Author: Chanelle Bessette

Should You Swap Your Bank Account for a Digital Wallet?

Posted on by Chanelle Bessette

Cashless and contactless payment options have been on the rise for years, spurred by the COVID-19 pandemic. Hand-in-hand with these options, digital wallet apps and services have also increased in popularity. An estimated 60% of the global population — 5.2 billion people — will be using digital wallets by 2026, according to a 2022 study from the data analytics group Juniper Research. As digital wallets have become more widespread, are they viable replacements for bank accounts? Here’s what you need to know.

What is a digital wallet?

A digital wallet is an application or service — typically on a smartphone — allowing users to store debit and credit card information and passwords. Some digital wallets can also store electronic tickets, passes, gift cards and personal identification cards, said Francisco Alvarez-Evangelista, advisor at the financial analysis company Aite-Novarica Group, by email. PayPal, Apple Wallet, Google Wallet and Samsung Wallet are some examples. Though you may lean toward using whatever app is associated with your smartphone, you can also download other digital wallet apps.

There is also some crossover between digital wallets and payment apps such as Venmo since many of these apps have begun to offer many of the same features, like peer-to-peer money transfers and special branded credit cards, as well as the ability to store a cash balance in the app. In some cases, such as when paying for an item or service, the terms “digital wallet” and “payment app” could be used interchangeably.

Can I use a digital wallet instead of a bank account?

You can use a digital wallet instead of a bank account, but there are some significant caveats to consider.

A digital wallet is essentially a collection of your payment cards in one place, but it could also be a place to keep cash, such as your Apple Cash or Venmo balances. This tactic has some downsides, namely that you don’t earn interest, and the Federal Deposit Insurance Corp. might not protect your funds. Some exceptions exist; Venmo, for example, takes funds directly deposited or deposited through the “cash a check” feature and sweeps them into partner bank accounts so that customer funds can be FDIC-insured. As far as interest goes, however, you’re more likely to earn a good return on your money by putting it into a high-yield savings account instead, where interest rates have been increasing.

“While it is possible to replace a bank account with certain digital wallets, most consumers have banking needs that exceed what most digital wallets today offer,” Alvarez-Evangelista said. “While not all digital wallets are the same, most consumers look to digital wallets to augment their financial experiences online.”

A mix of digital wallet apps and bank accounts might meet your needs better than using one alone since you might need different apps when sending money to different people. Also, if you have credit cards compatible with specific digital wallet services — such as the Apple Card or the Venmo credit card — then having the companion app can lead to additional benefits, like bonus cash back.

How to use a digital wallet

Open or download the app. If your mobile device has a built-in wallet, e.g., the Apple Wallet on an iPhone, you may want to explore the app to see if it suits your needs before downloading another app. If you’d prefer to use another service, perhaps to pay a merchant at a farmers market that only accepts a specific app, you can download a new one.

Create a profile and add your payment info. Your app should walk you through the setup process, where you’ll create a user profile. After your profile has been set up, you should be able to link different debit cards, credit cards and bank accounts to the app. Your app may also allow you to hold a money balance in the app, similar to a bank account, in that you’ll be able to add to it and withdraw from it.

Use your smartphone to make contactless transactions. If you’re using a smartphone digital wallet, your phone will be able to be “tapped” at a payment terminal, using near-field communication for the transaction to go through as the two electronic devices trade payment information.

Consider whether you want to maintain a balance in your wallet. As mentioned above, a digital wallet might not be the best option for storing liquid cash, especially not large amounts. However, having a small balance available can be helpful when you need to send money to friends or family on the fly, such as to pay for your share of a dinner tab. You can also link payment cards or bank account information if you don’t want to pay from your app balance.

Ask a Nerd: How Can I Avoid Overdraft Fees From Overspending?

Posted on by Chanelle Bessette

If you’re like me, this week, you’ll probably feel the same thankful I-don’t-need-to-shop-this-much-again-for-another-year sigh of relief. But even when the year-end holidays have passed, you might still be seeing the ghosts of all your purchases on your bank statement, especially if you overspent to the point of overdrafting and are dealing with extra fees.

Leaning on overdraft coverage — where you spend more than you have in your checking account and have to rely on your bank to pay for your transaction — as a remedy for overspending can be costly. Many overdraft fees are $30 or more per occurrence, and you may be hit with that fee multiple times if you keep spending. Here are your options for overdraft protection and some tips on how to avoid overdrafting during the next big spending season.

Common overdraft protection options

Here’s my quick breakdown of the overdraft protection options that banks typically offer:

Overdraft protection transfers. Many banks will let you link your savings account to your checking account and pull in your savings to cover the cost of an overdraft. Be careful, though: Banks sometimes charge a fee for this service.

