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  1. The pros and cons of online banks If you love your local bank but want loans with better terms or more interest on your savings, you may want to consider an online bank. Many online banks offer interest rates that are 20 times the national average on their savings accounts and CD products, and many come with no fees at all. Online banks intentionally make it easy to transfer money into and out of their accounts, and some come with mobile apps that make mobile banking a breeze. Take the CIT Bank Savings Builder account, for example. This high-yield savings account lets you earn 2.45 percent APY with a minimum balance of $25,000 or a monthly transfer of at least $100 — and all with no fees. But high-yield savings accounts aren’t the only area where online banks shine. When it comes to loans, an array of online lenders ranging from Marcus by Goldman Sachs to Earnest offer personal loans with incredibly low rates and no origination fees or hidden fees. Of course, there are downsides to online banks as well, including the fact that many don’t have any physical branches to speak of. Customer service is typically available over the phone or via chat or email, but the experience will be a lot less personal overall. Online banks also require some patience. If you want to make a deposit via your bank’s mobile app, for example, you may have to wait a few days for the transaction to post. Wire transfers and ACH transfers can also take time, which can be inconvenient if you need your money in a hurry. As a final downside, many online banks don’t come with a broad range of ATMs in their network. For that reason, you may wind up paying higher ATM fees than you would if you used a traditional brick-and-mortar bank for all your banking needs. Here’s a breakdown of pros and cons: Pros of online banks: Earn more interest on your savings Potential for lower fees or no fees Convenience of online banking Cons of online banks: Potential for higher ATM fees Not ideal for those who don’t use the internet Online transactions can take time to process bankrate.com
  2. The pros and cons of using your local bank According to a 2018 Bankrate and Money survey, the average U.S. adult has used the same bank account for 16 years. If you fall into that category, you’ve most likely been with your local bank since you opened your first checking account at age 13. They gave you your first auto loan when you barely had any credit history, and you may have even went to them for your first mortgage. Why wouldn’t you want to keep your savings with a bank that has played such a constant role in your life? The answer is simple — opportunity cost. The average brick-and-mortar bank is paying .01 percent APY on their savings accounts this year. Some of the country’s biggest banks pay even less than that. When you park your money in a bank account that’s not offering enough interest to keep up with inflation, it’s important to think long and hard about what you’re giving up. Imagine you have $10,000 saved and the ability to let it sit in an account for five years. If you earned .01 percent on your savings during that time and interest compounded monthly, you would earn a whole $5 over five years for a grand total of $10,005 in the end. If you earned 2.25 percent on your savings, on the other hand, you would end the five-year period with $11,189.54 in the bank. That’s a big difference, especially since there’s no additional effort on your part. Another downside of using a savings account from a traditional bank is the fact that most aren’t free of fees — or they make it difficult to avoid them. With a Chase savings account, for example, you must keep a minimum amount on deposit, set up repeating transfers or link to one of their premier checking accounts to avoid the $5 monthly account management fee. Your local bank may also offer additional products and loans you need access to such as home equity loans, auto loans, personal loans and mortgages, but you’ll never know how competitive they are unless you shop around. Typically speaking though, loans from traditional banks come with higher fees and higher rates over all. Of course, there are upsides to using a traditional bank — and especially one you’ve known and trusted your whole life. For example, you may know your banker and have a personal relationship with people who work in your local branch. You can also stop by your bank to ask questions and speak with a person who can access your account, which makes traditional banking infinitely more personal than online banking. Some consumers enjoy the familiarity of banking with people they know, and it’s hard to blame them for that. If you have money to deposit or withdraw, you can also swing by your local branch and complete the transaction in person. Most big banks also have broad ATM networks customers can access in the local area and other parts of the country. Here’s a breakdown of pros and cons: Pros of brick-and-mortar banks: You can stop by in person to ask questions Convenience and a personal experience You may have access to a broad ATM network Cons of brick-and-mortar banks: Fees and interest rates may not be competitive Most big banks pay almost nothing on their savings accounts bankrate.com
