Reasons to save money seem to be never-endingâcollege, emergencies, retirement, vacation. However, about 20 percent of Americans don’t save any of their annual income at all, according to a Bankrate survey. So if you’ve buckled down, cut your expenses and finally saved up a nice chunk of change, great! Now, the next step is finding a good place to put it.
While researching where to store your hard-earned cash, you’ll probably come across two potential account types: money market accounts and savings accounts. Many banks offer both types of accounts, but deciding between a money market account and a savings account may depend on your particular savings goals and needs, says Jeff Rose, CFPÂ®, founder of the financial education blog Good Financial Cents.
âBoth types of accounts have different rules about maintaining minimum balances,” Rose says. He adds that these factors can vary depending on the particular bank.
You may even find that making a decision between a money market account vs. a savings account is too hard and you want both types of accounts. (Don’t worry, we’ll get to that later). For now, asking the question, “How is a money market account different from a regular savings account?” is a good place start.
Here’s what you need to know to decide between a money market account and a savings account:
Money market account: Maintain growth and easy access
Not to be confused with money market funds, which are a type of investment, money market accounts are a type of deposit account.
“A money market account, traditionally, has been a high-yield savings account with higher-than-usual opening deposit requirements and/or monthly minimum balance requirements,” says Brynne Conroy, blogger for the women-focused personal finance website Femme Frugality.
You can think of the benefit of a money market account as a savings-checking hybrid. This is an important piece of the money market account vs. savings account story. On the savings side, with a money market account, you can typically earn interest on the balance you have stashed away. If the bank offering the account is FDIC insured, then your deposits are insured up to $250,000 or the maximum allowed by law.
âA money market account makes more sense when you want to maintain liquidity and to grow your savings over time.”
When you’re thinking money market account vs. savings account, note that one of the unique features of a money market account is that you can access funds with a debit card as well as through an ATM and checksâjust like you would with your checking account. It’s important to note that federal law does limit certain types of withdrawals and transfers from money market accounts to a combined total of six per month per account. There are no limits on ATM withdrawals or official checks mailed to you. You can also make an unlimited number of deposits.
Money market accounts may require that you open the account with a minimum amount, as well as maintain a minimum balance. If your balance falls below the required minimum, you could be charged a fee, and your account could actually be closed if you regularly dip below the minimum.
Not all banks have these requirements, though. When considering the difference between money market accounts and savings accounts and shopping for a money market account, you may be able to find one with no minimum balance requirements and with tiered interest rates, Conroy says.
A Discover Money Market Account, for instance, doesn’t charge account fees, including minimum balance fees.1 Plus, a larger deposit can put you in a higher interest rate tier, allowing you to earn even more on your savings. These are all things that can guide you when deciding between a money market account and a savings account.
Still need some help weighing money market account vs. savings account? See if any of the following scenarios jump out as describing your financial needs.
Go with a money market account ifâ¦
- You want to easily access your funds.2 As you consider the difference between a money market account and a savings account, note that the debit and check-writing capabilities of money market accounts make them great for accessing your money conveniently. âA money market account makes more sense when you want to maintain liquidity and to grow your savings over time,” Rose says. Need to pay the handyman for a new water heater or access cash from your emergency fund? You don’t have to worry about keeping a ton of cash in your checking accountâsimply write a check directly from your money market account, or stop by the nearest ATM.
- You have a large balance. Since money market accounts can require a higher minimum balance than regular savings accounts, it might be a good fit for you if you plan to keep enough money in your account to meet the requirement and avoid fees. Plus, if you plan to make large withdrawals from your account, it’s important that you keep enough funds in it so that you don’t dip below the minimum balance. “Know that if you’re not meeting minimum balance requirements, you’re more likely to have to pay a monthly maintenance fee,” Conroy says.