An overdraft line of credit. Potentially a very costly option, an overdraft line of credit will cover the cost of your overdraft but will likely have an interest rate that is comparable to that of a credit card.

A grace period or buffer amount. Many banks are introducing longer grace periods where you aren’t charged a fee for a day or two after your overdraft so you have time to add money to your account. Some banks are offering buffer amounts, meaning that overdrafts are covered up to a certain amount, like $100, until you’re able to put more money into your account.

Opt out. If you don’t want to deal with the hassle of worrying about overdrafts, you can opt out of all coverage options and your bank will simply decline any transactions that would result in an overdraft. You’ll avoid fees this way, but it can also be awkward if your debit card doesn’t go through when you’re trying to make a purchase.

Banks are taking steps to make it easier for customers to handle overdrafts, but there are also plenty of tactics that can reduce the chance of an overdraft.

Prep for the future to avoid an overdraft

Here are some other tips for avoiding overspending:

Set up low-balance alerts. Most banks allow you to set up low-balance alerts, where your bank will text, email or send a push notification to let you know when your account drops below a certain threshold, like $50. This service can give you a heads-up that you need to be careful with your spending.

Keep an eye on automated payments. Automatic subscriptions and bill pay can be a surprise, making a low balance and an overdraft more likely.

“Keep track of any and all auto payments that regularly occur, and plot them on the calendar to remind you when they should be coming,” said Nia Adams, a personal finance educator at Perspectives, via email. “Many times, funds come out on different days depending on when weekends and holidays fall.”

Shop for a bank with a better overdraft policy. If your bank is particularly harsh with its overdraft fees, now is a great time to shop around, as many banks are reducing or eliminating their overdraft fees.

Budget for the next holiday season. Perhaps holiday spending is a regular tripwire for your budget, and overdrafting becomes a higher risk for you at that time of year. If that’s the case, you might want to reevaluate how you spend on gifts.

“Create a holiday-specific plan,” said Patrina Dixon, founder and CEO of It’$ My Money, via email. “Try to lean towards sentimental gifts as opposed to expensive ones.”

She suggested framing photos from happy memories with your loved one.

“Or,” she added, “make a list for gifts by person, and add an actual gift suggestion and max dollar amount you plan to spend for each. Be sure that total is noted in your budget.”

Consider using a prepaid debit card. If you want to put the guardrails up on your spending, consider getting a prepaid debit card during a spendy season. Since the card isn’t linked to an account, you won’t be able to overdraft, and you’ll be able to use the card like a regular debit card.

Budgeting takes a lot of willpower, and the holidays can be a crucible that tests your spending habits. But with some planning and account setup, you can be better prepared to handle the expenses that come with the season.

Chanelle Bessette writes for NerdWallet.

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4 Bank App Features You Might Be Missing Out On

Posted on by Chanelle Bessette

If you use your bank’s mobile app, you likely have access to an array of features, some of which you may not know about. These features could make saving, earning cash back, budgeting, increasing your financial security and checking your credit score easier depending on what services your bank offers. Here are some features to look for in your banking app and any banking apps you may be considering for the future.

Cash back offers or statement credit on debit spending

Your bank might offer opportunities for special cash back or statement credits either as a flat percentage of your spending or for spending at specific retailers. SoFi Checking and Savings and LendingClub offer these kinds of spending features, as do some major banks such as Discover and Chase. For example, Logan Allec, a certified public accountant and owner of Choice Tax Relief in Santa Clarita, California, says the Chase app helped him discover lots of opportunities for statement credits from debit card spending.

“I was scrolling through the app one day and saw the list of Chase offers for debit card spending,” Allec says. “A lot of them are for places I never shop, but I use home improvement stores a lot and one popped up for the Home Depot for 10% back as a statement credit.”

Budgeting features and insights

Some bank apps make saving and budgeting easier by allowing you to direct money toward specific goals or by giving a better overview of you’re spending.

Sara Lohse, director of marketing at a financial services firm in Austin, Texas, discovered a unique feature for her savings account that allowed her to break up her savings into subaccount “buckets.”

“I use Ally for my main savings account, and I use the savings bucket feature to save for different financial goals,” Lohse says.

She used the buckets feature for saving for a down payment on a house, her emergency fund and house furnishings. Her parents were matching her down payment contributions, so she set up a bucket for that as well.

“I had a bucket labeled ‘Mom, put money here’ so that she knew which bucket to contribute to,” Lohse says.

Another app feature that could help you manage your money? The ability to look at your overall spending trends. PSECU, a state-chartered credit union in Harrisburg, Pennsylvania, offers its customers a “financial insights” tool in their mobile app. The tool gives a monthly recap of your cash flow and how much you spent versus how much you brought into your account, and it learns your spending habits over time.

