If you’ve made it through 6 Steps to A Better Checking Account, you are ready for a few other ideas to turn your checking account into a potent tool for managing your finances:

1. Don’t be afraid of multiple accounts – You have to start with one checking account, but that doesn’t mean you have to stop there. Most banks and credit unions will let you have multiple accounts, often free just like the first one. Personally, I have one for the house, a second for business and a third for myself. It’s a little more work, but it makes keeping the cash straight much easier. No more worrying that you spent your business reimbursement on that quick trip to Atlantic City.
2. Don’t assume that once you start with one bank, you can’t do business with another – The big bank on the corner would love you to believe that once you have an account with them, you’re with them for life. Once you start believing that, you may not notice that their auto loan rates are 0.25% higher than the other guys, or that their mortgage folks charge an additional $100 on loan origination. It is a slippery slope.
   Every financial transaction stands on its own. Look for the best deal every time, and don’t let loyalty to your primary bank make you accept being overcharged for an identical pile of money. Having familiarity with a bank means you should at least consider them on the next financial transaction, but it gives them no guarantee of your future business.
3. Don’t always be swayed by the interest rate – My local bank once offered me a decadent 1.5% interest on my checking account, so I did a little math. If you have an average balance of $1000, 1.5% will net you $15 every year. Great! But if your balance drops below $250 at any point during any month (stick with me, I know this would never happen to you), there is a $20 monthly service charge. If it happens again a second month – boom, another $20. Something tells me the bank was betting on one or two of those fees every year.
   You can use the same approach to evaluating an extra 0.25% with some bank by mail institutions. Yes, 0.25% is real money and the banks are just as well insured. But compare how much extra you earn per year ($2.50 on a $1000 balance) versus the inconvenience of mailing every deposit, waiting an extra three days for deposits to clear, plus the cost of stamps and envelopes. That extra quarter point hardly seems worth the effort.
4. Don’t be afraid of smaller institutions if they meet all your other criteria – I love my credit union – it’s where I have most of my everyday banking accounts. They are convenient, frugal and no frills. Sure, their jingles aren’t as catchy, but when I need to get a loan approved fast, they don’t have to run to the Loan Advisor department in Des Moines to get it approved. More importantly, their rates are consistently a little better than the big banks.
   Credit unions used to be hard to join, but that is seldom the case any more. Be sure to consider them before if you are looking for good, basic service.

(Photo Credit – aeropw)

Sure you have a checking account – nearly everyone does. And you probably selected for perfectly reasonable considerations at the time: the bank because it was where your parents set up your savings account when you were three, or there was a branch near your school, or you thought they had a great radio ad.

But now that you are out on your own, it is probably time to check out the competition. Rest assured, with a potential for steady income, every bank in town wants you as its customer. Of course, once you get past the marketing hype, you need to look at things like their monthly minimum balances and the many creative ways they have to charge you extra fees. Once you do, you may start to wonder who exactly wants to give these people their money in the first place.

To avoid being one of those souls stuck with a boring checking account in a thankless bank, here is a checklist of things you should consider when a doing a checking account review:

