Bankrate.com Best banking moves to make in 2008 Thursday January 10, 6:00 am ET Dana Dratch
Want to take the first step to smart money management? Start with your checking and savings accounts.
"If you develop good checking habits, if you develop good savings habits, all your money management challenges are going to fall into place," says Susan Tiffany, director of personal finance information for adults for the Credit Union National Association.
1. Re-evaluate your needs and shop around Institutions change and so do your needs. The bank that was right around the corner two years ago might not be convenient after you change jobs. If your institution has merged, that "free" checking might not be so free anymore. Or you may have noticed that you're losing more of your money to fees.
So take an objective look at what you need, what your bank offers and what it's costing you. Review several monthly statements. How much are you keeping in your accounts? What are you earning? What are you paying in fees and how often are you getting hit?
While shopping around is always good advice, it's particularly important for 2008. "Competition for deposits has never been keener among institutions," says Joe Belew, president of the Consumer Bankers Association.
The situation could continue. "It all depends on interest rates," he says. "As lending margins get more narrow, deposits become more valuable because it's a cheaper source of funding than borrowing."
At the same time, Americans are saving less money than ever, so deposits are a scarce resource.
That doesn't mean banks will be giving away the store. More consolidation means fewer players to choose from, as well. So evaluate a wide range of options: online institutions, credit unions, and large and small banks. See who's offering the best rates, the least restrictions and the least fees.
Don't forget to give your current institution a chance to meet or beat the competition. Even if you don't want to move your money, this can be a good strategy to negotiate a better deal on your interest and services.
You probably want to re-evaluate your options if your institution merges. Often policies change, so in many cases, it's almost like a new entity. While merger mania among banks will likely continue, many believe it could slow a little in 2008.
2. Investigate all your alternatives Look at the small and large banks, along with credit unions. Some institutions may pay foreign ATM fees or give you a healthy rate of interest on your deposits. By investigating various types and sizes of savings institutions, you maximize your options. You also reward the one that's truly offering you the best deal.
3. Be suspicious of free checking offers "There's no such thing as free checking," says Eric Halperin, director of the Washington, D.C. office of the Center for Responsible Lending. "People need to pick and choose their banks more carefully."
In many cases, penalty and service fees "will more than make up for what you're not paying for checking," he says. 4. Monitor your accounts regularly Banks and credit unions are offering a lot of easy (and free) ways to keep up with your account transactions and balances, from online banking to phone-in services. Whether you have a lot or a little, it pays to keep tabs on your money.
There are three things to check: First, is the service free? Some phone-in services allow you only a certain number of free calls per month, or charge you if you speak to a person rather than using an automated system.
Second, does the bank accept this system as valid proof of what's going on in your account if there's ever a dispute? In some instances, institutions will offer convenience services like checking your balance from the ATM or by phone, or making ATM deposits, but if there is a discrepancy, only teller-based transactions are accepted as verifiable proof of what you really had in your account on a specific day.
Third, if you use online statements, how long will they be available for free? In many cases, you lose free access after six months, says Linda Sherry, spokeswoman for D.C.-based Consumer Action. That can make it more complicated if you need records for more infrequent activities, like doing taxes or financial planning.
If your institution has a cut-off date, then either print out statements or save them electronically, Sherry says.
5. Don't get comfortable with fees Fees are not the cost of enjoying your favorite convenient banking services. If you're getting hit often, it's time to modify your usage, investigate ways to get the same privileges without fees or change institutions.
6. Keep up with the rules Institutions often change policies or merge. That means the rules you were playing by last week might no longer apply. But you can keep up without driving yourself nuts or reading yards of tiny gray print.
Here's how: Keep up with your accounts regularly. When you see a fee, call and find out why you're being charged. If it's the first one, they might be willing to waive it. And now you've got a heads up for next time.
If you're going to make a transaction for the first time, or just the first time in a while, call in and find out what the rules are, along with any possible fees you could incur.
7. Be smart with debit cards The cards are supposed to be a convenient way for you to access your money, but they can cost you, too. The cards are the No. 1 contributor to overdraft fees, says Halperin. Consumers pay about $17.5 billion in overdraft fees annually.
One reason: In many cases, the cards allow you to keep spending whether there is money in the account or not. Every little transaction is followed by a big overdraft fee.
So either trade your debit for a simple ATM card, or just resolve to use it only at the ATM.
8. Opt out of your bank's courtesy overdraft protection What your bank might not tell you is that there are cheaper ways to cover overdrafts.
Consumers pay an average of $34 for each overdraft, according to studies by the Center for Responsible Lending. But you can cut that in half easily. If you're willing to change institutions, you might be able to eliminate it entirely.
Set up an automatic transfer from savings or a line of credit for just such occasions, recommends Halperin. This way, each overdraft will be paid, unlike "courtesy" protection where you'll pay a fee whether or not the bank honors the check or charge.
One thing to watch: Some banks will charge an account transfer fee, often $10 to $15, says Halperin, so you have to shop around.
9. Start an emergency fund No matter how well you plan, you're always going to have those unforseen expenses. An unexpected auto repair, a new washing machine or a vet bill. Start socking away a little every month and you won't have to put it on the credit card.
This will be especially important in 2008, according to some industry watchers.
"As people's incomes tighten and costs go up, people need to be thinking about savings," says Halperin.
10. Get something for your money If you're parking some money in your checking or savings account, look for an institution that will give you something in return, like interest.
"You're seeing more places that pay interest, a respectable rate of return, on a checking account," says Mark Oleson, professor of personal financial planning and director of the office for financial success at the University of Missouri-Columbia.
Online banks have traditionally offered the best rates (5 percent, or close to it), and some brick-and-mortar institutions will match that or come close.