- You want one account with the flexibility of two. If you’re liking the ability to swipe a debit card and write checksâbut are also looking to earn interest on the cash you’re parking in the accountâthen a money market account could be for you. “A money market account may offer you the higher interest rates you would get in a savings account, plus the debit card and check-writing abilities of a traditional checking account,” Conroy explains.
Savings account: Get your nest egg started
Savings accounts are a basic deposit account where you can keep extra cash. Like money market accounts, you can earn interest on the money you have parked in the account. If you have a savings account with a bank that is FDIC insured, you’ll have that same insurance on your deposits as was described above.
Savings accounts are also subject to the same limit on withdrawals and transfers, Conroy notes. Similar to money market accounts, there are no limits on ATM withdrawals or official checks mailed to you.
Now on to the differences between money market accounts and savings accounts. For one, you can’t write checks or pay for things with a debit card when using your savings account. To access your funds, you’ll need to transfer them to another account, visit the bank or ATM to make a withdrawal or withdraw via official bank check.
Another key difference between a money market account and a savings account: The minimum deposit to open a savings account and ongoing minimum balance required for savings accounts may be lower than money market accounts. You may even be able to find savings accounts with no minimum balance requirement.
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Still deciding between a money market account and a savings account?
Go with a savings account ifâ¦
- Earning interest is a goal. When debating money market account vs. savings account, know that some savings accounts could offer higher interest rates than you’d find with money market accounts. âHistorically, money market accounts have offered higher interest rates in exchange for higher minimum balance requirements,” Conroy says. That’s not necessarily the case anymore, she notes. âThe lines are blurring as high-yield savings accounts, typically those offered by online-only banks, get ever more competitive with money market accounts.” The Discover Online Savings Account, for example, offers a competitive interest rate and no minimum balance requirement. Plus, there are no account fees.1
- You don’t plan to touch the money often. Though it’s easy to transfer money in and out of a savings account, there are more limitations to accessing your money if you’re considering the difference between a money market account and a savings account. So if you’re working on building up your emergency savings or simply don’t want to be tempted to dip into your funds regularly, a traditional savings account might be the better option. “If you know having access to your funds is not a good thing because [you tend to spend more than you should], then leaving them in a savings account makes more sense,” Rose says.
- You are concerned about balance requirements. Since savings accounts can have small or no minimum balance requirements, this account type could be right for you if you’re just getting started building a nest egg and don’t have a ton to deposit yet. If you plan to make a big withdrawal, such as for a down payment on a car or security deposit on your new apartment, you don’t have to worry about dipping below a minimum balance.
How to use both accounts to your advantage
Because savings accounts and money market accounts have some similar features, deciding between a money market account and a savings account can be difficult. You’ll need to look at your banking habits and financial goals when choosing where to put your money, Rose says.
But remember, you don’t necessarily have to choose one account over the other. Having both a savings account and a money market account can help you reach various savings goals simultaneously.
If you decide to use both types of accounts, Rose suggests assigning each a specific goal. For example, you could keep a portion of your savings in a money market account so the money is easily accessible for shorter-term goals (saving for the holidays, anyone?) and more frequent expenditures for which you might use your money market debit card, ATM access or checks.
Rose says you could then consider using a savings account for a longer-term goal (the kids will grow up and go to college some day), where the money can sit and generate interest until you need it further down the road.
“Match the financial goals to the account that will serve you best,” Rose says.
Money market account vs. savings account: The best decision for you
When deciding between a money market account and a savings account, be sure to carefully examine each account’s offerings and requirements closely, âcomparing things like APY, monthly maintenance fees, minimum balance requirements and any other fees that may be associated with the account,” Conroy says.
At the end of the day, whichever account you choose (or both!) should help you reach your financial goals and money management success.
1Outgoing wire transfers are subject to a service charge. You may be charged a fee by a non-Discover ATM if it is not part of the 60,000+ ATMs in our no-fee network.
