How Do CDs Work?

February 10, 2021 by Liam Lane Posted in Apartment Life, Personal Finance Tagged Auto, away, CD, CDs, Compound Interest, Credit, credit history, credit report, Credit Score, FDIC, Finance, Financial Wize, FinancialWize, Insurance, Interest Rates, invest, investment, investments, Loans, Make, market, money, Money Market, Money Market Account, money market accounts, More, Personal, personal finance, Popular, Products, Purchase, Rates, Rewards, savings, Savings Account, savings accounts, top-five-post

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A certificate of deposit, more commonly known as a CD, is a special type of savings account. You deposit your money into the account and agree not to make any withdrawals for a certain period of time. At the end of that time, you get your money plus whatever was earned in interest back.

Want to know more? We’ve got you covered. We’ll dig into traditional CDs, including what they are, how they work and whether they’re right for you.

Just How Do CDs Work?

A traditional CD is essentially a time-bound deposit. In exchange for earning interest, you enter into an agreement that lets the bank use your money for a fixed time. The bank rewards you by paying you a higher interest rate than it does for a regular savings account or money market account. This works for the bank because they can use your money to earn more money—such as by extending other customer’s long-term loans.

When opening a CD, you choose how long you want to give your money to the bank. This is known as the term length. Common term lengths for traditional CDs include 6, 12, 18, 24 and 30 months and 3, 4, 5 and 6 years. Some banks and credit unions also offer a custom term length.

What Is a Traditional CD?

A traditional CD can also be called time deposits, fixed deposits or term deposits. Unlike a traditional savings account that lets you withdraw money anytime, a CD has a fixed term and:

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Requires a minimum deposit amount that is higher than a savings account
Allows you to withdraw money at the end of the term—earlier withdrawals can be made only by paying a penalty
Don’t let you add money after your initial deposit

By opening the CD, you agree to leave your one-time deposit in the account for a fixed amount of time. In an emergency, you can withdraw funds early, but you’ll have to pay an early withdrawal penalty. In exchange for agreeing to a set term length, you get a fixed interest rate, typically one that is higher than a traditional savings account. Generally, the longer the term length, the higher the interest rate.

Like traditional savings accounts and money market accounts, traditional CDs opened at a bank or credit union are protected by the Federal Deposit Insurance Corporation (FDIC)or National Credit Union Administration (NCUA) for up to $250,000 per person. Many analysts consider CDs to be one of the safest forms of investment offers. They also pay higher interest rates than money market accounts and savings accounts, making a CD a more lucrative low-risk option for investors.

Considerations Before You Open a CD

You might think that opening a CD with the longest term is a good idea. But having a very long term may not be the best thing to do. For example, you may need your money before the time period is up. If you choose to remove your money before that happens, you can be penalized by the bank or credit union. Here are some other things to consider before opening a CD:

Do CDs pay interest monthly? The interest rate on a CD is the annual percentage yield (APY). This is how much interest you will earn after a year. However, many banks compound interest on CDs monthly. Some CDs allow you to choose to take the monthly interest earned out. Others let you cash out the CD only at the end of the term length.
Can you lose money in a CD? No, you can’t lose money on a CD as long as it insured, which is one reason they can be attractive investments. FDIC and NCUA coverage is limited to $250,000 per person, per bank, per account category. So, if you have multiple CDs at the same bank or credit union, the total of all CDs is only insured up to $250,000. As long as you’re under that, you’re guaranteed to get your money back if your bank or credit union goes under for any reason.
How much interest will I earn on a CD? The amount of interest you earn on a CD varies depending on how long the term is, the amount you deposit and the APY. In general, longer terms, higher interest rates and larger deposits will net you more interest gains.

So, are CDs worth it? The bottom line is that, before you invest in a CD, you need to make sure you’re confident that you won’t need the money before the maturity date or that you’re comfortable paying a penalty if you need the money earlier. If you’re not sure, consider choosing a high-yield savings account or money market instead.

When Your CD Matures

When your CD reaches the end of its term, it matures. Toward the end of your term, your bank will inform you about its impending maturity and present you with options, including taking your money and walking away or renewing for another term length. Sometimes, if you don’t withdraw your money, the bank will automatically reinvest your balance into another CD with the same term length as the first.

