$avings Account Tingz (Part I)

Rep: Thank you for calling ABC Credit Union, this is Ashley speaking, how may I help you?

Member: Good morning! I am definitely not a happy member this morning because I woke up to find my savings account negative $100.00 due to something called a Regular D fee. What is that about? I was told that my accounts would be free when I first opened them. If that is not the case, then I need to close all of my accounts immediately!

Rep: I am so sorry to hear that you’re upset ma’am, and there is no reason to close out your accounts as this is a fairly easy fix. Bare with me one moment as I look further into your account… I found the issue, I believe the fee you’re referring to is actually called Regulation D (also known as Reg D).

Member: Okay, well no one ever told me about that when I opened my account. Is there a way that I can avoid it?!

Rep: Yes ma’am, Reg D is a government regulation that limits you monthly electronic withdrawals from a savings account to 6. This includes paying some kind of bill electronically from your savings or even transferring money from your Savings to your Checking account. It also includes overdraft protection. The best way to avoid these fees is to pay bills and do other transactions out of your checking account. Also, only keep the money that you plan on saving in your savings account instead of transferring money from your savings to checking whenever you think you need it. This information would have been given to you in your Truth-in-Savings disclosures at the time of account opening.

Member: Is there any way that I can get that fee reversed?

Rep: Yes, I will go ahead and reverse this fee for you as a one-time courtesy, but I do believe that you should really consider opening one of our free checking accounts.

Member: Yes, I would love to do that. How long will it take?

Rep: Only about 5 minutes, and you’ll get a debit card with reward points as well.

Member: Thank you so much, you have truly been a great help!

Rep: No problem, always remember that you can check your app to see how many transfers you have done from your savings account for the month.

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I know it’s hard to believe for some, but your savings account is an account used specifically for saving money all while earning dividends. Yes people, you can actually earn money on your money while just leaving funds in this account. Dividend rates have been relatively low (usually offering less than 1 percent) especially since the stock market crash of 2008. However, some financial institutions have higher rates than others.  Think of the Reg D fee as a penalty for you dipping into your savings to pay for something unnecessary.

What are the key benefits of having a Savings Account?

Imagine keeping all of the saved cash you have under a mattress and then one day you leave home for a few days and come back to your house being on FIRE! I know, a little dramatic, but if you have a savings account, at least you know that your funds will be protected whether there is a fire or not. You are more tempted to spend your money when you have cash on hand. With a savings account, your money is protected and out of sight.

Is my money safe?

Your funds are protected by the NCUA when it comes to Credit Unions and the FDIC when it comes to banks. Both insure your money for up to $250,000. When you are ready to access the funds in a savings account, you can withdraw the funds at the ATM or visit your institution’s teller. You can also make a transfer in online banking from Savings to checking and pay for something using a check, debit card, or Electronic funds transfer. Some of you may be thinking that having a savings account makes it very difficult to access your funds, but as you can see, that’s not true at all.

How can I make my money grow?

As I mentioned before, a savings account pays dividends on the money you have in your account. These dividends are usually paid to your account on a quarterly basis. Dividend rates are usually determined by the conditions of the economy. FI’s also have a say in the designated dividend rate for their institution because they need to have a competitive advantage. Checking and savings accounts usually have a very low interest rate and are very low in risk because the funds are protected by the NCUA/FDIC.

If you’d like to compare rates for different institutions, it is best to go by the Annual Percentage Yield (APY). When looking for the best savings account, you should be looking at the minimum balance required, fees, and other features.

How do I open a Savings Account?

The process to open a savings account is usually very quick and easy depending on where you go. You can either open the account online, through a mobile device, or in person by visiting your local branch. Here are some helpful tips for guidance when you decide to open the account:

· Compare the minimum balance required, fees, and dividend rates. Some institutions may even require that you have a savings account in order to open a Checking (Usually Credit Unions).

· If you’re thinking about joining a Credit Union instead of a bank, make sure that you can qualify for membership. CU’s usually require that you live, work, attend school, volunteer, or worship in one of their specific fields of membership.

· Make sure to choose the bank/credit union that meets all of your needs. Because the rate for a regular savings account is so low, this benefit is not too important unless you are making large deposits. Always utilize an FI that is convenient for you, that you’re willing to put money in, and that has a mobile app that is easy to comprehend.

· Do you have all of the information needed to open the account? Most places usually require a Government Issued ID (Driver’s license, passport, etc), Social Security number, as well as a mailing address.

· Open the account with the necessary required deposit.

At least one account holder must be 18 or older in order to open the account. Some places have different rules and regulations so always check and see what your bank requires to open the account. There are also various options for people under the age of 18, including a custodial account.

Smaller banks and credit unions can also offer a much higher return than bigger banks when it comes to the money that you deposit into their accounts. There are accounts called CD’s (Certificates on Deposit) that require a commitment of anywhere between 3 to 84 months that are still very low risk and offer a much higher dividend rate. Some places will even match a rate on a certificate from a different institution because they know that they have deposit goals that they need to meet.

If you ever come across an institution that you are not familiar with, be sure to find out if they are insured by the FDIC or the NCUA.

Are there any Costs or Limitations to having a Savings account?

While Savings accounts are typically free, a lot of institutions still require that you keep a minimum balance in the account. If you should ever fall below this balance, your account may be charged a fee which can bring your balance negative. This fee can also result in overdraft fees so be sure to check with the policies and regulations of your FI.

While working for Credit Unions, I have noticed that you have to keep a minimum par balance (usually $5 that stays on hold in the savings) in order to keep your membership. If the savings ever falls below the par, there is a big possibility that you can lose out on a lot of the benefits that your CU has to offer. You don’t get that balance back until you close out the account.

Some places offer an incentive if you have other products open with them. For example, if you have a checking account, you can get a free savings account as well with no fees. But be careful, because if you close the checking account while still keeping the savings, you may get hit with the fees.

As I previously discussed, the savings account is limited to 6 electronic withdrawals as set by the Federal Reserve in 2018. If you go over the 6, your institution has the ability to charge a fee or completely stop withdrawals for the month. For example, imagine your bank charges a $20 fee for every electronic withdrawal you do over the 6 allotted per the month and you do 11, that is a $100 fee that is deducted from your account for the month. This counter starts over at the first of each month. Some FI's offer a tool that keep track of all of the transfers you've done out of your savings account for the month in online banking.

And there's part one of Savings Account Tingz! Make sure to subscribe so that you know when part 2 has been posted. Feel free to visit the forum to post any questions you may have or shoot me an email at shanieceaxtmann@gmail.com. I hope you enjoyed it and your feedback is greatly appreciated!