“If you spend more on Dunkin’ Donuts this month than last month, for example, it’ll trigger an alert for you that your spending has gone up in that category,” says Lindsay Oparowski, director of member experience at PSECU. “Awareness is the first step to budgeting, and that’s the power this tool is giving you.”

Advanced security features

Security is a major consideration for your finances. As a result, more banks are integrating advanced security features such as multifactor authentication, biometric identification for logins, remote card locking and new card activation. Multifactor authentication uses additional methods of verifying that you’re you, such as sending a confirmation number via text or email. Biometric information, including facial and fingerprint recognition, helps confirm your identity to the bank app.

Remote card locking is also available through many apps, and it allows you to render your debit card unusable if it’s missing or if you want peace of mind that no one will try to use it. You can typically unlock the card anytime. If you receive a new debit card in the mail, you can likely activate it from your mobile bank app as well.

Credit score approximations

A more common feature appearing in bank apps is a credit score estimate. These scores are simulated by evaluating the factors that make up a consumer’s regular credit score, but they don’t require a hard pull on the customer’s credit report, which would usually make their score drop a bit temporarily. Credit score estimates aren’t always perfect reflections of your actual credit score, but they tend to be close enough to give you a general idea of your financial standing.

Chanelle Bessette writes for NerdWallet.

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How to Save More When Inflation Makes Your Money Count Less

Posted on by Chanelle Bessette

The investing information provided on this page is for educational purposes only. NerdWallet does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments.

When it comes to spending power, inflation means that things cost more and that your money becomes less valuable. When a period of high inflation hits — like right now — you may want to consider changing up the way you handle your finances to help protect the value of your cash.

“Inflation is a time for investors and savers to reevaluate their strategies,” says Walter Russell, CEO of financial advisor firm Russell and Company.

Through the Federal Reserve, the government tries to combat inflation on a large scale by raising the federal funds rate, which is the interest rate that commercial banks use to borrow and lend money to each other.

When the cost of borrowing becomes more expensive, higher interest rates trickle down to consumer products such as loans and mortgages, making them more expensive. But higher interest rates may also apply to deposit accounts, meaning that banks start to offer higher interest rates on checking, savings and certificates of deposit.

No one knows what the future will bring, but by making changes to how you spend and where you keep your money, you may be able to weather times of inflation more easily.

Here are some ways to save more during periods of inflation.

Look for high-yield interest rates

It can be frustrating to not be able to get loans for big purchases as easily during periods of high inflation. Still, consumers can take advantage of higher interest rates on bank accounts to fight the effects of inflation on their cash. Bank account interest rates usually don’t totally beat the rate of inflation, but these accounts can help hedge against inflation far better than keeping cash at home or in a low-rate account.

The national average annual percentage yield for savings accounts is 0.06%, according to the Federal Deposit Insurance Corporation, but there are plenty of financial institutions that offer rates that are much higher — some even 1.00% APY or more. To find these rates, you can research high-yield or high-interest accounts and choose the bank that works best for you.

Find ways to keep costs low

If you haven’t looked over your budget in a while, now may be a good time. During the pandemic, you may have subscribed to multiple streaming services that you don’t use anymore, or you might be spending more money dining out or paying for more convenience services now.

Some people are taking even more radical steps to save money. Amanda Claypool, a financial blogger based in upstate New York, has recently made larger lifestyle changes to keep her costs low in the face of inflation. She spent 2021 living out of her car while driving around the country and plans to return to that way of living soon to save on housing costs. She’s also been trying to trim her budget by biking 16 miles round-trip to work and by eating more rice and beans, a cheap but healthy meal.

“I’m concerned about rising food costs and the impact that will have on the entire supply chain,” Claypool said through direct message. “I’m using the time now to prepare for future food insecurity by learning what food my body actually needs compared to what I enjoy eating. This might seem drastic, but it’s helping me save money and eat better in the short term.”

Not everyone can or wants to move into their car, but Claypool’s money-saving tactics can work on a smaller scale. You can bike more often instead of driving everywhere, and you can reevaluate your food budget to add more cheap healthy meals. For a bigger change, you could downsize your housing to save even more money.

Consider investing or buying bonds for long-term savings

It’s a good idea to keep short-term cash — like an emergency fund — accessible in a savings account, but if you have savings that you don’t expect to need for a year or more, you may want to consider investing those funds or buying a treasury bond.

“For someone who has a lot of cash sitting on the sideline, [investing] could help you not lose money,” Russell says. ”More people might be willing to take on more risk because they want a higher rate of return.”

Russell also recommends that consumers look into getting TreasuryDirect Series I savings bonds, which can give an interest rate of over 7% on up to $10,000 for a one-year term. These bonds are basically like a certificate of deposit: You put your money in one for a year, and by the end of the year you have a guaranteed rate of return that hopefully stays higher than the current rate of inflation — so your money won’t lose value.