How to Open a CD

Opening a CD is relatively easy. You can apply online or go in person to your bank or credit union. When researching online options or talking to your bank, ask questions, know your investment rationale and find out about withdrawal penalties and possible alternative products.

CD Options

Longer CD term lengths can be more attractive than shorter term lengths. If you purchase a CD when interest rates are low though, you end up with a lower APY for the rest of your term. A shorter term length may actually let you renew for a higher APY.

A CD ladder—or CD laddering—is a common CD tactic used to help maximize returns on CDs. Laddering is using multiple longer-term CDs opened at different times and/or for different term lengths. This disbursement strategy gives you access to money at various times and rates. You avoid being locked into any single term, interest rate or maturation date. And you can reap the benefits of a CD without needing to risk paying penalties if you need money early.

CDs and Your Credit

A CD won’t impact your credit one way or another, but a bank or credit union may make a hard pull or a soft pull of your credit when you apply for a CD. Most only do a soft pull, but it won’t hurt to ask before you apply if a hard pull is a concern.

CDs won’t help you build your credit history. However, some banks offer a CD secured loan if you open a CD. This is a loan that uses your CD deposit as collateral. If you default on your loan payments, your CD will be taken to pay the loan. Making timely payments on the loan can help you build your credit as long as your bank or credit union reports your payments to all three credit bureaus.

To learn more about investment options or find the details on popular savings accounts, check out Credit.com’s personal finance resources.

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Source: credit.com

Compound Interest Calculator

February 10, 2021 by Liam Lane Posted in Financial Planning, First Time Home Buyers Tagged 4%, Auto, budget, building, Compound Interest, Credit, earnings, Financial Planning, Financial Wize, FinancialWize, government, Grow, How To, invest, Investing, IRA, Make Money, market, money, Money Market, Money Market Account, money market accounts, more money, News, Personal, principal, Retirement, Saving, savings, savings accounts

Compound interest is one of the most important concepts to understand in investing. It’s something about investing that many people aren’t familiar with, but it plays an essential role in making investments profitable.

If you’re curious about compound interest and how it works, good for you — you’re on the right track. In this post, you’ll find a compound interest calculator that can quickly and clearly show you how much money you might make by investing in an account that delivers compound interest.

Use the calculator below to get a sense of your potential earnings, then read the sections below to gain more insight into how you can make money through compound interest.

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Compound Interest Calculator

First, tell us about your investment plan by filling in the fields below.

Investment Plan:

Starting Amount:

Years to Accumulate:

Contribution Amount:

Rate of Return:

Compound Frequency:

Years to Accumulate:

Your Investment Results:

Ending Amount: $0

Total Investment

Compound Interest Earned

Simple Interest Earned

Investment Growth Over Time

Investment Breakdown

Total Investment

Compound Interest Earned

Simple Interest Earned

How to use a compound interest calculator

Using the compound interest calculator is simple. Follow these steps to see what you might earn through compound interest investing.

Enter your initial investment. It can be any value that you like, but it’s helpful to make it a realistic amount. For instance, if you’re saving up to invest right now, you can put the amount that you plan on investing once you’ve saved up enough.
Next, enter the amount you plan on adding to your investment portfolio each month. This can also be any value you like, but it’s most useful if you enter an amount that you can budget for. Even if that’s just an extra $10 a month, it makes a difference.
Choose whether you want your interest compounded annually, compounded monthly, or compounded daily. (If you don’t know what that means, stay tuned for the definitions below.)
Input the estimated rate of return. This can vary considerably, but index funds and similar investment vehicles can yield between 2% and 10% returns.
Input your time horizon — the amount of time until you withdraw or use your investments.

Once you’ve filled out the calculator, you should see an estimate of the amount you’re likely to have when the period of compound investing is up. If you’re a little confused about how we got this number, or what you need to do to grow your money in this way, check out the definitions, guide, and FAQs below.

Investment definitions

Compounding: This occurs when the money that is made from an investment is reinvested, increasing the total amount of interest yielded the next time your interest is compounded.

Index fund: Index funds are bundled investments that roughly track the growth of a market index, which is a collection of publicly-traded companies. They are often considered lower-risk investments.

