Would you ever use a Balance Transfer?

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When it comes to credit card marketing, there are some things I just never pay attention to.  One is the APR, which is the comically high interest rate you pay on the part of your balance not paid in full by the due date.  I’ve seen rates from 10, 20 to even 30 percent on certain cards.  Those are scary numbers, but I’m not scared of them.  That’s because I make it a priority to always pay my credit card balance in full.  Getting into credit card debt is one of the toughest holes to dig out of because of the aforementioned crazy high interest rates.  Everyone should avoid by any means necessary.

Another thing I don’t worry about?  Late fees.  Some companies even market cards with certain benefits like “low late fees” or “you won’t pay your first late fee.”  These marketing ploys don’t work on people like me who pay off their credit card balance as early as possible.  Adding an extra $30 to your bill is not what smart people do.  Paying your credit card bill in full and on time is one of the best things you can do for your credit score.  If you make a big purchase that takes a decent amount of your credit limit, it may even be worth it to make an early payment so your credit utilization ratio stays at a good level.

Another thing I don’t pay attention to is balance transfers.  They allow you to move your credit card debt from one card to another, with the idea being you’re moving debt from a high interest card to one with a low interest, or temporarily no interest card.  This allows you to save some money on interest payments.  The catch is that you must pay off the debt in the specified amount of time, usually around a year or so.  If it takes longer, then you get hit with a REALLY high interest rate.  Sneaky credit card companies.  I never really had a need for this because I don’t have credit card debt.  But on a fateful morning about one year ago, I did a balance transfer.  And here’s why.

I was calling to activate a new credit card with a sweet and easy to get sign up bonus.  My favorite kind.  The credit card rep was going through his usual money making pitches: credit monitoring service?  NO.  PIN for ATM access?  NO.  Balnace transfer to pay off credit card debt or student loans?  NO….wait what?  Student loans?  I love paying those off early.  I asked for more information and he informed me that they would deposit a certain amount of money into my bank account which would go on my credit card.  I could then use that money in my bank account to pay my student loan bill (or whatever I wanted technically but I figured paying off a student loan would be more responsible).

The terms of the balance transfer were I would pay no interest for a year (I did pay a 3% fee for the transfer of money so it’s essentially a loan with a 3% interest rate).  So I had a year to pay back this amount or face hefty interest rates.  Luckily, I had a student loan which I could easily pay off in a year that had an interest rate of 8.5%.  So the bank was giving me a loan with a 3% rate to pay off a loan with an 8.5% rate.  And I had a year to pay them back.  I pulled the trigger and happily got rid of that student loan and paid the bank back in 6 months.  I saved a couple of hundred dollars in interest payments in the process.

This is probably the only scenario I could imagine myself doing a balance transfer.  Since the interest rates of the rest of my student loans are pretty manageable, I don’t see myself doing this again.  Also, life can intervene in your ability to pay off a large balance in a year, so there is a little bit of risk involved.  With a freshly minted 1 year old boy, that’s a risk I would rather not take.  I really don’t pay attention to balance transfer offers anymore but for people with high interest debt with relatively low balances, they might be an option.

Leave a comment below about your experience with balance transfers or why you would never go near one.

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Diamonds in the Rough Roundup 1/10/14

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Here are some posts that have piqued my interest this week:

–Best Rewards Cards of 2014 by Mike Jelinek:  This post provides a good overview of what to look for in a rewards card and gives their take on what are the best cards. The author clearly favors the Barclaycard Arrival World Mastercard (evidenced by the NINE sign up links present in the post).  It is a good card, but the annual fee greatly decreases its value after one year considering there are many cards that offer at least 5% back on lots of categories.  I don’t think there is ONE good card for everybody, but the Arrival is a decent choice.

–Save Money on Health care:  The Benefits of an HSA by Catherine Hawley:  Nice and informative post about Health Savings Accounts (HSA’s).  Opened my first one this year so we’ll see how it goes.  HSA’s have great tax advantages as you contribute to them with pre-tax income, they grow interest tax free and they can be withdrawn and used tax free for eligible healthcare expenses.

–Start the New year by Saving Money by Arthur Murray:  Nice and easy to digest money saving tips for the new year.  Love the recommendation and possible savings of a good credit score.

–5 signs your credit card sucks by Bargaineering:  I talk a lot about the characteristics of awesome credit cards, but a lot of people would benefit from just getting rid of their terrible cards.  This post gives the main traits of crappy credit cards.  Avoid them.

