chronic illness, and a lagging economy don't have to end in financial ruin if individuals exercise good fiscal management. In the Old Testament, Joseph was appointed governor over all of Egypt. During seven plenteous years, he saved corn and grain; and during seven ensuing years of famine, the stored up grain saved an entire nation from starvation. "And let them gather all the food of those good years that come, and lay up corn under the hand of Pharaoh, and let them keep food in the cities. And that food shall be for store to the land against the seven years of famine, which shall be in the land of Egypt; that the land perish not through the famine" (Genesis 41:35-36). Similarly, 21st century Josephs would do wise to stockpile liquid assets as a hedge against escalating interest and a lagging economy.
In times of economic uncertainty, depositors need wisdom, along with expert investment advice to determine which vehicles offer the highest savings account rates. While regular passbook earnings may not rise above 1%, other vehicles, such as certificates of deposits (CDs), mutual funds, and money market accounts (MMAs) offer some of the best interest rates for savings. Money market accounts trade in short-term securities and are issued by banks and mutual funds. While minimum balances are usually required, MMAs pay off in double the interest of a regular savings account, due to higher potential earnings. Bank-issued money market accounts also offer check writing and fund transfers to linked checking accounts; and deposits are FDIC insured. However, the disadvantage of an MMA is that potentially higher returns depend on stock market fluctuations, which can make investing riskier.
CDs have traditionally been a saver's best option, offering flexibility and better earnings. Depending on the amount of minimum deposit and terms, CDs can net nearly a 4% interest rate. States determine their own interest rate; so depositors should reference online postings where they reside. Account holders can choose from short-term 3-month, 6-month, and 18-month CD rates; or longer term annual yearly percentages spanning as much one to five years to maturity. Minimum required deposits vary from $0 to $100,000 and up, with interest averaging 3.4% annual percentage yield (APY). One rule of thumb for the prospective account holder: CDs with larger minimum required deposits ($10,000 and up) are going to yield the best interest rates for savings. Depositors who have more liquid assets to invest will realize greater returns if they can afford to park larger sums for a longer period of time. A drawback to certificates of deposit is that a current interest rate is subject to change without notice, leaving depositors at a disadvantage. Additionally, penalties are imposed if depositors decide to withdraw monies before CDs mature. Retirement funds like IRAs and 401ks also pay excellent returns, but waiting for maturity dates can tie up cash for years. Long term vehicles such as these are also subject to penalties for early withdrawal, as much as 10%.
As banking becomes more competitive, an increasing number of depositors are opting for the ease and convenience of Internet banking via online savings accounts (OSAs). Statistics indicate that by the year 2010, OSAs will top $400 billon. The advantage is clearly a win-win situation for both banker and depositor: no teller expense, paperless transactions, no-or low-cost fees, and few if any minimum balances required. Virtual banks have virtually no overhead and can pass profits on to depositors at the highest savings account rates. Depositors can earn an average of 2.0 to 4.5 percent interest with minimum deposits of as little as $25. OSAs can be linked to existing external accounts and all transactions, maintenance, withdrawals, and deposits can be made electronically. However, OSAs may require depositors to limit the number of withdrawals or adhere to specific withdrawal schedules. In addition to offering some of the best interest rates for savings, opening an OSA translates into environmentally responsible money management. Paperless and carbonless transactions help save trees and protect the environment from toxic waste. Zero travel to bank branch offices means fewer green gas emissions from automobiles and fewer fuel costs.
No matter what method depositors choose, finding the best interest rates for savings requires time online browsing and studying financial websites. Individuals can find the best offerings by logging onto search engines and typing in "high yield savings accounts." Most sites will list comparable interest earnings state by state and product by product. Savers simply download and print out the stats to study the best rates. Other than surfing the web, depositors can consult with bankers, credit unions, and other financial institutions to get information on top earning accounts. High yield savings accounts can be used in conjunction with existing retirement funds and regular passbook accounts to provide multiple income streams for present and future financial needs. Time spent researching possible alternatives to low-interest passbook savings is a small investment for earning interest on short-term deposits.