Interest: The money you make on your investments; essentially, the money you earn for investing in the success of a company, a government bond, or a fund.

Principal: The amount of money that you start out with when you begin investing.

Rate of returns: The rate at which you accrue interest — for example, 3% returns would mean that, for every $100 invested, you would earn $3.

Returns: The money that you earn on your investments.

Time horizon: The amount of time that you plan on investing.

Now that you have a few key compound interest definitions in mind, we can explain how it works.

How does compound interest work

Having more money can help make you more money — that’s the principle behind compound interest. Here’s how that breaks down. Let’s say that you have $1000 to invest. You put it in an account (let’s say a money market account) that yields 2% interest, compounded monthly. At the end of the first month, you’d have $1020. So far, so good.

But here’s where it gets really interesting. That 2% rate of return now applies to the $1020 total, not just the principal investment of $1000. So, after the end of month 2, you’ll have $1040.40 — an added $0.40 compared to the previous month.

That might not sound like a lot, but it starts to add up. Have you ever rolled a snowball down a hill? The same idea applies. As your money grows and adds to itself, the amount that it can add to itself the next time your interest compounds is more. It may not be a get-rich-quick scheme, but it’s a reasonably secure way to start building your net worth in the long term.

Plus, you’re not limited to money market accounts with rates as low as 2%. If you’re willing to put a little more risk on the line, you can get returns as high as 10% in some cases. We’ll cover that more in a later section. But first, time for a little math homework (just for those who are curious!).

Compound interest formula

Compound interest is really mathematically interesting. Here’s the formula: A = P(1 + r/n)(nt)

If you want to try to see what’s going on behind the scenes in our calculator, here’s how to do the math yourself using the compound interest formula.

The A in the formula is the amount you’ll end up with; this comes last.
The P in the formula above stands for your principal, that’s the amount that you start with.
Multiply P by 1 + your interest rate r (given in a decimal; so 4% would be 0.04) divided by n, the number of times your interest is compounded in a given period.
Raise all of that to the power of n times t, where t is the number of time periods elapsed.
For example, if you’re investing for 12 months, and your account interest is compounded daily, n would be roughly 30, and t would be 12 if you want to know how much you’ll have in a year.

Try the formula out yourself, and see what result you get compared to the result in our calculator to check your work!

Compound interest accounts

Now that you understand the basics of compound interest, you’re probably wondering how you harness it to increase your net worth. The key is to use accounts that offer compound interest. Here are a few examples:

High yield savings and money markets. These are essentially savings accounts. They aren’t investment accounts (which we’ll discuss in a minute), but they do use a similar principle to grow your money. Rates on these can be fairly low compared to other options, but your money remains accessible, so you won’t have to worry if you need access to your cash fast in an emergency.

Retirement accounts. If you have a 401k or IRA opened right now, good news: you’re already accessing the power of compound interest. Most retirement accounts use a diversified and stable portfolio to grow your money over time, investing in index funds, government bonds, and dividend stocks to help you build your nest egg.

Investments. Of course, one of the most aggressive and effective ways to utilize the power of compound interest is to start investing. There are a number of different ways you can invest — be sure to read our guide to investing for beginners for a more thorough explanation — but all can involve compound interest. For example:

- Dividend stocks sometimes allow you to reinvest the payout from your dividends, increasing the amount of your dividend the next time there is a payout.
- Index funds, like mutual funds and ETFs, also often allow investors to reinvest their earnings, harnessing compound interest in their favor.
- If you invest directly in stocks, you can always use the money that you earn to reinvest or invest in another stock — be aware that this is a riskier option, however.
- Whether you choose an in-person brokerage or a trendy new robo-advisor, you’ll likely be able to use the power of compound interest to grow your capital.

Compound interest is a mathematical force that can help you build your net worth over time. You can get started today by finding the right investing or saving vehicle for your personal finances. And don’t forget to download the Mint app, where you can conveniently track your investments all in one place.

Compound interest FAQs

How do I calculate compound interest?

You can calculate compound interest in one of two ways: you can use the formula listed above to calculate it by hand, or you can use the compound interest calculator to figure out your total more quickly. Just be sure you know the necessary variables:

The principal amount
Your interest rate
How often it’s compounded
The number of compounding period that will occur

What will $10,000 be worth in 20 years?