1. Nearby branches – You are going to receive a lot of checks in your life. Having a branch nearby where you can immediately make a deposit will make all the difference in the world. You are simply asking for trouble when you have a bunch of checks you drag around with you day after day, waiting until you swing by a branch to deposit them.
   And while rates may be better with some online banks, don’t underestimate how inconvenient it is to to mail every check you receive to someone far, far away and wait for the check to clear. This may be fine for secondary accounts (more on that in Part 2), you will want to have your primary account somewhere very close to home.
   Want to find all your local choices? Go to maps.live.com or maps.google.com and type in “bank near your address” and see who comes up. That is your starting point.
2. Nearby ATMs – Most banks have ATMs out front, but don’t forget all the other places you regularly go where you may need cash. Think of places like the office, the grocery store, your favorite afterhours hangout, or the airport. Remember too that while regional (think smaller) banks often have lower fees, if you plan to travel regularly, a national bank could save you a lot in nuisance ATM fees.
3. Zero monthly fees – There was a time when free checking was a big deal, but now banks view checking accounts as an inexpensive way to get you accustomed to banking with them. As banks have become more competitive, free checking is a given.
   Of course, banks had to come up with some clever ways to get money from you anyway. Today, free checking can come with some serious strings, like minimum account balance, or guaranteed direct deposit of your paycheck, or something really unusual like a commitment to use their debit card as a credit card a few times every month. Personally, I can’t imagine spending my free time stressing out about whether I used a debit card ten times a month to save a few bucks on checking, especially when there are better deals around the corner.
   Unless you are certain the bank’s requirements for free checking will not be a problem for you, feel free to check out another bank.
4. Overdraft protection – It happens to everyone sooner or later. Even with your diligent attention to your checking balance, at some time in your life, you will inadvertently bounce a check. When you do, you will learn just how many creative ways your bank has created to remind you that you don’t want to do this a second time. Returned check fees, insufficient fund fees, redeposit fees and more – the list gets longer every year.
   The antidote to bounced check fees is overdraft protection. Overdraft protection is a loan that you only use when you need it. When you withdraw more funds from your account than you have on hand, money is taken from the overdraft account to make up the difference. Of course, you owe the money back, but paying a few days interest is far more attractive than $50 in bounced check charges.
   Ask about overdraft as you are setting up your checking account, and get it set up at the same time. If you can get a credit card, you can get overdraft protection from your bank. It’s worth the hassle.
5. Online access – Today, nearly every financial institution offers online access to your account. You should be able to view balances and recent transactions at the very least, and to make payments and transfer funds if the bank really wants to impress you.
   Don’t just accept that the bank has online access available – find out what online services they really offer. Don’t settle for poor online service. The best ones offer services like SMS messages to let you know that your funds are dangerously low, mobile applications for your cell phone, and automatic feeds to financial products like Quicken or mint.com.
   Insist on online access as part of giving them your business, and look for banks that think of online services as an integral part the way they do business.
6. Cold hard cash – Okay, you found two banks with everything you are looking for. How do you pick the winner? Thirty years ago or so, banks used to lure in new customers by giving away free household appliances, like toasters or electric can-openers. Really, you’ve got to marvel at the creativity. Nothing says quality banking services like a small electric skillet.
   Today, because basic banking services like checking and savings have become a commodity, many banks have taken the less subtle approach to lure you in – cash. The idea is that once you find how convenient they are, you will stick with them. If they meet every other criteria and are willing to pay you to prove it, who are we to say no?
   Once again, though, read the fine print. Often the requirements that go with that cash (direct deposit, remain active for 180 days, limited online capabilities, nearest branch two states away) can make it less attractive that it first appears.

We’ll have even more thoughts on checking accounts and banks in the next post. Stay tuned… Check out 4 Ways to Further Improve Your Checking Account.

(Photo Credit – aeropw)

Forbes recently examined the financial impact of college debt, looking at both the short and long term implications of some pretty hefty student loans. Forbes draws interesting comparisons between the rapid accumulation of debt for degree programs and the mortgage craze of a few years ago.

As the article points out, a lot of students get in trouble racking up debt for degree programs that ultimately may have little impact on their income. Just as in the mortgage mess, there are some striking similarities between the availability of mortgage loans to finance overpriced homes, and student loan for degree programs of questionable value. As the article states, the parallels are uncanny and troubling:

Misguided easy-money policies that are encouraging the masses to go into debt; a self-serving establishment trading in half-truths that exaggerate the value of its product; plus a Wall Street money machine dabbling in outright fraud as it foists unaffordable debt on the most vulnerable marks.

While there are many very good degree programs, there seem to be a growing number of schools and complicit loan providers providing education and the means to pay for it with highly inflated claims of value. The most important takeaways:

• Know what you are buying when you pay tuition. The real value of getting a college education is expanding your personal horizons. If you don’t absolutely love the program of study, or at least believe it will improve your income down the road, you probably shouldn’t be spending your time or money getting a degree.
• Recognize that every college degree does not necessarily increase your earning potential. The employment market determines whether a degree will add to your personal income. For better or worse, some degrees are simply worth more than others.
• Shop around for college loans just like any other financial product. Avoid paying unnecessary loan origination fees and inflated interest rates.
• Just as you should carefully evaluate a loan offer you get in a car dealership, you need to be equally wary of financial aid officers – especially if their primary job is to sell you a degree program. Sadly, their motivations are often the same. “What would it take to get you into a degree program today?”

You can read the full article here.

(Photo Credit – marganz)