–Say No to a Boring Retirement with These Alternatives by MoneyNing:  Retirement is traditionally viewed as just chilling at home and watching TV for a few decades.  This should not be the case as people are living longer and sometimes with not enough money to whittle away their golden years.  It’s important to stay active once you call it quits from your traditional work, and this post gives a few ways to do just that.

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How to Save 10-20% on Almost Everything

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This post is going to be short and sweet (which is what most good financial advice should be).  No one wants to pay more than they have to for anything.  If you had a choice between $20 for some jeans versus $12 for the same jeans, I’m pretty sure most people would prefer to pay $12.  The fact is, that choice is there for us.  And it’s in the form of glorious gift cards.

Most people associate gift cards with things people gives us when they don’t know what gift to get.  How about buying gift cards for yourself?  And getting them at a pretty good discount?  It’s all possible through gift card portals, the best of which is giftcardgranny.com.  GCG is an aggregate site that lists all the gift cards available for almost any company from many different gift card purchasing websites.  Depending on the company, you can easily find gift cards from 5-20% off.  For example, a recent search for Starbucks gift cards shows that there are $75 gift cards which are selling for $63.30.  That’s a 15% discount!  For people who frequent Starbucks, you’re not going to find savings like that anywhere else.  Don’t like to spend that much at Starbucks?  There are $10 gift cards selling for $8.45, about 15% off once again.  Hate Starbucks?  Dunkin Donuts has a decent selection of gift cards also.

There are many, many locations that have gift cards for sale.  Dining places usually have better discounts (like Starbucks in the previous example), but there are usually some pretty good discounts for other places like Home Depot and Target.  It is unfortunately hard finding grocery store gift cards, so you’ll have to stick with any number of awesome cash back cards for groceries.  It’s also important to not go crazy buying gift cards.  It’s easy to see all those discounts and start buying up stuff like crazy.  The solution?  Only get gift cards for those places you go to all the time.  Check your credit card statements from the last few months and note the places you go to more often than not.  Then get a gift card with a good discount to those places and voila!  You just saved a good amount of money by not doing much work at all.

Gift cards don’t usually provide return or purchase protection on products like most credit cards do.  So any big purchases should probably still be made with cash or a credit card.  But for little things you buy here and there that can add up, getting some gift cards can be very helpful.  Just remember to use them and make sure they don’t end up in the bottom of some drawer like most gift cards do.

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Diamonds in the Rough Roundup 1/3/14

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Happy New Year everyone!  Start it right by perusing some of these great posts:

–Why You Can’t Get Ahead…Ever by Afford Anything:  Great motivational post on getting out of the scarcity mentality, where you feel there is only so much to go around and you have to just accept your lot in life, and getting into an abundance mentality, where you feel there is enough to go around for everyone and you just have to go out and get it.  Many people get stuck in the rut of just thinking their yearly income is all they have.  But with a little creative thinking and work, it is possible to make multiple streams of income to help you reach your goals faster.

–Book Review: Your Money or Your Life by Green Money Stream:  Kay reviews one of the first and one of my favorite finance books I have read.  It gives a good amount of practical info and is a great motivating book.  Make sure you spend your life energy in the right way, you only get so much of it!

–Are You Cleaning Out Your Own Wallet? by Mr Money Mustache:  Controversial post (look at some of the comments) on how we spend too much on cleaning products and too much time on cleaning in general.  I totally agree that we do.  There are cleaning agents for every single thing out there and the companies that make them seem to think we can’t live without them.  It just takes a few minutes of cleaning every week to keep most areas clean.  While I think showering every single day may not be necessary for some people, showering every 2-3 days during winter as the author says he does sounds a little dirty, especially considering he’s a contractor.

–Build Your Financial Nut: 401K Retirement Contributions Matter Less Over Time by Financial Samurai:  Great post by the wise Financial Samurai which shows that as you max out your 401k contributions, after a few years your contributions make up less and less of your portfolio.  When your account gets to be a sizeable number, HOW you invest starts to become more important than HOW MUCH you invest.