That totally depends on how much interest your account produces and whether you invest more as time goes on.

Let’s assume an average return rate of around 7%, and assume that you don’t add in any more money. In that case, your $10,000 could turn into $40,547 — still an impressive amount. That’s the power of compound interest.

How do you calculate compound interest monthly?

To calculate compound interest monthly, simply set the “compounding frequency” setting on the calculator above to “monthly.” Alternatively, you can use the formula above and set n equal to 1 and t equal to 12 to find out how much money you’ll have if interest is compounded monthly for a year.

Sources

Wealthsimple | Investor.gov

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Mint Google Play Mint iOS App Store

Source: mint.intuit.com

4 Questions to Ask Before Choosing a Checking Account

February 10, 2021 by Liam Lane Posted in Adult Nursing Home Guide Tagged ATM, Automatic Transfer, Banking, Banking 101, budget, Cash Back, Cash Back Rewards, Checking Account, Convenience, Credit, credit history, Debit Card, Direct Deposit, earnings, Emergency Fund, FDIC, Fees, Finance, Financial Goals, Financial Wize, FinancialWize, High-yield Accounts, Home, How To, Interest Rates, Joint Account, keep, Life, Lifestyle, Managing Your Money, market, Mobile Check Deposit, money, Money Market, Money Market Account, Online Bill Pay, Online Checking Account, Opening an Account, Personal, personal finance, Purchase, Rewards, Rewards Checking Account, save, Saving, savings, Spending, Starting Out

Choosing a new checking account can be an important step toward financial independence. Here’s how to do it right.

You’ve probably had a checking account for most of your life and never gave it much thought. It’s just there to store your everyday cash, right? Not necessarily.

If you’re considering questions about checking accounts as you take a closer look at your current setup and explore opening a new one, it’s important to note that checking accounts are designed with different and unique features. Some may even be more beneficial to you than you realize.

For starters, most checking accounts offer a host of conveniences, providing customers the ability to set up automatic payments for routine bills, schedule electronic transfers and make all deposits and transfers via a smartphone app. Some accounts even allow you to earn cash back on your debit card purchases.

“A checking account can have a long-term impact on your financial well-being, so it’s worth taking the time to figure everything out,” says Jeff Kreisler, money expert and author of the personal finance book “Dollars and Sense.”

You may not even think you have questions about checking accounts if you've had your account for a while—but reviewing your account features can help you decide if you need to switch.

At this point, you might be thinking, “What questions should I ask before opening a checking account?” To help you decide which account is right for you, here are four key questions to ask yourself:

1. What types of checking accounts should I consider?

Before you open a new checking account, do a little homework to learn about the different types of checking accounts offered by banks, Kreisler says. There’s the standard personal checking account that allows you to write checks and make payments with your debit card or electronically. But when thinking about questions to ask when opening a checking account, go beyond the basic features to find an account that best fits your lifestyle and financial goals. Here are some examples:

Online checking account: Ready to bypass the teller lines with the benefits of an online bank? Then this is the checking account for you. Doing your banking from any computer or mobile device is sweet—and since online banks don’t have brick-and-mortar locations, they can often pass their savings from overhead down to you. Just verify that the online bank or credit union supplying the checking account is backed by the FDIC or the National Credit Union Administration.
Rewards checking account: One question to ask before choosing a checking account is if you can earn rewards or incentives for certain activity. Discover Cashback Debit, for example, lets you earn 1% cash back on up to $3,000 in debit card purchases each month.¹ That means your monthly cashback earnings could yield $360 in total rewards each year (finally, dinner and drinks at that new French bistro in town!). Some banks may also offer a checking account bonus just for opening a new account, while others have a variety of reward options based on certain qualifying purchases. A rewards checking account works for almost anyone looking to maximize their debit spend or a balance they regularly hold in their checking account.

Say hello to
cash back on debit
card purchases.

No monthly fees.
No balance requirements.
No, really.

See Details

Discover Bank, Member FDIC

Joint checking account: Most checking accounts can be opened as a joint checking account, which is an account held by two or more people. This can be a convenient solution for couples, minors and their parents and even seniors and their caregivers who are trying to manage a household budget. It does require good record keeping and communication, so make sure you understand the ins and outs of joint accounts before choosing this option.

