Wouldn’t it be nice if you could combine a few errands into a single trip? Thanks to stores that give you physical cash back on debit card purchases, you may be able to do your shopping and bank transactions in one location.

From in-store ATMs to gas stations and grocery stores, there are many ways to withdraw cash from your checking account without stepping foot inside a bank.

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How Can You Get Cash Back with a Debit Card?

When you pay with a debit card at a physical retailer, you often have the option to get physical cash back. This allows you to withdraw cash from your checking account during the transaction without paying a fee.

If you request cash back, the extra money is included in the total sale price. Your bank then deducts the combined amount from your checking account. 

Getting cash with your debit card can cost you. Some stores set a minimum purchase amount before you can get cash back with your debit card. In some cases, you may be required to buy something you didn’t want or need.

You might also pay a fee to withdraw cash using your debit card to help cover the store’s costs. It’s similar to what you’d pay at an out-of-network ATM.

4 Places to Get Cash Back with a Debit Card

Many everyday stores and retailers provide cash back when you pay with a debit card. If you’re always paying extra ATM fees or having to borrow cash from friends, memorize this list of stores so you can get cash on your own.

Get cash back at the grocery store

You can get cash back at the grocery store by paying with your debit card instead of using credit or cash. Grocery stores from Albertsons to Winn-Dixie allow you to make a withdrawal from your checking account when you swipe your card and enter your PIN during check out.

Since most stores don’t charge a fee to withdraw money from your checking account, it’s one of the best options to get cash and save some money at the same time.

Most stores have a limit on how much you can withdraw. If you need $500 in cash for next weekend’s road trip, a trip to the bank may be a better option.

For a smaller amount of cash, you can visit:

Gas stations that give cash back

With a gas station on virtually every corner, it’s easy to get cash if you’re running errands, taking a road trip, or need it quickly.

The maximum withdrawal amount tends to be lower at gas stations. Some locations have caps of only $10. The majority don’t charge fees to get cash back, so that’s a plus.

If you’re looking for a gas station for cash back, try:

Remember that many gas stations are independently owned and operated even if they’re part of a franchise. In this case, the policies can vary from store to store. It’s a good idea to call ahead to ask about limits and fees.

Use your debit card to get cash at department stores

In addition to grocery stores and gas stations, some department stores let you get fee-free cash back with your debit card.

Department stores like Costco, Target, and Walmart are just a few of many options. There’s typically a minimum purchase requirement to consider. Sometimes paying for a small, cheap item with your debit card is enough.

When you need cash, you can usually find it at:

• Costco
• Kmart
• Target
• Walmart
• Walgreens
• Rite Aid
• CVS
• Staples

Not all merchants will process these requests at the register. You may have to visit the customer service desk instead.

Withdraw cash from an ATM

The most obvious place to get money with your debit card is to visit the ATM at your bank. This lets you avoid paying out-of-network ATM fees. These fees cost $2 or more per withdrawal, so it pays to use the ATM at your bank, even if it isn’t the closest.

You might qualify for fee reimbursement if your bank offers it. In that case, if you can’t use your bank’s ATM and are charged a fee, you’ll be automatically reimbursed for that fee.

There are a lot of surcharge-free ATMs located all across the country, and banks and credit unions usually participate in a card network so you can access them.

Some of the major ATM networks include:

• Star
• MoneyPass
• Allpoint
• Pulse Select
• Alliance One
• TransFund
• CO-OP (for credit unions)

If your account is at a credit union, it’s likely they participate in the CO-OP network which gives you access to almost 30,000 free ATMs. You can also use your bank’s ATM locator through their mobile app to find fee-free places to get cash.

Cash Back vs. Cash Withdrawal

The term “cash back” can refer to both getting cash from a store while you’re shopping in person and the cash back you earn when using a specific app that’s linked to your debit card.

If a cashier asks, “Do you want cash back?” while you’re checking out, they mean if you want to get physical dollar bills.

On the other hand, there are apps that offer cash back which refers to the percentage of the total purchase you can earn when the debit card is linked to the app.

3 Places You Can’t Get Cash Back

Using your debit card to request cash back is a simple process, but there are a few places where getting cash back isn’t an option, such as:

• Most clothing stores
• Home goods stores
• Home furnishings stores

These places don’t give you a choice to withdraw cash. If you’re shopping for a new outfit, picking up a lamp, or buying a new sofa, you may have to go elsewhere to get cash back with your debit card.

Pros and Cons of Getting Cash Back with a Debit Card

Paying with a debit card is a popular way to shop, and getting cash back is just an extra perk. But before you start making this a regular habit, you should consider these points.

Cash Back Apps You Can Use with Your Debit Card

In addition to getting cash back with your debit card, you can also earn a percentage of your purchase back when you link these apps to your debit card.

Dosh

Dosh is an app, available on the App Store and the Google Play Store, that has an in-store cash back program. You can earn cash back when shopping in-store with retailers including:

• Walmart
• Cost Plus World Market
• Sephora
• Finish Line

You can even earn cash back through nearby restaurants and hotels around the world. After you’ve earned cash back through Dosh, you can transfer it to your bank, Venmo, or PayPal account. You need to have at least $25 in cash back to withdraw. 

Rakuten

Most people know Rakuten as a browser extension, but you can also sync it to your debit card to get cash back.

Here’s how the process works. You create an account online, and click on the “in-store cash back” section. From there, you’ll see a range of in-store cash back offers, including:

• H&M
• Athleta
• Levi’s
• Gap
• Finish Line

Rakuten’s browser extension will also alert you of any deals or savings opportunities when you shop online.

Related: The Best Cash-Back Apps to Save Money Shopping Online and In-Store

The post 35 Stores That Give Cash Back on Your Debit Card Purchases appeared first on DollarSprout.

These days, the majority of financial transactions take place online.

Even exchanging money between family and friends is now done through online apps like Venmo, PayPal, or Zelle. Most of these require a linked bank account.

That means if you’re one of the 7% of people in the United States without a bank account, then managing your money, especially cashing checks, is a bit trickier.

When you have a bank account, cashing a check is super easy. You can drop by the bank or use an ATM. With some banks, you can even use their app to take a quick picture of the check and deposit it from your phone.

Without your own bank account, you can’t just walk into a local branch to deposit a check. Even if it does cash your check, you’ll have to pay a small fee every time.

If you don’t have a bank account, but you still need quick access to your cash, then head to one of the check cashing places on this list.

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7 Places Where You Can Cash a Personal Check

Even though it can be tough to cash a check when you don’t have a bank account, it’s not impossible. There are several companies that will let you cash a check, but you’ll probably have to pay a small fee for the service.

The good news is that you can walk out with cash in your pocket today.

Every check cashing place will have different rules and requirements for getting your check cashed. Some places will cash certain types of checks that others won’t, so be sure to call ahead before making a special trip.

1. The Bank listed on the check

If you’re trying to cash a check without a bank account, the easiest place to start is with the bank on the check you’re trying to cash.

To find this information, simply look above the memo line in the bottom left corner. Call a local branch to find out its check cashing policy.

It can easily verify the availability of funds by checking the account balance of the one who wrote you the check. Some banks will even give the account owner a phone call on the spot as a security measure to ensure there is no fraud taking place.

The bank listed on the check used to be the cheapest option to get your cash. Now, most of the big banks have started implementing fees to get your check cashed if you do not have an account with them. Most charge a flat rate or a percentage of the check amount up to a certain maximum.

Every bank will have different terms and requirements to cash checks that are tied to its institution. The most foolproof option is to call ahead and ask about its policy and fees.

You’ll need 1-2 forms of valid ID to confirm the check is yours, so make sure to bring a driver’s license, passport, or another government-issued ID card.

2. Walmart

Walmart is one of the most global and accessible check cashing places on this list. With over 5,000 locations, close to 90% of the population in the United States lives within 15 miles of a Walmart.

Walmart also has reasonable fees at $4 for a check under $1,000 and $8 for anything over that limit. This is right in line with the fees most of the major banks charge.

