You have a job or you have a fantastic home business. Where do you put your money so it will grow the fast while still being in a safe place?
One of my favorite banks is Ally Bank. It is an online bank so it doesn’t have the extra costs of locations. Meaning the money goes to the customers. How amazing is that?
Online Savings Account
Savings Accounts are typically used in order to have easy access to money. You should put aside money for expenses. like saving up for a down payment, car loan, college tuition, or at least six months worth of living expenses in case something goes wrong like an illness or losing a job. Emergency funds should not be put in the stock market because if a bear market decides to growl, you are in a lot of trouble.
I love the Ally Online Savings Account because as of this writing of this post, the interest rate is 2.00%. That is 20% above the national average for Savings Accounts. A lot of banks with brick and mortar locations have 0.01% or 0.03% interest.
Also, Ally Bank has no monthly maintenance fees or minimum balance requirements. You put in only $50 and you’re still earning interest!
Where would you want to put your savings for your down payment? A 0.01% savings account or a 2.00% savings account?
High Yield Certificate of Deposit (CD)
Want to keep your money safe, but know you won’t need access to it until a few years? A good choice is Ally’s CD. You get 2.75% interest for a 12 month CD. Let’s say you put in $25,000 for a 12 month CD that you are planning on using for a future down payment. You will earn $687.50 in interest at the end of the 12 months.
Ally CashBack Credit Card
Ally Bank has a great credit card. You can get 2% cash back when you purchase groceries and gas. You get 1% cash back on all other purchases. Plus, you get a 10% Ally Deposit Bonus when you deposit your cash back into an eligible Ally bank account. Not to mention, you can earn $100 welcome cash back after you spend $500 in eligible purchases.
For instance, if you spend $500 in your first month in groceries. You get $100 welcome cash back plus $10 from the 2%. If you deposit the money into an eligible Ally account, you get to pocket $121. Not bad earning for only spending $500.
You receive a 0% APR on balance transfers during the first 12 months of opening your account. Afterwards, the APR standard rates is 15.24%, 20.24%, or 25.24% depending on your credit worthiness.
Words of Caution
Typically, you earn more by investing money in the stock market. However, if you need to access money soon, you need to put it into a bank account. The reason is that if a bear market decides to growl when you need the money, you are in a lot of trouble!
If you need to access money sooner than 12 months, do not put it in a 12 month CD because you will get hit with penalties if you take it out earlier.
Lastly, credit cards should only be used by people who can manage money efficiently. If you can’t pay off your balance every month, do not get a credit card. Any perks offered by a credit card company are cancelled out by the interest rate.
Also, if you are planning on taking out a mortgage or a car loan soon, do not open more credit cards! The more credit inquiries that are on your account, the lower your credit score will be. Let’s say you have a 780 credit score. You decide to open three more store credit scores to take advantage of the discounts. That lowers your credit score to 710. The bank takes scores very seriously. The lower your credit score and the more it shows you are seeking credit, makes you more risky in the eyes of the bank. Therefore, your interest rate on your loan will be higher and if your credit score is really low then you might not get approved for a loan at all.
If I were part of the underwriting team for a bank, I would not approve of a loan for someone with a 550 credit score.
Making financial decisions are crucial. The wrong decisions can turn the high earner into a pauper.
Please feel free to comment and share your experiences!
To yours and everybody’s financial security!
* Note: Nothing here is meant to be taken as financial or legal advice. Please contact your own financial advisor or attorney for guidance.