After growing quickly, Simple was acquired by BBVA in 2014. In 2020, BBVA’s U.S. operations were then acquired by PNC Bank. It appears that is shutting Simple down in “order to focus on its core banking platform,” according to reports.

If you are a Simple customer looking for an alternative banking solution that includes robust budgeting capabilities, then Qube Money might just be the perfect solution for you. While existing Simple accounts will be fully transferred to BBVA accounts, most Simple customers opened their account because they didn’t want to use a traditional megabank and will be looking for an alternative.

It’s also important to realize that Simple differed from standard online banks because they offered budgeting and planning tools that helped their customers reach financial milestones.

For this reason, many Simple customers are now looking to Qube Money.

What is Qube Money? 

Qube Money is a mobile banking app that marries best-in-class budgeting capabilities with cash management. Qube Money can be thought of as the marriage of mobile banking with cash envelopes. If you are looking for a free online banking solution and do not need or want any budgeting features, Qube is not your best option.

However, if you have had trouble creating a budget, sticking to a budget, or simply want to start living within your means, then Qube’s features are incredibly powerful.

I think of Qube Money as a great solution for someone that doesn’t know where or how they are spending their money. 

Here is what a current Qube customer had to say about the service: “Qube is so easy to use and makes planning and executing my budget simple and concise. Mostly I love the peace of mind I’ve had since using Qube. The anxiety and stress I used to feel about spending money is gone!”

How does Qube Money Work?

At its heart, Qube Money is a budgeting tool that leverages banking services to help you plan your spending.

The power of Qube’s budgeting tools lies in the Qubes that you create. Qubes are the digital envelopes that you allocate your money into each month.

Instead of using real physical envelopes to distribute the cash, you divide up your checking account into individual “qubes.” Think of Qubes as sub-accounts of the primary checking account.

Are you wondering what envelope budgeting is? Let’s talk about that and return to how Qube works.

Cash Envelope Budgeting Systems

Cash envelope budgeting is, in many ways, the most rudimentary way to budget. You can think of it as the way your great grandparents might have budgeted many years ago.

For those who struggle with sticking to their budget, a physical envelope system is a more rigid budgeting method. This makes it extremely useful for those who need the most help.

This is how it works. When using a physical envelope budgeting system, one goes to the bank in person and withdraws the cash needed to cover their budgeted expenses for the month. The money is then physically divided into each budgeting category and placed into corresponding envelopes. Categories may include things like groceries, gas, entertainment, etc. 

Once the cash runs out from an envelope, one has to wait until the following month to refill the category before spending any more money. If you are very disciplined, you won’t borrow money from one envelope if you overspend on another.

Cash essentially limits your ability to overspend. No cash = no spending.

While this is undoubtedly a surefire way to prevent lifestyle creep and overspending, there is typically one complaint that many have shared: managing the cash and having to carry it around can be quite a hassle. It’s also cumbersome to track where you spend money unless you keep very detailed records and save receipts.

It can also be risky. What if you lose an envelope or it gets stolen?

Qube Money is the answer to those who want to stick with a strict envelope budgeting system but want to leave the cash behind.

Qube Takes Budgeting To The Next Level

Before making a purchase using the Qube Money check card, you select which envelope you want the transaction to pull from and proceed through the transaction. The data then updates, and you see your new remaining balance.

Much like a physical envelope, if you don’t have enough money within a qube, you can’t spend the money. There are no overdrafts, so the transaction will be declined if there are not enough funds in the allocated qube to cover the total. 

To illustrate how this works, imagine you are standing in line at the grocery store. You have a cart full of food, and you have $350 allocated for your groceries for the month. While the cashier rings up the person in front of you, you pull out your phone and select your grocery qube. You “move” the 350 dollars over to the card, and you’re ready to go.

Once your groceries are rung up, the total is $150. The transaction clears, and the remaining $150 is returned to your grocery qube for next time.

Your qube will only be open for a limited amount of time so that you don’t go on and make another impulse purchase without having to reopen a spending qube. 

No transaction logging is needed, as that transaction automatically comes from your grocery qube. It’s similar to logging transactions, except you’re logging them before the transaction rather than after. 

This is an excellent feature because your budget will always be up to date. If you’re like me, you may sometimes forget to track an expense or update them weekly. Qube Money eliminates this aspect of digital budgeting, which isn’t often discussed.

Adding The Right Amount Of Friction To Hold You Accountable

Simply put, spending money is easy. Far too easy. It’s not hard to imagine how one could effortlessly spend their entire paycheck and then wonder where the money went at the end of the month. Actually, you probably don’t need to imagine it at all, because that’s how most people do it.

An unplanned expense or unexpected decrease in income is enough to shatter any sense of security. For many reasons, it’s harder to be successful with money today than ever before.

One of the critical ways that Qube helps you stick to your spending plan is that you have to physically open the app and select from which qube (or digital envelope) you want to spend.

Your Qube Card literally won’t work unless you open a spending qube.

That visual reminder and act of seeing your financial plan staring you in the face before you spend is incredibly potent.

Decades ago, people would carry their checkbooks with them, and they would balance them. A checkbook had a ledger in the front that you would use to make sure you wouldn’t write a check that would bounce. So you always knew your bank balance.

Now with credit cards and digital payments, you essentially just swipe or click a button, and the entire process is over before you even have time to think about whether you should be making the purchase.

The qubes are your accountability partner to make sure you stick to your plan. Now you just sit back and watch your savings grow as you only spend what you planned.

Qube As A Standalone Banking Solution

In its current format, Qube works best if you already have an existing bank account that you can link. If you need the ability to send transfers to other people with Zelle, you will be disappointed. 

While management at Qube has stated that they intend to build out more robust banking functions, it’s currently best used as a world-class budgeting tool. The best part is that a basic plan is free.

How Much Does Qube Money Cost?

Qube Money has announced four plans. Your needs will dictate which plan is right for you. The “Basic” plan is free ($0) per month. This plan is an individual plan with 10 qubes.

The “Premium” plan includes the free plan services plus additional features such as unlimited qubes and the ability to get more than one card if you share finances with a significant other/partner/spouse/etc. The premium plan is $8 per month. 

A Family plan is $15 per month, and in addition to the Premium plan features, it allows you to add up to 10 kids accounts. There is an upcoming ‘chore tracking feature,’ which could be a motivator for task-oriented families. It’s clear that the app was designed with families in mind.

For $25 a month, a Platinum account gives you access to all of the features of the cheaper plans in addition to rewards, benefits through corporate partners, access to additional training, and a sleek metal card.

Qube Money Pricing

Qube Takes Family Spending And Coordination To The Next Level

It’s easy to see at first glance that Qube was created with families in mind. Qube’s family plan allows you to have different cards for your entire family. Everyone can log into their app and see their specific spending Qubes.

If you have little ones that do chores in exchange for an allowance, they can have their own personal spending Qube. The ability to set parent permissions means that you are always in control while still teaching your kids about responsible spending habits.

Qube vs. Simple Bank – How They Stack Up

If you are deciding if Qube is a good replacement for Simple, it comes down to one thing: budgeting.

Do you need help tracking your spending? Want to curb an impulse spending problem? Do you want to accelerate your ability to reach your financial goals and set money aside for upcoming expenses like vacations or home repairs?

If you want to have complete control over your spending, look no further. Qube is easily the most complete budgeting and spending solution that I’ve seen on the market. 

On the other hand, if you just want an online bank to hold your money, other digital alternatives like Ally and Varo will be better suited.

If you are ready to learn more about Qube and start to get your financial life back under control, you can visit Qube’s site to learn more!

The post Simple Bank Closing: See Why Qube Money Is A Worthy Substitute appeared first on Finance Plan Today.

Let me explain why.

The other day I had a dream that I was lost and wandering through a jungle. It was one of those dreams where I was seeing myself in the third person as if I was in a movie. Except instead of jumping from tree to tree like Tarzan I was terrified that I wouldn’t be able to find my family. The jungle was swelteringly hot and humid. For some reason, I was barefoot and it looked my feet were getting battered by the raw terrain.

Out of the corner of my eye, I noticed that there was a shiny canister in the distance. As I approached I realized it was actually a phone. Finally, I would be able to call my wife and call for help.

But that’s not what happened. I just looked at the phone and unsure of how to use it, I just left it there on the ground. I was horrified as I watched myself walk away from the phone in my dream. Sadly, I didn’t even spend two minutes to try to see how it worked. In the dream, I kept trying to scream to myself to walk back and call for help. I woke up sweating and glad it was just a nightmare.

Is that something you would do? Would you walk away from the phone instead of using it to call for help? I woke up before anything happened to me, but let’s just say I don’t think anything good was going to happen.

Humans Have A Tendency To Favor Convenience Over Efficiency

As I reflected on it, I realized that the dream I had was a perfect metaphor for so many of the decisions we make as human beings. We’ve been essentially hard-wired to optimize for convenience instead of efficiency.

This leads us to make decisions that are actually not in our own best interest. How does this tie into high interest savings accounts or getting a high interest rate? Well, most people I speak with who have a decent amount of money saved up either keep it in their checking account or standard savings account.

When I asked them if they are aware that high yield savings accounts pay much higher interest rates they usually say yes. In one extreme example, a close friend confided that they had $200,000 sitting in their checking account. They didn’t know how to start investing their money so it just sat there for years.

Let’s just say that I walked them through the process of opening a high interest savings account and an investment account.

