Banking and Savings

Basics of Saving  Pay yourself first – savings should be a fixed expense!  Save any amount you can.  Save early. It’s all about building good habits.

Banking Alternatives pawn shops charge very high interest for loans based on the value of tangible assets (such as jewelry or other valuable items). check-cashing stores charge high fees (sometimes 2 or 3 percent) just to have a paycheck or government check cashed. rapid-refund tax services provide “instant refunds” when you pay to have your federal tax return prepared. However, this “instant refund” is a loan with interest rates as high as 120 percent. check-deferral services/ pay-day loan stores allow consumers to get a cash advance on their next paycheck. However, these short-term loans are very expensive. A $200, two-week advance may cost over $30 (with annual costs exceeding $900). These are not credit-building tools!

Payday Lending  They are reported to the credit bureau, but…  They have a very minor impact on your score if you pay it off on time  If you DON’T pay it off on time, it can ruin your credit  The risk outweighs the benefit  It will show as a payday loan on your report – which unfortunately has negative connotations  And, can you pay it off within 2-3 pay periods?

Payday Lending – Do the Math  You will usually pay around $600 for borrowing $500 – IF you pay on time!  $100 more in interest for extending for two additional weeks  If you do not pay that amount, the high interest rates can result in fees of over$1000 if payments are spread out over six months  It’s a cycle – payday loan stores make money when you cannot pay in time, and they won’t tell you about the 400%+ APR rates

Other Options  Negotiate a payment plan with the creditor  Charge the amount to your credit card  Receive an advance from your employer  Use your bank’s overdraft protections  Obtain a line of credit from an FDIC approved lender  Borrow money from your savings account  Ask a relative to lend you the money  Apply for a traditional small loan  Ask your creditor for more time to pay a bill  Use a cash advance on your credit card

Money is secure FDIC guarantees your money No direct deposit fees Interest earned is free money Banks SAVE YOU money! No per transaction fees Why Bank? Banks can save you up to $1,000 per year in transaction fees!

Compound Interest  Banks allow you to gain compound interest, unlike currency exchanges, check-cashing stores, and pay-day loan stores. Interest is money that the bank gives you for leaving your money in their hands  Compound interest formula:  M = P( 1 + i ) n M is the final amount including the principal. P is the principal amount. i is the rate of interest per year. n is the number of years invested.

Compound Interest at Work  Let's say that I have $ to invest for 3 years at rate of 5% compound interest  M = 1000 ( ) 3 = $  You can see that my $ is worth $ over 3 years  The bank is paying you approximately $52 per year to keep your money

Saving in a Tough Economy  A struggling economy means low interest rates, and $52 dollars might not seem worth the time, but an emergency fund will always help you in the future  Reasons to save:  Emergencies and unexpected expenses  Medical expenses  Obtaining a secured credit card  Easy savings tips:  Envelope system  Paying yourself back  Setting up automatic transfers  Saving spare change

Online Savings Accounts Here are the savings accounts with the highest yields that are available nationally and FDIC-insured (meaning your money is protected if the institution fails), according to an analysis from bankrate.com:  Barclays Online Savings APY: 0.90% Requirements: No minimum balance. What to know: No fees, and customers can link their savings account to accounts at other banks.  GE Capital Bank Online Savings Account APY: 0.90% Requirements: Must deposit at least $1 to begin earning interest. What to know: No monthly fees, limit of six withdrawals per month

Online Savings Accounts, Continued  Sallie Mae Money Market APY: 0.90% Requirements: No minimum balance. What to know: No monthly fees.  American Express High-Yield Savings Account APY: 0.85% Requirements: No minimum balance. What to know: No monthly fees, and customers can link their account to existing accounts at other banks.

Using Your Debit Card The funds will leave your account immediately. Paying with DebitPaying with Credit The funds may not leave your account immediately. The merchant will be charged a fee that is a percentage of your purchase. Some banks may charge you a processing fee for choosing debit. The merchant will be charged a flat fee for the purchase. Some banks will give you rewards for signing with credit. Even if you choose “credit” you are still using your money!

Overdraft Protection Even if you don’t have sufficient funds in your account, your bank will let your check or debit purchase clear. Most banks charge a FEE for overdraft protection. AND the amount of your overdraft might be considered a loan and you will need to pay that money back with interest. It may be better to deny overdraft protection and avoid overdrawing by ALWAYS KNOWING HOW MUCH YOU HAVE in your account.

Payroll Options NOTE: It is NOT necessary for you to choose a payroll card, and your employer should not make it mandatory! Paper Check: check-cashing fee, delay in deposit Direct Deposit: goes directly into your bank account, immediate delivery on payday Payroll Card: monthly fee, minimum balance fee, reload fee, transaction fee, minimum deposit fee

Which bank is right for me?

Things to Consider Is the bank FDIC insured? Will my deposit be safe? FDIC Insurance Are there monthly maintenance fees or minimum balance fees? What is the overdraft fee? Are there fees for debit transactions (using your debit card)? Fees Does the bank have convenient branches and ATM locations? Location Consider the Interest rate. Is there a minimum balance required to earn interest? Interest

Bank on Chicago  Low or no monthly fee (less than $15 required)  Low or no opening deposit requirement (less than $50 required)  No monthly minimum balance requirement  Provide a pathway to a checking account for individuals with ChexSystems records  Accept at least one form of alternative identification (for example, Foreign Passport, Mexican Consular Card, ITIN, etc.)  Free check cashing (at least two times per month)  Offer affordable bill payment options (less than $1.50 per bill)  Provide clear and brief explanation of banking basics and terminology in plain language  Offer Savings accounts – subject to eligibility requirements

Credit Unions vs. Banks Credit Unions Better interest rates Lower fees Commitment to community Not-for-profit Members are shareholders More locations Great online banking tools More account options Banks Different people have different needs – find the institution that is right for you!

Read the Fine Print  Not all bank accounts are equal  You need to read the fine print to figure out which one is best for you  Consider your NEEDS and HABITS when choosing an account, and don’t just pick the one with the most features

ChexSystems  Network is comprised of member financial institutions that regularly contribute information on mishandled checking and savings accounts to a central location  Completely different from your credit score and credit report  Keeps track of your debit history  Order you FACTA Free Annual report (your ChexSystems history) at consumerdebit.com or call

ChexSystems Record  Any checking account closures you have had  Any returned (bounced) check retailers have reported about you  How many financial institution inquiries have been made about you and in what timeframes  How many check orders you have placed and how often Having a bad ChexSystems report can keep you from opening a new account and could cause you to pay extra banking fees!

Online Banking Check AT LEAST twice a week! 1 Know how much you have in your account and avoid overdraft fees 2 Catch any retail errors 3 Ensure there are no unauthorized transactions But don’t forget about checks that haven’t been cashed!

 Direct deposit  Paychecks  Tax refunds  Automated bill payments  Utilities, electricity, etc.  New Technology  E-checks  Text message updates  Smartphone deposit (Very easy: just click and drag)

Thank You