The biggest advantage of cashing your check at Walmart is that it has a number of options. For instance, you can get straight cash back or a reloadable Walmart Moneycard.

Walmart check cashing options:

• Pre-printed checks
• Payroll checks
• Government checks
• Tax checks
• Cashiers’ checks
• Insurance settlement checks
• 401k and retirement distribution checks
• MoneyGram money orders
• Two party personal checks ($200 max)

Two Important things to be aware of:

1. Walmart recently started cashing personal checks, but there is a $6 fee and a check limit of $200. If you’re looking to cash a personal check, you may want to look at other options.
2. They have strict check limits. For most of the year, you can cash a check as long as it’s under $5,000. During tax season (Jan-April), this limit is raised to $7,500.

You’ll need to bring the check and a valid ID with you to the store.

3. Ace Check Cashing

A number of businesses operate solely for this purpose. If you don’t have access to a local bank, then a check cashing place may be your only option.

Be careful though because these stores generally charge the highest fees of all the options on this list. Most check cashing stores have varying fees even among their own branches, so be sure to call and ask beforehand.

Before you cash your check at a store like this, make sure to ask if they require a credit check. Some stores will run a credit report before cashing the check because they are effectively giving you a short term loan until they are reimbursed with the funds from the issuing bank.

Ace Check Express is one of the most popular options, with physical locations in 24 states. It will cash almost any kind of check as long as you have a valid form of identification.

Ace Cash Express Options:

• Personal checks
• Payroll checks
• Government checks
• Tax refund checks
• Insurance settlement checks
• Money orders

The big advantage Ace Cash Express has over Walmart and other stores is that it will cash a personal check for you. It does not have fees listed on its website, so you’ll have to call a local store to get information on how much it will charge to cash your check.

4. Gas station

Gas stations used to be a much better option for cashing checks, but many places have stopped offering this service because of the high risk of fraud. Once the check is cashed, there is almost nothing the gas station can do to track down the person responsible.

However, 7-Eleven still cashes checks. Many locations have a Vcom kiosk. This is basically a touch-screen station where you can cash checks, pay bills, and handle other financial tasks.

The easier option is to download the Transact by 7-Eleven app. You can deposit checks with your phone. The cash gets added onto your reloadable 7-Eleven prepaid card, which functions just like a Debit MasterCard. Most online and retail stores will accept them.

The funds take about 48 hours to be loaded onto your card.

You can even use it to set up direct deposit from your employer and government benefit checks.

Other gas station check cashing options:

• Pilot Flying J
• TravelCenters of America

With gas stations and travel centers, not every location will be able to cash a check, so call ahead to find one that does.

5. Your employer

In some cases, your employer can actually cash personal checks for you.

There are specific rules and regulations on check cashing, so most employers avoid offering this service. However, some do. There is no daily limit to the dollar amount on the checks that an employer can cash as long as they are payroll checks.

Employers can also cash non-payroll checks as long as you don’t exceed $1,000 per day. Anything above that and they would be subject to banking regulations as an official “check casher.”

6. Grocery store

Grocery stores are one of the most dependable and convenient options for cashing a check. You probably already go to the store a couple of times a week, which means you don’t have to go out of your way if you have a store that offers this service.

Not every grocery chain does this, but here are some that do:

• HEB
• Kroger
• Publix
• Winn Dixie
• Albertsons ($1,000 limit)
• WinCo
• Stop & Shop
• Hyvee

Fees and check limits will vary from store to store, but all will require a form of government ID.

Most won’t let you cash personal checks because of fraud risk, but if you’re trying to cash a government check, payroll check, cashier’s check, or money order, then your odds are good.

Related: 35 Stores That Give Cash Back on Your Debit Card Purchases

7. Endorse your check to a friend or family member

If you don’t have a bank account of your own, then you could endorse the check to a friend or family member who does.

Endorsing a check is a simple two-step process:

• You write “Pay to the order of [Name]”
• Sign underneath

They can then cash the check for free and give the funds to you.

This obviously requires a deep level of trust and, in some cases, you both have to be present at the bank so they can prove that you are not being pressured or forced to do this. You’ll likely be asked to fill out a form to certify your endorsement.

Depending on how often you need to cash a check, it may be much easier for you to open a checking account of your own and avoid this workaround. The last thing you want is for money to get in the way of your relationships with friends and family.

Check Cashing FAQs

Can you cash a check at an ATM?

Even with a bank account, you technically can’t cash a check at an ATM.

You could deposit a check and immediately follow it up by withdrawing cash from your account. However, if you have nothing in your account prior to depositing the check, you will not be able to withdraw the funds for 24 to 48 business hours.

Without an account, though, there is no way to do this.

Can I cash a check without an ID?

With the exception of endorsing your check to a friend or family member, all of the check cashing places above will require at least one form of ID, sometimes two. If your ID is expired, then technically it is not valid and won’t count as a form of identification.

If you do not have an ID, you have three options:

• Endorse the check to someone else
• Cash the check online
• Sign up with a bank and use its online app

How can I cash a check online?

If you don’t have a bank account but have internet access or a smartphone, there are a few options. The two most popular apps that don’t require a bank account to be linked are PayPal and Ingo Money.

You can use Ingo money to deposit almost every kind of check, including handwritten personal checks. You simply endorse the check by signing it and taking a picture of the front and back. Once the check is approved, the funds will be sent wherever you designate them.

With Ingo, you have a number of options to access your money:

• Prepaid debit card
• Pick up cash in person at a MoneyGram location
• Amazon gift card
• PayPal account

However, the fees for Ingo can add up quickly. Government and payroll checks are $5 each. If the amount is over $250, you’ll pay a 2% fee. This means for a $1,000 check, you’ll pay $20. For all other checks, you’ll pay a 5% fee.

With PayPal, the fees are only slightly better. You’ll pay 1% for government and payroll checks and 5% for all others. You can transfer the funds to a prepaid debit card and then withdraw the cash at most ATMs.

With both online apps, you can avoid paying these fees if you are willing to wait a full 10 days to access the funds.

Cashing a Check is Easiest and Cheapest with a Bank

When you don’t have a bank account, you’ll always be stuck paying fees to get your checks cashed.

If you’re tired of paying fees, driving around town, and calling places to ask about their policies, you might want to consider opening a bank account. The best online checking accounts allow you to earn the highest interest rates on your savings and get your checks cashed fee-free every time.

The post 7 Best Places to Cash a Check (Besides Your Bank) appeared first on DollarSprout.

These days, checkbooks have largely gone the way of the dinosaur. Some people still keep one around for old times’ sake — or for budgeting reasons. But for the most part, they’ve been almost entirely replaced by debit and credit cards.

For anyone who remembers the slog of balancing a physical checkbook, this isn’t such a bad thing.

But there are times when a plastic card or paper cash just won’t do. For instance, say you need to mail a significant sum of money or send a secure payment. People without checking accounts also need a way to pay bills. For anyone in situations like these, a money order is the solution.

How to Fill Out a Money Order in 5 Simple Steps

Here’s a simple guide on how to fill out a money order and what to do with it after you’re done.

1. Add the recipient

Like filling out a check, you have to designate a specific recipient on each money order. Write the name of the person or organization to whom you’re sending money on the line that says some variation of “Pay to” or “Pay to the order of.”

The designated recipient must match the person or business’s legal name because the bank or post office cashing the money order will check their ID. Using a nickname or incorrect spelling may cause issues for the recipient when cashing their check.

2. Fill in the purchaser’s address

After writing the name of the recipient, add your residential address on the designated space. Some money order forms ask you to list the recipient’s address as well.

The address line is mostly a relic of the time before you could easily reach a purchaser or recipient by phone or email, so it’s not typically required. You can always ask the cashier if it’s acceptable to leave the address line blank.

3. Provide any additional information

Like checks, personal money orders have a line to write a note to the beneficiary.

If you’re sending a birthday check to your sister, write a memo like, “Happy 25th birthday.” If it’s a rent check to your landlord, write your apartment number. If you’re paying a bill, include your account number so the company can credit your account accordingly.