The government will continue to review inflation data and make appropriate changes to the federal funds rate. However, there are other factors that may slow inflation in the coming year, such as changes to global supply chains that might free up inventory and lead to lower prices for goods. No matter whether inflation goes up or down, though, it’s a good idea to keep an eye on ways to optimize your savings.

This article was written by NerdWallet and was originally published by The Associated Press.

Chanelle Bessette writes for NerdWallet. Email: cbessette@nerdwallet.com.

The article How to Save More When Inflation Makes Your Money Count Less originally appeared on NerdWallet.

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From Cryptocurrency to Cash: How to Bank Your Digital Coin

Posted on by Chanelle Bessette

This article provides information for educational purposes. NerdWallet does not offer advisory or brokerage services, nor does it recommend specific investments, including stocks, securities or cryptocurrencies.

Cryptocurrency, the blockchain-based digital currency that has captured the interest of investors and financial service firms alike, has a challenging problem. It can be hard to actually spend this currency like you would regular money. But there are new services on the horizon that could help people use bitcoin and other digital coins in more mainstream ways for their day-to-day finances.

Here’s a look at how to use these banking-style services for cryptocurrency, as well as their benefits and barriers.

What is cryptocurrency banking?

The term crypto banking could be considered a misnomer, since the exchange companies and firms that offer these services aren’t technically banks, but it generally refers to the ways in which consumers can manage their cryptocurrency balances. At this stage, this kind of banking mostly just allows people to hold their funds in a digital wallet or spend it like they would spend traditional money.

Benefits of cryptocurrency banking

At this time, the main benefit of this kind of banking is cryptocurrency debit cards. They allow you to use your digital coin balance like any other currency to make everyday purchases or withdraw it as cash instead of keeping it as an investment.

Before these debit cards were available, you could spend your cryptocurrency only at retailers that chose to accept it directly or sell it in exchange for dollars. Now, financial technology firms are partnering with chartered banks and/or debit card issuers to offer these cards, using their partner’s logistical and regulatory framework to automatically sell your cryptocurrency behind the scenes, converting it into dollars and allowing retailers to accept it. This means that your digital funds are accepted wherever many regular debit cards are.

Barriers of cryptocurrency banking

Perhaps the biggest barrier to lending and spending cryptocurrency is how volatile it is. It’s the same barrier to investing in it: To hold cryptocurrency, you have to accept that “if your coin falls, you could lose a lot of money,” says Francisco Alvarez-Evangelista, a research associate at the Aite-Novarica Group, a financial services analysis firm.

Many banks rely on the stable value of currency in order to lend, borrow or earn interest on money, but it’s not possible, at this time, to do those things with cryptocurrency in a way that’s as stable or safe as with traditional currency.

And to spend your digital coin, you have to accept the risk that its value could go up after you spend it, since your transactions are based on the real-world value of your coin as it exists at that moment. For example, if the value of your cryptocurrency doubled after you bought a $5 sandwich, that means it effectively cost you $10. But the value could also go down, making previous purchases a good deal.

Another barrier to consider is that regulators are still evaluating cryptocurrency fintechs. The U.S. Securities and Exchange Commission recently announced that it was going to potentially sue Coinbase, one of the most well-known exchange firms, for offering a new lending product, and Coinbase has since canceled the product launch.

Consumers should also know that using a cryptocurrency debit card is considered a taxable event by the Internal Revenue Service, since the cardholder is technically selling cryptocurrency as they make transactions with their debit card. Some card issuers may automatically generate 1099 forms for their customers to use when filing taxes, but the consumer is still responsible for keeping track of their tax liability.

How to try cryptocurrency banking

To start using these kinds of banking services, you must first purchase cryptocurrency, such as bitcoin, litecoin, ether or any other currency that you would like to invest in. Cash App, Coinbase and PayPal are just a few companies with apps that have made it easier to purchase and sell cryptocurrency, even in small amounts, and store it in a digital wallet.

If you want to spend your balance easily, you’ll need to open an account with a firm that offers cryptocurrency debit cards and uses the kind of digital currency you own. Coinbase, for one, has a special debit card that lets customers spend any Coinbase assets they own and earn cryptocurrency rewards, but there’s currently a waitlist for new customers. BitPay, another firm, offers a prepaid Mastercard debit card that customers can use to spend their digital currency. There are others, but it’s not a widespread bank offering.

In the future, cryptocurrency could have the potential to be a source of peer-to-peer loans, where individuals can quickly and securely process loans to each other, according to research from CB Insights. It’s a huge area of untapped potential but for right now, the world of cryptocurrency banking is limited to a small pool of players with some very new products and services.