2Federal law limits certain types of withdrawals and transfers from savings and money market accounts to a combined total of 6 per calendar month per account. There are no limits on ATM withdrawals or official checks mailed to you. To get an account with an unlimited number of transactions, consider opening a Discover Cashback Debit account. If you go over these limitations on more than an occasional basis, your account may be closed. See Section 11 of the Deposit Account Agreement for more details.
The post Money Market Account vs. Savings Account: Which Is Best for You? appeared first on Discover Bank – Banking Topics Blog.
A consumer loan is a loan or line of credit that you receive from a lender.
Consumer loans can be auto loans, home mortgages, student loans, credit cards, equity loans, refinance loans, and personal loans.
This article will address each type of consumer loans.
Get Approved for personal loan today.
Types of consumer loans:
Consumer loans are divided into several kinds of categories. They include auto loans, student loans, home loans, personal loans and credit cards. Regardless of type, consumer loans have one thing in common: you have to repay the loan at some period of time.
Most people who are thinking of buying a car will apply for an auto loan. That is because buying a car is expensive.
In fact, it is the second largest expense you will ever make besides buying a house. And unless you intend to buy it with all cash, you will need a car loan.
So, car loans allow consumers to purchase a vehicle where they may not have the money upfront. With an auto loan, your payment is broken into smaller repayments that you will make over time every month.
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You can choose between a fixed or variable interest rate loan. But the most important thing is, whether you’re buying a new or used car, it’s important to compare loans to help you find the right auto loan for your needs.
Start comparing auto loans now!
Another, and most common, type of consumer loans are home loans. A home loan or mortgage is a loan a consumer receives for the purpose of buying a house.
Buying a house is, undoubtedly, the biggest expense you’ll ever make in your life. So, for the majority of consumers who want to purchase a house, they will need to borrow the money from a lender.
Home loans are paid back over a period of time. Those mortgages term are typically 15 to 30 years. They can be variable rate or fixed rate. A fixed rate means that your repayments are locked in for a fixed term.
Whereas a variable rate means that your repayments depend on the interest rate going up or down when the Federal Reserve changes the rate.
Over the loan’s term, you will pay back the principle amount of the loan plus interest. This makes it very important to compare home loans. Doing so allows you to save thousands of dollars on interest and fees.
The most common types of consumer loans are personal loans. That is because a personal loan can be used for a lot of things.
A personal loan allows a consumer to borrow a sum of money. The borrower agrees to repay the loan (plus interest) in installments over a period of time.
A personal loan is usually for a lower amount than a home loan or even an auto loan. People usually ask for $500 to $20,000 or more.
A personal loan can be secured (the consumer backs it with his or her personal assets) or unsecured (the consumer does not have to use his or her personal asset).
But most of them are unsecured, so getting approved for one will depend on your credit score, income and other factors.
But consumers use personal loans for different purposes. People take out personal loans to consolidate debts, such as credit card debts. You can use personal loans for a wedding, a holiday, to renovate your home, to buy a flt screen TV, etc…
Consumers use these types of loans to finance their education. There are two types of student loans: federal and private. The federal government funds a federal student loan.
Whereas, a private entity funds a private student loan. Generally, federal student loans are better because they come at a lower interest rate.
Believe it or not credit cards is a type of consumer loans and they are very common. Consumers use this type of loan to finance every day expenses with the promise of paying back the money with interest.
Unlike other loans, however, every time your pay with your credit card, you take a personal loan.
Credit cards usually carry a higher interest rate than the other loans. But you can avoid these interests if you pay your balance in full immediately.
Small Business Loans
Another type of consumer loans are small business loans. These loans are used specifically to create a business or to expand an already established business.
Banks and the Small Business Administration (SBA) usually provide these loans. Small Business Loans are different than personal loans, because you usually have to provide a collateral to get the loan.
The collateral serves as a way to protect the lender in case you default on the loan. In addition, you will also need to provide a business plan for the lenders to review.
Home Equity Loans
If you have your own home, you can borrow money against it. These types of consumer loans are called home equity loans. If you’ve paid off the mortgage on the home, you can borrow up to the full value of the home.
