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.
âA 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.”
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 sweetâand 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.
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.”
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 feesâor none. Discover Cashback Debit comes with no fees. Period.2 That means you won’t be charged a fee for any of these services.
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.
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 VenmoÂ® 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.
The post 4 Questions to Ask Before Choosing a Checking Account appeared first on Discover Bank – Banking Topics Blog.
Children grow up. Fast. One day you’re buckling them into a car seat, and the next you’re handing them the keys. Like learning to drive or taking on a first job, managing a checking account is a big milestone that teaches responsibility and will help your child learn important financial habits.
Parents often ask: How do I open a checking account for kids? Many checking accounts, including Discover Cashback Debit, are for adults aged 18 and up, so you can help your child set up their own account when they are heading off to college or starting their career. If you’re interested in opening your child’s first checking account when they are younger, you could consider opening a joint checking account that you share with your youngster. Note that for some checking accounts, like Discover Cashback Debit, you have to be at least 18 years old to be added to the account as a joint accountholder.
“Is your teen interested in managing money, saving for different goals and spending on their own?” asks Kimberly Palmer, a banking expert for NerdWallet. If so, a checking account can be a great way to flex those skills and practice money management, she adds.
If you’re interested in setting up a checking account for kidsâwhether it’s a joint account you help manage or a solo account for your older teenâconsider the following four tips:
1. Factor in fees
When opening your child’s first checking account, it’s important to understand all of the fees associated with the account and who is responsible for paying them, says Mia Taylor, an award-winning financial journalist who writes for The Simple Dollar and other finance sites. Your child may think you are covering the fees if you have a joint account, for example, so be clear on the parameters when you open the checking account.
If you’re wondering how to open a checking account for a kid going to college or starting their first job, “look for an account with no minimum balance fees or monthly balance fees,” Palmer says. That way, your child won’t have to worry about being penalized for having a low balance or stress about fees eating into earnings and spending money.
If you’re setting up a checking account for a kid heading off to college or moving to a new city, you’ll also want to consider the fees associated with withdrawing cash from out-of-network ATMs. You can use a bank’s ATM locator to ensure there are no-fee ATMs near their college campus or apartment.
2. Focus on features
Choosing the right checking account for your child’s lifestyle may mean finding an account that has features that support their needs and goals, as well as your preferences.
If you are opening your child’s first checking account and they are younger and sharing the account with you, you may want the ability to set limits on spending and the number of withdrawals. “Parents and teens may have different preferences for each of these features, so it’s important to talk about what you’re looking for ahead of time and compare the different options together,” Palmer says.
If you have a joint account with your child, you could also consider setting up email or text alerts for every transaction or every “large” transaction over a certain dollar amount. This may help you keep better track of your child’s spending habits and could help you have conversations about how to create a budget. Setting up a low balance notification may also be wise when opening your child’s first checking account to help avoid overdraft and insufficient funds fees.
âParents and teens may have different preferences for each of these features, so it’s important to talk about what you’re looking for ahead of time and compare the different options together.â
When choosing a checking account, you may want to find a checking account that offers rewards. Discover Cashback Debit, for example, offers 1% cash back on up to $3,000 in debit card purchases each month.1 If your child is 18 or older, you can let them decide how the cashback should fit into their budget and financial goals.
3. Make mobile a priority
It’s no shock that today’s kids are experts at navigating a smartphone. As you make plans to set up a checking account for kids, be sure to consider whether the checking account has a mobile app for making deposits and tracking funds, Taylor says.
“Mobile deposits are a huge convenience factor for teens” since it allows them to deposit funds with the snap of a photo, Taylor says. Be sure to also research the app’s functionality (the easier, the better) and security, Palmer adds.
Tracking spending with a pen and paper may feel tedious to digital natives, so talk with your child about how they can sync their checking account with other budgeting and spending apps. Exchanging money with friends via digital wallet apps may also be of interest to your child, but you may want to consider providing guidelines when opening your child’s first checking account.
“Only send money to people you know, not to strangers,” Palmer suggests.
Even though digital wallets can be convenient for older teens, Taylor says you may not want to overcomplicate a checking account for a younger child. “Keep it simple in the beginning,” she says. “As teens get older, they can add those features on their own.”
4. Use the account as a teaching tool
Good financial habits are learned early and remembered for decades. That’s why the most important thing parents can do when opening your child’s first checking account is to use the account to have discussions about money, Palmer says.
“Ask them what they want to save for, what kinds of items they hope to buy and whatâif anyâmoney they would like to donate to a cause that is important to them,” Palmer says. “A checking account is a useful way to plan for future expenses and savings goalsâall lessons that carry into adulthood.”
âSit them down and show them what you’re doing with your own checking account so that you can pass on good values early on. The earlier you start with kids, the wiser they will be.”
A great way to pass on money management lessons is to show your children how you manage your own account.
