Even if you’re making a bundle on Wall Street, chances are you can sock away more money for yourself by changing the way you’re doing your banking.
Sure, I know the stories about this or that institution paying low yields or gouging its customers with stiff fees. But the onus is on you–not the bank–to make your money work harder. By following the simple game plan below, I guarantee you’ll earn more when you save, and save more when you borrow.
No bank is going to take you by the hand and show you all its basic secrets. It makes bigger profits when you don’t begin to take control of your personal finances, which is the trick to beating the bank.
– Transfer your low-paying savings accounts to a higher-paying institution. That includes ridiculous 2 percent passbooks and money market accounts. Out-of-state, FDIC-insured institutions will more than double your money, and they’re only a toll-free call away. See a complete free list on the Internet at http://www.bankrate.com.
– Shop for the cheapest checking account. Compare the fees and charges at about six outfits with those at your present bank. A non-interest account generally is cheaper than one that pays interest–a stingy 1 percent on average–and your opening deposit requirement will be lower.
If the account is interest-bearing, keep only the minimum balance required. Stash the rest of your cash in a money market account paying 5-plus percent, and once a month transfer just enough to checking to pay your bills, without incurring a withdrawal penalty as with a CD.
– Don’t renew your CDs at the same old, low-paying bank. Tell the institution now–in writing–that you don’t want any part of an “automatic rollover.” Rather, you intend to shop the highest-paying, FDIC-insured outfits out of state, and if your bank will match that yield, fine. Otherwise, sayonara. You’ll wind up earning at least $100 to $150 more on every $10,000 you invest.
And remember, CD offers aren’t carved in stone. Often you can negotiate a higher yield, just as you can talk the bank into lowering the interest rate on your credit card.
– Go short for now with your CD investments. Two to five years is too long because no one knows where rates will be in the year 2000. Six to 12 months is plenty. Among the institutions that accept deposits from out of state, this week Safra Bank, New York (800-223-2311), offered the highest yields on $10,000 one-year CDs (6.17 percent); $25,000 and $50,000 six-month accounts (6.01 percent); and $100,000 six-month jumbo CDs (6.17 percent), according to Bank Rate Monitor.
By contrast, the average bank today offers 4.88 percent and 5.17 percent, respectively, on six-month and one-year low-minimum deposits, and 5.26 percent on one-year jumbos, says BRM.
– Check out an asset-management account. More banks and brokerages are offering them, such as Merrill Lynch, Chase Manhattan, CoreStates Bank and KeyCorp. The account consolidates your checking, mutual funds and stock investments in one place and usually comes with a credit card and ATM access. A “sweep” feature automatically moves your idle cash into an interest-bearing account instead of letting it doze off earning nothing.
– Refinance your mortgage if you’re currently paying a 9.5 percent rate or higher. Say you still owe $60,000 on your original $100,000 loan with 20 years to go. You refinance the $60K for 30 years at 7.5 percent. Your monthly payment drops to $417 from $834, and you save a total of $106,612 in interest costs.
But shop before you jump. Add up three things–all upfront fees, total interest cost (in dollars, not percent) and closing costs including points–at several banks and mortgage companies, and then compare.
Other ways to slash your costs are by making biweekly mortgage payments, or adding $100 to your monthly payment.
– Why are you still carrying 18 percent credit cards? If your credit history is decent, there’s a 7.99 percent card with a $35 annual fee and a 25-day grace period at Pulaski Bank and Trust, Little Rock, Ark. (800-980-2265). That’s if you typically finance your purchases. If you always pay off the monthly balance, there are a slew of no-annual-fee cards available, starting with AFBA Industrial Bank, Colorado Springs (800-776-2265).
– Join a credit union. Credit unions on average charge 1.5 percent less on a new car loan, and pay about one-half percent more on CDs. And their fees and charges are less.
– Latest rate trend. Absolutely zero movement on CD rates, while mortgage rates upticked to 7.52 percent on 30-year fixed-rate loans.
– Credit card tip. You might soon be able to pay your income taxes via credit card under the new tax law signed by President Clinton.