4. Sign your money order

Once you’ve filled out the money order, sign it and hand it to the cashier. You only have to endorse the front, as the recipient signs the back of a money order.

5. Keep your receipt

A receipt is proof that you sent the money order, which is handy if you’re paying rent or other bills. You can also use the receipt to cancel a money order, like if you find out you’ve been scammed. If a money order is lost, the receipt will help you recoup the money and purchase a new money order.

Always keep the receipt until you confirm the person has received and cashed the money order.

Related: What Is a Bank Statement and How Do I Read It?

How to Send Your Money Order

Sending a money order is simple because there are so many places to do it. Chains like Western Union and MoneyGram are available at grocery stores, gas stations, drugstores, and convenience stores. The post office sends money orders as well.

Your bank or credit union may also provide money orders, often for free depending on your account. Talk to your bank first to see if this option is available.

If your bank is far away or doesn’t offer free money orders, you can choose a third party to send one. Deciding which company to choose depends on where you live and how much you want to spend, so do a little research to get the best rate.

The post office charges $1.25 for money orders of $500 or less and $1.75 for money orders between $500.01 and $1,000. Western Union charges $1.50 and Moneygram charges $.89.

Most personal money orders have an individual limit of $1,000, so you have to divide the amount into separate money orders to send more than that. If you’re paying rent with a money order, chances are you’ll have to do this.

You can pay for a money order with cash or a debit card. The money has to come out of a bank account because the issuing company has to verify that you have the funds.

If you try to pay for a money order with a credit card, the card company will count it as a cash advance and charge you a high interest rate.

Where to Cash a Money Order

There are a few options on where to cash a money order. First, look at the issuer. If it’s a Western Union money order, you can go to a Western Union location to cash it. If it’s a United States Post Office money order, you can go there.

Going directly to the issuer will usually cost less money than a different location, and it’s often free.

You can also deposit a money order directly into a checking or savings account at your bank or credit union. When doing this, you may not receive access to the full sum right away. The bank has to verify the legitimacy of the money order, which can take a few days to process.

When to Use a Money Order

Money orders might seem like an unnecessary hassle, but there are times when it’s actually better to use one instead of a check. If you’re sending money overseas, a money order is probably the least expensive and safest way to do so. The post office can send money orders to 28 different countries.

A money order is also more secure than a check because it doesn’t have any identifying information on it. Banks can identify it by the money order number rather than by your account number. A check will always have the account and routing number visible, which can be used to hack into your account. If you’re sending funds to someone you don’t know that well, a money order is a great way to add a layer of security to the payment.

The post How to Fill Out a Money Order (Step-by-Step Guide) appeared first on DollarSprout.

It feels like free money. That’s why it can be such a shock when you find out that yes — paying taxes on interest is something you need to do.

The amount you actually owe in taxes will depend on two factors: how much interest you earned and your tax bracket. We’ll break down how to find out how much you owe and how to reduce your tax bill so you don’t have to worry about paying taxes on interest.

That way, your taxable interest won’t give you any surprises come April 15.

What is Taxable Interest Income?

It may not seem like you’re earning a significant amount from your savings account. But collectively speaking, that’s a lot of money the IRS is missing out on every year among all Americans who pay taxes.

That’s why the IRS requires you to report — and pay taxes on — the interest that you earn from your bank accounts. The IRS treats that money exactly the same as if your employer paid it to you in the form of wages.

How much interest income do I have to report?

Knowing how much interest is taxable is easy: all of it is taxable.

If you file a tax return at all, you’ll also need to report the interest you’ve earned on your bank accounts.

Your bank makes this easy for you. It’ll send you Form 1099-INT at the end of the year if you’ve earned more than $10 in interest. This form specifies exactly how much interest you’ve earned. That way, you don’t have to tally it up yourself. Simply report this number on your tax return, and you’ll be all set.

Even if your bank doesn’t send you a Form 1099-INT because you earned less than $10 in interest, you still need to report any interest income on your tax return.

How the tax rate affects your savings account interest

Your tax rate will depend on two things: your income for the year and how much interest you earned on your accounts.

Your income determines which tax bracket you fall into.

For 2021, here are the income tax brackets based on your filing status:

To find out how much you’ll owe in savings account interest tax, you need to find out which tax bracket you fall into. Multiply your interest income by your tax rate to calculate how much you’ll owe in taxes from that interest.

For example, let’s say that Jim and Pam earn $75,000 per year together from their day jobs. They file their taxes jointly, so this puts them in the 12% tax bracket. Let’s also say they earned $200 in interest from their high-yield savings account.

To calculate their bank account interest tax, they’d simply multiply $200 by 0.12, which would equal $24. Jim and Pam would owe an extra $24 on their taxes as a result of their bank account interest.

As you can see, even if you fall into a higher tax bracket, you probably won’t owe a huge amount of money on your bank account interest. Most people don’t earn much interest to begin with. Even if the fraction you owe in taxes is large, the overall tax due probably won’t be.

How to Avoid Paying Tax on Savings Account Interest

Still, if you’d rather not pay any extra taxes on that money, or if by chance you really did strike it big with your interest income, there are many ways you can lower your tax bill so you don’t even have to worry about paying taxes on interest.

Each of these methods relies on lowering your overall tax bill — not your taxable interest specifically. By lowering your overall tax bill, you can cancel out any taxes you may have owed as a result of your taxable interest income.

Even if you don’t have to pay any bank account interest tax at all, you can still use these techniques to lower your overall tax bill and maybe even get a tax refund.

Contribute to a traditional IRA

Traditional IRAs are excellent savings accounts to use for retirement. Plus, any money you put into them now can be written off on your taxes. You can contribute up to $6,000 to your traditional IRA in 2020. If you’re 50 years of age or older, your contribution limit is capped at $7,000.

So if you earned $50,000 during the year and contribute the maximum amount for people under age 50, you only need to pay taxes on $44,000 worth of income. And that’s not including any other deductions you may qualify for.

There are some limits to this, however. If your workplace offers you a retirement plan and you earn more than the maximum threshold ($65,000 for single filers or heads of households, $124,000 for couples filing jointly or widowers), then you’ll only be able to deduct a part of your traditional IRA contributions.

Similarly, if only your spouse is covered by a workplace retirement plan, those deductions start being phased out at $196,000 if you file taxes jointly.

Workplace retirement plans

If your workplace offers a retirement plan such as a 401(k), a 403(b), a 457, or a Thrift Savings Plan, you can also lower your taxable income by contributing to these accounts. For 2020, you can contribute up to $19,500 to these accounts.

Health Savings Accounts (HSAs)

If you are covered by a High Deductible Health Plan (HDHP), an HSA is another great way to lower your tax bill. These accounts let you set money away for certain health care expenses such as doctor’s visits, prescription medicine, lab tests, and surgeries.

More importantly, any money you put into an HSA can be deducted from your taxable income. For 2020, you can contribute up to $3,550 for a single person or $7,100 for a family.

Bank Account Interest Tax FAQs

These answers to commonly asked questions about bank account interest taxes should help clear your final concerns on the matter.

Always Pay Your Taxes When They’re Due

Paying taxes on your taxable interest doesn’t have to throw a wrench in your plans.

Even though you do have to pay taxes on this income, most people will only owe a small amount in taxes. That’s because most people just don’t earn much interest on bank accounts.

Paying taxes on interest is inevitable. The most important thing is to file your tax return and pay your tax bill by the tax deadline. One thing’s for sure: you won’t want to pay any tax penalties as a result of filing or paying your taxes late. Late fees would likely be more than the amount you actually owe in savings account interest tax itself.

The post Do I Have to Pay Taxes on Bank Account Interest? appeared first on DollarSprout.

It’s an important collection of information, but most of us don’t actually look at it unless something is wrong. You may take a quick glance at your balance every month, but chances are that piece of paper goes straight in the trash shortly after.

However, if read correctly, your statement can tell a much more interesting story than you may realize.