–

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In and outs of the FSA

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2014 is upon us and it brings with it a sea of change in the US healthcare system.  There are new plans and acronyms being thrown all over the place.  From the ACA (Affordable Care Act), HDHP’s (High Deductible Health Plans) to healthcare.gov (website that didn’t work), there are plenty of new terms to confuse even the most literate of people.  Some people got brand new health plans because their original one was cancelled.  Some stayed with their original plan only to see higher premiums.  Pretty much everyone’s health insurance situation changed a little bit this year so it’s vital to at least have a general understanding of the new landscape.

One healthcare acronym that I’d like to focus on that has been around for a few years is the FSA (Flexible Spending Account or Arrangement).  The FSA is an employer sponsored account which is not for everybody, but has some pretty cool benefits if it fits your situation.  It is completely voluntary, and it allows a predetermined (by you) amount of your money to be taken from each paycheck and contributed to the account.  The funds in the account are tax free, which is the main benefit of this account.  If you happen to be in the 33% tax bracket, that essentially gives you a 33% discount on healthcare expenses paid from your FSA.  Very hard to beat savings of that level.

There are, of course, plenty of catches and rules to look for.  There are only certain things that are eligible to be paid for by an FSA.  A complete list can be found on irs.gov, but the most common expenses are doctor or hospital co-pays, medications and dental visits.  Some other helpful things which are right up my alley include the costs of contact lenses, glasses and eye surgeries (including LASIK).  Certain over the counter medications can be covered as well as long as you have a prescription for them from your doctor.  There can be some paperwork needed to verify certain purchases, but that usually just involves emailing or faxing an itemized receipt.  As long as you stick to the list from the IRS, you should find plenty of eligible items.

A major limitation of the FSA is the “use it or lose it” nature of the account.  That is, if you choose to elect $2,500 (which is the maximum amount for 2014) to be contributed to your account but only end up spending $1,500 for the year, you lose that remaining $1,000.  It just disappears.  Probably into some government entities’ account.  Some employers now allow you to carry up to $500 into the next year, but you still lose it if you don’t spend it all by the specified period.  Not all employees offer this, so let’s just assume you have a year to spend everything.

This means if you decide to max out your FSA, you really need to plan ahead.  If you have a big family that spends a lot every year on glasses, contacts, the dentist etc, maxing out your FSA makes a lot of sense.  If you’re a single guy who is relatively healthy and doesn’t go to the doctor much, maxing out your FSA may not be the best use of your money.  Some other situations where it would make sense to go all in on your FSA would be if you have any planned upcoming medical procedures or events, such as the birth of a child or LASIK surgery.  These procedures can easily go into the thousands of dollars, so using $2,500 of FSA money for that would be a great move.  Assess your situation and see how much FSA money would be right for you.

Another limitation with the FSA is that it can only pay for things which were done in that same year.  So if you elect to start an FSA for 2014, you can’t use that money to pay for a hospital visit which was on December 31,2013.  I learned this the hard way as my son decided to be born in late 2012 rather than early 2013.  In any case, this is worth considering as some people believe that you can use FSA money to pay for last year’s medical bills.  You can’t.

Finally, there is a sort of new account on the block called a Health Savings Account (HSA).  It is pretty similar to the FSA in that you contribute your pre-tax money to be used for eligible healthcare expenses.  The biggest difference is that the HSA money is your property, so you can keep it even if you switch employers or don’t touch your funds at all.  It rolls over year after year.  Some even allow you to invest those funds or at least earn some interest on them, which is not a feature of the FSA.  Also, the maximum contribution is much higher ($6,550 for 2014) than the FSA.  Many employers offer both, so you should take your time deciding which one is right for you.  Be on the lookout for a future post detailing HSA’s.

Those are essentially the main features of the FSA.  It’s pretty easy to sign up for, and can be very helpful as it uses pre-tax money for stuff you would have paid for anyway with your after-tax money.  Leave any questions in the comments below.

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Whatever you do, don’t follow the herd!

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I really need to get something off my chest about the thing that bothers me the most around holiday time.  It’s not the busy roads or hordes of people mindlessly flocking to the mall.  It’s not dealing with people everyday who are stressed out to the max.  It’s not even the barrage of Christmas colors and songs that hits you everywhere you go.  All of those things suck.  But it’s not what annoys me the most.  The thing that annoys me the most is…garbage day.