This article was written by NerdWallet and was originally published by The Associated Press. The author held no positions in the aforementioned securities at the original time of publication.

Chanelle Bessette writes for NerdWallet. Email: cbessette@nerdwallet.com.

The article From Cryptocurrency to Cash: How to Bank Your Digital Coin originally appeared on NerdWallet.

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How You Can Recover From a Bounced Check

Posted on by Chanelle Bessette

Bounced checks happen. Maybe you got an unexpected delay in receiving your paycheck before you mailed out your rent payment. Or maybe you forgot that you sent a check for your niece’s birthday and double-dipped that same cash on another check to the electric company.

Here’s how you can recover from sending a bounced check and how to prevent bounced checks in the future.

Steps to take when your check bounces

  1. Reach out to the person, business or organization that tried to cash your check. Whether your recipient was a friend, family member, roommate, landlord, utility company or anyone else that you want to pay, you should reach out to them as soon as you know your check bounced or is in danger of bouncing. This early communication should help mend any confusion or ill feelings that may arise, and you can get to work paying what you owe.
  2. Cover the bounced payment amount. Perhaps your bounced check was an accident and you just need to move a bit of money around. If that’s the case, try to cover your payment as soon as possible.

If you don’t have the funds on hand, then talk to the recipient about the circumstances of your financial hardship. They might be able to help you by setting up a payment plan to cover your payment in installments.

  1. Ask your bank if it can forgive your overdraft fee. If this is your first time bouncing a check, your bank might be more lenient about forgiving your nonsufficient funds or overdraft fee. If this has been a pattern of behavior, however, then your bank might become more stringent about requiring that you pay your overdraft or nonsufficient funds fee.
  2. Pay your fee if it can’t be forgiven. If your bank isn’t budging on your returned check, nonsufficient funds or overdraft fee, then you may have to pay it in order to remain in good standing with your bank. Consider shopping around for a new bank with a lower overdraft fee.

Potential consequences of a bounced check

Repercussions for bouncing a check range from mild annoyances to civil or criminal action. Here are some of the potential outcomes when you bounce a check.

You may be charged a returned check fee, nonsufficient funds fee or overdraft fee. These fees are common at most banks. They can usually be upward of $30 or more per overdraft, and some banks charge this fee multiple times per day or charge you for having a continuous negative balance. Familiarize yourself with your bank’s overdraft policies so that you can know what you’re on the hook for in case of a bounced check or overdraft, as well as how you can avoid overdraft fees in the future.

You may deal with personal or professional fallout. Depending on your relationship with your check’s recipient, you may face some frustration or grudges as the result of a bounced check, which is why it’s important to let your recipient know the situation as soon as possible.

Your bank may report you to ChexSystems. ChexSystems is a reporting service that banks use to alert one another about customers who might not be responsible with their accounts, such as an ongoing issue with a customer not paying overdraft fees. It’s possible to clear your ChexSystems record, but a negative mark can stay on your record for up to five years.

You could face criminal or civil penalties. Depending on where you live, how much the check was for and whether you knowingly gave someone a bad check, you may be subject to federal or state criminal laws regarding bounced checks, some of which could even result in a felony charge. On a less extreme level, the recipient of the bounced check may try to sue you in civil court if the payment issue remains unresolved.

Tips to avoid bouncing a check in the future

Whether you made a one-time mistake or have a habit of bouncing checks, you’ll find that there are steps you can take to avoid bouncing checks in the future.

Sign up for overdraft protection, if available. Overdraft protection is a service that many banks offer that allows you to transfer money from a linked bank account to cover an overdraft. Some banks charge for this service while others provide it for free. If overdraft protection transfers aren’t available, your bank may have an overdraft line of credit, which is basically a way to borrow money to cover an overdraft. However, overdraft lines of credit can charge high interest rates, so make sure you use one only if you know you can pay it back quickly.

Consider sending a money order instead. If you get a money order from your bank, the bank will likely withdraw the funds from your account immediately, so you don’t have to worry about accidentally spending the money that’s supposed to go toward a check. Some bank accounts offer these services for free while others charge for them, and sometimes there are funding limits to how much you can put on a money order at once. Check with your bank to see if this option is available to you.

Use a payment app instead of a check. If you’re looking for a more immediate and convenient way to send money — as opposed to writing and mailing a check, then waiting for it to clear — consider looking into payment apps instead. Apps like Zelle, Venmo and Cash App allow you to send money quickly and without the hassle and delay of sending a check.

Chanelle Bessette writes for NerdWallet. Email: cbessette@nerdwallet.com.

The article How You Can Recover From a Bounced Check originally appeared on NerdWallet.

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Are You Saving Money in the Right Place?

Posted on by Chanelle Bessette

If you’re working toward a savings goal, you have a lot of options for where you can put away your cash. Savings accounts, certificates of deposit, money market accounts, cash management accounts and investment accounts are all possibilities.