If you don’t have a high-interest savings account, you need to stop what you are doing and open one. You can quickly open an online savings account that offers competitive interest rates in minutes. CIT Bank is a perfect example of a solid option for a high interest account.

Bank	APY %	Minimum Deposit
	0.45%	$100
	0.3%	$0
	0.4%	$0
	0.25%	$0
	0.15%	$0
	0.15%	$1
Updated: 6/29/2020

What Is A High Interest Savings Account, Anyway?

A high-interest savings account is a deposit account offered by a financial institution that offers a higher interest rate than a traditional savings account. Yup, it’s that simple.

High-interest savings accounts are typically offered by online banks like CIT. These online-only banks use the money they save from not having to have physical local branches to offer interest rates that may be as high as 200+ times greater than what a typical traditional bank is able to offer.

These accounts are essentially the same as standard savings accounts except they have higher savings rates. You can still use them for direct deposit and mobile banking like you normally do. The best accounts also have no monthly maintenance fee, no minimum balance, and a low minimum deposit. If you are a member of a credit union, that is also another place to inquire about a high yield savings account.

Keep in mind that savings accounts cap the number of monthly withdrawals and don’t have a debit card or ATM card so you’ll want to keep a checking account linked to it.

What Is Considered High Interest?

The mega-banks like Chase, Bank of America, and Wells Fargo offer savings accounts that start with super-low interest rates ranging from 0.01% APY to 0.04% APY. APY stands for Annual Percentage Yield and is the effective annual rate of return.

These numbers are extremely low. These mega banks also love charging a monthly fee.

In fact, if you’ve read our article on how to pick investments, you’ll remember that index funds with fees in the 0.04% range are solid choices for their low fees.

However, when it comes to earning interest, you want to find an account with the highest number possible.

To put 0.01% interest into context for you, let’s assume for a second that you’ve built an amazing budget and have been saving and investing for retirement like a champ. In fact, you’ve been able to save up $1,000,000! You’re a millionaire.

So how much interest would that $1 million earn if you put it into a savings account that only earned a savings account rate of 0.01%? $100 per year. A HUNDRED bucks! That’s it. That’s about $8.33 per month in return for letting them hold you million dollars.

You don’t need to be a rocket scientist to know that’s pathetic.

In comparison, the leading high-interest savings accounts are earning at least 1%.

If you think 1% still sounds low, just remember that it’s 100 TIMES larger than 0.01%. In other words, for every $1 you’d earn with a rate of 0.01% APY, you’d earn $100 with a rate of 1%!

And this ignores the effect of compounding which means the difference would only grow over time since you’d be earning interest on the money that you made off of previous interest.

Do you even need more reasons to transition to an online bank?

How Do You Open A High-Interest Savings Account?

Opening a high-interest savings account is very similar to opening any other kind of savings account, except the process typically has to be completed entirely online. You can open one now at CIT Bank.

You’ll want to fund your account by making an online transfer from an existing checking or savings account. Your new bank will walk you through the process and it’s super easy.

Some banks will have a required minimum balance, while others won’t. The ones we list below have a low minimum balance requirement, a low initial deposit, a high APY, and no account fee.

Which Banks Offer High Interest Savings Accounts?

This list includes some of our favorites.

• CIT Bank
• Varo Savings Account
• Marcus by Goldman Sachs
• Synchrony Bank
• Ally Bank

Are High Interest Savings Accounts More Risky Than Traditional Low Interest Savings Accounts?

No! One beautiful thing about the banks offering high-interest savings accounts is that they still play by the rules and regulations of the traditional retail banks.

This means that their accounts are FDIC insured up to $250,000 per depositor. We have both personally had high-interest savings accounts for that past decade and the safety or security of our accounts has never been an issue.

Not even at the height of the financial crisis.

When Is The Right Time To Open A High Yield Savings Account?

Yesterday!

But seriously, now is the right time. If you are thinking about it and don’t have a high-interest savings account then you are leaving money on the table.

Unless you’re the kind of person that enjoys feeling parched on a scorching summer day and would walk away from free ice-cold water.

Some of you might be worried that you don’t have very much money, but the awesome news is that several of the banks that offer the highest interest rates have no minimum balances.

How Much More Interest Could I Get From A High Yield Savings Account Compared To A Normal Savings Account?

Let’s face it, this is the reason that you’re even considering opening a high-interest savings account. And when money talks, we listen.

So how much money in interest have you been missing out on if you have a savings account or checking account that earns virtually nothing? Let’s explore an example.

Let’s assume there are two identical people. Perhaps they are twins…

Both start with $250 in the bank. In addition, they are able to deposit and save an additional $250 per month thanks to having an airtight budget. (Use our free monthly budget template)

Ignoring interest, they’ll have $500 saved at the end of month 2, and so on, until they have saved $15,000 by the end of the 5th year. This doesn’t include interest.

The only difference between them is that one of them has a high-interest savings account while the other just has a normal low-interest savings account.

Assume the high-interest savings account earns 2.1% APY compared to 0.01% APY with the traditional low-interest savings account.

How much more does the person with the high-interest savings account have after 5 years? Let’s see.

As you can see in the example above, the person with the high-interest savings account was able to save an extra $811.56.

Not too bad for doing absolutely nothing for it besides switching bank accounts.

The Pros Of High Interest Savings Accounts

The Pros

• High-interest rates mean you’ll make more money in interest
• Online-only banks tend to have fewer fees and lower limit requirements
• Many online banks offer 24/7 customer service via calls or emails
• Around the clock access via online banking

The Cons

• No physical branches mean you can’t talk to a specialist in person if you need help
• It may take a few days to transfer the money to a checking account so that you can withdraw it

Can I Keep All Of My Money In A High Interest Savings Account?

As attractive as it may seem, there’s a reason why you can’t use high yield savings accounts as your primary bank account. The reason is that there is a federal law that limits the number of monthly withdrawals that you can make to 6.

So if you have 6 bills to pay on a monthly basis, or need to transfer money out more than 6 times a month you could run into issues.

Some banks will penalize you with fees if you exceed the 6 monthly withdrawals and may also convert your account to a checking account. Other banks have their own limits, so you’ll want to check first if you plan to use your account pretty actively.

High Interest Savings vs Money Market Accounts

A money market account (MMA) is the child of a savings and checking account. MMAs are structurally almost entirely the same as a savings account, except they typically offer higher interest rates and have high minimum balance requirements.

Since money market accounts also typically have interest rates that are higher than checking or traditional savings accounts, they can be an attractive alternative to high interest savings accounts. The biggest differences are that MMAs are like a hybrid of checking and savings accounts and they typically have pretty high minimum balance requirements.

What Can High Interest Savings Accounts Be Used For?

So if I am limited in the number of withdrawals that I can make on a monthly basis, how should this account be used?

The perfect use for a high-interest savings account is to save money that you won’t need to spend regularly. Do you have an emergency fund yet? These savings accounts can be the perfect place to store money for a rainy day. Or if you are saving up for the down payment on a house or another large purchase.

Remember that ideally, you’ll want to have a savings goal of having 3 to 6 months of living expenses saved for emergencies.

As you can see, switching to a high-interest savings account is a no-brainer. Not sure if your relationship with money is broken? Not having a high-interest savings account may indicate that it is.

Make sure you open your high interest savings account today to have your money start working for you!

No, it won’t solve all of life’s problems. But it’s better than walking right past a free bottle of ice-cold water on a hot summer day. If you’d like to get an even higher interest rate, check out a CD or certificate of deposit!

Looking for even more ways to save or make money?

Consider refinancing your student loans to lower your monthly payment and interest rate. Or download Robinhood or Webull to get a free stock and start investing!

Camilo Maldonado

Camilo is a personal finance expert and the Co-Founder and CEO of Finance Plan Today. I was raised in poverty by a single mother and had to learn everything about personal finance on my own. I have been featured on Forbes, Business Insider, CNBC, and US News. Earlier in my career, I worked as an investment banking analyst on Wall Street at JPMorgan Chase & Co., and I have an M.B.A. from Harvard University and a B.S.E. in finance from the Wharton School of the University of Pennsylvania.

FinancePlanToday.com

The post High Interest Savings Account – Why You Need One appeared first on Finance Plan Today.

Summary Of Money Market Accounts (MMA) 

Money market accounts typically offer higher annual percentage yields (APY) than standard savings account. MMAs are like a cross between a checking and savings account, providing both high APYs and liquidity.

• Generally have excellent APYs
• Typically require high minimum balances
• Provide more access to funds via debit card and checks
• Limited to six (6) withdrawals a month
• Less liquid than checking accounts, but more than savings and CDs

We believe that MMAs shine when appropriately used alongside their friends, the certificate of deposit (CD), savings, and checking accounts. CIT Bank offers all these products.

How Do Money Market Accounts Work?

MMAs work similarly to saving accounts and certificates of deposit. You sign up for one (like CIT Bank’s) online or in person, provide some personal identification information, and sign the dotted line. Once completed, you deposit money and watch your savings grow.

Money market accounts are more flexible than standard savings accounts and CDs. You can generally access your money through checks or debit cards. Though, you can only withdraw your money a maximum of six times per month, limiting MMA liquidity. 

Though, one norm is that MMAs generally require a high minimum deposit and balance. Banks may penalize you if your balance falls below the minimum. 