Vice versa, if you’ve paid half of the mortgage on the home, you can borrow half of the value of the house. You can use a home equity loan for several purposes like you would with a personal loan.
But most consumers use this type of loan to renovate their house. One disadvantage of this type of loan, however, is that you can lose your house in case of a default, because your house is used as a collateral for the loan.
Loan refinancing is a basically taking a new loan to replace an existing one. But you get this loan specifically either to refinance your existing mortgage or to refinance your student loans or a personal loan.
Consumers usually refinance in order to receive a lower interest rate or to reduce the amount of monthly payments they are making on their existing loans.
However, reducing to a lower payment will lengthen the time to pay off the loan and you will accrue interest as a result.
Consumers also use this type of loan to pay their existing loans off faster. However, some mortgage refinancing loans come with prepayment penalties. So do you research in order to avoid that extra charge.
The bottom line is consumer loans can help you with your goals. However, understanding different loan types is important so that you can choose the best one that fits your particular situation.
So do you need a consumer loan?
Get Approved for personal loan today.
Speak with the Right Financial Advisor
If you have questions about your finances, you can talk to a financial advisor who can review your finances and help you reach your goals (whether it is making more money, paying off debt, investing, buying a house, planning for retirement, saving, etc). Find one who meets your needs with SmartAssetâs free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.
The post What Is A Consumer Loan? appeared first on GrowthRapidly.
Discussing how youâll split the bills is a vital conversation if youâre merging lives. Some couples choose to keep their finances completely separate, and thatâs OK.
Itâs been a wonderful two years. Youâre talking about growing old together. Then the conversation turns to how little money you make and how you might be a burden to your boyfriend later on.
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.
Life can also change. What if the two of you married and he got sick, so you had to become his caregiver? Would you think of him as a burden then?
He makes significantly more than I do (between four to five times as much), and he worries that my low income means Iâll be a burden on him when we get older if we decide to marry. The way I see it, I am very responsible with the money I do make. I donât have any debt, and I pay all my own bills.Â
This may be a painful discussion. You may not like the answer you hear. But I suspect a likelier outcome is no answer at all â just a bunch of hemming and hawing. If thatâs what you get, then you have your answer.
Do you have any advice for us? This is one neither of us knows how to navigate.
One thing I have to wonder about based on what you told me is whether this is about money at all. Imagine your salary were to quadruple tomorrow. Do you think your boyfriend would be enthusiastic about your future together? Or do you think heâd find another hang-up?
Iâm a 35-year-old female whoâs divorced, and my boyfriend is 38 and never married. Weâve been dating for two years, and itâs been wonderful. Recently, weâve been having talks about our future, but money is a bit of a hang-up for him.Â
That doesnât sound wonderful to me. That sounds cruel.
Your value goes way beyond your salary. Please donât waste your time trying to build a future with anyone who doesnât recognize that.
Paychecks change. Thereâs no guarantee your boyfriend will always be a high earner. And just because you have a low income at 35 in the midst of a pandemic doesnât mean youâll always have a low income. Thatâs not to say that thereâs anything wrong with not having a high salary. But I donât want you defining your potential by what you earn right now.
Most couples encounter this situation to at least a degree. Few people will marry someone whose salary is identical to theirs for their entire careers. Youâre marrying a person, not a paycheck.
Robin Hartill is a certified financial planner and a senior writer at The Penny Hoarder. Send your tricky money questions to AskPenny@thepennyhoarder.com.
It sounds like this is a topic the two of you have been dancing around for some time. This is going to require a brutally honest conversation. Your boyfriend needs to decide whether heÂ can treat someone who makes way less than he does as an equal partner and back it up with action. Until then, any discussions about how to handle finances are premature.