So which should you choose? That depends on how far away your goal is, how much you hope to earn on your cash and how often you want to access it. Here’s how to decide which savings or investment vehicle is best for you.

Factors to consider when stashing your savings

The features of different accounts can help you select the right savings vehicle. When deciding where to stash your savings, consider:

Access to withdrawals. Some accounts — such as CDs and retirement accounts — charge a penalty fee if the account owner withdraws money before a certain time. If you think you’re going to need your liquid cash in the near future, that will affect your choice of account.

Interest rate. Some types of accounts offer higher interest rates or potential investment income than others. Both factors can also vary depending on the bank or brokerage.

How far away your goal is. Think about how much you’ll need to save to achieve your financial goal and how long it will take you to get there. If it’s longer than several years, shift your mindset from saving to investing.

“Anything past four or five years is no longer savings,” said Todd Christensen, education manager for the nonprofit debt relief service MoneyFit, in an email. “You should see anything longer than four or five years instead as an opportunity to invest and build your net worth.”

With these points in mind, check out these savings options.

Where to put short-term savings

Short-term saving goals are those that will likely take less than a year to save for, like for a vacation, small emergency fund or a home improvement project. Good homes for that money include:

High-yield savings account. These accounts, typically offered by online banks, tend to offer much higher interest rates than savings accounts at traditional brick-and-mortar banks. Though the return is lower than with savings vehicles such as CDs or investment accounts, you’re able to quickly access your cash as needed.

Money market account. An MMA is a savings account that has some checking features, such as offering paper checks or a debit card. Interest rates for competitive MMAs tend to be similar to those of high-yield savings accounts.

Cash management account. CMAs — offered by brokerages rather than banks — typically have decent interest rates and some checking features, such as a debit card and ATM access.

Where to store medium-term savings

Say you want to save for something that may take a year or more, like an emergency fund with three to six months of expenses, a large wedding or a down payment on a house. An account that keeps your money safe and separate and earns a little interest is the way to go. The interest rates on these products usually don’t surpass inflation, so they won’t be optimal for building wealth.

“Instead, use these savings vehicles to keep your money safe from your impulses,” said Christensen.

High-yield savings account. Like short-term savings goals, medium-term goals are also a good match for a high-yield savings account, since they are liquid.

CDs. If you know exactly when you’ll want to use your savings — say, to purchase a house two years from now — consider putting the funds into a CD that matures just ahead of that date, allowing you to earn a set amount of interest toward your financial goal. Keep in mind that most CDs charge a penalty if you withdraw your cash before the end of the CD’s term. If that’s a concern, you can also consider a no-penalty CD, offered at some banks.

MMAs and CMAs. Money market accounts and cash management accounts can be solid options here too, due to their easy access, decent interest rates and useful checking features.

Where to keep cash for long-term financial goals

Maybe your goal is to save for or invest in something that will take a decade (or several), like retirement or your child’s college fund; here are good options.

Investment account. Over a long enough period of time, invested cash tends to earn the highest rate of return compared to other savings vehicles. If you’re saving for retirement, an account like a 401(k) or an individual retirement account (IRA) will be the best option for your savings. However, retirement accounts carry early withdrawal penalties until investors are at least 59½ years old. Another alternative: You can invest in a taxable investment account, which doesn’t have penalties for early withdrawal, but you will have to pay annual taxes on any capital gains.

A good guideline is to keep cash invested for at least five years, to weather potential stock market volatility; being able to invest for the long term can help offset such fluctuations.

529 plan. 529 savings plans are tax-advantaged investment accounts that allow parents to set aside money for kids’ college tuition and earn compounding returns. If you want to save specifically for the costs of education, 529s are worth considering.

Whatever your financial goals, you have solid options for where to stash your money and, ideally, see it grow.

Chanelle Bessette is a writer at NerdWallet. Email: cbessette@nerdwallet.com.

The article Are You Saving Money in the Right Place? originally appeared on NerdWallet.

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‘When Can I Shred This Check?’ and Other Online Banking FAQ

Posted on by Chanelle Bessette

As the COVID-19 pandemic leads banking customers to lean into online technology to manage their money, those trying online banking for the first time may find themselves with questions about how to handle things previously done in person or with paper documents.

If you’re stuck on how to handle some of the practical aspects of online banking, here are answers to common questions.

Should I save monthly statements?

Experian, one of the three major credit bureaus, recommends keeping bank statements for tax purposes to confirm your income or deductible expenses. If you do end up using your statements for your taxes, you may want to hang onto your statements for up to seven years in case the IRS decides to audit you. Even if your bank keeps digital records of your statements, you may want to print or download your statements just in case.

When should I shred the paper check from a mobile deposit?