Pros and Cons of Money Market Accounts

Although money market accounts have solid APYs and allow greater access to your money, they have some drawbacks. For example, maintaining an extensive minimum balance can be difficult. Even then, some high-yield savings accounts offer similar APYs at no minimum balance.  

When Should I Get A Money Market Account?

First, run through the eight steps of personal finance and establish some savings. Once you’ve built an emergency fund, you can start thinking about making the most of what you’ve saved up so far. 

You should consider opening a money market account if you have enough money to meet minimum balance requirements and want to earn a higher interest rate. You should also read into high-yield savings accounts and certificates of deposits. Make sure you understand the differences between them—we talk more about them below!

With proper planning, you can make your money grow even more than before. 

Say you have $10,000 in a standard savings account. If the economy is good and your life is stable, then you should consider opening an MMA. Why? MMAs usually have higher APYs than savings accounts!

There’s no perfect way to distribute your money, but it’s worth placing some cash into both your high-yield savings account and money market account to maximize the interest you earn. You can get even more technical and open an MMA, CD, and savings account.

Are Money Market Accounts Safe?

Yes!

MMAs are FDIC-insured up to $250,000, meaning that if the bank with you have the MMA with suddenly fails, the government will give you back your money. FDIC insurance applies separately to each FDIC-backed account you own. 

With 2020 being the year of surprises and unpredictability, at least you can sleep well knowing your MMAs are protected. 

Moreover, MMAs provide guaranteed returns. Comparably, investing in the stock market can be a risky, unpredictable task. MMAs list out the exact APYs you’ll get on your savings, making them a safe way to earn passive income. 

How Are Money Market Accounts Taxed? 

The interest you earn from MMAs is taxed according to your income tax bracket. 

For example, if you earn $100 from a money market account in 2020, and your total taxable income for that year was $100,000, then you’d face a tax of 24% for your capital gains ($24).

The bank where you have an MMA will provide a 1099-INT statement when it’s tax season. The form contains precise information about the interest you earned. 

Money Market Accounts vs. Different Types Of Accounts

There are a lot of different types of bank accounts. It can be overwhelming to try and figure out what they all do, and if you should even open them. 

Read through the following, and you’ll walk out a little more confident!

There are primarily four different types of accounts:

• Checking
• Savings
• Certificates of deposits
• Money market

They differ in terms of liquidity, APYs, and minimum balances. 

Money Market Accounts vs. Checking Accounts

Checking accounts are the most flexible account out there, granting you almost unlimited access to your funds. However, they earn little to no interest, creating a significant tradeoff. 

MMAs earn much higher interest at the expense of less liquidity. There are also laws limiting the number of transfers and electronic payments you can do with your MMA to six (6). Individuals who surpass the limit will be fined, and their accounts may even be closed.

Thus, you shouldn’t put all of your money into an MMA nor a checking account. Instead, you should split between the two accordingly to maximize the interest you earn while being able to access your money for emergencies. 

Money Market Accounts vs. Savings Accounts

Money market accounts and savings accounts are similar but have some minor differences. Generally speaking, MMAs have higher APYs than savings accounts.

According to the FDIC, the national average MMA APY on Jan 6, 2020, was 0.15% vs. savings 0.09%. Although these differences can seem minor, some high-yield savings accounts and MMAs can have rates that are 20x over the national average. 

Though, it’s worth noting that MMAs typically require a higher minimum balance than savings accounts. Thus, it might be difficult to open an MMA vs. a no-minimum savings account like CIT Bank’s.

Furthermore, both are limited by a maximum of six (6) withdrawals per month. However, MMAs provide more ways to access your money via checks and debit cards that savings accounts don’t typically have. 

Looking to learn more about the differences between them? Read our MMA vs. savings account article!

Money Market Accounts vs. Certificates of Deposits (CD)

CDs are the least flexible type of account, locking up your money for a set period. However, with this illiquidity comes great returns, since CDs generally have the highest APYs of all the accounts. 

Given that MMAs are much more liquid, it’s good to mix your savings among the two to have as much access to your money as possible while maximizing your interest. Though, if you’re looking to get fancy, take a look into CD ladders!

MMAs vs. CDs vs. Savings Accounts vs. Checking Accounts

	MMAs	CDs	Savings	Checking
APY	Higher	Highest	Lower	Lowest
Liquidity	Higher	Lowest	Lower	Highest
FDIC Insured
Checks	(limited)			(unlimited)
Debit card
Withdrawals per month	6	0	6	Unlimited
Minimum balance		Sometimes	Sometimes	Sometimes
Annual fees	Sometimes	Sometimes	Sometimes	Sometimes

What’s A Money Market Fund? Is It The Same As An MMA?

No, no, no! Don’t confuse the two. 

A money market fund is a product offered by an investment company. It’s a mutual fund investing in safe assets such as U.S. Treasury securities. Money market funds are some of the least volatile investments out there, regarded to be pretty safe. 

However, money market funds are not the same as money market accounts. For example, MMAs are protected by $250,000 worth of FDIC insurance, whereas money market funds have no such insurance protection.

Make sure you understand their differences! 

How Do I Use Money Market Accounts With Other Accounts?

We’re glad you asked. Notice that these accounts all have differing levels of flexibility and APYs, with the least flexible (CDs) having the highest APYs, and vice versa.

Say you have $10,000, and you’re looking to maximize the interest you earn while maintaining some access to your money. You could split it in the following ways:

• $7,000 in a CD ladder
• $1,500 in an MMA
• $1,000 in a high-yield savings account
• $500 in your checking account

Why is this effective? Well, if you don’t need to have access to this money at a moment’s notice, you’ll get a better return on your money while maintaining some liquidity.

Consequently, stashing away 70% of your savings for the long term is a pretty solid move. You can even maintain flexibility by putting some money into a CD ladder.

With the remaining $3,000, I’d probably put a majority between an MMA and a high-yield savings account. Though, since MMAs require a high minimum balance, it may be challenging to find one that works if you only had $10,000 in the first place. 

The basic idea behind all this distribution is that you’re trying to accrue the most interest possible while maintaining access to the money you need. The precise splits vary from person-to-person. Experiment and see what works best for you!

Is The Money Market Account The Best Bank Account To Have?

We don’t believe there’s necessarily a “best” type of account.

Although a checking account is an arguable necessity, MMAs genuinely do their best alongside their counterparts. Like in the previous example, opening all four types of accounts can keep your money liquid while maximizing your interest. 

Essentially, each account has pros and cons that can cover one another. For instance, the high APYs of a CD cover the drawbacks of a checking account. 

Frequently Asked Questions

John Ta

John Ta is an undergrad at the University of Pennsylvania and the founder of Penn’s first undergrad personal finance club, Penn Common Cents. As a first-generation college student, he had to learn everything about personal finance on his own and seeks to mend the financial literacy knowledge gap seen almost everywhere. John is currently studying for an MS in Chemistry and a BA in Physics (business & tech concentration), Biochemistry, and Biophysics and is interested in the intersections of finance and healthcare.

The post Best Money Market Accounts appeared first on Finance Plan Today.

What Is A High-Yield Savings Account?

A high-interest savings account is a deposit-based account that pays interest at rates about 20x the national average savings interest rate. How is this possible?

Most high-yield savings accounts are offered by online-only banks, which cuts the costs of brick-and-mortar locations. These online banks can then provide high-interest rates that grow your money passively. 

How Do High-Yield And Standard Savings Accounts Differ?

To put these gains into perspective, say you and your friend both had $10,000.

You open a high-yield savings account with a 1.00% APY, whereas your friend opens a typical savings account with a 0.05% APY. Over just ten years, you’ll have made about $1,000 more than your friend! Not to mention that the only difference between you and your friend was that you read about these accounts. 

By not opening a high-yield savings account, it’s almost like leaving free money on the sidewalk. 

The shocking thing about the scenario I’ve described is that it happens all the time. I know friends and family that have never opened a high-yield savings account. All that foregone interest. 

If you’re reading this article and you don’t have a high-yield savings account or MMA, you should open one now.

Bank	APY %	Minimum Deposit
	0.45%	$100
	0.3%	$0
	0.4%	$0
	0.25%	$0
	0.15%	$0
	0.15%	$1
Updated: 6/29/2020

But Aren’t The Interest Rates Tiny Anyways?

Well, yes, if you look at it like that, then your other options are:

• Leaving your money in your piggy bank
• Placing your money in a standard savings account

By not placing your savings into a high-yield savings account, you’ll be missing out on thousands of dollars like in the previous example. Keep in mind that the effort required to run either account isn’t different. In other words, it’s quite literally like saying you don’t want free money.  

But wait, it gets more complicated. There’s something called inflation.

The average rate of inflation in the United States hovers around 2% every year. If you put your money under your pillow or in a regular savings account, then you’ll be losing money to inflation every year. 

A high-yield savings account will fight against the inflation rate to keep you above the minimum. 

So sure, the interest rates might be low, but they aren’t irrelevant. Their rates earn significant cash over the years and stand against inflation. 

Pros And Cons Of High-Yield Savings Account

High-yield savings accounts offer stellar interest rates that can pay out a lot over time. However, you can only withdraw your money externally a maximum of six (6) times a month. In short, there’s a tradeoff between your APY and liquidity. 

Furthermore, these accounts are generally insured by the FDIC for up to $250,000. Insurance means that if your bank were to suddenly collapse, you would still get up to $250,000 of your money. This protection makes savings accounts safer than storing your life savings at home, where a house fire or robbery could ruin everything.