Iâm not asking him for anything, although I do understand that at this rate my retirement savings will be meager while his will be substantial. That could lead to problems if he wants to travel and not feel bitter about having to pay for me for everything later on.Â
Ultimately, this is your boyfriendâs hang-up. Youâre living within your means. Thereâs nothing wrong with you just because you canât afford to live within his means.
But youâre not ready to have that conversation yet. Thatâs because of a problem that, at least as youâve described to me, exists entirely in your boyfriendâs head. It doesnât sound like thereâs a concern about whether you can afford a life together. He has no reason to worry that youâll run up debt or drain his bank account. Is he seriously worried that the bitterness heâd feel over money would overshadow his happiness should he build a life with you? You really need to establish that now so that you can move on if the answer is yes.
Is he willing to shoulder a greater share of the bills for the privilege of building a life with you? Or is he willing to adapt to your more frugal lifestyle so he can have the peace of mind of knowing he never contributed an extra cent? His call.
For some people, money is very much a dealbreaker. But other people get really antsy when they start talking about the future. So they look for a dealbreaker â any dealbreaker â to make you think that youâre the one with the problem, not them. Iâm not saying thatâs necessarily the case here, but itâs fodder for you to consider. You need to know if youâre dealing with a cheapskate or a commitment-phobe dressed in a cheapskateâs clothes.
But the control factor also worries me here. If you got married and he paid most of the bills, could he still approach this as a true partnership of equals? Or would he make you feel like a child asking a parent for allowance money?
What if you could pay for your next date night or trip to the grocery storeâwithout having to dip into your budget? If you use cash back to your advantage, these benefits could become a reality.
In the past, you had to swipe a credit card to earn cash back. But with Discover Cashback Debit, you can earn cash back by spending with your debit card (you read that right: debit card), allowing you to reach your financial goals without the risk of going into debt.
To best use this budget bonus, you might be wondering, âWhat should I do with my debit card cash back?” According to Eric Rosenberg, financial consultant and founder of the website Personal Profitability, âYou could put [your cash back] into savings or treat yourself to something from your wish list.”
Read on for things to do with cash back to help you achieve the right balance of responsibility and fun:
1. Save for a rainy day
Sometimes it seems like everything goes wrong all at once: You get a flat tire. The sink starts leaking (ugh, again!). You get a parking ticket. Since life can throw unexpected, costly curveballs your way, it’s important to have an emergency fund. Also known as a rainy day fund, an emergency fund is cash that’s set aside to cover unplanned, yet crucial, expenses.
âSo many people can’t afford the cost of an emergency from their savings,” Rosenberg says. If you don’t have this type of fund to fall back on, starting an emergency fund (or adding to an existing fund) could be a top priority when evaluating what to do with your cash back from a debit card.
When thinking about building an emergency fund as a thing to do with cash back, note that experts typically recommend putting aside at least three to six months of living expenses for this purpose. To maximize your emergency fund, you may want to consider moving these savings (and the cash back you’re putting toward this fund) to a high-yield savings account. That way, your emergency fund can steadily grow with interest until you need it. (P.S. More to come on how to automatically move your cash back into savings.)
2. Pay down your debt
If you owe, it can be tough to climb your way out of debt. Whether it’s from credit cards, student loans or a mortgage, interest is accruing and costing you money. Learning how to use your debit card cash back to offset debt can help you save on those interest payments down the road.
According to consumer money-saving expert Andrea Woroch, when you’re focusing on paying off debt, “It’s natural to cut back where you can. But you may eventually hit a wall where you can’t find ways to tackle expenses any further,” she says. That’s where learning how to use debit card cash back comes into play. Since a debit card with a cash back feature can allow you to earn for your everyday spending, those earnings can become a new source for paying down debt, Woroch adds.
3. Shore up for those special moments
You know you’d like to have more nights out, but they don’t come cheap. What to do with your cash back could include spending on special outings, Woroch says. Is there a restaurant you and your significant other have been dying to try? Is there a concert the whole family is super eager to see? There may also be larger events with family and friends to think aboutâplanning a milestone birthday or anniversary or that getaway with college buds. You can set aside your debit card cash back and earmark it for your relationships to create memories that will last a lifetime.