It can offer a close look at your financial habits, highlight potential problems, and prove your worthiness as a borrower. Your bank account statement can also help you build a detailed budget.

The key to understanding your bank statement is learning to speak the language.

What is a Bank Statement?

A bank statement is a record of your transactions from a checking or savings account over a certain period of time.

It shows all the deposits and withdrawals that occurred in your account, including checks you wrote, credits you received, and more. The bank statement also shows your beginning and ending balance, as well as how every transaction affected your balance.

Bank account statements are useful for monitoring your spending and your deposits. A mortgage lender might also ask to see your bank statements to make sure you have enough to make monthly payments or to ensure that no suspicious deposits have occurred recently.

How to Read a Bank Statement

If you’ve never actually checked your bank account statement, reading it for the first time is like translating hieroglyphics. Thankfully, understanding a bank statement is simple once you learn what each part represents. Here are the most important terms to know:

Starting balance: This is the amount you had in your account during the beginning of the statement period. In other words, it’s the money you had in your account before any deposits or withdrawals were made.

Ending balance: This is the amount in your account when the statement period ends. If you save more money than you spend, your ending balance will be higher than the starting balance. If you spend more or transfer more to a different account, you’ll have a lower ending balance than you started with.

Deposits: These are individual installments of funds into your account. This can include direct deposit from your employer, cashed checks, wire transfers, money you transferred from PayPal or Venmo, and other credits.

Withdrawals: This portion of the statement shows the transactions where you withdrew funds from your account. This can include both online transfers, like a payment to your credit card, and transactions that occurred with your debit card.

Interest: Some banks pay interest on their checking accounts. If you earned interest during the period, your bank statement will show how much you earned. If you have multiple savings accounts under the same umbrella account, the statement may show the total interest paid as well as the total interest for each account. Some banks will also list the amount of interest you’ve earned over the life of the account.

Fees: This portion reveals the exact fees you paid during the statement period. That can include fees for overdrafts, returned checks, ATM withdrawals, and a monthly maintenance fee. If you went abroad and used your debit card, you may have been charged a foreign transaction fee or ATM withdrawal fee.

Daily balance detail: Your bank may also show your balance for each day of the statement period. This allows you to see how your balance fluctuated throughout the month. It can be useful for anyone who likes to examine their spending habits in detail.

Overdraft protection: Your bank statement may reflect if you have overdraft coverage on your account and whether it had to kick in at any point during the statement period.

Statement period: These are the dates during which the transactions occur, usually a month-long period. However, if the statement says, “January 2019,” that doesn’t necessarily mean the statement period was actually for the month of January. It may begin at the end of December and end a few days before the end of January.

How to Use Your Bank Statement

Knowing what a bank statement is and how to properly use it could help further your financial goals.

Reconcile your accounts

You may remember your mom or dad sitting down at the dining room table with their checkbook in front of them. They were probably reconciling their accounts, evaluating how each transaction changed their account balance. This is simply to insure that the bank calculated the figure correctly.

You can still do this with your bank statement by going through each deposit and withdrawal. These days, this can all be done digitally — no checkbook required.

Track your spending

You can also use your bank statement to track your spending. Either manually input the data or sync your bank account to an online system like Mint or Tiller. Tracking your spending is the single most important step in creating an airtight budget.

If you don’t currently have a budget and want to start one, you can use previous bank statements to determine how much you’re spending in each category. Just divide up each expense into a specific classification, like food or entertainment.

Correct any errors

Always be watchful for any errors when checking your bank statement, like a check that was deposited when you issued a stop payment or a fee charged erroneously. The bank is unlikely to be as vigilant about your account as you are. That means it’s your responsibility to notice any mistakes.

It’s usually only possible to correct mistakes with your bank within a certain period of time. Therefore, it’s best to review your statement upon receipt. If something seems off, call your bank’s customer service line immediately.

Keep a record

By law, banks have to keep your statements available for five years. Still, it might be a good idea to store your statements separately in a cloud-based system like Dropbox or Google Drive.

You can save bank statements as PDFs or scan in your paper statements.

Your Bank Statement Says a Lot

All the information contained in your bank statement tells a story. Once you learn how to read the story, you can use your bank statement to track your spending, create a budget, and reach your financial goals faster than you thought possible.

The post What Is a Bank Statement and How Do I Read It? appeared first on DollarSprout.

Online banks have become increasingly popular thanks to their lower fees, higher interest rates, and 24/7 access. Not only that, you can bank from the comfort of your couch and don’t have to drive anywhere. 

They’re ideal for anyone with a busy schedule or who can’t regularly get to a local bank branch. Apps like Chime recognize those benefits and provide account options for anyone who prefers a fully digital banking experience.

But is Chime the best option for you? Let’s take a look at its services and products to help you decide. 

What Is Chime?

Chime is a mobile-only banking services provider, operating exclusively online and with no physical branches. However, it provides all the features of a traditional bank right from your mobile device. This includes paying bills, viewing your account balance, and transferring money between accounts. Fortunately, the app is intuitive, making it easy to manage your account virtually. And if you have any trouble, Chime’s support team is accessible via phone or the app.

With their mobile banking, you can block debit card transactions if you lose your card or suspect it was stolen, sign up for instant transaction alerts, and deposit checks via the mobile deposits option. You can also withdraw money for free with their in-network ATMs, integrate your Apple Pay or Google Pay, and send checks. 

You can download Chime’s mobile app for both iOS and Android phones.

Open an account

0.50% APY Check site for most current rate

$0 Min. Opening Deposit $0.01 to earn APY

4.0/5.0 DollarSprout Rating

Chime is a fee-free online banking service provider offering checking and savings accounts to customers. It has a competitive APY on its savings account and provides a number of other features including second chance banking options.

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Pros

• Early access to your paycheck
• Competitive interest rate
• No overdraft or account maintenance fees
• Automatic savings tools
• Large ATM network (38,000 fee-free ATMs)
• Second chance banking options
• FDIC-insured

Cons

• More difficult to deposit cash
• Few account options: no loans, credit cards, or retirement planning accounts
• No physical branches

Chime Accounts Options

If you use Chime, you can choose from three different types of banking accounts: checking, savings, and a credit rebuilding account. There are no other options. For instance, you can’t open an IRA, money market account, or take out an auto loan or mortgage. Additionally, you can’t open a joint account with someone else.

To open an account, you’ll need to provide your first and last name, email address, your physical address, and a few other details. You’ll receive a confirmation email and, once you download the app, you’re ready to go. You should receive your debit card in the mail within a few days of opening your account.  

Chime checking account

Chime’s checking account, known as Chime Spending Account, works like a normal checking account, making it easy to withdraw cash for free from an in-network ATM or make a purchase with your debit card. There are no foreign transaction fees, no monthly fees, and no overdraft fees; the only fee associated with this account is a $2.50 charge for using an out-of-network ATM. Should you lose or misplace your card, you can disable it right from the app. 

Other features of the Spending Account include integration with your mobile wallet, overdraft protection, and there’s no credit check required to open an account. This makes is a good option for customers with a poor banking history. 

You can add money to your account via direct deposit, mobile check deposits, and transfers from other banks. In-person deposits are available at locations including Walgreens, CVS, and 7-11 using the Green Dot® network. If you choose to deposit money in person, check with the retailer first to find out what the fees might be. You might find it’s a better choice to do an electronic deposit. 

If you prefer to write checks, you can use the free Chime Checkbook. However, rather than writing a physical check, you initiate a check request via the app. After you provide the required information, Chime sends it on your behalf. While there are no limits to the number of checks you can send per day, the maximum you can send per check is $5,000. 

Spending limits

Chime does put a limit on how much customers can withdraw per day but they do not limit the number of purchases you can make. However, they do cap your spending at $2,500 per day. Included in that $2,500 are ATM fees and withdrawals, funds withdrawn at a point-of-sale, and any purchases you make.