What Is A Money Market Account?

A money market account (MMA) is the child of a savings and checking account. MMAs are structurally almost entirely the same as a savings account, except there are generally three key differences:

1. Usually require a high minimum balance
2. Typically have higher APRs than savings accounts
3. More liquid than savings accounts

The same story about leaving money on the street still most certainly applies here, but to an even greater extent. Since MMAs can have higher APYs, they will pay out more over time. 

Higher Minimum Balances

You might be wondering throughout this article thus far: how can MMAs offer higher interest rates? 

It comes down to the typically required minimum balances. With high-interest rates comes hefty minimum balances. 

Since banks use your money to make more money, they’d be more than happy to give you slightly higher rates if you give them lots of money. Remember that banks offer various lending products such as loans, which have interest rates that can start around 3%. 

If your bank offers a 2% interest on your MMA deposits, then they can use that money to lend it to others for higher interest rates, making money for the bank. The more money you give the banks, the more money they can generate. 

Higher APRs Than Savings Accounts

According to the FDIC, the national average APY on an MMA and savings account were 0.11% and 0.07% for the last six years. Given that MMAs typically need higher minimum balances, it’s no surprise that MMAs have always had higher interest rates than their savings account counterparts.

More Liquid Than Savings Accounts

MMAs come with unique liquidity features. While MMAs and savings accounts are both limited six (6) external withdrawals a month, MMAs generally have debit card and limited check access that allow you to access your money much more frequently than a savings account.

Pros And Cons Of Money Market Accounts

Generally speaking, MMAs are an excellent deposit account to grow your savings. They provide high APYs alongside increased liquidity. However, most MMAs require a high minimum balance, which can deter many people from opening one. Furthermore, they suffer from the same withdrawal limit as savings accounts, but offer limited debit card and check use.

Which Is Better: A High-Yield Savings Account Or MMA?

Neither is necessarily “better” than the other. They are each good in their own right and are best used together—more on this later.

The main difference between them is that MMAs typically have better APYs than savings accounts and have higher minimum balances. MMAs alone also provide more ways to tap into your money. 

Though, in the grand scheme of things, MMAs and savings accounts are similar. If you’re looking for an account to place your money in, either one will work. 

When Should I Get An MMA?

You should get an MMA when you feel like you’ve:

1. Run through the eight steps of personal finance and established an emergency fund
2. Earned enough savings to surpass the minimum balance
3. Opened or considered a checking account 

Since an MMA doesn’t allow unlimited access to your funds, it’s important to not lock up everything into one MMA. Instead, you should also open a checking account to have unhindered access to a portion of your money at any time of the day.

Furthermore, you can’t get an MMA unless you have enough to meet the minimum requirements. Otherwise, the bank might charge fees or close your account if you can’t make the threshold. Thus, you can only enjoy these perks and benefits once you’ve saved up enough money. 

When Should I Get A High-Yield Savings Account?

On the flip side, you should get a high-yield savings account when you have:

1. Run through the eight steps of personal finance
2. Money underneath your pillow or in your piggy bank
3. Opened or considered a checking account

Most top tier online-only high-yield savings accounts don’t charge annual fees nor require minimum balances. Consequently, you should open a high-yield savings account as soon as you can to take advantage of the interest rates. Leaving your money under your pillow will cause you to lose out on a lot of passive gains and inflation. 

Moreover, opening a savings and checking account alongside one another is pretty standard. Each account’s strengths cover the other’s weaknesses. Thus, split your money between the two accounts accordingly. 

How Do Money Market accounts and Savings Stack Up Against CDs and Checking Accounts?

In brief, here’s a quick summary of certificates of deposits and checking accounts:

• Certificates of Deposits (CD): Best APY account that locks up deposits for some time
• Checking accounts: Most flexible type of account that offers unlimited access to funds but pays little to no interest

With so many types of accounts, how do you balance between them?

Say you have $25,000, and you want to maximize the interest you earn while maintaining access to your money. You could split it by:

• $15,000 in a CD
• $5,000 in an MMA
• $3,000 in a savings account
• $2,000 in a checking account

Why does this distribution work? Well, if you put all of your money into a checking account, you’d be barely earning any interest. You don’t necessarily need 100% access to your savings.

On the flip side, don’t put all of your funds into a CD. Then, you wouldn’t be able to tap into your money when needed, and that could be pretty bad.

Thus, stagger your savings into accounts that are increasingly less liquid but pay more. Putting around 60-70% of your savings away for the long term is a solid move. You could even throw them into a CD ladder to maintain liquidity. 

With the remaining money, split it between an MMA, a high-yield savings account, and a checking account. You’ll get the highest APY with an MMA, but you also need to have some money for immediate use via your checking account.

The core idea behind all this splitting is that you’re making the most interest possible while maximizing accessibility to your funds. There’s no “one size fits all” rule for this organization.

In short, all four accounts perform best when used together. 

Is An MMA The Same As A Money Market Fund?

No, they are about the same as a bat is to a bat. The first flies, whereas the second is for baseball. 

An investment company like Fidelity offers a money market fund, which is a mutual fund investing in safe assets such as U.S. Treasury securities. Money market funds are some of the least volatile investments out there. 

However, money market funds differ significantly from money market accounts. For example, MMAs are protected by $250,000 worth of FDIC insurance, whereas money market funds have no insurance protection. This difference is crucial to understand.

If you were to lose all of your money from your money market fund, tough luck. 

Ensure that you fully understand their differences before opening either account. 

The Major Takeaways

Money market accounts and high-yield savings accounts are more similar than different. The differences are that MMAs typically have higher APYs, required minimum balances, and more ways to access your money.

Can you go wrong with opening either one? Nope. Both are excellent ways to save money and to earn interest. 

Is either one better than the other? Nope again. They perform at their best alongside their siblings, the CD and checking account. Each account’s pros cover the other’s cons and vice versa. 

Check out some of the best money market accounts!

John Ta

John Ta is an undergrad at the University of Pennsylvania and the founder of Penn’s first undergrad personal finance club, Penn Common Cents. As a first-generation college student, he had to learn everything about personal finance on his own and seeks to mend the financial literacy knowledge gap seen almost everywhere. John is currently studying for an MS in Chemistry and a BA in Physics (business & tech concentration), Biochemistry, and Biophysics and is interested in the intersections of finance and healthcare.

The post Money Market vs. High-Yield Savings Accounts appeared first on Finance Plan Today.

CIT Bank Review

Name: CIT Bank

Description: offers innovative checking, savings, money market, and CD accounts with competitive APYs, charging little to no fees and a sleek user interface to streamline the online-banking process. While they don't have any in-person brick-and-mortar locations, they offer robust customer service. 

Overall

4.6

• Savings
• Checking
• Money Market
• CDs

Summary

CIT Bank offers innovative checking, savings, money market, and CD accounts with fantastic APYs, charging little to no fees and a sleek user interface to streamline the online-banking process. While they don’t have any in-person brick-and-mortar locations, they offer robust alternatives for customer service. 

Pros

• Stellar APYs
• Easy-to-use UI
• No monthly/annual fees
• $30 reimbursements for ATM fees

Cons

• No brick-and-mortar branches
• Some minimum deposits required
• Fees for wiring money with account balances less than $25,000 

What Is CIT Bank?

CIT Bank is an online bank headquartered at Pasadena, California, offering products ranging from savings accounts to mortgages. Founded in 2000, they’ve since grown tremendously, ranking among the top 50 largest banks in the United States.

CIT Bank also has a user-friendly mobile app and a streamlined website that makes the online banking experience fantastic. 

As an online-only bank without any brick-and-mortar branches, they don’t need to pay building and employee costs. Consequently, they can offer competitive annual percentage yields (APYs) across all their deposit products. 

Just how competitive, you ask? According to the FDIC, the average standard savings account APY was 0.07% over the last six years. CIT Bank’s rates are generally about 10-20x higher than the average. 

That difference in rates is frankly ridiculous and helps cement CIT Bank as a fantastic bank to open any high-yield account. 

As a side note, CIT Bank and Citibank are two entirely different banks. This is often a point of confusion, so please don’t mix them up.

What Products Does CIT Bank Offer? 

CIT Bank offers all the standard banking products you can think of, but with innovative twists here and there. For example, they have the following accounts:

• Savings 
• Checking 
• Money market (MMA)
• Certificates of deposits (CD)

In terms of loans, CIT Bank also provides mortgages. Furthermore, they have a plethora of resources you can use to learn more about banking in general.

Are Online Banks Good?

Online banks are not only safe but can also earn you enormous interest over time. 

Imagine your typical standard savings account with a big, well-established bank like Chase or TD Bank. Remember when your interest rates hovered around 0.01%? These pathetic rates don’t exist at CIT Bank. 

Typically, interest rates at CIT Bank are about 10-20x higher than the national average rate. Not sure how much of a difference that makes?

Say you and your friend both had $10,000 and were looking to save it for the long term.

You open a high-yield account with 1.00% APY, whereas your friend opens a typical savings account with 0.05% APY. Over ten years alone, you’ll have made about $1,000 more than your friend. 

The difference? You read into high-yield accounts offered by online banks like CIT Bank and realized how much passive income you could make. All you do now is sit back, relax, and watch your savings grow.

Sure the rates are low, but that doesn’t mean the money you make is irrelevant. Choosing to not open a high-yield account because the APYs are “tiny” is literally like leaving thousands of dollars on the sidewalk. 