The above checking accounts are the most standard and usually have appealing benefits. But if you have more questions about checking accounts, there are options that can cater to more specific needs. However, they often have less flexibility. For instance:

Interest-bearing checking accounts are available for those who want to earn some money while their cash is parked in the account. The rate of return is usually low and minimum balance requirements high.
Student checking accounts are often low-cost, but they could come with limitations. Whether or not a student account is available may be a good question to ask before choosing a checking account if you’re looking for a starter account for yourself or your child.
Second-chance checking accounts could be a fit for those who may not be able to get a standard checking account due to their banking or credit history; however, they often have higher fees.

“A checking account can have a long-term impact on your financial well-being, so it’s worth taking the time to figure everything out.”

– Jeff Kreisler, money expert and author of Dollars and Sense

2. Are there fees associated with the checking account?

This is one of the most commonly asked questions about checking accounts. Before choosing a checking account, be sure to research its fees, says Marc Bernstein, financial planner and strategist for MWealth Advisors. Types of fees and fee amounts can vary greatly from bank to bank, and even among accounts at the same bank.

A question to ask when opening a checking account is if the account charges fees for ATM use, automatic bill pay, monthly maintenance, ordering checks, replacing a debit card or ordering official bank checks. Banks may charge any combination of these fees—or none. Discover Cashback Debit comes with no fees. Period.² That means you won’t be charged a fee for any of these services.

Asking about fees is one of the most important questions to ask before choosing a checking account.

Along with including the fee topic on your list of questions to ask before choosing a checking account, you should also consider obtaining “a document outlining the fees you’ll be paying, in case you have any questions, and check the fine print,” Bernstein says. You can also typically find a list of fees (if any) on the bank’s website or in the account agreement.

3. Is there a minimum balance requirement?

According to Bernstein, among the questions to ask when opening a checking account is if it requires an initial minimum balance to open. You’ll also want to know if a minimum balance needs to be maintained to avoid a fee.

Bernstein suggests looking for an account with no minimum balance requirement if you tend to keep less than $1,000 in your account or like to have flexibility when making large withdrawals.

If you’ve asked this question about checking accounts and are still comparing accounts that have a minimum balance requirement, realistically determine how much you can keep in your account per month and what you will be charged if you can’t keep that balance.

Even if your account falls below a minimum requirement, there could be a way to save on fees. If you have multiple accounts at one bank, the bank may allow you to combine the balances to waive checking fees.

The total average cost of withdrawing cash from an out-of-network ATM is $4.68. That’s 36 percent higher than it was 10 years prior, with no signs of decreasing.

– Bankrate’s 2018 checking account and ATM fee study

4. What ATM fees could I incur?

If you frequent the ATM to take out cash, a good question to ask before choosing a checking account is: Where are the bank’s ATMs located in relation to your home and work?

Availability of ATMs is an important question to ask when opening a checking account that can really affect your wallet. For instance, if you decide to withdraw money from an ATM that’s not in your bank’s network, you can get hit with two separate charges: a surcharge from the ATM owner (since you’re not a customer) and a fee from your own bank.

And those fees can really add up. According to Bankrate’s 2018 checking account and ATM fee study, the total average cost of withdrawing cash from an out-of-network ATM is $4.68. That’s 36 percent higher than it was 10 years prior, with no signs of decreasing.

One way to get cash without paying an ATM fee is to use your own bank’s ATMs. The more ATM locations that your bank offers that are conveniently located, the less likely you are to use one that’s out-of-network and rack up unnecessary charges. If you can’t always use your own bank’s ATM, one of the questions to ask when opening a checking account is whether your bank allows you to use a broader ATM network for no-fee transactions.

Find the best checking account for you

Opening a new checking account is an important step toward establishing, or rebuilding, your financial foundation.

Now that you can ask the right questions about checking accounts, you’re one step closer to choosing an account that fits your individual needs. And that feels like money in the bank.

