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Managing Several Bank Accounts?

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plugilir
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Managing Several Bank Accounts?  Reply with quote  

Alright so im very new to banking and just want to clear up a few questions. I've been told its good to have more then one bank account because it protects your money better because if something goes wrong with one account you have the other accounts still safe. Now lets say i make around 250 every 2 weeks. If i had 3 bank accounts which had a checking and savings in each how would I split this money to every account. Ive also noticed that accounts have monthly maintenance fees which you can avoid by meeting certain requirements (ex: having at least one qualifying direct deposit of $250 or more made to your account each statement cycle). If im only making a small amount of money every 2 weeks how can i meet each banks requirements so that i dont get money taken away from me?

Id also like to start applying for credit cards and if i got more then one credit card what would be a good way to manage them. Would i use one card for stuff like gas, another for wants like food, products at stores, and another for maybe online purchases? Or do I just pick one at random each time i make a purchase to use?

I also dont understand APR and APY very much and I would like to know how i can put my money to work in my savings. Like put in a certain amount of money and have it build with interest. How does this work.

Ive had a bank account for like 2 years so im not completely new to banks but im trying to learn more so i can take advantage of all the benifits there are out there and make money and manage money better.

Thanks

Jeremy
Post Wed Mar 07, 2012 8:47 pm
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asapcc
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I'm not sure who told you that you need several bank accounts to protect your money, but that's simply not true (unless you have hundreds of thousands of dollars in savings). Since most bank accounts are FDIC insured for up to $250,000, if anything goes wrong with the bank, you're insured for up to $250,000 by the Federal government.

http://www.fdic.gov/deposit/deposits/insured/basics.html

There might be other reasons to have multiple accounts, but if you're worried about loosing your money, don't! Unless you have more than the FDIC limit... you have nothing to worry about...

As far as credit cards, people have different opinions about how many to have and how to use them. Personally, I have a low interest rate credit card that I carry long-term charges on -- then a second card to earn rewards from my everyday spending. Since the reward card has a higher interest rate, I try to pay it off before the grace period ends and interest starts accumulating. This means I don't usually use it unless I know I can pay it off by the end of the month. With the other card I tend to carry a balance since the rate is lower...

Some people use more cards than this, but for me, it's just too much of a hassle. Since some reward cards will provide bigger incentives for certain types of purchases, people take advantage of this by carrying numerous reward cards -- each one being used at different locations for different purchases. But I wouldn't recommend this unless you're organized (and responsible!) enough to manage a variety of different accounts...
Post Wed Mar 07, 2012 11:16 pm
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oldguy
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quote:
I would like to know how i can put my money to work in my savings. Like put in a certain amount of money and have it build with interest. How does this work.


One bank account is enough, you shouldn't keep much in a bank anyway, just enough to manage your monthly businesee - ie, rent, car payment, CC payoff, utilities, food, phone. The rest of your income should be put to work - but not in savings, and not in a bank.

Banks provide safe storage of money, but no growth, just enough interest to offset inflation. The two appreciating assets (wealth builders) are stocks and real estate, they growth (on average) much faster than inflation. For stocks, use a no-load company such as Vanguard or Fidelity and invest in a stock index fund such as the SP500. Index.
Post Wed Mar 07, 2012 11:58 pm
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fast
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Re: Managing Several Bank Accounts?  Reply with quote  

quote:
Originally posted by plugilir
I've been told its good to have more then one bank account because it protects your money better because if something goes wrong with one account you have the other accounts still safe.

Some MSB's will open up a separate sweep account to protect their general operating account from the delays that result from correctable errors. Imagine the consequences of mistakenly adding a single zero to a $10,000 money transfer. Incompetence is commonplace, and although legitimate errors are corrected, they are not always done so in a timely fashion.

I suggest not being on the losing end of others’ mistakes. One simple way to avoid not being without funds is to have more than one account -- with funds that you can have immediate access to. For example, you might consider having a checking account at one institution and a separate savings account at an entirely different financial institution. To illustrate, you could keep $1000 to $3,000 in each account. That would leave you with $2,000 to $6,000 available to you before something might happen and at least half that should something drastic happen. Later, after you're dealing with more money, then you can start making investment decisions in other kinds of accounts.

quote:
Id also like to start applying for credit cards and if i got more then one credit card what would be a good way to manage them. Would i use one card for stuff like gas, another for wants like food, products at stores, and another for maybe online purchases? Or do I just pick one at random each time i make a purchase to use?


The magic number that's thrown about sometimes is three or four credit cards depending on your credit mix. As far as managing them is concerned, I'd keep in mind that your financial decisions should be geared towards doing what's best for you, not your credit score. That's not to say you cannot use cards, but never delude yourself into thinking that carrying a balance is good because it increases your score, as what's far more important than your score is your financial health. If I were playing the credit score game, I'd only use the cards enough to keep the account open, so every few months or so, I might make a single purchase (like a candy bar or tank of gas) and not use them again for awhile. Keeping your credit utilization less than 10% (yet above 0%) will usually yield the best results.

quote:
I also dont understand APR and APY very much and I would like to know how i can put my money to work in my savings. Like put in a certain amount of money and have it build with interest. How does this work.


APR (Annual Percentage Rate) is the annual rate of interest you pay.
APY (Annual Percentage Yield) is the annual rate of interest you pay.

But wait, they’re not the same. Hmmm. Something’s different. The person who quotes you the APR has only one eye open. She does not see and therefore does not consider the subtle effects of the interest that compounds during the year.

The person who quotes you the APY has both eyes open. He sees clearly what you’ll be paying (or earning if you’re the lender, of course), for what he quotes does consider the effects of intra-year compounding.

The thing to keep in mind is to compare apples to apples and oranges to oranges. In other words, it doesn’t matter if you’re quoted the APR or the APY so long as you’re comparing the same thing when you’re doing your comparison shopping.
Post Thu Mar 08, 2012 1:51 am
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plugilir
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Thanks a lot for the comments, helped a lot. Im still young but just trying to learn everything early and get a grasp on how investments, taxes, etc.. all work. Thanks again for the help!
Post Thu Mar 08, 2012 2:51 am
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