  3. 8. Do your homework You don’t want to become a member of a credit union or a customer of a bank without knowing exactly what you’re getting yourself into. Once you’ve reached the point where you’re comparing a handful of banks, consider reviewing what experts have to say about them. Find out where your bank of choice might stand in terms of customer service and whether you’re the type of person who would benefit most from what they have to offer. Consumers tend to remain customers of their banks for a long time. Carefully weighing your options is best before agreeing to begin a relationship with a particular bank. If you’re having a hard time settling on one bank, consider whether you can handle managing accounts at several different ones that can collectively help you stay on top of your finances. bankrate.com
  4. 7. Understand terms and conditions You shouldn’t open a bank account without knowing what’s in the fine print. If there are monthly service fees, ask whether you can get them waived. If there are out-of-network ATM charges, find out whether the bank offers refunds. Make sure your savings will be federally insured by the National Credit Union Administration or the Federal Deposit Insurance Corp. (just in case your bank closes). Finally, as you’re comparing CD rates and other products, watch out for promotional deals that expire. “Teaser rates or things like that — these are things that typically look good in the short-term,” Boneparth says. “But over the long-term, it ends up costing you money.” bankrate.com
  5. 6. Examine digital features Most banks offer basic services through their mobile and online channels, McAdam says, like the ability to transfer funds, pay bills, check balances and make mobile check deposits. But not all banks offer advanced digital capabilities. Some banks are missing features that are increasingly being demanded by consumers, McAdam says, like the ability to lock a debit card (and prevent a stranger from using it) or manage mobile banking alerts. In certain cases, there are online banks that don’t offer a smartphone app. If you value a high-tech online or mobile experience, read our bank reviews and check with the banks you’re interested in to see if they can provide what you’re looking for. bankrate.com
  6. 5. Find a bank that fits your lifestyle The bank you choose should meet your needs. If you’re entrepreneurial, you’ll want a bank that can provide support as you build a business. If you’re trying to save more money, Ben Brown, founder of the investment advisory firm called Entelechy, recommends looking for a bank that lets you open and name separate accounts. “What I typically do is have clients open their main checking account, which acts as sort of a clearinghouse and then multiple savings accounts for different goals,” Brown says. “You might have a travel fund, a gift fund and a regular expense fund, just to make budgeting much easier.” Considering your spending habits is also a good idea when deciding where to bank. Many banks have budgeting tools built into their websites or apps that make it easy to track your expenses and see where your money is going. bankrate.com
  7. 4. Don’t rule out credit unions Many consumers are familiar with the biggest banks. But you’ll want to shop around and consider credit unions, too. Finding out what local credit unions offer may take time. However, doing some research could pay off. “By not having shareholders, credit unions can reinvest their earnings in the form of lower, reduced loan rates and higher earning rates on savings,” says Jaspreet Chawla, vice president of membership at Navy Federal Credit Union. “This creates a unique relationship that generally leads to more opportunities for members to engage with and have a voice in organizational decisions.” Joining a credit union is not as difficult as it used to be. Quite a few are available nationwide and many allow you to qualify for membership simply by joining an organization like the American Consumer Council. bankrate.com
  8. 3. Think about accessibility When it comes to banking, another key factor is accessibility. Most consumers will want to take into account ATM location convenience, branch location convenience and the availability of online and mobile banking, says Paul McAdam, senior director of banking services at J.D. Power. The characteristic that’s most important, however, varies, particularly by generation. For younger consumers, mobile banking capabilities trump branch location convenience. The opposite is true for older bank customers. Still, branches continue to play a role in the lives of most Americans, with 78 percent saying they’ve opened their most recent new account or product in person at a branch, according to J.D. Power. Their data also indicates that branch offices in convenient locations is the most common reason why a consumer selected their primary financial institution. The takeaway? Even if you plan to do almost everything online, you might want a bank with some physical branches. bankrate.com