¹ ATM transactions, the purchase of money orders or other cash equivalents, cash over portions of point-of-sale transactions, Peer-to-Peer (P2P) payments (such as Apple Pay Cash), and loan payments or account funding made with your debit card are not eligible for cash back rewards. In addition, purchases made using third-party payment accounts (services such as Venmo^® and PayPal^™, which also provide P2P payments) may not be eligible for cash back rewards. Apple, the Apple logo and Apple Pay are trademarks of Apple Inc., registered in the U.S. and other countries.

² Outgoing wire transfers are subject to a service charge. You may be charged a fee by a non-Discover ATM if it is not part of the 60,000+ ATMs in our no-fee network.

Source: discover.com

Advantages And Disadvantages of Money Market Accounts

February 1, 2021 by Liam Lane Posted in Adult Nursing Home Guide, Banking, Investing, Personal Finance Tagged 4%, away, Banking, Buy, Buying, Buying a house, cit bank, Credit, Debt, Fees, Financial Advisor, Financial Goals, Financial Wize, FinancialWize, government, house, Interest Rates, Investing, Main, money, Money Market, Money Market Account, money market accounts, personal finance, Retirement, Saving, savings, Savings Account, savings accounts, Taxes, Uncategorized, Vs.

Saving money in a place like a money market account can assure that the money will be there safely when you need it. A money market account is an alternative to savings account, and usually pays more interest rate than a savings account.

See, Money Market Vs. Savings Accounts: What’s The Difference.

Overall, money market accounts are worth it, especially if you’re saving for a short-term goal. However, like any investments, there are some disadvantages to money market accounts.

In this article we will address three main things: what is a money market account and what are the advantages and disadvantages of money market accounts.

*TOP CIT BANK PROMOTIONS*
PROMOTIONAL LINK	OFFER	REVIEW
CIT Bank Money Market	1.00% APY	Review
CIT Bank Savings Builder	0.95% APY	Review
CIT Bank CDs	0.75% APY 1 Year CD Term	Review
CIT Bank No Penalty CD	0.75% APY	Review

What is a money market account?

Before we get to the advantages and disadvantages of money market accounts, it’s best to define what a money market account is.

A money market account is an interest bearing account that you can open at a bank or credit union. It is more like a savings account, though there are some key differences.

Money Market Accounts Advantages and Disadvantages.

Advantages

Let us consider the advantages of money market accounts.

Interest rate: The main benefit of a money market account is that the interest rate is much higher than that of a regular savings account. For example, CIT bank offers a money market account with 1.00% APY. Whereas the interest rate for a typical savings account is anywhere around 0.10%. MMAs interest rates are similar to those of certificate of deposits. The main difference, however, with a CD you earn a fixed interest for a fixed amount of time. And CD rates are higher than MMAs. And a penalty may apply if you withdraw your money early.

FDIC Insured. One of the benefits of money market accounts is that they are FDIC insured. Your money is secured by the federal government of up to $250,000. If you have more money than that, then you will need to open another account so all of your money can be protected.

To recap, money market accounts are FDIC insured, they offer higher interest rates than savings accounts, and they permit check writing privileges. Despite these many advantages, money markets also have disadvantages.

What are the disadvantages of a money market account?

Minimum balance: Most money market accounts require a minimum deposit account of $1,000. Although, that’s not a big amount, it may not be feasible for a young saver. Plus, a penalty will apply if your balance falls below the minimum requirement.

Limited check writing: While MMAs offer check writing privileges, there is a limit. With a money market account, you can only write six checks per month against your balance, which can be a disadvantage if you pay a lot of bills every month. So, money market accounts are a disadvantage for those who need to write more than six checks per month.

Account fees: Another disadvantage of money market accounts is the fee. If you donât maintain the required minimum balance, a fee will apply. So, maintaining the minimum balance is important because any fee will eat out your interest or earnings.

Taxes: Taxes are another disadvantage of money market accounts. You will pay taxes on whatever interest you earn in a MMA.

Inflation: just like taxes and account fees can reduce your interest, inflation can do the same thing. Let’s suppose you generate a 3% return on your money market account per year, and the inflation is 4%. That can impact your total return significantly.

Best Money Market Accounts

CIT Bank Money Market Account

The CIT Bank money market account is one of the best ones out there. Currently, the money market account offers a 1.0% APY.

This is very competitive comparing to other MMAs. Moreover, CIT Bankâs MMA has a required account minimum of only $100.