Yes, garbage day.  The day the nice garbage men come around and collect our built up waste for the week.  It is usually on an assigned day of the week.  In our neighborhood it is Friday morning, meaning you put it out on the curb Thursday evening.  Sounds simple enough.  Now, even those nice garbage men need days off.  They work for the county after all, so they get all major holidays off.  Which means the day they don’t work, the garbage doesn’t get collected.  They made a system for this that has been in place since the dawn of time: if your collection day is on the holiday or after, your new collection day will simply slide to the next day.  You can even go on the county’s website and they have a nice little chart that will tell you the EXACT DAY when your trash will be picked up.  Sounds easy enough right?

WRONG!  This is not easy for about 50% of the people living in your neighborhood.  (I have driven through my neighborhood and verified this percentage like a crazy man.)  They have lived in this neighborhood through many holidays, yet they will invariably always put their trash out the day before a holiday.  Someone will see that someone else put their trash out, and will feel the urge to do the same.  Yet they know full well that tomorrow is Christmas and nothing happens on Christmas, including the trash getting collected.  But they do it anyway.  This pattern repeats itself on New Years Day, the Fourth of July and other national holidays.

Now, there is nothing horribly wrong with putting your trash out when it’s not going to be collected the next day.  You’re stinky refuse will just be on display for your neighbors to enjoy for a day longer.  Not the end of the world.   What is disconcerting about it is the herd mentality.  It makes you do things that you shouldn’t be doing, even though you know better.  I would wager that pretty much every homeowner in my neighborhood knows that the trash is collected the day after your usual day when it’s a holiday.  I’ve seen and talked to many of my neighbors and they seem like fairly intelligent people.  Even if they don’t know when the exact collection day is, I’m sure they have an inkling that the collection schedule usually changes around holiday times.  But still, like every holiday, a lot of people will put their trash out on their usual day because other people are doing it.

Wow I just spent about 500 words talking about trash day.  The moral of the story is to avoid the herd mentality!  It makes smart people do stupid things.  This is oh so prevalent in the world of money, and it can get you in a lot of trouble.  The examples are almost endless.  The big one which gets people in a lot of trouble is Keeping up with the Joneses.  This is when people buy things that are more expensive than they need or can afford.  “Hey that cool looking guy down the street got a BMW.  Let me check online and see if there are some deals in the area.”  Before you know it you end up in a showroom and sign off on a car which will cost you $500 a month for many years.  And your 5 year old Honda was working great all this time.  This is a classic example of following the herd even though you know that money could be put to better use.

Another thing the herd does?  They don’t save for the future.  They’re too busy keeping up with their neighbors to do so.  According to a report by the National Institute on Retirement Security, one third of people between ages 55 and 64 have saved NOTHING for retirement.  That’s right, 33% of the country will have to work until they die or depend on social security or family in their latter years.  The median amount of savings among this age group is $12,000.  That’s about how much they spend taking the entire family on the obligatory 2 week long Disney World vacation.

The herd has no idea what they’re doing when it comes to saving for retirement, so don’t be one of them.  The most efficient way to save for retirement is to cut your unnecessary expenses and use that extra cash flow to contribute to your retirement accounts.  If you get a raise or sudden influx of money, funnel it into your retirement and forget about it.  You already proved you can live without that money so you don’t need to spend it all.

There are so many examples when following the herd is the wrong financial move (more future post ideas!)  Lifestyle inflation and not saving for retirement can be two of the more disastrous ones.  Don’t worry about what the average person is doing financially, because they’re probably doing it wrong.

Happy New Year everyone!  I’m so not looking forward to trash day this week.

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Diamonds in the Rough Roundup 12/27/2013

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Though this Roundup series is pretty new, this is going to be the last one for 2013.  It’s always good to reflect on the past year and make sure next year is even better:

–2013: Looking Back by The Broke and Beautiful Life:  In this post, Stefanie shows us how New Year’s resolutions are done.  They should be written down and tracked as the year goes on.  While you may not meet all of your resolutions, achieving most of them is a lot better than achieving none.  Great job Stefanie and hope you have a great 2014.

–Should you Contribute to a 401k or IRA when in debt?  Apply the 5% Cutoff Rule by 20SomethingFinance:  Saving for retirement while in debt has been an age old question.  And the answer differs depending on your situation.  I firmly believe that saving for retirement early on in life, even if it just a little bit, is a great move.  As your debt is being paid off, you can then increase your retirement contribution.  The key is to not give in to lifestyle inflation which would lead to a decrease in your debt repayment and/or retirement contribution.