âYou could put [your cash back] into savings or treat yourself to something from your wish list.”
4. Support your children’s allowance
If you have kids, you’ve probably heard this one before: âMom, Dad, can I have some money?” Sometimes it can feel like you’re a walking ATM. One thing to do with cash back is to set aside an allowance for your kids. You can then use this cash to teach your children good savings habits and how to manage money on a monthly basis for the things they need and want, says Rosenberg of Personal Profitability. The best part: The money isn’t really coming out of your budget since you’re earning it for your everyday expenses and from money you’d be spending anyways. Win-win.
5. Stockpile funds for the holidays
In thinking about what to do with your cash back, spending it on gift-giving and holiday expenses may be a good goal. “Some people go into debt during the holidays. To help avoid that circumstance, use your cash back to get ahead,” Woroch says.
And, really do think ahead if holiday spending is on your list of things to do with your cash back. The earlier you stash your cash back away for the holidays, the longer it will have time to accrue if you put it in a savings account for safekeeping. Season’s greetings may be the last thing on your mind while you’re flipping burgers on the 4th, but planning ahead could really impact your end-of-year festive spending.
How to maximize your cash back
Now that you know what to do with your cash backâwhether it’s going to work for your emergency fund or funding emergency holiday giftsâconsider steps you can take to get the most out of your extra dough. For example, find a rewards program that matches your spending style. With Discover Cashback Debit, you can earn 1% cash back on up to $3,000 in debit card purchases each month.1 That’s up to $360 a year. Not too bad for just going about your daily debit card spending.
To make the process of saving that extra cash even easier, consider opening a Discover Online Savings Account. If you sign up for Auto Redemption to Savings, your cash back will be automatically deposited into your savings account every month.
âThe hardest part about saving for many people is remembering to make a transfer or take the cash to the bank,” Rosenberg says. “If you can automate it, you are setting yourself up for success. It’s like saving while you sleep.”
If you’re still considering how to use your debit card cash back to the fullest, Woroch suggests paying for group purchases when you’re out with family or friends. “Whether you’re going to dinner or renting a condo, cover the entire expense on your card and ask friends and family to pay you back with cash or [via mobile payment],” Woroch says. “This way you can benefit from earning more rewards.”
When it comes to how to use your debit card cash back, the key is to make sure you have enough in your account and aren’t spending too much if you offer to temporarily foot the bill. You don’t want to overextend in order to earn, as you could be hit with overdraft fees or not have enough in your account to cover bill payments, Woroch says.
“Whether you’re going to dinner or renting a condo, cover the entire expense on your card and ask friends and family to pay you back with cash or [via mobile payment]. This way you can benefit from earning more rewards.”
Get ahead with a combination of strategies
If you’re looking for things to do with cash back, using these tactics can help you improve your financial foundation and have some fun along the way. Understand your needs and goals to help you create a cash back plan, and then maximize your strategy with tools to help you automatically direct your cash back to savings to limit the temptation to spend the money elsewhere.
“We are all so busy these days, and managing money is often pushed down on the to-do list,” Woroch says. Learning how to use your debit card cash back can help you put money management front and center. Start earning!
1 ATM transactions, the purchase of money orders or other cash equivalents, cash over portions of point-of-sale transactions, Peer-to-Peer (P2P) payments (such as Apple Pay Cash), and loan payments or account funding made with your debit card are not eligible for cash back rewards. In addition, purchases made using third-party payment accounts (services such as VenmoÂ® and PayPal, who also provide P2P payments) may not be eligible for cash back rewards. Apple, the Apple logo and Apple Pay are trademarks of Apple Inc., registered in the U.S. and other countries.
The post How to Use Your Debit Card Cash Back to the Fullest appeared first on Discover Bank – Banking Topics Blog.