Open a CIT Bank Money Market Account.

Bottom line:

While money market accounts offer several benefits, there are disadvantages as well. The main disadvantages are that the minimum balance can be high for a young investor. Moreover, taxes and account fees can eat away whatever interest you might earn.

Related:

7 Best Short-Term Bonds to Buy in 2020
Vanguard CD Rates: How Much Can You Earn
Grow Your Money: Mutual Funds & CDs

Speak with the Right Financial Advisor

If you have questions about your finances, you can talk to a financial advisor who can review your finances and help you reach your goals (whether it is making more money, paying off debt, investing, buying a house, planning for retirement, saving, etc).
Find one who meets your needs with SmartAssetâs free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.

*TOP CIT BANK PROMOTIONS*
PROMOTIONAL LINK	OFFER	REVIEW
CIT Bank Money Market	1.00% APY	Review
CIT Bank Savings Builder	0.95% APY	Review
CIT Bank CDs	0.75% APY 1 Year CD Term	Review
CIT Bank No Penalty CD	0.75% APY	Review

The post Advantages And Disadvantages of Money Market Accounts appeared first on GrowthRapidly.

Source: growthrapidly.com

Money Market Account or Checking Account: Which Is Best For You?

January 29, 2021 by Liam Lane Posted in Adult Nursing Home Guide Tagged ATM, Automatic Transfer, Banking, Banking 101, Cash Back, Checking Account, Convenience, Debit Card, Direct Deposit, Emergency Fund, Fees, Financial Education, Financial Goals, Financial Wize, FinancialWize, gas, High-yield Accounts, Interest Rates, Managing Your Money, money, Money Market, Money Market Account, money market accounts, Online Bill Pay, Online Checking Account, Opening an Account, Rewards, Rewards Checking Account, Saving, savings, Savings Account, selling, Selling a Home, Spending, Vs.

If you’re looking for a new bank account that allows you to easily store as well as access your cash, you might be thinking about opening a money market account or checking account. But how do you know which to choose? Decisions, decisions. Both types of accounts have unique advantages, depending on your savings and spending goals.

âThink about how you will be using the money within the account,” says Jill Emanuel, lead financial coach at Fiscal Fitness. “Is this money for daily, weekly or monthly use? Or is it money that will not be needed regularly?”

When comparing a money market account vs. a checking account, consider how often you'll need to access the funds in the account.

You’ll probably need a little more to go on before answering the question, “How do I decide between a money market account or checking account?” No worries. Our roundup delves into the features of both types of accounts to help you determine which one could be right for your financial plans, or if there’s room for both in your money mix.

Get easy access to your funds with a checking account

In simple terms, a checking account allows you to write checks and make purchases with a debit card from the money you deposit into the account. That debit card can also be used to withdraw cash from the account via an ATM.

When deciding between a money market account or checking account, Emanuel says most people use a checking account for the primary management of their monthly income (i.e., where a portion of your paycheck is deposited) and daily expenses (often small and frequent transactions). âA checking account makes the most sense as the account where the majority of your transactions occur,” she adds. This is because a checking account typically comes with an unlimited number of transactionsâwhether you’re withdrawing cash from an ATM, transferring money to a savings account or swiping your debit card.

While a checking account is a good home base for your finances and a go-to if you need to easily and quickly access your funds, this account type typically earns little to no interest. Spoiler: This is one key difference when you compare a money market account vs. a checking account.

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âIf you plan to use your account for monthly bill payments and day-to-day transactions, you would be better suited with a checking account, as these support daily and frequent use.â

– Bola Sokunbi, certified financial education instructor and founder of Clever Girl Finance

Grow your balance with a money market account

When you’re comparing a money market account vs. a checking account, think of a money market account as a savings vehicle that allows you to earn interest on the balance you keep in the account.

“A money market account is an interest-bearing bank account that typically has a higher interest rate than a checking account,” says Bola Sokunbi, certified financial education instructor and founder of Clever Girl Finance.

With some money market accounts, you can even earn more interest with a higher balance. Thanks to its interest-earning potential, a money market account can be the way to go if you’re looking for an account to help you reach your savings goals and priorities.