11. Automate your savings Want to make it really easy? Set up an automatic transfer into your savings account on the same day your paycheck is deposited. People who automate their savings put away an average of $55 more per month than those who don't, according to a recent study by NACHA -- the Electronic Payments Association. Automatic savers sock away an average of $450 a month compared to $395 for the rest of us.
12. Don't get hung up on the numbers Remember the old rule of thumb about banking: three to six months' income for emergencies?
"I really think we freak people out with that number," says Tiffany. "It's just too big."
"It would be great to have that amount, but don't worry about the amount," she says. "Be more concerned about making savings a habit."
New rule of thumb: Whatever the amount, just start saving it.
13. Climb the ladder If you're using CDs for savings, consider laddering, says Tiffany. It's a way of making sure that, no matter the term of your CDs, you'll have some cash available every year in case you need it.
How it works: If you have $5,000, you put $1,000 each in a one-year, two-year, three-year, four-year and five-year CDs. After a year, you roll the one-year CD into another one-year CD. The second year you do the same when the second (two-year) CD comes due.
"Over time, you get all of that money working for you at a five-year rate," she says. But at the same time, one CD will come due every year, so you have a window of opportunity to access the money if you need it.
One caveat: Sometimes you can find a rate that's as good (or nearly as good) as a multi-year CD through a savings account or money market account, especially online. In that case, you have the flexibility of having your money available on short notice, along with the benefits of interest.
14. Take advantage of cool tools A lot of banks are offering access to software programs that help you chart your expenses, plan savings and -- literally -- paint a picture of your financial situation, complete with charts and graphs, says Sherry. That can be a great way to stay on top of your finances.
"It's a cool way to see where your money goes, and it helps you plan," she says.
Recently, I received a package containing 2 DVD full of NYTS stuff.. Lately, i have been endulging myself in those dvd's. Especially the hymn sessions and graduate sermons. For me this has been a great encouragement to be able to go back in time and to relive those two weeks. I learned alot from all those graduate sermons. But there is one that i am particular fond of. I guess the reason why i am fond of it, is the fact that he is my brother, and i personally take extra attention to the words. I guess it is because I like to use his words against him. and I am able to be more critical with his view on things. And since I am his brother and everything he has learned, I have taught him.. HE is my protege.... hehehe!! JK!>.
Reflection and motivation and food for thought: (Building bridges not walls. by e.chang. Graduation sermon NYTS 2004)
I have been thinking alot about why we (as christians and people) are afraid to do things. if we are the perfect one for duty, then why wont we take up the charge and do it, or why wont people give us the chance? Is it because they look down on us. or see our flaws and our youth? Why is it that we are afraid to take charge and press forward. Is it because we are scared of the path of hard work and toil? Do we let our fears over come us, because we feel that the pressure is to great. So we reject the things that were meant for us? Why is it that we push people away when things get too personal? How come we cant motivate our self? Could these all be reasons or combinations of reasons why we wont "Man" up to what we were meant to do? Is this not the wall we want to cross over.. isnt this the wall that we must break down. How can we scale a wall and make a bridge when we dont believe that we can do it? Could it be the lack of motivation. Or worse, do we reject the project, because we are too good for it. What is it that fuels us to do what we do? We need to ask ourselves, what is the reason we do this, why are we like this, what is our motive to do theses things. How do we anchor ourlseves into what we believe and how do we use ourselves and the things and people around us to be our motivators in life and in faith. Faith is like life, there are always ups and down. Given an up there will always be a down. However, in faith you are in control of the ups and down. Spirituality is based on the how close You want to draw near to Him. He will draw nearer to you if you draw nearer to Him. Especially in faith, all things are given to build your faith up. But it is up to your ability to realize that this is building block rather than a hinderence. Visualization is the key, looking pass the present, will help you realize the greater scheme to your trials and tribulations and your turmoils. In Pauls life, it is exteremely clear that he dwelt on what was in the future. this allowed him to over come the tribulation of the present. (He was accused, put on trial, he went blind, he was shipwrecked). He said this, "I have become all things to all men, that i might by all means save some." If he did not see the greater good for him to suffer how would he be all things to all men. If he did not endure the suffering, How then could he save some? "In all the things Paul did he kept this in mind and that is what fueled him. And that is why he continued his ministry. he did not preach just because he felt compelled to repay the love of God, but instead he preached because he knew what he had to do..." (e.chang). This by no means mean to run or ignore the problems that you face today. It does not mean that you must be self less all the time. And it definitly does not mean take life lightly as tomorrow is more important. But it means that the things you will endure today will make you who you are tomorrow. If we do not constantly build our selves up, test our selves and evaluate what we have learned. Then we will never be better than what we were yesterday.
"i planted, apollos water but it was God who gave the increase". (1 Cor3:6) Faith is exactly like this.. fundementally, we must take the first step to plant it. plant it deep to grow deep roots. Then we must nurture and water it, by allowing it to spread in our lives, in all of our thoughts.We must do our part. Finally it is God who grants us the increase, it is our faith in God that will over come all trials and tribulations. Both spiritual and phsyical.
weight: 180 (down 20lb since nyts) Gonna graduate in Dec 2004 (accounting, anyone looking to hire me?) Ankle still hurts (dunno why) Having problems waking up now.. i dunno but i missed every monday since school started. Sleeping problems are going away, i am glad...
A friend said," ... it is when you are on the right track when you are attacked, and if you thought u were on the right track but arent attacked, then you should be worried." It is funny how easily i can fall because i am weak. being scared alittle actually stopped me.. from PUSH-ing. or FROGing. Time to tighten my belt and get back on track.. I was on the right track.