So yes, online banks are an excellent way to grow your savings. Furthermore, CIT Bank is FDIC insured, meaning that if the bank were to collapse, up to $250,000 of your deposits would be returned.

Savings Accounts

In terms of savings account, CIT Bank offers two kinds:

1. Premier High Yield Savings 
2. Savings Builder

The former is more of a standard type of savings account where you leave your savings to “sit and rest.” The latter of the two is fascinating and inspires owners to maintain a good savings history. 

Given that both accounts are savings accounts, they are both limited to six (6) withdrawals per year by the FDIC. Excessive transactions will cost you $10 for each offense and could even lead to the closure of your account. 

Also, wiring money externally will cost $10 per wire if your account balance is less than $25,000. 

Premier High Yield Savings Account

This product is what you think of when you think “savings account.” 

Offering typical high-yield savings interest rates, this account operates entirely online. Notable benefits are:

• No monthly or annual fees
• Fantastic APYs
• Mobile check deposits

The premier high-yield savings account is a good start, but we think the Savings Builder is a far better product. Keep reading to learn more! 

Savings Builder

The CIT Bank Savings Builder is a unique and inventive banking product created to promote good savings behavior. 

There are two interest rates: a base rate and an upper rate. Throughout the lifetime of the account, your base rate is the minimum APY you’ll earn.

If you make monthly deposits of $100 or more, then your APY will be bumped to the top rate. This bonus rate is incredible, considering it will only motivate you to establish stellar savings habits. 

Moreover, you won’t only be building a good savings pool, but you’ll also be establishing a robust and ample emergency fund. Remember that the average American can’t afford a $400 emergency payment. 

Some of the perks included when opening this account include:

• Fantastic APYs
• Incentivized savings
• Little to no fees

However, the savings builder APYs may not be as appealing as some of its competitors. Some competitors even have standard savings accounts that offer higher rates with no additional effort required. 

Though, the incentive portion of creating a savings pool is not to be underestimated and might be worth losing a few tenths of interest rates. 

Checking Accounts

Typical standard checking accounts offer pitiful interest rates and sometimes don’t even pay any interest. CIT Bank’s eChecking accounts stand in stark contrast to this reality, offering rates that are much higher than the national checking account APY. 

Furthermore, eChecking accounts have a plethora of perks. For example, some of the benefits include the following:

• Good APYs compared to the national average
• CIT Bank ATMs don’t charge fees
• Get up to $30 reimbursed every month for using other bank’s ATMs
• Debit card with EMV chip security
• Little to no fees
• Remote check deposit through the CIT Bank app

To translate “EMV chip security” into English, they are the square chips you see in your debit or credit cards these days. They help to fight against fraudulent activity. 

It’s worth noting that the eChecking account requires $100 to open and that $30 overdraft fees exist. Moreover, if you try to wire money out of your account, you will be charged a $10 fee if you have less than a $25,000 balance. 

Generally speaking, the CIT Bank eChecking account is a good option for your first checking account. 

Money Market Accounts (MMA)

CIT Bank’s MMA is solid. Like a typical MMA, they earn more interest than their savings account counterparts. However, CIT Bank’s MMA only has a $100 minimum balance, which is surprising considering their APYs are higher than the savings accounts that also have a $100 minimum. 

As a consumer, you should have no complaints about the rates there.

Other pluses include:

• Remote check deposit through the CIT Bank app
• No monthly or annual fees

Though. MMAs have some fees to know about as well:

• Limited to six (6) withdrawals per month; $10 excessive transactions fees
• $25 overdraft fees
• $10 outgoing wire fees for accounts with a balance less than $25,000 

While CIT Bank MMAs might offer higher APYs than their high-yield saving account counterparts, you lose the savings incentive introduced by the Savings Builder product. The extra motivation to save money might be worth the loss of a few percentages of interest. 

If you’re looking to learn more about the differences between MMAs and savings accounts, read our article!

Certificates Of Deposits (CD)

CIT Bank has a wide variety of CD options, ranging from your typical to no-penalty CDs. 

All these CDs will lock a fixed rate over the term length. This prevents interest rates from changing even throughout economic recessions, but can also stop you from getting more favorable rates. 

CIT Bank also doesn’t charge any monthly or annual fees for their CDs. 

Term CDs

These CDs are your standard CD. You deposit some money into the account, locking it up for a while and earning some interest. 

CIT Bank requires a $1,000 minimum to open a typical CD and allows term lengths starting from 6 months and up to 6 years. Furthermore, you’ll be charged early withdrawal fees if you break your CD before its term length. 

No-Penalty CDs

CIT Bank also offers specialty CDs such as the no-penalty CD, a CD that doesn’t charge early withdrawal fees. 

To be frank, no-penalty CDs are mostly just a fancy name for a savings or money market accounts with a fixed rate. This similarity is why no-penalities offers mediocre rates relative to the typical ones. 

Pretty much everything about no-penalty CDs is the same as the standard CD. CIT Bank’s no-penalty still requires a $1,000 minimum deposit, but only allows term lengths of 11 months. 

Jumbo CDs

Banks are willing to give you higher APYs if you can give them more money. 

To open a jumbo CD, you must deposit $100,000 at minimum. That’s a whole lot of money for sure. However, jumbo CDs grant superior interest rates in return. 

CIT Bank offers two to five year long jumbo CDs. These CDs are basically no different than the standard CD, besides requiring an enormous initial deposit.

Is CIT Bank Safe?

It’s not really our right to be the judge on this, but we can provide you the facts to help you make a justified decision. 

CIT Bank has not reported any significant breaches since its founding and provides extensive security to fight against hackers. However, when giving your sensitive personal and financial information online to even trustworthy companies, there’s always a risk involved. 

Furthermore, CIT Bank is FDIC insured, meaning that if CIT Bank were to suddenly fail, up to $250,000 of your money would be protected. You shouldn’t worry about whether your funds will suddenly disappear one day. 

However, they aren’t accredited by the Better Business Bureau (BBB) and are rated a “B-” rating, reflecting their failure to respond to several filed complaints. Though, TrustPilot consumers have rated CIT Bank 4.4/5.0 stars. 

How Does CIT Bank Make Money?

If CIT Bank barely charges any fees and gives you money in return for you opening various accounts, it’s a good question to ask how any bank makes money.

Remember that banks also act as lenders, loaning money for you to go to school, get a car, or buy a house. These loans generally have an interest rate that is usually somewhat higher than the APY of your savings account. 

By giving banks money, they can lend that money to other people and charge higher interest rates on their loans, earning them a profit. This scheme is why banks love jumbo deposits—they can use all that money to make enormous revenues. 

At the end of things, it’s a win-win situation for both parties. You make money, and the bank makes money. 

How Is CIT’s Customer Service?

With online banking, it’s easy to be worried about the quality and quantity of customer service representatives. CIT Bank realizes these concerns and presents plenty of viable help options. 

You can send CIT Bank a secure message or email 24/7. If you want to talk to a human instead, there are still good options:

• Weekdays: 9 AM to 9 PM ET
• Saturdays: 10 AM to 6 PM ET
• Sundays: Closed

What I Wish Was Different About CIT Bank

For starters, it would be nice if CIT Bank established an ATM network around the country. Currently, there aren’t any CIT Bank ATMs, and a network would help you tap into your funds more quickly.

Moreover, CIT Bank should work on fixing their BBB rating. A “B-” is a bit concerning for a top 50 bank and looks odd compared to a 4.4/5.0 star TrustPilot rating.

How To Get Started With CIT Bank?

Opening an account with CIT Bank is relatively simple and can be completed in three steps:

1. Provide your name, address, phone, email, and social security number
2. Make the necessary minimum deposit
3. Accept the confirmation email

Remember that the minimum deposit varies by product. For CIT Bank’s high-yield savings, checking, and money market accounts, the minimum is $100. Comparably, their CDs require a $1,000 minimum, and their jumbo CDs request $100,000. 

Once you’ve opened your account, you have full freedom to add even more money to your account. You could also go ahead and create another account to start your first CD, for example. 

Should You Use CIT Bank?

Generally speaking, CIT Bank is a great bank to open a deposit account with. All their products offer competitive APYs with little to no fees. Their customer reviews and history reflect that they are a pretty trustworthy bank as well.

However, if you’re looking for a bank with in-person branches, then CIT Bank probably won’t work for you. They are an online-bank with zero brick-and-mortar locations. 

Though, it’s always a good habit to take a look into other options before delving specifically into CIT Bank. Some other banks offer products with higher APYs or innovative products.

It’s worth noting that CIT Bank’s Savings Builder is one of its most entrepreneurial accounts, offering an incentive for you to build good savings habits. Despite it not having the highest rates out there, the added motivation could be worth the cost of losing a few tenths of a percent. 

John Ta

John Ta is an undergrad at the University of Pennsylvania and the founder of Penn’s first undergrad personal finance club, Penn Common Cents. As a first-generation college student, he had to learn everything about personal finance on his own and seeks to mend the financial literacy knowledge gap seen almost everywhere. John is currently studying for an MS in Chemistry and a BA in Physics (business & tech concentration), Biochemistry, and Biophysics and is interested in the intersections of finance and healthcare.

The post CIT Bank Review appeared first on Finance Plan Today.