If you’re deciding between a money market account or checking account, you may think that a money market account seems like a typical savings account with your ability to earn, but it also has some features similar to a checking account. With a money market account, for example, you can withdraw cash from an ATM and use a debit card or checks to access money from the account. There are no limits on ATM withdrawals or official checks mailed to you.

You can withdraw cash from ATMs and write checks with a money market account or checking account.

Before you decide to use this account for your regular bills and your morning caffeine habit, know that federal law limits certain types of withdrawals and transfers from money market accounts to a combined total of six per calendar month per account. If you go over these limitations on more than an occasional basis, your financial institution may choose to close the account.

Don’t need regular access to your funds and want your money to grow until you do need it? Then the benefits of a money market account could be for you.

Deciding between a money market account or checking account

Still debating money market account or checking account? Here are some financial scenarios to help you determine which account may best suit your current needs and goals:

Go with a checking account if…

You want to keep your funds liquid. If you’re thinking money market account or checking account, know that a checking account is built for very regular access to your funds. âIf you plan to use your account for monthly bill payments and day-to-day transactions, you would be better suited with a checking account, as these support daily and frequent use,” Sokunbi says. Think rent, cable, utilities, groceries, gas, maybe that morning caffeine craving. You get the idea.
You want to earn rewards for your spending. When you’re comparing money market account vs. checking account, consider that with some checking accountsâlike Discover Cashback Debitâyou can earn cash back for your debit card purchases. The best part is you are earning cash back as you keep up with your regular expensesâno hoops to jump through or extra account activity needed. Then put that cashback toward fun things like date night, lunch at your favorite spot or a savings fund dedicated to something special.

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You want to deposit and withdraw without the stress of a balance requirement. If you do your research when comparing money market accounts vs. checking accounts, you’ll find that some checking accounts don’t require a minimum balance (or much of one). However, you may be required to maintain a minimum balance (and potentially a higher one) with a money market account in order to avoid a fee. If you’re accessing your money frequently and need to make large withdrawals, a checking account with no minimum balance requirement is a convenient option.

Go with a money market account if…

You want to earn interest. âIf your money is just sitting there, it should be earning money,” Emanuel says of the money market account or checking account question. âI spoke with a woman recently who told me she’d had around $50,000 sitting in her checking account for at least the last 10 years, if not longer. If that money had been in a money market account for the same period of time, she would have earned thousands of dollars on it. Instead she earned nothing,” Emanuel says.
You want to put short-term savings in a different account. If you have some short-term savings goals in mind (way to go!), you may benefit from keeping your savings separate from your more transactional checking account so you don’t dip into them for a different purpose. That whole out of sight, out of mind thing. âA money market account is the perfect place for money that will be accessed less frequently, such as an emergency fund [a.k.a. rainy day fund], a vacation fund or a place to park money after you’ve received an inheritance or proceeds from selling a home,” Emanuel says.
You need an account to fund your overdraft protection. If you’re comparing money market account vs. checking account, consider that a money market account could also cross over to support spending goals. One way is in the form of overdraft protection. If you enroll in overdraft protection for your checking account, for example, you could designate that funds be pulled from your money market account to cover a balance shortfall.

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âA money market account is the perfect place for money that will be accessed less frequently, such as an emergency fund [a.k.a. rainy day fund], a vacation fund or a place to park money after you’ve received an inheritanceÂ or proceeds from selling a home.â

– Jill Emanuel, lead financial coach at Fiscal Fitness

Using both accounts to achieve your financial goals

Speaking of crossover. Both spending and saving are vying for your attention, right? Consider leveraging both types of accounts if you have needs from the checking and money market account lists above.

“Personally, I use my checking account for bill payments, my day-to-day spending, writing checks and for any automatic debits I have each month,” Sokunbi says. She’s added a money market account to the mix “because of the higher interest rateâto store my savings for short-term goals, for investing or for money I’ll be needing soon,” she explains. Maybe it’s not about deciding between a money market account or a checking account, but getting the best of both worlds.

Before opening a money market account or checking account, do your research and compare your options to see which bank offers the best package of low or no fees and customer service, in addition to what you need from an interest and access to cash perspective.

The post Money Market Account or Checking Account: Which Is Best For You? appeared first on Discover Bank – Banking Topics Blog.

Source: discover.com