They offer a schedule for their customers to view the spending and frequency limits for daily transactions:

Transaction Type	Frequency and/or Dollar Limit
ATM withdrawal	$500 per day, no limit to the number of times per day
Cash back at point-of-sale	No limit up to $500 per day
Over the counter withdrawals	No limit up to $500 per day
Card purchases requiring signature and PIN	No limit up to $500 per day

Although Chime does not charge a fee for these transactions, they are subject to merchant and ATM owner fees.  

Gas station transactions

Chime advises customers to avoid paying for gas at the pump. They state that gas stations can hold up to $125 on your account and, although it’s usually released within two hours, it can sometimes take up to two days. To prevent this, Chime suggests paying at the register. 

This is the only type of transaction they caution against. 

Chime Savings Account

If you’re looking for an online savings account with no fees, no minimum opening balance, and no maximums on interest earned, you might want to consider Chime’s savings account.

Their current 0.50% APY on savings is more robust than what you’ll find at brick-and-mortar banks and is in line with what other online savings banks offer. Deposits are FDIC-insured up to $250,000.

Understanding that many people struggle with saving money, Chime offers a couple of ways to automate your savings goals: 

1. Save When I Get Paid. Using this feature means that Chime will automatically transfer 10% of your paycheck (of paychecks $500 or more) into your savings account on payday. For instance, if you earn $800 each payday, $80 is moved into your savings account. This is the simplest way for most people to save, and you can make a new budget to account for your adjusted net pay.
2. Round Ups. When you make a purchase using your Chime debit card, the cost of the purchase is rounded up to the nearest dollar and the difference is transferred into your Savings account. For example, if you’re buying lunch for $8.46, Chime will charge your account $9 and the remaining $0.54 is put into savings. It’s an easy way to save money if you make a lot of debit card purchases, but try to avoid making purchases just for the round ups. You can find other ways to save. 

You must earn a minimum of $500 each payday in order to use the Save When I Get Paid option. If you are a lower-wage earner or earn the majority of your wages in cash, this might not be the best savings account for you.

Related: Best Online Savings Accounts with the Highest Interest Rates

What Else You Need to Know About Chime 

Here are some other features you can choose from when banking with Chime. Most of them are standard, but understanding what you’re getting with your accounts is important when selecting a bank. 

Get paid early

Signing up for direct deposit with your Chime Spending Account means you can access your paycheck as soon as your employer deposits it. That can be up to two days earlier than your normal payday.

Chime makes it easy to register for direct deposit, and it can be done entirely via their app. You will need to submit a pre-filled form (provided by Chime) to your employer, but that’s it. There is nothing else you need to do to get paid early.  

There is no extra fee for this feature, and it comes standard with all Spending Accounts. 

SpotMe overdraft protection

As long as you have a total of $500 in monthly direct deposits, you can use the free SpotMe overdraft protection. With this feature, if you make a purchase that causes you to overdraft, Chime will spot you the overage up to your limit (not to exceed $100). The next time you’re paid, they apply it to the negative balance.

Limits are set based on account history and can’t be manually overridden by Chime staff. 

Note, however, that SpotMe only applies to debit card transactions. According to their site, it does not cover ATM withdrawals, PayFriends transfers, ACH transfers (including direct debits and services like Venmo or Square Cash), or Chime Checkbook transactions.

PayFriends

This is Chime’s version of Cash App, Venmo, and other peer-to-peer (P2P) payment apps. It’s free to use and there are no fees for transferring money. PayFriends connects directly with your Spending Account to transfer to (and accept transfers from) other Chime users. 

You can use this on both iOS and Android phones and can send money to friends and family regardless of the platform they use, even if it’s different from yours. 

However, you can only use this to move money between Chime accounts. If you want to send money to a roommate, for example, who does not bank with Chime, you will need to use another P2P app. 

Referral bonus

To encourage users to refer their friends and family, Chime offers a referral bonus. Each time someone you refer signs up and receives one qualifying direct deposit of at least $200 with 45 days of opening their account, you both get an extra $50. 

Your referral link is provided within the app, and they encourage users to share it on social media. They also encourage users to follow them on social media to learn about new offers.

Chime claims that they will occasionally send new incentives via the app, and asks users to be on the lookout for those as well.

Historical technology issues

Chime has previously had problems with the app or account features crashing or not working. The largest outage, in October 2019, lasted over 24 hours. Customers were left without access to their money, and some found their debit cards deactivated as well. While they were not the only online bank that experienced the outage, its issues lasted the longest. 

During outages, Chime communicates with users via Twitter, utilizes its status updates page, and phone lines are open for questions.

Chime Review Summary

Overall, with a 4.5-star rating on Trustpilot, customers are happy with Chime.

Seldomly, users voice complaints revolving around poor customer service, issues with mobile checking deposits, security issues including login problems and accounts being hacked, and Chime slow response time to reports of fraudulent charges. 

If you’re looking for an exclusively online financial app with low to no fees, a competitive interest rate, and easy ways to save money, Chime is a good choice. It’s also a solid option for those without the best banking history.  

 

The post Chime Review 2023: A Simple Option for Checking, Saving and Credit Building appeared first on DollarSprout.

According to one 2017 CareerBuilder survey, nearly eight in 10 Americans currently live paycheck to paycheck._[1]

An alarming trend, but one we can work together to address.

Fortunately, there are many things you can do to improve your situation and alleviate that financial stress.

For starters, by strategically opening several bank accounts, you can take advantage of timely promotional offers and ensure you’re always getting the best rate on your deposit.

Multiple Bank Accounts for Budgeting

The answer to the number of bank accounts you should have depends on your individual situation. Most people are fine with just a few bank accounts at first.

As your needs change, you might find that it’s easier to budget your money with more accounts. Let’s talk about what those accounts are and how to use them.

Accounts for spending

Most everyone knows they need at least one checking account to hold their cash for day-to-day use. Single people and married couples who manage their finances jointly may only need one checking account.

Some married couples, however, find that having two checking accounts to split their finances works best for them. If one spouse is a spender and the other is a saver, this can be a good solution. Of course, it then requires both spouses to manage their checking accounts independently.

One or both partners will also have to manage a third joint checking account to pay shared bills like utilities, rent/mortgage, etc. This account setup adds new complexity to the situation, but for some people, the benefits outweigh the drawbacks.

Accounts for saving

Savings accounts generally offer a lot of helpful benefits that are custom-designed for the job. For example, savings accounts offer higher interest rates and have limits on how often you can withdraw money. Keeping your savings separate from your spending money (i.e. your checking account) also ensures you don’t accidentally spend your money on impulse purchases.

Most people have at least one savings account as well. However, if you’re living paycheck to paycheck, go into debt frequently, or just want to plan things out better, you might find that having multiple savings accounts for different purposes works better for you. This is known as the “bucket” savings strategy. Most banks and credit unions will let you open multiple bank accounts online to achieve this.

Related: The Best Online Savings Accounts with the Highest Interest Rates

Emergency fund

Many people find it helpful to keep a separate savings account specifically for an emergency fund. This money is for events such as unexpected car repairs, job loss, or emergency hospital visits. It’s like a fire extinguisher in a glass case: you only break the glass (i.e. withdraw the money) in a true emergency.

If your emergency fund is mingled in with your savings for other accounts, you risk inadvertently withdrawing the cash. As a result, you could find yourself in a sticky situation when a true emergency arises.

Short-term savings

Many people also find it helpful to set up separate savings accounts for short-term savings goals like a vacation, holiday shopping, or health care expenses. Some people refer to these mini-savings accounts as “sinking funds.”

Again, separating these savings ensures that you don’t accidentally use them for the wrong purpose. It’d be a shame to save for travel only to find you accidentally spent the funds on something else and no longer have the money to purchase your tickets.

Accounts for investing

It’s also a good idea to have investment accounts for your future, such as for retirement or a down payment on a house. Unlike an emergency fund, these are planned expenses that will come to pass. However, they’re still years in the future.

Many people invest their savings in equities such as stocks, bonds, index funds, and mutual funds. These investment accounts generally allow your money to grow to a much greater value over time. On the other hand, they’re not insured, and there’s also the possibility that you’ll lose a great deal of money.