Major banks recommend that after you’ve made a mobile deposit, you write “mobile deposit” and the date of deposit on the front of the check. Keep the check until you’ve made sure the deposit has gone through — which may take several days — and that the bank doesn’t need the original check for any reason. Once the check has been cleared in your account, it’s best to shred it.

How do I send money or pay bills through my mobile banking app?

If you want to send money to friends or family, your bank may have you covered with the Zelle money transfer service. Zelle, which is integrated with many major banks and also available as a separate app, allows registered users to receive and send money from their bank accounts.

You can also sign up for money transfer apps like Venmo or Cash App and link them to your bank account to send and receive money, as long as your sender or recipient has the same app.

To pay your bills online, your bank might have the option to set up recurring payments to services like your cell phone provider or utility company, allowing you to automate your monthly bills. Some banks can also send a check on your behalf if necessary. Wells Fargo, for example, offers online bill pay services, but you can also schedule paper checks to be sent for you if your service provider doesn’t accept electronic payments. Search your bank’s FAQs or reach out to its customer service department for details on its bill-pay features.

What should I do if my mobile banking app isn’t working?

It’s a universal truth that technology comes with occasional frustrations. Sometimes banks experience app outages, and sometimes there are problems on the user side. There are a few things you can do to diagnose the problem:

  • Make sure your login credentials are correct. Entering an incorrect username and/or password is a common stumbling block and will prevent access to your account. Some banks might even lock you out after too many failed login attempts. If you’ve forgotten your login information, contact your bank’s tech support team.
  • Check your email and your bank’s social media accounts. Your bank may have posted on its Facebook or Twitter accounts or sent an email notification about any known app problems. Many consumers today also use their banks’ platforms to flag problems themselves. If there’s an outage, your bank may post information on how long it’s expected to last and how you can access your account in the meantime. Bookmark or follow your bank’s social media accounts for quick access.
  • Update your app and/or your phone software. Your version of the app could be out of date, or your phone’s software may need updating to use a newer version of the app. Go to your phone’s app marketplace (e.g., Apple App Store or Google Play Store), search for your bank’s app and see if there’s an option to update.
  • Get technical support from your bank. For help, reach out to your bank’s customer service representatives by phone, email or chat, if available.
  • Use your desktop login or visit a branch or ATM. If your app isn’t working, you may still be able to log in on a desktop computer. If your bank has physical branches, you should be able to get in-person service, although COVID-19 precautions may mean that hours are limited or appointments required. If you’re trying to deposit a check or check your balance, you can use an ATM, as long as your bank offers use of a network.

This article was written by NerdWallet and was originally published by The Associated Press. 

Chanelle Bessette is a writer at NerdWallet. Email: cbessette@nerdwallet.com.

The article ‘When Can I Shred This Check?’ and Other Online Banking FAQ originally appeared on NerdWallet.

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Social Distancing During the Coronavirus? Take Your Banking Online

Posted on by Chanelle Bessette

If the coronavirus has you self-isolating, you’re likely more concerned about staying in touch with loved ones and carefully planning your grocery excursions than about changing your money routine.

But if you’re concerned about how to do your everyday financial tasks from home, consider starting to bank online — especially if your bank has temporarily closed its locations. Handling your finances remotely can be convenient even after you feel safe returning to a branch.

“It’s everyone’s responsibility to prevent the spread of COVID-19,’’ says Richard Crone, a payments expert and CEO of Crone Consulting, LLC. “For the safety of consumers, the bank staff, all our families and the community, nobody should be walking into a branch. Financial services can all be obtained digitally. It’s a risk we don’t have to take.”

What is online banking?

Online banking lets you manage your accounts through your desktop or mobile devices. You can typically perform tasks such as transferring funds, paying bills, depositing checks and checking your account balances.

If you have questions that you need a human to answer, you can usually reach out to the bank’s customer service reps via phone, social media, email or online chat as well.

There are many online-only banks, but these days, most brick-and-mortar banks also have online services their customers can use from home (or elsewhere). Banking apps and bank websites allow customers to log in securely to view and manage their account balances from anywhere they have the internet.

Is online banking safe?

Banking sites and apps take many steps to keep your money secure. Mobile banking apps often offer two-factor authentication, which requires you to login with your password as well as an additional code sent via email, call or text. Smartphone logins can be protected with passwords and sometimes biometric measures, like fingerprints or face recognition. Apple users, for example, can set up Face ID on their iPhones so that the device has to recognize the user’s face before they can sign in to a banking app. Bank websites also encrypt your data to prevent third parties from accessing it.

These mobile safety features can make other financial tasks simple and secure as well, such as using your smartphone’s wallet app to make contactless payments.

“It’s much safer to bank, and pay, with your mobile device,” Crone says.

