A checking account at one bank is the same as a checking account at another bank, right? Well, maybe not. In fact, according to the J.D. Power 2021 U.S. Retail Banking Satisfaction Study, now 41% of people do all their banking online. This is a pretty big shift from traditional banking.
After reviewing the financial strength of a bank, here are several other things to consider as you decide what’s really most important to you in selecting a bank.
The online bank versus nearby location
While having a nearby brick and mortar location is important to many banking consumers, you might find better interest rates with an online-only bank because they don’t spend lots of money to maintain physical branches. As people switch to taking care of all their basic banking transactions online, one of the reasons to visit your local bank branch is to talk with a banker. If you believe you’d benefit from such discussion, make sure the online bank you’re considering will facilitate that for you.
Understand key bank fees
In addition to charging loan fees when they lend out money, banks bring in much of their revenue by charging fees on your deposit accounts. You’ll have a much more positive experience by ensuring your bank’s fees don’t outweigh the benefits of the account you’re considering. Here are three key fees to understand:
- Monthly maintenance fees. This is a monthly fee a bank charges on an account. Understand how yours works. Banks will waive these fees if your account is above a certain balance. Others waive the fees if you behave in a way they want you to behave. For instance, if you use a debit card versus writing a paper check. Others want you to make direct deposits. Still others want you to use their bill pay service. Understand this fee class and determine if you can abide by the terms your bank sets for them.
- Overdraft fees. These fees are charged to a checking account if you attempt to buy something but don’t have enough money in your account. There are a variety of ways to avoid overdraft fees, such as signing up for a protection program or linking your savings account to automatically pay the rest of the bill. Take the time to understand your bank’s options to avoid overdrafts and the cost associated with them.
- ATM fees. Some ATMs require you to pay money to use their machines, especially if the ATM you’re using isn’t in your bank’s network. Don’t overlook the opportunity to save money by ensuring that the bank you’re considering supplies ATMs in your area so you won’t have to pay a fee every time you need to use an ATM.
Other banking tools
Banks often provide tools to help you budget your daily and monthly expenses. Many offer free credit scores and credit monitoring. Others offer automatic transfers into a savings account. Still others offer the ability to open multiple savings accounts and label each account for different purposes.
Keep these tips in mind the next time you need to choose a new bank. With many different banks to choose from, a little research can ensure the bank you choose fits your financial needs and priorities.
It’s hard enough to watch your child leave for college. Now you also have to say goodbye to the tuition and fees tax deduction. Congress decided not to extend this $4,000 deduction for 2017, leaving many parents worried that college will now be more expensive.
But it isn’t as bad as it sounds. That’s because Congress left in place two popular education credits that often offer a more valuable tax break:
The AOTC. The American Opportunity Tax Credit (AOTC) is a credit of up to $2,500 per student per year for qualified undergraduate tuition, fees and course materials. The deduction phases out at higher income levels, and is eliminated altogether for married couples with a modified adjusted gross income of $180,000 ($90,000 for singles).
Lifetime Learning Credit. The Lifetime Learning Credit provides an annual credit of 20 percent on the first $10,000 of tuition and fees, for either undergraduate or graduate level classes. There is no lifetime limit on the credit, but only couples making less than $132,000 per year (or singles making $66,000) qualify. Unlike the AOTC, this deduction is per tax return, not per student.
So who is affected by the loss of the tuition and fees deduction? If you are paying for your student’s graduate-level courses and are making too much to qualify for the Lifetime Learning Credit, the tuition and fees deduction was generally the only means you had to reduce your tax bill.
But there’s still hope! In addition to the two alternative education credits, there are many other tax benefits that reduce the cost of education. There are breaks for employer-provided tuition assistance, deductions for student loan interest, tax-beneficial college savings options, and many other tax-planning alternatives.
Each year a new crop of graduating high school seniors begin their collegiate careers while college graduates consider the opportunities that graduate school provides. As a result, the mountain of student debt continues to build. While this debt is unavoidable, here are some ideas to help make that mountain a little less insurmountable.
Know the note – Not all student debt is created equal. Understanding the terms of all your student loans is important. With this knowledge, select the correct loan option and know which loan to pay first. Things you should know about each loan include:
- The interest rate
- The term of the loan
- Amount of any up-front fees
- Pre-payment penalties (if any)
- When interest and payments start
- Payment amounts
- Payment flexibility
- How interest is calculated
Suggestion: Create a spreadsheet with a student loan in each column. Then note the variables from this list under each note. It will create a strong visual of your student loan situation.
Pay the interest – Some student loans accrue interest while you are in school. With the compounding of this interest, your student loan amount continues to grow with each passing year before repayment begins. Banks love this. You should not.
Suggestion: Figure out how to make the interest payments while in school. This will not only lock the amount you owe, it will reduce the amount of interest payments you will be paying on your interest.
Pay a little extra in the early days – The math of loans benefits banks in the early years of the note. This is because the vast majority of interest is paid by you in the first years of repayment. The last year of your loan repayment is primarily principal payments.
Suggestion: Pay extra every month as soon as payments start. While this seems impossible as you enter the workforce, even $10 extra a month can dramatically reduce the amount of total payments you make over the life of your loan.
While student debt is an unavoidable outcome of getting a great education, it can be minimized if actively managed. Remember small changes can yield results if planned for in advance.