CIT Bank Savings Builder Review

Name: CIT Bank Savings Builder

Description: is a high-yield savings account with a high-rate, competitive APY, and a unique incentive to maintain and grow your savings.

Overall

4.4

• APR (Interest Rates)
• Account Fees
• Customer Service
• Products

CIT Bank Savings Builder Review

The CIT Bank Savings Builder is a high-yield savings account with a high-rate, competitive APY, and a unique incentive to maintain and grow your savings.

Pros

• High-interest rates
• Little to no fees

Cons

• No physical branches
• Requires frequent maintenance for APY 

• Open Account!

CIT Bank Savings Builder Summary, Rates, and Fees

Summary of Interest Rates

Overall Summary

What is CIT Bank?

Founded in 2000, CIT Bank is an online bank headquartered in Pasadena, California, offering products such as high-yield savings accounts, money market accounts, and certificates of deposit.

CIT Bank also offers a user-friendly mobile app and sleek website that helps facilitate its online banking experience. 

However, CIT Bank can offer such competitive interest rates because they don’t have any physical locations, nor do they have a free ATM network. Without brick-and-mortar banks, CIT Bank doesn’t need to worry about paying maintenance fees, wages, or rent, allowing the firm to provide much higher-than-average annual percentage yield (APY). 

How much higher? Well, according to CNN, the average savings account APY is 0.06% across the United States. This finding means that CIT Bank Savings Builder’s APY is nearly 20x higher than the national average. That’s ridiculous. 

Are Online Banks Bad?

No, not at all! Frankly speaking, I don’t think I went to my brick-and-mortar bank once throughout the past year. In the age of the mobile phone, you can do everything you need to do online.

Online banking can be time-saving and efficient. For example, rather than going all the way to your bank in-person to deposit a check, you can take a picture of your check and deposit it online. Furthermore, I usually check my bank account using my phone weekly while I am walking to class or when I am eating dinner—multitasking!

However, if you enjoy talking to someone or like the feel of in-person banking in general, then online banks may not be for you. Another downside to CIT Bank is that you can only get customer service through the phone, but we’ll talk more about that later.

How Does CIT Bank Savings Builder Work?

The CIT Bank Savings Builder is a unique and one-of-a-kind product designed to incentivize good savings habits. 

You are first given a base 0.55% APY if you deposit less than $25,000 into your account. However, as long as you make monthly deposits of at least $100, your APY gets bumped up to an upper-tier rate of 0.75%.

It’s also worth noting that if you maintain a balance greater than $25,000 in your account, you’ll automatically have the upper-tier rate, but in reality, most of us don’t have $25,000 lying around.

This bonus rate is a pretty sweet deal, considering that it will help motivate and encourage you to maintain a steady stream of savings. Besides, not only will you be building up your savings, but you can also build your emergency fund simultaneously. Remember: the average person can’t afford a $400 emergency payment.

With CIT Bank Savings Builder, you can (hopefully) accumulate enough savings for a few months to develop an ample emergency fund.

Is There An Annual Fee?

CIT Bank has no annual fees to open the savings account and doesn’t charge any monthly maintenance fees. However, if you need to make an outgoing wire transfer with less than $25,000 in the account, there is a $10 fee. 

What Are The Overdraft Fees?

Hold on. There are no overdraft fees for savings accounts. Consequently, we don’t even have to worry about them. Yay!

Pros & Cons of CIT Bank Savings Builder

Like all products, the CIT Bank Savings Builder has both ups and downs. We’ve left out “online bank” as neither pro nor con. Depending on your perspective, online banking can go either way. 

Pros

• Fantastic APYs (~20x higher than the national average)
• Incentivized savings system helps build your future
• No maintenance or opening fees
• Money compounded daily

Cons

• No free-to-use ATM network
• $10 per outgoing wire transfer for account balances less than $25,000
• No brick-and-mortar in-person locations
• Customer service may not be the greatest

Is The CIT Bank Savings Builder For Me?

Generally speaking, if you’re looking for a solid savings account with an excellent APY, the CIT Bank Savings Builder will work great for you. An untold benefit is the intrinsic motivation that comes with making these monthly $100 payments to maintain your upper-tier APY—encouraging and developing savings is something that will benefit you for years to come. 

It’s also worth noting that some competitors do offer accounts with higher APYs. However, the added incentive to make these monthly installments is not something to put aside and may outweigh the benefits of higher interest payments. Consequently, while higher APY accounts promote a “set and forget” style of saving, the CIT Bank Savings Builder will promote healthy injections of cash into your savings account.

How To Compliment Your Savings Account

If you’re looking to truly maximize your accrued interest, it might be best to combine the CIT Bank Savings Builder with a CIT CD or some other high-yield savings account with a certificate of deposit. For example, if you have $10,000, a savings account with 1% APY, and a CD with a 2% APY, wouldn’t it make the most sense to put $5,000 into both your savings account and CD? Not only would this split earn you $50 more in interest over a year, but you’d also still have somewhat frequent access to your money.

If you want to delve deeper into this idea, you could put $1,000 into a checking account, $2,000 into a savings account, and the rest into a CD ladder to maximize your money’s liquidity while pursuing high-interest yields. Finesse.

How Can I Access My Money?

Since the CIT Bank Savings Builder is a savings account that is FDIC insured, you are limited to six (6) preauthorized or automatic transfers and withdrawals. This precaution means that you cannot withdraw money out of your account more than six times a month, or you might face fees and even closure of your account.

This access frequency starkly compares against a certificate of deposit, which doesn’t allow you to access your money throughout the entire lifetime of the CD.

Said differently, you can access your cash an unlimited amount of times with your checking account. Consequently, there exists an interesting trichotomy between your savings, checking, and certificate of deposit accounts in terms of APYs and liquidity. 

You can use CIT Bank’s online banking website or your mobile app to access your money and initiate transfers. Unfortunately, CIT Bank doesn’t have a free-to-use ATM network, even for their checking accounts.

Will My Money Be Safe With CIT Bank?

Absolutely! CIT Bank is FDIC insured, meaning that if CIT Bank were to suddenly fail, you wouldn’t lose any of your deposits. Up to $250,000 in deposits, the FDIC will ensure that CIT Bank’s performance will not hurt you. 

How Is CIT Bank’s Customer Service?

With online banking, people are often concerned about the quality and availability of customer service representatives. To amend these concerns, CIT Bank presents a plethora of contact methods.

CIT Bank allows you to send a secure message or email at any time of the day and week, and they offer automated telephone banking that provides your account balance 24/7. 

If you want to talk to a customer service representative instead, there are also a good variety of options:

• Weekdays: 9 AM to 9 PM ET
• Saturdays: 10 AM to 6 PM ET
• Sundays: Closed

How Could CIT Bank Improve?

For starters, CIT Bank could offer free-to-use ATMs across the country to make it a little easier to access your money. 

Besides, CIT Bank is not accredited by the Better Business Bureau (BBB). Based on customer interactions, the BBB gave CIT Bank a “B-” rating, which reflects their failure to respond to five (5) complaints filed against them.

While the savings builder product is a solid pick, so you’ll want to read some of the complaints and see if you think they would affect your experience as a customer.  

How Does CIT Bank Compare With Competitors?

CIT Bank does an okay job against the competition. Considering that some banks actually do offer higher APYs without any need of $100 monthly deposits, then the question just really depends on your personal preference. 

If you need an external incentive to build your savings, then the CIT Bank Savings Builder is best for you. A good sign of this would be whether you’ve struggled to save money and budget in the past.

We’ve listed some of CIT Bank’s competitors below: 

Bank	APY %	Minimum Deposit
	0.45%	$100
	0.3%	$0
	0.4%	$0
	0.25%	$0
	0.15%	$0
	0.15%	$1
Updated: 6/29/2020

John Ta

John Ta is an undergrad at the University of Pennsylvania and the founder of Penn’s first undergrad personal finance club, Penn Common Cents. As a first-generation college student, he had to learn everything about personal finance on his own and seeks to mend the financial literacy knowledge gap seen almost everywhere. John is currently studying for an MS in Chemistry and a BA in Physics (business & tech concentration), Biochemistry, and Biophysics and is interested in the intersections of finance and healthcare.

The post CIT Bank Savings Builder Review appeared first on Finance Plan Today.

Picture yourself on a sweltering summer day in a bustling city like New York. It’s late August and the concrete has absorbed sunlight all day and it’s radiating back at you. It feels like you’re walking on a mirror. If the sunlight wasn’t punishing enough, the humidity is almost unbearable.

Add in the throngs of people and the exhaust from the cars, and you’re sure it’s hotter than a sauna. Beads of sweat drip down your brow, and you are kicking yourself for not wearing a hat or bringing a water bottle with you. You’re so thirsty and devoid of liquids that your throat hurts and you feel weak.

You blink and for a second you think you must be in a tropical jungle. And that’s when you realize you left your wallet at home so you can’t buy any water. The feeling of being light-headed isn’t going anywhere.

But suddenly, as if the God’s want to put an end to your suffering, a stranger emerges. It’s a little old lady who sees you struggling and offers you a free bottle of ice-cold water. ICE-COLD.

But you walk right past her.

Like a seasoned New Yorker, you merely glance over, assuming it’s too good to be true. This isn’t your first rodeo. You assume there’s a catch. Some sort of scam.

But there wasn’t. She was just trying to save you.

Dehydrated and exhausted, you barely make it home and have a terrible headache. Later in the day you tell your friends about how hot it was and complain that you weren’t able to buy water because you left your wallet at home.