  9. 2. Focus on the numbers Don’t like wasting money? Find a bank that doesn’t levy unnecessary charges. “Why would you pay $100 a year for checking, savings and basic banking if you can pay $30 or $5 or nothing?” says Douglas Boneparth, a CFP professional and president of Bone Fide Wealth, a New York City-based financial adviser firm. Since online banks have few (if any) branches, they have fewer operating costs. That’s why they usually don’t charge as many fees as brick-and-mortar banks. Fees you should watch out for include monthly maintenance fees, ATM fees and the cost of overdrawing a checking account. Bankrate data reveals that the average overdraft fee is around $33.36 in 2019. Even opting for an overdraft protection program (where the bank covers a purchase that you can’t afford) can be expensive. The Consumer Financial Protection Bureau (CFPB) found that those who opt in to overdraft protection pay about seven times more in fees than those who don’t. When you’re shopping for a new bank, find one that has more lenient overdraft policies. And when you find your perfect account, do this: Link your checking account to another account at your financial institution so that if you run out of money in your checking account, the bank will pull money from the other account to cover the transaction. You may be charged a fee for this, but it’s typically less than an overdraft fee. Sign up for low-balance alerts through your bank or credit union’s website. These alerts, which you may be able to receive on your smartphone, will alert you when you are at risk of overdrawing your account. bankrate.com
  10. 1. Identify the type of account you need Banks offer many different types of products and services. Trying to compare all of them at once could seem overwhelming. A good place to start is deciding which type of account you want to open based on your financial goals and priorities. If you’re interested in saving more money, you could open a high-yield online savings account. The Federal Reserve has cut interest rates twice so far in 2019 and many banks have lowered savings account yields. But compared to their brick-and-mortar counterparts, online banks are still offering competitive rates. Perhaps you’re looking to replace your checking account. If that’s the case, you might want to go with a bigger, traditional bank that has multiple types of checking accounts to choose from. Or you may want a high-yield checking account like the ones often offered by credit unions and community banks. Money market accounts — hybrid accounts that may have check writing privileges, but allow for a limited number of monthly transactions, like savings accounts — are another option, but aren’t offered by all banks. As you’re doing your research, knowing what you want out of a bank can help you narrow down your list bankrate.com
  11. A trader is an individual who engages in the buying and selling of financial assets in any financial market, either for himself or on behalf of another person or institution. The main difference between a trader and an investor is the duration for which the person holds the asset. Investors tend to have a longer-term time horizon, while traders tend to hold assets for shorter periods of time to capitalize on short-term trends. Understanding Traders A trader can work for a financial institution, in which case he trades with the company's money and credit, and is paid a combination of salary and bonus. Alternatively, a trader can work for himself, which means he is trading with his own money and credit but keeps all of the profit for himself. Among the disadvantages of short-term trading are commission costs and paying away the bid/offer spread. Because traders frequently engage in short-term trading strategies to chase after profit, they can rack up large commission fees. However, an increasing number of highly competitive discount brokerages has made this cost less of an issue, while electronic trading platforms have tightened spreads in the foreign exchange market. There is also disadvantageous tax treatment of short-term capital gains in the United States. Trader Operations: Institution vs. Own Account Many large financial institutions have trading rooms where traders buy and sell a wide range of products on behalf of the company. Each trader is given a limit as to how large of a position he can take, the position's maximum maturity and how much of a mark-to-market loss he can have before a position must be closed out. The company has the underlying risk and keeps most of the profit; the trader receives a salary and bonuses. Most people who trade on their own account work from home or in a small office, and utilize a discount broker and electronic trading platforms. Their limits are dependent on their own cash and credit, but they keep all profits. Discount Brokers: An Important Resource for Traders Discount brokerage firms charge significantly lower commissions per transaction but provide little or no financial advice. Individuals cannot trade directly on a stock or commodity exchange on their own account, so using a discount broker is a cost-effective way to gain access to the markets. Many discount brokers offer margin accounts, which