“Sit them down and show them what you’re doing with your own checking account so that you can pass on good values early on,” Taylor says. “The earlier you start with kids, the wiser they will be.”
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 VenmoÂ® and PayPalÂ®, who 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. Venmo and PayPal are registered trademarks of PayPal, Inc.
The post 4 Considerations for Opening Your Child’s First Checking Account appeared first on Discover Bank – Banking Topics Blog.
With so many of us dealing with the coronavirus pandemic (plus the financial fallout from it) and spending more time at home this year, thereâs a very good chance your family budget looks different. Our own budget had some big adjustments (transportation costs went down to basically nothing) along with some minor changes (buying supplies and items around the house for projects).
Our money dates have had us reevaluate some things and redirect money to other expenses and savings. Besides making sure that youâre taking care of essential expenses and building up your financial cushion, you want to want to make sure you include another key area in your budget – some guilt-free spending in there as well.
Why Budgets Need to Include Some Guilt-Free Spending
First off what exactly is guilt-free spending? And why should families include it when planning out their budget. Basically, it covers the expenses that you enjoy. Every family has different ways they use that money. It could be travel, eating out together, adding another pair of shoes to your collection, or gadgets. With families having to deal with so many decisions and challenges, there has been an increasing awareness of having proper self-care as part of the routine. Families are now including that in their budgets.
The key part of keeping these expenses guilt-free is that they bring you joy without breaking the bank. These arenât frivolous spending sprees. They can be meaningful purchases such as supplies for a hobby like painting that enriches your life. Second, these expenses are planned ahead of time and baked into your budget so youâre not taking on debt or upsetting your familyâs cash flow.
Why Budgets Typically Fail
One of the reasons why I think having some fun money in your budget is a wise move is because itâll help make your budget more sustainable. How? If I asked you what the point of a budget is, what would you say? Most tell me itâs to keep their spending in check.
It makes sense to believe that because for most families thatâs what itâs about – restrictions. However, the best budgets Iâve seen are geared towards the direction of the money. Iâve interviewed families who have retired early or have knocked out a ton of debt and something they had in common was that their budgets reflected their priorities and circumstances.
Before they put pen to paper (or tap the app), they sat down and defined what goals they wanted to achieve. If you had to break down a budget the three key areas are basically:
Paying your essential bills.
Building long term financial stability.
Have the money you can use now to enjoy.
Many times, the disagreements, arguments, and sometimes sabotage with budgets come from friction on finding a balance between spending money with long term stability and enjoying now. If you skew too much to saving up for the future, one or more of you in the family could start getting resentful. Financial infidelity or set back with keeping the budget can occur for many reasons, but some spouses say one reason is thereâs absolutely no wiggle room in the budget for fun. If youâre only focused on the now when something comes up – hello 2020! – youâre left without a safety net.
For families with kids, thatâs an additional source of stress they donât need.Â I noticed that the families who hit their goals had found a way to balance things. They save towards their long term goals as well as set aside money to enjoy now. How? By redoing how they approached their budgets.
Easy Budget Framework to Use
Letâs go back to those three key goals of any budget – taking care of essentials, saving for the future, and spending on the present. Families looking to include all of these goals need a budget that can weave them together. If youâre just starting out with a budget and are still trying to figure out a framework, an easy foundational budget is the 50/20/30 budget. It divides up your money into those three key goals, with 50% going to necessary expenses, 20% towards financial stability and wealth, and 30% towards discretionary or fun money.
Feel free to adjust the percentages based on your circumstances, but for many families that three-bucket approach is easy enough to set up and it gives them enough wiggle room where there can enjoy some of their money now. Once youâve created that budget, you can then take the next step – automating your money. Weâve done this for over a decade and it has been incredibly helpful. We have our bills automated every paycheck plus our savings and investments are scheduled monthly. With those necessary things taken care of first, we know whatever spending we do wonât harm our expenses.
Staying on Top of Your and Budget – The Easy Way
Now that you have a budget and youâre including some guilt-free spending, how do you make sure youâre staying on track? There are some wonderful options out there including money apps like Mint. You can stay on top of your money without losing your mind because the apps can pull that data from your accounts and give you an easy and clear way to see where your money is going. You can also use Mint to track your goals like paying down debt or saving up for a house. With that information in front of you can quickly and easily see how youâre doing anytime.
Another handy tool with Mint is how simple it is to set up alerts on certain spending. So if you have set aside $200 for your âfunâ account, Mint can notify you when your spending is getting close to your limit. Itâs a more proactive and real-time way to manage your money without having to worry about every single penny.
Your Take on Budgets
As you can see, with a little planning you can be financially savvy and enjoy some fun now. Iâd love to get your thoughts – how do you approach your budget? What are some must-have expenses in yours?
The post How to Include Some Guilt-Free Spending in Your Budget appeared first on MintLife Blog.