That’s why a lot of people prefer to keep their investments in a bank account where it earns a smaller (but guaranteed) rate and is insured. There’s no right or wrong answer, and we encourage you to speak with a financial advisor for these big life decisions.

However, since we’re on the topic of bank accounts, there are a few you might consider adding to your arsenal.

Related: A Beginner’s Guide to Investing in the Stock Market

Certificates of deposit

Certificates of Deposit (CDs, or “Share Certificates” at credit unions) are timed deposit accounts. When you open a CD, you deposit a set amount of money into your account, typically $500 to $1,000 or more.

You agree to hold that money in the account for a set period of time, ranging from a few months to several years. During that time, you’re not allowed to withdraw or access the money in your account. If you do, you’ll be charged a penalty.

Once your CD matures, you’ll receive your original deposit plus the interest earned on your account. CDs generally offer higher interest rates than any other account type at a bank or credit union.

Because of the timed deposit feature and higher interest rates, these accounts are especially good if you already have a large amount of money that you won’t need until a later date.

Related: What is a CD Ladder (and Should You Have One)?

Money market accounts

Money market accounts work much like savings accounts. They typically require a higher deposit than a savings account, but they also come with higher interest rates.

Unlike a CD, you can withdraw funds from your money market account whenever you want as long as you stay under the monthly withdrawal limits. The interest rates on these accounts are typically between that of a regular savings account and a CD account.

These accounts are especially good if you have a higher dollar amount to save but still may need to access them at any time. If you have a large emergency fund, a money market account can be a great place to store it.

Related: Best Money Market Account Rates

Other investment accounts

Some banks and credit unions also offer traditional investment accounts in addition to the equity investments mentioned above. These can be great ways to grow your long-term savings such as your retirement funds.

However, keep in mind the fees that a bank or credit union may charge for these accounts. Banks and credit unions may charge a higher fee than working directly with a brokerage such as Vanguard or Fidelity.

If you’re using these investment accounts to supplement your retirement savings, it’s usually enough to have just one Traditional IRA or a Roth IRA account. If you’re self-employed, you may also be able to choose from other retirement savings accounts, such as a SEP IRA or a Solo 401(k).

How Many Bank Accounts Should I Have in Total?

There is no right answer for everyone. How many bank accounts you should have depends on your individual situation and your financial goals.

Most people prefer three bank accounts at a minimum: a checking account, a savings account, and an account for retirement savings (although this can be held at a brokerage instead).

In practice, most people are better served with this minimum three-account setup plus at least a few extra savings accounts for long- and short-term savings goals. Married couples who find it difficult to manage money together may also want to keep individual checking accounts.

When it comes to managing your finances, oftentimes keeping it simple when it comes to the question of using multiple bank accounts for budgeting is the best solution. Minimizing your number of accounts will help you stay organized and manage your money with confidence.

The post How Many Bank Accounts Should I Have? Experts Say At Least These 3 appeared first on DollarSprout.

At first glance, the similarities between banks and credit unions might seem evident. After all, both offer checking accounts, savings accounts, and even loans and credit cards.

But what is the difference between a bank and a credit union? Believe it or not, there are some very real differences that may affect your banking experience.

Depending on your particular needs, a bank or a credit union might be a better option for you.

What Is a Bank?

A bank is a business.

Banks allow you to deposit your money with them. In turn, they’ll lend out a portion of that money to people who need loans. Banks earn interest off of the loans, and to entice you to deposit more money (so they can make more loans and earn more interest), they offer you a small amount of interest in turn.

In general, banks will let anyone open an account with them. There usually aren’t any specific requirements to open an account besides living within the bank’s service area, being a U.S. citizen, and meeting the minimum balance requirements.

Banks can be owned by private investors or traded openly on the stock market. Either way, banks do have owners and shareholders that they’re beholden to, and this drives a lot of the decisions that banks make.

What Is a Credit Union?

A credit union, on the other hand, is a nonprofit organization.

Credit unions are owned by members, which are people who actually use the credit union. If you open an account or take out a loan at a credit union, you are a member. Membership is usually restricted to people in a certain group.

For example, credit union membership is commonly restricted to people who live or work in certain areas, who work for certain employers, or who have a family connection to the credit union. Many credit unions (but not all) also allow you to become a member by joining a related nonprofit organization for a small fee.

Credit unions are governed by boards of directors who make decisions based on what’s in the best interest of members. This means that they may make slightly different decisions because they’re not trying to maximize profits for a select group of people who own the bank.

Differences Between Banks and Credit Unions

In addition to the structure of a credit union vs. bank, there are often differences between the products offered, interest rates you can earn, convenient features, and customer service. The question is whether the benefits of a credit union outweigh those of a bank.

Products

Banks and credit unions offer a similar suit of basic products. For example, you’ll find a basic checking and savings account at most any bank or credit union.

Credit unions often offer a wider range of savings accounts. If you’re looking for a Holiday Club savings account to help you save for the holidays throughout the year, for example, you’ll have an easier time finding this at a bank vs. a credit union. It’s also very common for credit unions to offer kids’ and teens’ savings accounts.

Banks, on the other hand, may be more likely to offer more specialized high-end products such as wealth management, investments, or business accounts.

Interest rates

In general, credit unions offer better interest rates on deposit accounts and lower interest rates on loans. This is due to their ownership characteristics.

Credit unions are owned by, and make the best decisions for, their members. Banks, on the other hand, often offer lower interest rates because this will generate more profit for their owners.

It’s important to note, however, that this isn’t a hard-and-fast rule. There are many big banks coming out with innovative online products that are offering even higher interest rates than what credit unions offer.

For example, the Wall Street bank Goldman Sachs recently launched an online-only bank called “Marcus by Goldman Sachs” that offers interest rates that even many of the best credit unions can’t compete with.

Related: The Best High-Yield Online Savings Accounts

Safety

Rest assured that your money is safe whether you choose to deposit it in a bank or a credit union — up to a point.

Credit unions are covered by the National Credit Union Administration (NCUA). This program provides up to $250,000 worth of insurance per person at each credit union.

Banks, on the other hand, are covered by the Federal Deposit Insurance Corporation (FDIC). This insurance program also provides up to $250,000 worth of insurance per person at each bank.

Even though these are different insurance programs, they’re still functionally the same. Just make sure you keep less than $250,000 at any given bank or credit union and your money is safe.

Convenience

One pro of big national banks is that they’re available all over the country. There’s a Chase Bank and a Wells Fargo in even the tiniest of communities, it seems.

This can be helpful if you end up moving in the future. If you’re banking with a local credit union in Colorado, for example, and you move to Washington state, you may not be able to do your banking in person anymore, or you may be forced to switch banks.

Even though most credit unions aren’t available nationwide, many still partner with a network of nationwide ATMs to provide you access to cash when you’re away from home.

You may even be able to do your banking in person at a Shared Branch location with another credit union. However, you could be charged a fee for each visit. Many credit unions are also available online, so even if you move, you’ll be able to access your money digitally.

Related: How Many Bank Accounts Should You Have? Experts Say at Least Three

Customer service

Your local bank and credit union are staffed by people within your community. Thus, there usually isn’t much of a difference in customer service between the two if you do your banking in person.

There could be a difference, however, if you need special accommodations. An underappreciated pro, the manager of your local credit union may be able to give you more leeway if you fall on hard times and need to take a temporary break in loan payments, for example, or if you want to take out a loan to build your credit up.

Again, credit unions are designed to serve their members, not owners and shareholders. As such, they may be slightly more inclined to help you out.

Banks vs. Credit Unions FAQs

To conclude our discussion of banks vs. credit unions, let’s briefly discuss the most common questions we see about the differences between banks and credit unions.

Which is safer, banks or credit unions?

Both banks and credit unions insure your money up to $250,000 per institution. They also both generally employ sound IT security and safety measures. As a result, there isn’t much of a difference between the two in terms of security. You should be safe at either institution.

Who can join a credit union?