Completely ignoring the fact, or irony, that you walked away from someone trying to give you an ice-cold bottle of water. Someone trying to help you.

Is that something you would do? Walk away from exactly what you need in a moment of need?

If you don’t have a high yield savings account, that’s exactly what you are doing. Yup, you’re doing it this second. Leaving the free water on the sidewalk while you struggle on the hottest day of the year.

Except the heat is your student debt, monthly rent payment, credit debt, car payment, or your other bills. And the water is ‘free’ money from a high yield savings account. Money we know you could use to make your life easier.

What Is A High Yield Savings Account?

A high yield savings account is a savings account that offers a high interest rate. It’s that simple. It’s the same as a high interest savings account.

High yield savings accounts are typically offered by online-only banks like CIT Bank. These online-only banks use the money they save from not having to have physical local branches to offer interest rates that may be as high as 200+ times greater than what a typical traditional bank is able to offer.

What Is Considered High Interest?

The mega-banks like Chase, Bank of America, Citi offer savings accounts that start with interest rates ranging from 0.01% APY to 0.04% APY. APY stands for Annual Percentage Yield and is the effective annual rate of return. You can just think about it as your annual interest rate.

These numbers are extremely low.

In fact, if you’ve read our article on how to pick investments, you’ll remember that index funds with fees in the 0.04% range are solid choices for their low fees.

However, when it comes to earning interest, you want to find an account with the highest number possible.

To put 0.01% interest into context for you, let’s assume for a second that you’ve built an amazing budget and have been saving and investing for retirement like a champ. In fact, you’ve been able to save up $1,000,000.00! You’re a millionaire.

So how much interest would that $1 million earn if you put it into a savings account that only earned 0.01%? $100 per year. A HUNDRED bucks! That’s it. That’s about $8.33 per month in return for letting them hold you million dollars.

You don’t need to be a rocket scientist to know that’s pathetic.

In comparison, the leading high yield savings accounts are earning at least 1%, but the best rates are closer to 2.2% APY.

If you think 2.2% still sounds low, just remember that it’s 220 TIMES larger than 0.01%. In other words, for every $1 you’d earn with a rate of 0.01% APY, you’d earn $220 with a rate of 2.2%!

And this ignores the effect of compounding which means the difference would only grow over time, since you’d be earning interest on the money that you made off of previous interest.

How Do You Open A High Yield Savings Account?

Opening a high interest savings account is very similar to opening any other kind of savings account, except the process typically has to be completed entirely online.

You’ll want to fund your account by making a transfer from an existing checking or savings account.

Some banks will have a required minimum balance, while others won’t. The ones we list below have no minimum balance requirement.

Which Banks Offer High Yield Savings Accounts?

This list includes some of our favorites.

• CIT Bank
• Varo Bank
• Marcus by Goldman Sachs
• Synchrony Bank
• Ally Bank

Are High yield savings Accounts More Risky Than Traditional Low Yield Savings Accounts?

No! One beautiful thing about the banks offering high yield savings accounts is that they still play by the rules and regulations of the traditional retail banks.

This means that their accounts are FDIC insured up to $250,000 per depositor. We have both personally had high yield savings accounts for that past decade and the safety or security of our accounts has never been an issue.

Not even at the height of the financial crisis.

When Is The Right Time To Open A High Yield Savings Account?

Yesterday!

But seriously, now is the right time. If you are thinking about it and don’t have a high yield savings account then you are leaving money on the table.

Unless you’re the kind of person that enjoys feeling parched on a scorching summer day and would walk away from free ice-cold water.

Some of you might be worried that you don’t have very much money, but the awesome news is that several of the banks that offer the highest interest rates have no minimum balances.

How Much More Interest Could I Get From A High Yield Savings Account Compared To A Normal Savings Account?

Let’s face it, this is the reason that you’re even considering opening a high yield savings account. And when money talks, we listen.

So how much money in interest have you been missing out on if you have a savings account or checking account that earns virtually nothing? Let’s explore an example.

Let’s assume there’s two identical people. Perhaps they are twins…

Both start with $250 in the bank. In addition, they are able to deposit and save an additional $250 per month thanks to having an airtight budget. (Use our free monthly budget template)

Ignoring interest, they’ll have $500 saved at the end of month 2, and so on, until they have saved $15,000 by the end of the 5th year. This doesn’t include interest.

The only difference between them is that one of them has a high yield savings account while the other just has a normal low interest savings account.

Assume the high yield savings account earns 2.1% APY compared to 0.01% APY with the traditional low interest savings account.

How much more does the person with the high yield savings account have after 5 years? Let’s see.

As you can see in the example above, the person with the high yield savings account was able to save an extra $811.56.

Not too bad for doing absolutely nothing for it besides switching bank accounts.

What Are The Pros Of High Yield Savings Accounts?

• High interest rates mean you’ll make more money in interest
• Online only banks tend to have fewer fees and lower limit requirements
• Many online banks offer 24/7 customer service via calls or emails

What Are The Cons Of High Yield Savings Accounts?

• No physical branches means you can’t talk to a specialist in person if you need help
• It may take a few days to transfer the money to a checking account so that you can withdraw it

These High Yield Savings Accounts Sound Amazing, Why Can’t I Just Keep All Of My Money In One?

As attractive as it may seem, there’s a reason why you can’t use high yield savings accounts as your primary bank account. The reason is that there is a federal law that limits the number of monthly withdrawals that you can make to 6.

So if you have 6 bills to pay on a monthly basis, or need to transfer money out more than 6 times a month you could run into issues.

Some banks will penalize you with fees if you exceed the 6 monthly withdrawals and may also convert your account to a checking account. Other banks have their own limits, so you’ll want to check first if you plan to use your account pretty actively.

What Can High Yield Savings Accounts Be Used For?

“So if I am limited in the number of withdrawals that I can make on a monthly basis, how should this account be used?” This is a good question that we get all the time.

The perfect use for a high yield savings account is to save money. Did you read our article about emergency funds? Do you have an emergency fund? These savings accounts can be the perfect place to store money for a rainy day.

If you don’t have an emergency fund, make sure you go learn about that after reading this article. In fact, having money set aside for an emergency is even more important than opening a high yield savings account.

Ideally you’ll want to have at least 3 to 6 months of living expenses saved for emergencies.

As you can see, switching to a high yield savings account is a no-brainer. Not sure if your relationship with money is broken? Not having a high yield savings account may indicate that it is.

No, it won’t solve all of life’s problems. But it’s better than walking right past a free bottle of ice-cold water on a hot summer day.

Have A Question About High Yield Savings Accounts? Ask below!

Looking for even more ways to save or make money? Look into CDs if you don’t need to spend your money any time soon.

For big savings, consider refinancing your student loans to lower your monthly payment and interest rate.

You can also download Acorns, Robinhood, or Webull to start letting your money work for you and grow over time.

Camilo Maldonado

Camilo is a personal finance expert and the Co-Founder and CEO of Finance Plan Today. I was raised in poverty by a single mother and had to learn everything about personal finance on my own. I have been featured on Forbes, Business Insider, CNBC, and US News. Earlier in my career, I worked as an investment banking analyst on Wall Street at JPMorgan Chase & Co., and I have an M.B.A. from Harvard University and a B.S.E. in finance from the Wharton School of the University of Pennsylvania.

FinancePlanToday.com

The post Here Is Why You Need A High Yield Savings Account appeared first on Finance Plan Today.

Not having a certificate of deposit is basically like leaving free money on the table.

While CDs tend to pay more than high-yield saving accounts, you aren’t able to easily access the money you’ve placed into the CD until the end of its lifetime.

How Do CDs Work?

CDs work in a very similar way to the savings account, except there are a few crucial differences between the two. Upon signing the contract for a certificate of deposit and depositing a certain sum of money, called the principal, the interest rate (APY) is locked for the time in which you leave the money with the bank, called the term length. 

The term length varies a lot, but it usually is either three months to five years long. If you try to withdraw your money anytime during the lifetime of the CD before the end of its term length, you will likely face early withdrawal penalties. 

While you are unable to touch your money for some time, generally speaking, CDs offer higher returns on your money than savings accounts and high-yield savings accounts. It becomes a balance between how accessible your savings are and how much you can earn in interest.

As you approach the maturity date of the certificate of deposit, the bank will notify you so that you can plan accordingly. This is important, because you will only have a 1 to 2 week grace period to withdraw your money, otherwise the CD will renew for the same duration.

When Should You Get A CD?

After you’ve run through the eight steps of personal finance and established some savings, you can start thinking about making the most of what you’ve saved up so far. 

A certificate of deposit is best after you have developed a robust set of savings in your high-yield savings account. With the proper strategy, you can make your money grow even more than before. 

Think about this way: if you have $10,000 in your savings account, and everything else is pretty stable in your life, then you probably won’t need to have immediate access to all of your savings at that time. Why don’t you put some of your money into a CD to maximize your returns and leave the rest for your general day-to-day use?

There is no perfect way to split your money up, but you should definitely not put all of it into a CD. Sure, you’ll make a lot of interest, but what if you needed to access your savings for an emergency? Then you’d find all of it tied up in a certificate of deposit! Things would go south really quickly.

Pros and Cons of CDs

When Should You Not Get A CD?

You should not get a CD if you feel as though your current financial situation is unstable or if you feel like you need to have immediate access to your savings.

