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Talking About Money - Tips and Tricks

I’m told that the best way to make your money work for you is to invest it. The problem with the investor model, though, is that you have to sock away a good deal of cash into sources that might go up, but there’s no guarantee. You could, in fact, lose it all. Plus, with sources like 401(k)s, IRAs, and certificates of deposit, you have to relinquish your cash for a certain amount of time. Sometimes, if you have a little extra cash laying around, you may just want to put it in a bank account so that it stays safe. There may be little to no growth, but at least you’ve got access to your cash in case of an emergency.
 Saving Money
And so, I went looking for a better interest rate than the one I’m getting in my current checking account. I started dreaming about experimenting with the banking institutions listed on BankRate.com’s online Survey of High-Yield Checking Accounts. Specifically, Northpointe caught my eye.
If, over the course of a month, you use your debit card 15 times and spend at least $500, then you’ll earn 5% APY interest on balances up to $5,000. The balance cap is comparatively low, and so you have to weigh your options here, especially when considering that other accounts offer lower interest rates but allow much higher balance caps.
 Northpointe
At any rate, the power of interest is undeniable. For instance, Main Street Bank offers 2.25% on account balances up to $25,000, which means you could make upwards of $562.50 a year. Now consider that 5% rate on the lower balance cap at Northpointe (again, $5,000) could earn you $250. If you get another account (say, Ouachita Independent Bank, which offers 3.01% on balances up to $15,000), then your additional interest could be $451.50. So those two interest rates (5% and 3.01%) give you potential yearly earnings of $701.50. Thus, the power of the high interest rate.
 
Ouachita BankNow, my only problem is this: how do I get $20,000 to spread over a couple of accounts? Yes, a lack of liquid assets seems to be the problem that most Americans have nowadays. In fact, a lot of what I’m talking about right now is, for most of us, hypothetical. A recent Atlantic story that has been floating around the Internet discusses a hard-to-believe statistic: 47% of Americans say they could not afford a $400 emergency. Clearly, a large group of Americans are dealing with financial insecurity, and so many of us have a long way to go before even considering how to invest our money.
 
So that got us thinking about the inverse of investing and earning interest: credit card debt and owing interest. When it comes to credit cards, what is a good deal? What is not a good deal? Is there such a thing as 0% interest rates on credit cards? Who can answer these questions for you if, like most Americans, you don’t have an investment banker handy? These are just some of the questions that are good to consider when thinking about opening a new credit card.
 
What is not a good deal when it comes to borrowing money?
 
Answering the question, “What’s a good deal on credit cards?” is much easier to answer than the reverse. The best credit card is the one that has the lowest interest rate possible. Indeed, credit cards in general, if you carry a balance on them, are not a good deal. Think of it this way: if you’re carrying a balance month to month, you are losing the money that you could be making by opening a high interest bank account. You are, in effect, financing someone else’s future instead of your own. Perhaps famed personal finance guru Dave Ramsey says it best when he advocates against all credit cards, no matter how low the interest rate. But this isn’t always very realistic. Sometimes a family needs access to low interest credit. It’s hard to build credit elsewise, and sometimes the alternative to having a decent credit card is relying on payday lenders. As NPR (and many others) have reported, payday lenders often prey on unsuspecting borrowers. So the answer to the question, “What is not a good deal when it comes to borrowing money,” I think the answer resounds strongly: payday lenders.
 Bar Men
For more on the controversy surrounding payday lending, check out this recent story on WVXU’s Cincinnati Edition.
 
Is there such a thing as 0% interest rates on credit cards?
 

NerdWalletApparently, yes, there is. My editor got a phone call from a credit card company offering her 0% interest, and she couldn’t believe it was true, so she asked me to verify if they were real. Of course, there’s a lot of small print to go along with the infinitesimal interest rates out there, presumably because the Big Bad Banks want to trick you into getting lost in their wilderness any way they can. But if you’re going to transfer your balance from one card to another, you could do worse than a 0% interest card. The site Nerd Wallet has a webpage dedicated to several of the best 0% and low interest card available.
 
Who can answer these and other questions if, like most Americans, you don’t have an investment banker handy?
 

Piggy BankThis is a hard question to answer because it depends so much on each borrower’s individual situation. A college student, for instance, might stay behind one day after his or her finance class and ask the professor for some pointers on what constitutes financial commonsense. Or parents could help prepare their kids for a world filled with predatory lending and skyrocketing credit cards by giving them a charge card with a low credit limit. But what about for people don’t always have access to good role models, or the money needed to talk to trusted professionals? To whom—or to what—can they turn? The answer, I think, is simple. The Internet is a great resource for people of all ages to learn new stuff. Trusted sites, such as Khan Academy, can begin an education. Check out this great Khan webpage about “annual percentage rate (APR) and effective APR.” Khan is such a great resource because it’s not just about the basics. It is a veritable wellspring of knowledge. After mastering the confusing landscape of credit cards, a person interested in making money can turn to additional webpages, including understanding stocks and bonds.


www.Dishmag.com / Issue 197 - November 2017
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