A pertinent con, not everyone is able to join a credit union. In order to maintain their special status, they are required by law to restrict their membership to certain groups of people.

Each credit union is different. To learn the membership criteria of a specific credit union, you’ll need to visit its webpage to see its membership rules or contact the credit union directly. In general, however, most credit unions restrict membership to people who:

• Live, work, or worship in a covered service area
• Are closely related to current credit union members
• Work for certain employers
• Have made a small donation to join a related nonprofit association

Is it easier to get a loan from a credit union or a bank?

If you have good credit and earn a decent income, you should be able to get a loan from either a bank or a credit union.

However, if one of those two things isn’t the case, you may find better luck in applying for a loan with a credit union. Many credit unions are willing to work with members who have low incomes or low credit scores by offering things such as secured loans, payday loan alternatives, or credit builder loans.

Which One is Best for You?

If you like the idea of being a member rather than a customer, earning higher interest rates on deposit accounts, and paying lower interest rates on loans, then a credit union might be better for you. On the other hand, if you prefer convenient banking across the entire country and a wider range of high-end banking products, then a bank might be your best option.

These generalities can help guide your search for a new banking institution. However, don’t let it box you in. The truth is that while these differences between banks and credit unions hold up over the big picture, there are plenty of individual outliers.

You’ll be able to find many online banks offering higher interest rates than the local credit union, for example. It’s also fairly easy to find larger nationwide credit unions that offer a wider range of products and services than your local bank.

Our suggestion? Start with a list of what’s most important to you in your financial life, and then base your search off that list. Whether it’s a credit union or a bank that you end up with, that’ll be the best way to guarantee you’re happy with the end result.

The post Credit Unions vs. Banks: Pros, Cons and Differences to Consider appeared first on DollarSprout.

Everyone wants a sure thing when it comes to money. They want to invest their money without losing it and get a huge return without inheriting any risks. They want to have both the comfort and security of a savings account with the high returns of a mutual fund in an IRA.

Unfortunately, you can’t always get what you want. The more returns you want, the more risk you need to take on. This is true whether you’re saving for retirement, your vacation home, or a simple emergency fund.

This is where a CD ladder comes in. A CD ladder combines the safety of a CD with the flexibility of a savings account. It gives you the higher returns of CDs, but with less structure.

What Is a CD Ladder?

A CD ladder is when you stagger your CDs so they all mature at different times. The purpose of a CD ladder is to keep your money liquid (or available to withdraw) like with a savings account while earning the higher interest rates that come with CDs.

When you withdraw money from a CD before maturity, you have to pay a penalty. This can considerably negate any interest you’ve earned up to that point. It’s not a good idea to open a CD or use a CD ladder unless you’re very sure you won’t need the money until the first CD matures.

CD ladder example

To create a CD ladder, you first want to choose a bank with high interest rates on its CDs. Let’s say you find a bank with a 6-month CD at 1% interest, a 12-month CD at 2% interest, and an 18-month CD at 3% interest.

After six months, your first CD matures and you decide to renew it. You buy an 18-month CD with the money. When the 12-month CD matures six months later, you buy another 18-month CD. This creates a CD ladder where you get access to funds every six months. This means that every six months, you’ll decide whether to open a new CD or withdraw the money plus the interest you earned.

A CD ladder that matures every six months is better than putting all of your money in an 18-month CD because you don’t have to actually wait 18 months to claim your money. Therefore, a CD ladder provides more flexibility and access than just using a traditional CD.

CDs Are the basis of a CD ladder

A CD ladder is composed of several CDs or certificates of deposit.

A CD is a savings vehicle offered by banks and credit unions that is similar to a savings account. When you open a savings account, you deposit the money and let it sit. You earn interest on the amount and can withdraw it anytime you want.

With a CD, on the other hand, you have to open the account for a certain length of time. Typically, that’s between six months to five years. The longer a CD’s maturity period, the more interest you’ll earn.

This makes it different from a savings account, which has no specific term requirement. Some banks also have a minimum deposit for CDs, between $500 and $10,000, while others have no requirement.

Like a savings account, CDs are FDIC-insured up to $250,000 per person. That means you won’t ever lose money on a CD as long as it’s below the insured amount. This makes CDs conservative investments, perfect for funds you need in the short term.

How to build a CD ladder

Even though a CD ladder might seem tricky, it’s actually quite simple to set up. You just need to know how much of your money you want to be tied up and what kind of timeline you’re on. Here’s a step-by-step guide on how to create a CD ladder for yourself.

Choose your CD laddering strategy

Once you decide to create a CD ladder, you’ll need to figure out how you want to stack the CDs.

This depends on when you want access to money. If your CD ladder is for a house you want to buy in five years, then you’ll want all your money to be available in five years. If you want a place to keep your emergency fund, then your CD ladder should probably mature every three months, just in case something happens.

A CD ladder should be specific to your needs. If you’re having trouble figuring out how to create one for yourself, you can ask a financial planner or even contact your bank. They can run you through the options and explain the penalties, interest rates, and other details.

Open your CDs

Once you know what kind of CD ladder you want, it’s time to actually open your CDs.

Make sure to shop around before deciding on your CDs since every bank and credit union has its own rate schedule. The interest rates will determine how much money your CD ladder earns so it’s wise not to jump ahead. Look at as many banks as possible to make sure you’re getting the best value.

Renew or withdraw

When your CDs mature, you’ll need to decide whether to renew them or withdraw the funds. To keep your ladder going, renew for however long you want.

If you do need the money, then you can go ahead and withdraw it. You can also choose to withdraw a portion of it and renew the rest. Because you’re withdrawing the funds after the date of maturity, you won’t have to forfeit the interest.

CD Ladder FAQs

Even though a CD laddering strategy may seem simple, we get quite a few questions about the specifics. Here are some of the ones you may be asking.

Is a CD Ladder worth it?

Creating a CD ladder can seem difficult and not worth it to the average consumer; but if you’re serious about maximizing your dollars, you should learn what a CD ladder is and how it can help.

Read on to see what a CD ladder is, if you should use one, and how to set it up.

Is a CD Ladder a good investment?

A CD ladder is a good investment if you’re certain you don’t need the money until the CDs have matured. Because you face a penalty when you remove a CD early, there’s no benefit to keeping the money in a CD unless you’re 100% sure you won’t need it.

For example, a couple looking to buy a house shouldn’t keep their money in a CD ladder if they’re already looking for homes and planning to buy in the next couple of months.

Likewise, a CD ladder isn’t the best place for long-term investors or people who are saving for retirement. CD rates typically max out at 3% interest, while the S&P 500 has an all-time rate of return of 9.8%._[1] A CD ladder is more appropriate for storing your emergency fund, not for building a nest egg.

What are the benefits of CD laddering investments?

The main benefit of CD laddering investments is that you earn more interest than by keeping your money in a savings or money market account. Plus, by staggering your CDs, you can achieve more flexibility than putting your money all in one CD.

CD ladders also provide a hedge against interest rate risk, which is when an investor has all their money tied up in a fund that has a lower interest rate than the current rates.

Can I use a CD ladder for my emergency fund?

A lot of people create a CD ladder emergency fund because they don’t want it to lose value while it’s sitting in a bank account. Other reasons for opening a CD ladder include saving for a down payment on a mortgage or a new car. In general, if you have a huge stash of money that you can’t invest in the stock market, a CD ladder may be an appropriate place to store it.

Interest rates for CDs vary based on the term. A CD with a six-month term will have a lower interest rate than a five-year one.

Will I owe taxes on my CD interest?

Interest earned on a CD will be reported to you through a 1099-INT form, which you’ll have to claim on your taxes. You only receive one of these forms when the CD matures and the interest hits your account.

There is no way to avoid paying taxes on interest earned from your CD, so just be prepared when tax time comes around. If you end up owing more than you expect, you can adjust the withholding on your W4 so as not to have a huge bill come April.