It would not be a good idea to lock up your life savings into a CD, only to realize that you’d have to pay early withdrawal fees to break out of the contract early.

Early Withdrawal From A Certificate of Deposit

We’ve been hinting at this throughout this article, but to be explicit, if you withdraw your money before the CD’s maturity date, you will face an “early withdrawal penalty” that depends on the institution.

However, for the most part, the withdrawal fees are usually based on how long the term length of the CD was and are often a function of the interest rate. Consequently, these fees are generally not too expensive, allowing you to pull your money out in a pinch.

CD Rates

Certificate of deposit interest rates generally vary on how the overall economy is doing. Currently, CD rates are particularly low due to the federal reserve’s interventions to dampen the recession.

CDs vs. High Yield Savings Account

Although we’ve briefly mentioned the differences between CDs and high-yield savings accounts, the table below summarizes everything:

Are CDs Safe Like Bank Accounts?

Yes! 

CDs are as safe as bank accounts; both products are FDIC-insured up to $250,000, meaning that if the bank you made the CD with suddenly fails, the government will make sure you get all of your money back, up to $250,000.

Only three things are guaranteed in life: death, taxes, and FDIC insurance protecting your certificate of deposits.

Where Can I Get a CD?

You can get one right now.

Most banks offer CDs, but you’ll want to shop around for the highest interest rate possible.

Do CDs Have Minimum Amounts

Unfortunately, to open some certificates of deposit, you may have to put in a minimum amount. For example, some CDs require you to have, at minimum, $1,000 or even $5,000. 

However, some of the best CDs available in the market have no minimum. See the table above in “CD Rates” to see the types of certificates of deposits available, including their required minimum investments.

How Are CDs Taxed?

The interest you earn from certificates of deposits is taxed using your tax bracket. For example, if you receive $100 from a certificate of deposit in 2020 and your total taxable income for that year was $51,000, you’d face a 22% tax rate ($22.00 in taxes for your gains). 

The bank where you have a certificate of deposit will issue you a 1099-INT statement when it’s tax season.

There Are Different Types of CDs

We’ve been talking about the good ole’ standard CD for some time now. However, it’s good to hear about the other types of CDs that exist.

No Penalty CD

Typical CDs charge hefty fees if you withdraw your money prior to the maturity date. However, some banks offer no-penalty CDs that allow you to withdraw your money whenever you want and cancel the CD.

Naturally, they offer lower interest rates, but it’s a perfect option if you need the flexibility (like if you are saving for the down payment on a home).

CIT Bank offers an 11 month no-penalty CD with a high yield, which is awesome.

Liquid CD

Regular certificates of deposits are faced with early withdrawal fees if you try to take your money before the end of the CD’s lifetime. 

On the other hand, liquid CDs charge no early withdrawal fees if you take your money out before the end of the term length. However, liquid CDs mostly have the same interest rates as their savings account counterparts because of how they are functionally identical.

Are there any advantages? Not particularly, but we just want to make sure you are aware of all the products out there.

IRA CD

An IRA CD is simply a different investment method you use when creating an IRA account. The IRA CD is the same thing as the standard certificate of deposit described above but used in your retirement account to enjoy tax advantages. 

Bump-Up CD

Typically, standard certificates of deposits have fixed interest rates, meaning that the rates cannot change during the term length of the CD.

However, what happens to your CD when the current interest rate is higher than the rate you’re locked into? Well, nothing happens—you’re just stuck with the rate you’ve originally signed up for.

With a bump-up CD, you can change the initial rate you’ve signed up with once during the CD’s lifetime. Now, you won’t miss out if the interest rate increases!

Callable CD

When you open a certificate of deposit, it is essentially a two-way deal: you promise to keep your money with the institution for a set time, and the issuer agrees to pay you interest in return.

A callable CD is unique in that the issuer has the power to nullify the contract anytime. However, they must still repay all of your money, so you won’t face any penalties if this does occur.

With this slight instability, you are taking on some additional risk, meaning that banks will compromise with you by offering slightly higher interest rates in return. 

Zero-coupon CD

Upon completion of the term length of the certificate of deposit, you’ll receive a 1099-INT tax statement that indicates the total interest earned throughout the CD’s lifetime. However, this interest is all taxed at the time the CD expires.

A zero-coupon CD offers a unique strategy such that the interest earned over time appears in separate 1099-INT statements every year. This particular investment allows savvy investors to prevent having large sums of interest income appear in one year, which could help avoid taxation bracket creep. 

Add-on CD

Say you wanted to add more money to your certificate of deposit. An add-on CD will allow you to deposit money to increase the CD’s principal. However, the amount of times you can add money to the CD varies from institution to intuition and is usually limited to once or twice through the CD’s term length.

Jumbo CD

Some institutions offer CDs with heightened interest rates if you have a considerable starting principal for your certificate of deposit. Conventional jumbo CDs require, at minimum, $10,000 and a going up to even $50,000 starting principal. The name, jumbo CD, simply refers to the substantial initial investment required to open the account.

Variable Rate CD

A variable-rate CD differs from a standard CD because the interest rate isn’t fixed for the duration of the agreement. That means you’ll be taking interest rate risk because the rate can fluctuate.

What Is A CD Ladder

What if I told you there was a way to keep your money somewhat accessible while maximizing your money over time?

This is the magic of the CD ladder.

We’ll show you how a CD ladder works, but it might require a bit of math and graphs—follow along carefully, and we promise it will be okay!

How To Build A CD Ladder

The idea of a CD ladder is to open multiple certificates of deposits with varying term lengths. For example, if you have $10,000 to put into a CD, but you don’t want to keep all of that money locked up for five years, you can open up five separate CDs for one, two, three, four, and five years and put $2,000 in each CD. 

After each year, you’ll have immediate access to a portion of the money you initially invested. After each CD’s term length ends, you can reinvest that money into a new five-year CD or take that money out to pay down your student loans, for instance. 

Why do you do this? Now, for each of the subsequent years to come, you’ll have access to a significant chunk of your money each year, while maximizing your returns using longer-term CDs. 

The takeaway: in the short-run, you will make a little bit less than you could have had you invested all of your money in a single five year CD, but in the long-run, you’ll be making just as much as you could have by investing all of your money in five-year CDs with frequent access to some of your money each year. Don’t make the mistake of locking all of your savings into a CD! 

CD Ladder Advantages

What sort of gains can you make using a CD ladder? Well, let’s compare it to making individual CDs for a wide variety of term lengths:

We can see that five year CDs will make us the most interest over ten years, but five year CDs also have the least flexibility in accessing your funds. However, while one year CDs offer the worst accrued interest over the same period, they allow you to access your money much more frequently.

CD ladders take the best of both worlds and make considerable amounts of interest while allowing you to access your money as frequently as one year CDs. The power of CD ladders is highlighted here.

A side note: if we did this over a 20, 30, or even 40 year time period instead, we’d find that the CD ladder ends up making the same interest as five year CDs alone. Limits. Who knew we’d see calculus in real-life.

Odd-Term CDs

While regular CDs are usually three, six, or twelve months, or two, three, four, or five years, odd-term CDs are a colloquial term for certificates of deposits that don’t follow the “norm.” For example, an odd-term CD might be seven months or 17 months.

The benefit? If you’re advanced, you could play around with these abnormal length CDs to try to maximize your returns with an even more advanced CD ladder. However, I do not think this is worth your time and is out of this article’s scope. 

CD Rollovers

A CD rollover is just a fancy term for saying that when your existing CD term length ends, a new CD will be created for a prespecified term length. Normally, the new CD will start with your initial investment plus any interest it has accrued through its lifetime. 

Now, I recommend against allowing CDs to automatically rollover. The issue is that if the certificate of deposit ends during a time where interest rates are low, then you could accidentally lock yourself into a bad rate for several years to come. Furthermore, you might foresee yourself needing that money in a month or two, so it wouldn’t be good if it suddenly got stuck in a CD.

CD rollovers are a tool used for pure convenience in automatically maintaining a CD ladder, for example. Still, it’s nice to keep a sense of manual control to ensure you can maximize your rates and control your money’s accessibility. 

Direct vs. Brokered CDs

Direct vs. brokered CDs can be thought of as buying vegetables from a farmer’s market vs. the supermarket. Brokerage accounts such as Fidelity offer brokered CDs, acting as the “middle-man” between you and the CD’s institution in such transactions.

Since CDs are essentially securities, you can easily purchase one through your brokerage account since the paperwork has already been completed upon creating the account itself.

The exciting thing is that some brokered certificates of deposits can offer interest rates that are a few percentage points higher than direct CDs. 

You might now ask, why would I ever get a direct CD if brokered CDs can offer even higher rates than their organic counterparts?

Well, firstly, not all brokered CDs are worth more than direct CDs. Secondly, if you need to withdraw your investment early from a brokered CD, the methodology is a bit more complicated than just paying a one-time fee—you’ll have to sell it in your brokerage account’s secondary market. 

Certificate of Deposit FAQs

John Ta

John Ta is an undergrad at the University of Pennsylvania and the founder of Penn’s first undergrad personal finance club, Penn Common Cents. As a first-generation college student, he had to learn everything about personal finance on his own and seeks to mend the financial literacy knowledge gap seen almost everywhere. John is currently studying for an MS in Chemistry and a BA in Physics (business & tech concentration), Biochemistry, and Biophysics and is interested in the intersections of finance and healthcare.

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