allow traders to borrow money from the broker to buy stock. This increases the size of the positions they can take but also increases the potential loss. Electronic Foreign Exchange Trading Platforms Foreign exchange trading platforms match currency buyers and sellers in the spot, forward and options markets. They sharply increase the amount of price information available to individual traders, and thus narrow price spreads and reduce commissions. Short-Term Capital Gains Tax A disadvantage of short-term trading profits is that they are usually taxed at the trader's ordinary income tax rate. Long-term capital gains are taxed at 20% but require the underlying instrument be held for a minimum of one year. Under current laws, there is no technical definition of traders for taxes. While there is a Trader Tax Status (TTS), election for this status is based on presented facts and circumstances of an individual. Some of the facts that the IRS considers while evaluating traders tax status are holding period of securities, number of trades conducted, and frequency and dollar amount of trades. There are workarounds for traders to reduce their tax liabilities from short term trades. For example, they can write off expenses utilized in their trading setup, much like a freelancer or small business owner. If they selected Section 475(f), traders can value their entire trades for a particular year and claim deductions for the losses they incurred. investopedia.com
  12. Rule 10: Keep Trading in Perspective It is important to stay focused on the big picture when trading. A losing trade should not surprise us—it is a part of trading. Likewise, a winning trade is just one step along the path to profitable trading. It is the cumulative profits that make a difference. Once a trader accepts wins and losses as part of the business, emotions will have less of an effect on trading performance. That is not to say that we cannot be excited about a particularly fruitful trade, but we must keep in mind that a losing trade is not far off. Setting realistic goals is an essential part of keeping trading in perspective. If a trader has a small trading account, he or she should not expect to pull in huge returns. A 10% return on a $10,000 account is quite different than a 10% return on a $1,000,000 trading account. Work with what you have, and remain sensible. investopedia.com
  13. Rule 9: Know When to Stop Trading There are two reasons to stop trading: an ineffective trading plan, and an ineffective trader. An ineffective trading plan shows much greater losses than anticipated in historical testing. Markets may have changed, volatility within a certain trading instrument may have lessened, or the trading plan simply is not performing as well as expected. One will benefit from remaining unemotional and businesslike. It might be time to reevaluate the trading plan and make a few changes or to start over with a new trading plan. An unsuccessful trading plan is a problem that needs to be solved. It is not necessarily the end of the trading business. An ineffective trader is one who is unable to follow his or her trading plan. External stressors, poor habits and lack of physical activity can all contribute to this problem. A trader who is not in peak condition for trading should consider a break to deal with any personal problems, be it health or stress or anything else that prohibits the trader from being effective. After any difficulties and challenges have been dealt with, the trader can resume. investopedia.com
  14. Rule 8: Always Use a Stop Loss A stop loss is a predetermined amount of risk that a trader is willing to accept with each trade. The stop loss can be either a dollar amount or percentage, but either way it limits the trader's exposure during a trade. Using a stop loss can take some of the emotion out of trading since we know that we will only lose X amount on any given trade. Ignoring a stop loss, even if it leads to a winning trade, is bad practice. Exiting with a stop loss, and thereby having a losing trade, is still good trading if it falls within the trading plan's rules. While the preference is to exit all trades with a profit, it is not realistic. Using a protective stop loss helps ensure that our losses and our risk are limited. investopedia.com
  15. Rule 7: Develop a Trading Methodology Based on Facts Taking the time to develop a sound trading methodology is worth the effort. It may be tempting to believe in the "so easy it's like printing money" trading scams that are prevalent on the internet. But facts, not emotions or hope, should be the inspiration behind developing a trading plan. Traders who are not in a hurry to learn typically have an easier time sifting through all of the information available on the internet. Consider this: if you were to start a new career, more than likely you would need to study at a college or university for at least a year or two before you were qualified to even apply for a position in the new field. Expect that learning how to trade demands at least the same amount of time and factually driven research and study. investopedia.com
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