1. Money in a bank account is safe.
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A bank is one of the safest places to stash your cash since your account
is insured against loss by the federal government for up to $100,000 per
depositor.
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2. You pay for the convenience of a bank account.
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Banks pay lower rates on interest-bearing accounts than brokerages
and mutual fund companies that offer check-writing privileges. What’s more,
bank fees can be high - account costs can easily add up to $200 a year or
more unless you keep a minimum required balance on deposit.
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3. Inflation can eat what you earn from a bank.
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Even at a low rate of inflation, the annual creep in the cost of goods and
services usually outpaces what banks pay in interest-bearing accounts.
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4. Not all interest rates are created equal.
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Banks frequently use different methods to calculate interest. To compare
how much money you’ll earn from various accounts in a year, ask for
each account’s “annual percentage yield.” Banks typically quote both
interest rates and APYs, but only APYs are calculated the same way everywhere.
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5. You can get better rates
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Certificates of deposit (CDs) offer some of the best guaranteed rates on
your money and are insured up to $100,000 each. The catch: you have to
lock up your money for three months to five years or more. If interest
rates fall before the CD expires, the bank is out of luck and must give you
the rate it quoted. If rates climb, you’re stuck with the lower rate.
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Also with rising interest rates, money market accounts can become an
attractive option, too. They pay more than banking accounts and you
don’t have to lock up your money for a specific amount of time.
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6. ATM fees can take a significant bite out of your budget.
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The convenience of using automated teller machines is an increasingly pricey
one. On average, the fee your bank charges you to use another institution’s
ATM is $1.25, according to a Bankrate.com survey in fall 2007. That’s on top
of the average $1.78 that the other institution will charge you to use its ATM.
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7. Getting the best deal takes work.
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You won’t get a great deal on a car if you just walk into a dealer and plunk
your money down. Likewise, you won’t get a great banking deal unless you
comparison-shop and ask about price breaks. For example, a bank might
offer free checking if you are a shareholder or if you direct deposit your paycheck.
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8. Use the Internet to shop for bank services.
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You can use the Internet to compare fees, yields, and minimum deposit
requirements nationwide. Sites like Bankrate.com allow you to search
and compare the highest yields and the lowest costs on banking, savings,
loans and deposit rates nationwide. You can also search by geographic
location or use CNNMoney.com loan center.
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9. Banking online can make bill-paying easier.
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Electronic bill-paying can save you the monthly hassle of paying your bills.
And if you couple online banking with a personal-finance management program,
such as Quicken or Microsoft Money, you’ll be able to link your banking with
your budgeting and financial planning as well. But be careful. Some vendors
only warn the consumer of price hikes in the fine print of a bill.
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10. You can bank without a bank.
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A number of financial institutions offer accounts that resemble bank services.
The most common: Credit union accounts; mutual fund company money
market funds; and brokerage cash-management accounts.
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http://money.cnn.com/magazines/moneymag/money101/lesson3/index.htm