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FINANCE FOR SINGLE MOTHERS -
BANKING
Deposit Account Types
Checking Accounts
A checking account offers quick and
convenient accessibility to your funds.
Depositing money into a checking account
provides you with a record (receipt) of
bills that you have paid.
Funds in a checking account is safer than
carrying large amounts of cash.
If your checks are
lost or stolen, you can close your
account and your liability would be limited.
It is important to store your blank
checks in a safe place.
Someone may be able to gain
information on your account or attempt to
gain access to your account.
Regular Checking
Account:
You can write unlimited checks and make
as many deposits as you wish.
The fee to maintain this account is normally
waived if you keep the required balance.
Check to see how the
balance to waive maintenance fee is
calculated.
Limited or Low Cost
Checking Accounts:
If you write
a very limited amounts of checks and keep a
relatively low
balance, check to see if the bank offers a
low-
cost flat fee
account.
With these accounts you are not
normally not
required to maintain a certain balance.
These
accounts may also
be recommended for students that write
very few checks.
Deposit Checking
accounts:
Some banks offer a free checking account as
long your employer directly deposits your
payroll into your account.
Instead of receiving a paycheck from
you employer you will
receive a voucher with all the
breakdown of information.
This can be a very convenient method.
You won’t have to stand in line at
the bank to make your deposits.
Interest Checking:
Interest rates paid on these accounts
currently pay under 2%. You may avoid paying
a service fee if you keep the
balance to waive maintenance fee in
your account.
This is a convenient account if you
keep high balances in your account.
Another preferred method would be to keep a
higher paying
money market account
and transfer as needed to your checking
account.
See money market account for
restrictions of transfers.
Federal Deposit Insurance Corporation,
better known as FDIC:
Banks that are covered under this
insurance are required to display the sign.
In the event of a failure of a bank
or savings association,
FDIC will cover
a single ownership account up to $100,000,
including principal and interest.
For more information see the FDIC
website at
www.FDIC.gov
Lost or Stolen Checks:
Always keep your stock of black checks
in a safe place.
If the event that your checks are
lost or stolen notify your bank immediately.
If you know exactly which check is missing
you may be able to put a stop on the one
check.
However, if you are missing a number of
checks it would be best to close your
account and open a new one.
If you have other checks issued but not
cashed (outstanding) work with you bank so
they may be paid.
Balance to waive Maintenance Fee:
There are several different methods
when it come to the required balance to
waive a maintenance or service charge.
A daily minimum collected balance means
the balance can never fall below a certain
limit and funds have already been collected.
Other accounts may require an
average collected balance.
This is just like it sounds, if the average
collected balance is say $1000.
The balance may fall below the
benchmark, however, the average must be
$1000.
Linked Accounts:
You may link a checking account to a savings
account to cover any overdrafts.
This way if you do not have enough funds to
cover a check, the funds will be
automatically transferred from a linked
savings account.
You may also want to link
accounts so that you can transfer funds from
checking to savings and visa versa.
Interest
Compounding:
What does compounding mean?
If interest is compounded daily you will be
earning more than if it were compounding
monthly or quarterly.
The more frequent interest is compounded and
added to an account the more value the
account will have.
If a bank compounds interest every day you
be effectively earning more interest than if
it compounded monthly.
Banks are required to quote the
annual percentage yield at the time you open
your account.
This will be a true reflection of how much
you earn.
Savings
Accounts
Having a savings account will give you a
little peace of mind.
You may wish to open more than one
type of
interest bearing account.
One for short term needs, that is more
accessible and perhaps a higher paying
account for long term savings.
Savings Accounts:
The minimum balance for opening a savings
account is normally $100 to $200.
Most basic savings accounts have
limitations on withdrawals or transfers per
month before the bank imposes a fee.
Basic savings right now are paying
somewhere below 2%.
These accounts may also be
linked
to a checking account.
On a statement account the bank will
regularly send you a statement showing the
current balance, reflecting any transactions
made.
If you tend to make a number of
transactions you might ask for a passbook
savings.
The bank will give you a little book where
they record each transaction.
This may be a little easier in
tracking your accounts.
Money Market Accounts:
Money market accounts require higher opening
balances and if the balance falls below a
certain level a fee may be imposed.
You may have no more than 6 transfers
on the account to yourself or a third party
(3 may be by checks).
The transfer restriction is by federal law.
If excessive transactions occur, the
bank is required to notify you and close the
account or cease paying interest.
These accounts may not be
FDIC
insured.
Also check to how often the
interest is compounded.
Certificate of
Deposits:
With the introduction of money market
accounts, the certificate of deposits
(C.D.) are not as popular as they
once were.
With C.D.s you are required to leave
you funds in the account for a certain
period of time (term).
The interest rates are tiered
to the dollar amount and the length of time
that you pledge your money.
Let’s say you open a C. D. account
and six months later you sudden discover
that you need the money for an emergency.
You will not only forfeit some of the
interest, since it did not run until
maturity.
You will also end up paying a penalty
charge.
If there is insufficient interest to
off set the penalty, the fee may be taken
out of the principal.
If you let the C.D. run until maturity, you
will have 10 days after maturity to close
the account or convert the money to some
other type of account.
If you fail to notify the bank, the
C.D. will roll over to the same term C.D.
that you had before.
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