With everyone trying to save money these days, any advantage will help. But, while most people are busy searching for different saving options, one of the simplest answers is usually right in front of them. Most people today have a credit card and a checking account. The majority of these people most likely have a savings account as well. Assuming one has all three of these accounts, lets start with how they can be used together to save you money.
Credit Cards Can Help You Save More Money
You probably see ads for credit cards all of the time that offer everything from cash back to airline miles. All of these rewards are there for the taking to anyone able to qualify. This means if you are approved for a cash back card, you will essentially get paid for spending money (as long as you pay your bill in full each month and avoid any interest). Other reward cards offer airline miles or points, which can be redeemed for just about anything. Some cards also offer signup bonuses and savings just for shopping in their own online “portal” to purchase popular items. Just make sure you are able to pay your balance back in full and that you pay it on time. If do not have a credit card, or have a card that doesn’t offer rewards of any kind, you need to start working towards improving your credit score. This will allow you to qualify for a rewards card and reap the benefits and savings. You may also want to take a look at secured credit cards, such as The Open Sky Credit Card, to get approved and start working on improving your credit.
Checking Accounts Can Pay Interest on Your Money
The next item in this combo is your checking account. Anyone who receives a paycheck most likely has one. But the question is, are you getting the most out of it? If you have a normal checking account and take advantage of some of the features, such as bill pay and automatic reminders for low balances or recent deposits, then you are probably pretty happy with everything. But, what if you could be paid interest on your balance as well? That’s right, there are checking accounts that pay you interest. These checking accounts are offered by banks such as Ally and Capital One. At the time of this article’s posting, the average interest rate between the three interest earning banks listed is 0.48% APY for their checking accounts (these are rates assuming minimum deposits, your interest rate could increase if you have more money in your account). One of the things these banks have in common is they are considered online banks. They do not have a branch down the street where you can go and do your banking. This is the reason they are able to offer interest on your account; they do not have the overhead costs that physical banks do. Which is why most physical don’t offer any interest on their most basic checking accounts. With online banks, everything you normally drive down to your physical bank to do is available online. With technology getting better, safer and faster everyday, all you need is an internet connection to take care of your banking needs. You can even link your new online checking account to your current physical bank account to get the best of both worlds. You can transfer money back and forth, as almost all online bank transfers are free, (It usually takes 2-3 business days for transferred money to show up in your account). Thus you get the convenience of a bank down the street and an interest paying online bank.
Now, lets combine the last two options we talked about; credit cards and interest-earning checking accounts. If you currently use a debit card and checks for most of your purchases, then you are withdrawing money from your checking account each time you make a purchase. If you use a credit card for most of your purchases, then you are withdrawing money from your checking account just once a month, when you pay your bill. This way, you allow your money to stay in your checking account longer and earn more interest. Interest you can now combine with the rewards you are getting from using your credit card to make purchases.
Savings Account Interest Can Add Up
Finally, the last part of this financial 3-pack is the savings account. And it involves online banks again. These banks are able to pass the savings they have from reduced overhead costs on to you in the form of interest. Lets take a look at some physical bank branches. At the time of this posting, Bank of America, Wells Fargo, Citibank and Regions Bank have an average savings account interest rate of 0.03% APY for their lowest tier accounts. The interest rate for the same accounts at the online banks Capital One and Ally Bank is 0.76%. Yes, you don’t get the luxury of driving down to the local branch to see your favorite teller to deposit, withdraw or transfer funds, but at about 25x the interest, it seems to be a good tradeoff. Again, you can link your current physical bank branch account, checking or savings, to any online account and get the best of both.
When you utilize these three options together, you will be looking at a much more fruitful financial result then you would by staying with same old setup. Do your homework and compare the latest offers for credit cards as well as online checking and savings accounts, and find the option that works best for you. From free airline tickets from your rewards credit card and actually earning interest on the money in your checking account, to upgrading your current savings account to an interest rate that is 25x your current account; this might be the nicest 3-pack combo your wallet has ever seen.