Maybe you want to lose those stubborn 10 pounds, score a big promotion or run your first marathon. Whatever your priority, it all starts with setting a goal.
Financial priorities are no different. Whether you want to save for your child’s college education or get yourself out of debt, budgeting to help reach your financial goals allows you to determine what’s most important to you, make a plan to attain those goals and hold yourself accountable for success.
Still, when it comes to managing your money, knowing how to set financial goals and sticking to them can feel like opposite sides of the same coin. You might even find yourself asking, “How do I create a simple budget to reach my financial goals?” If you follow these three steps, you could be crossing the finish line in record time:
1. Pick a day to get started
Sometimes the hardest part of tackling a new project is simply getting started, especially if your to-do list feels like it’s never ending. There’s always tomorrow, or the day after that… right? To create a simple budget to help you reach your financial goals, pick a day and time to get started. Consider picking a time when you do your best thinking, are most focused and least likely to get interrupted. Maybe it’s Sunday morning over breakfast and coffee before kicking off a day of chores or on a weeknight after the kids go to bed.
Once you’ve landed on the best time to sit down and create a simple budget, add it to the calendar and schedule reminders on your computer or phone to hold yourself accountable.
2. Create a simple budget, however complex your finances
Chances are your finances are pretty complicated, with lots of moving parts. Things seem to be moving along nicely with your regular expenses like rent, groceries, transportation and entertainment… and then your carburetor goes kaput in your car and you must replace it right away. Or that toothache has become unbearable and requires a root canalâand you’ll have to cover some of the expense out of pocket. Just when you’re finally making a dent in paying down your debt and getting your finances on track, life throws you some curveballs. But that doesn’t mean you can’t create a simple budget.
One of the easiest ways to create a simple budget and stay on track is to follow the 50-20-30 rule:
50 percent of your income should address your needs, such as housing, utilities, healthcare and transportation;
20 percent should be put toward your financial goals, like building your savings and paying off debt;
30 percent should cover your wants or discretionary expenses, like shopping, entertainment and dining out.
Managing your finances with the 50-20-30 is a good first step when you’re first learning how to create a budget, but trying to deal with multiple financial goals within that 20 percent bucket can be overwhelming. When it comes to budgeting to help reach your financial goals, certified financial planner Jim White suggests taking your financial goals one step at a time.
“Make a simple plan to tackle debtâor maybe just one debtâthen when that goal is accomplished, work on a simple plan for the next debt,” White suggests. “A bunch of small victories goes a long way to changing your financial discipline and gives you a boost to keep moving forward,” White adds.
Similar to how you picked a day to begin the budgeting process, make a habit out of managing your finances by picking one day of the week and checking in with yourself at a scheduled time. After about two months, budgeting to help reach your financial goals can become habit forming. “When you focus on your goals on the same day every week, you are creating a habit, and a pattern, to follow,” says Karen Ford, financial coach and motivational speaker.
Budgeting to help reach your financial goals becomes even more effective when you’re reviewing your priorities every seven days and making adjustments to your spending and saving as needed.
“Make a simple plan to tackle debtâor maybe just one debtâthen when that goal is accomplished, work on a simple plan for the next debt. A bunch of small victories goes a long way to changing your financial discipline and gives you a boost to keep moving forward.”
3. Automate your financial plan
Now that you know how to set financial goalsâwhether it’s paying down debt, saving up for a car or putting money away for retirementâwhat’s next? Time to get moving! One way to do that is to automate your finances. By setting up automatic bill pay and account transfers, it will be easier to stick to your plan for paying monthly expenses and contributing to savings.
When it comes to paying your bills and learning how to set financial goals, consider automating the bills that you pay regularly, especially those that fall within the 50 percent budget category that covers your living essentials. To gain momentum with your savings progress, set up automatic transfers from your checking account to your savings account for the amount you wish to save each month. If your financial goal is retirement, you could even set up automatic transfers to an individual retirement account (IRA) so you’re consistently making progress. You could also arrange to have a portion of your paycheck automatically go into savingsâbefore you even have time to miss it.
By making automatic contributions to your savings accounts, you are “subscribing to the idea of paying yourself first,” says Riley Adams, CPA and blogger for Young and the Invested, a professional’s guide to financial independence. “By doing this, it removes the temptation to spend and takes any lack of discipline out of the picture,” Adams says.
Keep in mind that any time you automate your finances as part of creating a simple budget, you should monitor your accounts regularly. Check in to make sure your automated settings are up to date, that you always have the funds available in your accounts to cover your expenses and transfers and that your savings are growing according to your plan.
How to set financial goals in 3 steps
Once you find time to focus on your finances, create a simple budget and automate your payments and transfers, budgeting to help reach your financial goals is one habit that is sure to stick. By following these three rules and keeping yourself on track, you’ll be ready to build a solid foundation for your financial future.
The post How to Set Financial Goalsâand Crush Them appeared first on Discover Bank – Banking Topics Blog.