If you have ever seen that Kevin Hart special, then you know “I gotta checking and I gotta savings” LOL! But seriously, most people only know that their bank offers checking accounts and savings accounts. Did you know that banking institutions have a whole variety of banking products designed to help you save money, grow money, and invest money? If you are only using checking account and savings account you are banking wrong! Here are 3 banking products offered by the bank that I actually use.
CERTIFICATE DEPOSITS (CD)
What is it?
A high yield money-saving vehicle that has a specific locked-in interest rate for a specific amount of time, anywhere between 3-84 months. The money saved must stay in the vehicle for the agreed time and is charged a penalty fee for early withdrawal.
There is a required minimum balance to open the account, anywhere between $5-$100,000, and most times no further deposits can be made after the initial contract is signed.
Once the interest rate is locked in the bank cannot change it until after the contract expires, unlike regular savings account where the bank can change rates at their discretion.
How I use them?
Currently, I have used certificate deposits through Navy Federal Credit Union, they both allow for continuous deposits.
I used a 12-month certificate deposit with a 2.75% interest rate and a $3,000 balance cap, I use this account for my emergency fund. Read more about building an emergency fund HERE.
My other certificate deposit is a 17-month contract with a 3.50% interest rate, no cap on the amount deposited. I use this account as my house down payment fund.
I like to make it harder for me to get money to curb spending, with the penalty fees I am less likely to withdraw unless there is an emergency. Also, the only way to withdraw is to go into the bank or call, I cannot move the money on my banking app.
Why you should use them?
For long-term money-saving, or if you already have a large sum of money you won’t use in the next 12-84 months. Certificate deposits give you a high-interest rate and a reason to not withdrawal money. Your bank will have a list of interest rates and contract lengths on their website.
*Pro-tip: If you don’t have a huge lump sum of money try finding a CD that allows for continued deposits, read the terms and conditions
2. SECURED PERSONAL LOANS
What is it?
A loan where the bank takes your money as collateral in exchange for a personal loan. Secured loans help you build credit and creates a monthly bill for you to pay back for your own money.
They use your money as an asset you currently own to trade you for a low-interest loan. But you can also use money already in your savings account. It’s the same concept as a secured credit card, meaning you already have the money in your checking account.
How I use them?
Funny enough, my mother used them to boost my credit score to 750 while I was still broke in college.
Get that myth that you need a credit card to build credit outta your head. Credit history time is also factored into your score, and having the secured loan created a 3-year time stamp on my report.
My credit union offered a 3.99% interest rate on an $8,000 secured loan for 60 months and every time I pay on the loan money is released.
Why you should use them?
If you have a lump sum of money and you need to build credit. There is no credit inquiry on your report because the money is already in your account and when you pay it off you get a credit boost!
3. ROTH INDIVIDUAL RETIREMENT CERTIFICATE ACCOUNT (IRA)
What is it?
A POST tax retirement account separate from your employer-funded account. Supported through your bank and backed by FDIC.
New 2022 laws allow for single account owners to put up to $6,000 into the account TAX-FREE, if you have a gross salary LESS THAN $137,000.
Penalty fees are applied for withdrawal before age 59 ½ but unlike a 401K, which is pre-taxed dollars, you are not additionally taxed for early withdrawal.
How I use them?
I have one IRA certificate account through my credit union at a 4.20% rate. I started it in 2018 when Navy Federal was offering a $100 match for your first $100 deposit. (I don’t leave money on the table)
For 7 months I just earned interest on $200 until I started working full time. Now, I still don’t put in a huge sum of money each month but I like to have a retirement fund aside from what my employer offers.
Honestly, you never know how long a job will keep you around, or how ethical they are *Cough Cough* Enron, Theranos, Madoff Investments.
Why you should use them?
As I said, you never know what may happen with your employer. We have seen it many times before, the higher-ups know the ship is sinking and us new hopeful, excited employees can’t see s*** hitting the fan until you get a notice saying your 401K has been seized.
That’s extreme I know! But seriously, I also like knowing I will have money that I won't have to pay taxes on when I do retire.
So here they are, 3 products your bank is offering right now. The bank is a business and will always look for ways to make money off of your hard earned money. It makes sense that you take full advantage of their products for your own interests!