Luckily, unless you earn hundreds or thousands in interest from your CD ladder, you probably won’t notice a huge difference on your taxes because of the CD ladder. If you’re somehow worried about the state of your taxes with a CD ladder, you can consult a CPA to get more specific advice.

Related: Do I Have to Pay Taxes on Earnings Generated by My Bank Accounts?

Will a CD ladder earn more interest than a savings account?

Consumers use a CD ladder because they want an insured savings vehicle that will also generate interest. 

If you pick a CD ladder with short terms, your rates may be the same or less than a savings account. In that case, you’ll lose out on the flexibility of a savings account for no reason.

Also, if you end up withdrawing money from a CD before the term is over, you could forfeit most or even all of your interest. That could drag down your earnings to less than a savings account. Before installing a CD ladder, make sure that you can handle your money being tied up.

What are the downsides to a CD ladder?

The biggest downside to a CD ladder is that your money is trapped in a CD unless you withdraw it early and pay a penalty. That makes a CD ladder less liquid than a savings account, which isn’t ideal if you need your money in the very near future. If you need to access your funds quickly, you shouldn’t hold it in a CD ladder.

Another downside to a CD ladder is that it can be tricky to set up if you don’t fully understand the concept. Opening a savings account is much easier and can provide a decent return if you choose the right bank.

If you put too much money in a CD ladder and need to withdraw it right away, you’ll have to pay an interest penalty on the account. Before creating a CD ladder, think of some possible scenarios that might cause you to need money quickly. Then determine how much you need to comfortably have in your savings account. You can deposit the remaining amount in a CD ladder.

If you need to withdraw money from a CD ladder but it’s close to maturity, see if you can hold off. Borrow money from a friend or take on some side hustle work. Giving up those returns would negate the benefits of a CD ladder, so always find another way if you can help it.

A CD Ladder Can Be a Great Way to Save Money

When you implement a CD ladder for your emergency fund or other short-term investment goals, you can earn more interest than if you kept the money in a savings account, especially if you find high-earning CDs.

Plus, the money will be less easily accessible than if it were kept in a savings account, which should prevent you from spending it unnecessarily. If you’re the type of person who thinks a sale at Nordstrom is an emergency, then having your money in a CD ladder might prevent you from making impulse purchases.

If you stack a CD ladder effectively and never withdraw it ahead of time, you’ll get the best return without sacrificing security. That’s part of what makes a CD ladder so attractive — it combines the safety of a savings account with the interest rates usually only available to high-net-worth clients.

The post What are CD Ladders? Here’s Everything You Need to Know to Build One appeared first on DollarSprout.

And while starting a side hustle, getting a second job, or working overtime can help you make more money, sometimes it’s nice to find some passive income.

That’s where high-yield savings accounts come in. These accounts have higher interest rates and help your money grow faster. If you’re serious about your savings, then you should be serious about your savings account.

The CIT Bank Savings Builder Account is a popular savings account, but it requires a hefty balance or monthly deposit to get the full benefit.

What Is the CIT Bank Savings Builder Account?

The CIT Bank Savings Builder Account is the bank’s best savings account option. It’s a high-yield account that provides customers with a .45% APY on balances more than $25,000 or with $100 monthly deposits.

This is much higher than what you’d find at a traditional savings account from a brick-and-mortar bank. According to the FDIC, the average interest rate at a savings account is .06%.

If you have $10,000 in a CIT Bank Savings Builder Account earning .45% APY, you’d earn $45.10 in interest after one year. If that money were in a traditional account, you’d only earn $6.

After five years at a CIT Bank account, you’d have earned $227.45 in interest. You’d only have $30 at a traditional bank — still less than what you’d earn in one year at CIT Bank.

For customers with less than $100 in monthly deposits or $25,000 in savings, the interest rate will be .29% APY. 

The account is FDIC-insured up to $250,000, like most types of checking and savings accounts. That means your money is safe with a CIT Bank account.

Also similar to other savings accounts, withdrawals are limited to six per statement cycle.

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0.80% APY

$100 Minimum Deposit

DollarSprout Rating

CIT Bank's Savings Builder makes saving easy. Automated monthly deposits help account holders grow their savings without the hassle of in-person banking. Deposit $100 or more monthly to qualify for the highest interest tier.

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Pros

• No monthly fees.
• Up to 0.80% APY if you meet the minimum balance or deposit requirement.
• Can open an account online in 10 minutes or less.

Cons

• Must have a $25,000 balance or $100 monthly deposits to qualify for the higher rate.
• Drops to 0.33% APY if you don’t maintain requirements. 

How Does the CIT Bank Savings Builder Account Work?

The CIT Bank Savings Builder Account is similar to other online-only savings accounts, but there are some discrepancies that potential customers should be aware of.

There are strict requirements. There are two interest rate tiers for the CIT Bank Savings Builder Account. To qualify for the highest tier with the .45% APY, you have to keep a $25,000 balance or make a minimum $100 monthly deposit each month.

If you don’t meet those rules, the interest rate drops to .29%. 

The interest rate may change. Consumers may remember that the CIT Bank Savings Builder Account used to have a much higher interest rate. That has since changed because the Federal Reserve cut interest rates several times in 2019 and 2020.

When the Fed lowers rates, banks and lenders follow suit. This usually results in banks dropping the interest rate on savings accounts. That also means that if the Fed raises rates, then banks like CIT may increase rates as well.

CIT Bank seems to have lowered its rates below major competitors like Ally and Capital One. It’s almost impossible to say when the interest rate will increase or if it will surpass other online banks.

Advantages of the CIT Bank Savings Builder Account

The Savings Builder Account comes with a couple of solid advantages.

You can open an account online. The CIT Bank Savings Builder Account is online only, so customers don’t have to open the account in person. This makes it available to people who live in rural areas or in small towns and don’t have a branch nearby.

CIT Bank also has a mobile app where you can deposit checks and transfer money.

No fees. CIT Bank doesn’t charge any monthly fees for its Savings Builder Account, even if you don’t meet the $25,000 or $100 monthly deposit requirement.

Disadvantages of the CIT Bank Savings Builder Account

This account isn’t right for everyone. Here are some downsides to keep in mind:

You need to have a $100 minimum opening deposit. Even though there’s no official minimum balance requirement, you do need to deposit $100 to open the account. This can be a struggle for those fresh out of college or living paycheck to paycheck.

Bad customer service reviews. Reddit users complain that customer service is slow and that their phone representatives appear to be understaffed.

Others say that CIT Bank doesn’t notify customers when the rate decreases. This can be disconcerting, especially because other banks like Ally do email customers when the rate changes.

CIT Bank Savings Builder Alternatives

For those who want a higher interest rate or need fewer requirements, there are plenty of other banks to check out.

Ally

Ally is one of the top online banks and is known for its high-yield savings accounts. Unlike CIT Bank, Ally doesn’t have any minimum balance or deposit requirements for this account.

Ally also lets customers create savings buckets, which are like sub-accounts within one savings account. If you have a few different savings goals, you can create a bucket for each of them so you know how much you have saved for each goal. The maximum amount of buckets is 10.

Capital One

Capital One is one of the most popular online high-yield savings accounts. 

Unlike CIT Bank, there are no minimum balance or deposit requirements. There are also no monthly or annual fees.

While Capital One is mostly an online bank, it does have some physical locations. These are mostly in major cities like Chicago, New York, and Los Angeles. 

Citibank

Citibank’s savings account has no minimum opening deposit and no balance requirement.

However, if you don’t have a balance of at least $500, you’ll pay a monthly fee. If you can’t meet this balance requirement successfully every month, then you shouldn’t open the account. You wouldn’t earn enough in interest to make up for the fee.

While Citibank has locations in a dozen states, it also offers online access to its savings account.

Savings Builder Review Summary: Who Should Use This Account?

If you’re looking for one of the best online savings accounts and meet the requirements necessary for the Savings Builder account, then it may be an appropriate match.

The difference between the CIT Bank Savings Builder account and other high-yield savings account is minimal, even with higher deposits.

The post CIT Bank Savings Builder Review 2023 appeared first on DollarSprout.