MONEY 24 - BANKING/LOANS

THIS IS MY 24^TH POST ON UNDERSTANDING MONEY TOOLS

Money, Money, Money.  We will continue from our last blog on banking and ideas. 

As we talked about banks are mainly in business to either deposit money into, or take money out, and I don’t mean in terms of robbing, instead borrowing money.  In line with savings accounts are “certificates of deposits” (CD’s) that the banks offer.  The interest rate you receive may vary according to the bank you use, the amount of money of the CD and the length of time the CD is for.  A CD is for a specific period of time and a defined dollar amount.  Early withdrawal will have a financial penalty.

In our wonderful world of financial technology you can go to websites like www.bankrate.com or www.money-rates.com and compare national rates for CD’s. These sites can also be used to search the lowest loan interest rates for cars and other things.  Make sure you check into the financial stability of the bank you are doing business with.

A bank savings account offers little interest these days, but you have liquidity of money, meaning you can take money out without penalty or tying your money up for a period of time as with the CD.

Let’s look at borrowing money.  Of course, this is one way banks make money.  They take in deposits and lend it out to customers.  The “spread” is profit for them.  Popular loans at banks are auto loans, home improvement and mortgage loans.  Banks love lending on collateralized items.  With this type of loan the bank will place a lien on your car or home, and file that document with the county clerk and recorder’s office so that it is of public record.

Banks offer safety deposit boxes to their customers to keep safe business documents, jewelry or any smaller item you may want to keep outside your home or office.  Some banks offer this as a free service although the free safety deposit boxes are small.  If you are using the depository for business this is a tax deductible item.  Some banks offer larger vaults, and there are private companies that offer large vault storage. You might want to store a collectable item in these private vaults that are temperature and humidity controlled.  Such items may be wood musical instruments, rare pieces of furniture or any items of value. Insurance is always recommended.

Another place you can check for rates and business similar to banking are credit unions.  Many times these institutions are better for serving the public than banks and they have been around since 1909. They are federally chartered by the US Government, however owned by individuals such as teacher’s unions. Credit unions are less for profit than banks. These chartered unions have the backing of an insurance fund and the US Government to $250,000 per account, similar to banks.