And of course, in terms of the coronavirus, banking online will help you follow isolation recommendations.

What are the perks of banking online?

Most banking services can be done remotely. The only thing you can’t do from home is deposit and withdraw physical cash. If that’s a necessity for you, most banks have large ATM networks, and you can use your bank’s website to find a nearby machine. Of course, be sure to wash your hands when you’re done.

If your current bank’s services aren’t mobile- or desktop-friendly, you can consider opening a new account with a tech-savvy bank that allows online applications. Crone anticipates that these kinds of banks will see a boom in customers in the near future as more people begin to bank remotely and avoid branches.

Banking online saves time. Instead of driving to a branch, waiting in line and talking to a teller, you can finish your banking with a few taps on your smartphone.

Sometimes you’ll get better interest rates. Online-only banks, which don’t have many (or any) branches, tend to have higher interest rates, too. They save money on operational overhead, allowing them to pass the savings on to consumers.

If you’ve been waiting to download your bank’s mobile app or tour your account services from your desktop computer, now is a good time to start.

Chanelle Bessette is a writer at NerdWallet. Email: cbessette@nerdwallet.com.

The article Social Distancing During the Coronavirus? Take Your Banking Online originally appeared on NerdWallet.

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Bye-Bye, Brick-and-Mortar: How One Couple Made the Switch to Online Savings

Posted on by Chanelle Bessette

If you’ve been considering making the jump to an online bank, here’s a reason to do it now: A recent Federal Reserve rate increase may prod banks to give their customers higher interest rates on their savings in 2019. Here, one man walks us through why he and his wife decided to take the plunge with a high-yield online savings account.

Paul, 33, writes tax regulations for a California government agency. (Due to the sensitive nature of his previous work as a tax collector, he prefers not to publicize his last name.) After selling a rental property in November, he and his wife, Jocelyn, 32, decided to search for a good place to park the proceeds. They decided a high-yield savings account at an online bank would be their best bet for high returns on their money.

The goals: a college fund and diversification

The family’s savings goals are a bit nebulous at the moment, Paul says, but with a 2-year-old on the scene and the possibility of other children in the future, he and Jocelyn want to have savings socked away for college and diversify where they keep their money. As state employees, Paul and Jocelyn use a local credit union for their day-to-day checking accounts.

“Besides our checking and savings, we have a mutual fund, a retirement account and stocks we own ourselves. I’m a fan of not putting all my eggs in one basket,” Paul says.

Why online banks were appealing

“It’s as simple as: I wanted to make more money off of my money,” Paul says. “I wanted something secure, reliable and not as open to market fluctuations, as opposed to a money market account. I also didn’t want to have to worry about locking away my money in a bond.”

Online banks are typically able to offer higher interest rates than brick-and-mortar banks because they don’t have to pay to maintain branches. An annual percentage yield, or APY, of 0.01% — a typical rate at a traditional bank — versus the 2% or more currently available at an online bank might not sound like much. But over the years, it can mean a difference of thousands of dollars as your money collects compound interest.

Say you put away a $10,000 windfall and added $100 per month to a bank account with a 0.01% APY for 10 years. With compound interest, you’ll have earned just $17. In an account with an APY of 2%, however, that same money will have earned more than $3,500 in interest. That allure, combined with ever-improving technology for online customer service, has made online banking increasingly popular.

But first, a few considerations

Paul and Jocelyn did have some initial concerns about online banking.

“I’m generally more distrustful of apps, and hacks make me nervous,” Paul says.

When researching online banks, he not only considered a bank’s website but also looked it up on the Better Business Bureau website, verified it was insured by the Federal Deposit Insurance Corp. and checked into whether the bank had ever been in the news for fraudulent behavior.

Pulling the trigger on an online account

After doing online research, Paul chose CIT Bank, an online-only financial institution that currently offers a higher-than-average 2.45% interest rate for customers who either have a $25,000 balance or who deposit $100 or more into their account monthly.

Paul says he’s not necessarily a brand loyalist, however; like many interest rate optimizers, he says he plans to go where any given bank will give him the best return on his money. He looks past promotional bonus offers on savings accounts — many of which come with strings attached, such as committing to stay with that bank for a certain length of time — in favor of more flexible arrangements that offer a greater return in the long run.

But for now, Paul plans to let his money do the work for him and his wife in their new online account.

Should you switch?

Online banking does have its drawbacks for some customers, especially those who enjoy face-to-face interactions with service reps or who aren’t as comfortable with the idea of using mobile technology to manage their money.

But for customers willing to take the plunge, the difference in the long-term returns of a high-yield interest rate can be well worth the effort of switching.

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The article Bye-Bye, Brick-and-Mortar: How One Couple Made the Switch to Online Savings originally appeared on NerdWallet.