–2014 New Year’s Resolutions by FrugalPortland:  In keeping with the theme of excellent New Year’s resolution posts, here is a great one.  It’s great that these awesome bloggers are willing to put their resolutions out there for everyone to see.  I can’t think of a better way to make yourself accountable while motivating your readers.

Happy Holidays everyone!

 

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If you’re already Drowning in Debt…Just Say No

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When I look back at my time in optometry school (it’s already been almost 5 years??!!), it seems like it went by in a blur.  Those 4 years seem to kind of blend together in a whirlwind of studying, lab practicals, and board exams.  Sometimes I am still utterly grateful I got through all of that.  But thinking back to my mindset when I was actually in school, it seemed like it was taking forever!  Four years of this stuff?  It felt like an eternity at first.  Many of my fellow students felt this way also.

What does this reminiscing have to do with drowning in debt?  A lot actually.  When the end was finally approaching, many people were understandably very relieved, and started thinking about their life after school.  We could finally call ourselves eye doctors, and that should come with all the trappings am I right?  Should I get a Lexus or a Benz to drive to work?  I can’t wait to move into that swanky apartment downtown and get the best furniture available!    The problem with a lot of these “trappings” is that most people will have to incur a lot of debt to get them.  Did I also mention that many optometry students graduate with upwards of $200,000 in student loan debt?

A lot of freshly graduated students quickly get themselves into the unholy tri-fecta of debt: car loans, mortgages and credit card debt.  Each one of these is a sucker punch right to the gut.  Add this to the already burgeoning student loan debt, and you’re likely to be knocked right out.  Just because you can “afford” the monthly payment, it does not mean that you should get that shiny new BMW right out of the gate.

Hopefully, right out of school is the point when you will be making the LEAST amount of money in your career.  Advancing in your company or growing a successful business will increase your income with time.  So there is definitely no need to rush out and get the new car and house right away.  Banks will most likely be here until the end of time whenever we want to borrow money.  If you are in significant student loan or credit card debt right out of school, it would be best to eliminate that first or at least whittle it down to a manageable level until you take on any new debt.

Waiting just a few years to take on new debt will put two things in your favor.  One, your income SHOULD be increasing, so your debt to income ratio should be looking better and better.  You might even be able to save up some of your income to make a good down payment on that house. townhouse you’ve been eyeing.  Two, if your income is increasing, you should also be increasing your debt payments.  This will get rid of your debt much faster than just making minimum payments, which the banks would absolutely love for you to do.

Another reason to consider just saying no to new debt right out of school is that buying a car or a house is a really big decision and a really big investment.  It’s not a decision to be taken lightly and requires your due diligence all the way through.  Your education was also a big investment which I’m sure you thought about thoroughly.  It usually takes a few years for people to decide what they want to pursue after undergrad.  So you should also take your time to really evaluate your needs and make the best choice possible when making yet another big investment.  Buyer’s remorse is very real, and it can suck.

For those people who are reading this while still in grad school, it may feel like it’s taking forever now, but it will be like a blur when it’s all over.  Take your time to decide when taking on new debt, since many new grads will be paying back lots of student loan debt at the same time.  There is nothing wrong with driving your old Corolla a few more years while you hack away at your current debt.

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Diamonds in the Rough Roundup 12/20/13

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Here’s the latest round up of great articles around the personal finance world:

–Bad Retirement Advice by Student Debt Survivor:  The key to having a healthy retirement fund is to start early.  You don’t even have to be contributing a lot, just $50/month to start.  The power of compound interest is so profound that it is not a smart move to put off contributing to retirement.

–5 Tricks to Save Money At Starbucks by Frugaling.org:  Getting coffee at Starbucks has become a staple for many people nowadays.  While the idea of paying 4-5 bucks regularly on a drink doesn’t seem too appealing, there are some ways to bring that price tag down.  Obviously, an even better way would be to reduce or eliminate the amount of times you visit Starbucks.

–Want to Save $100,000 on Your Mortgage?  Improve your Credit Score by Enwealthen:  Improving your credit score is one of the easiest and quickest ways to spend less.  Most people will get a home mortgage or auto loan at some point in their life, and having an excellent (not just good, but excellent) credit score can make all the difference.  The main things to remember are to pay your bills on time and use a credit card every once in a while.

–The lessons I learned paying off all$35,000 of my credit card debt in 2013 by Debt Blag:  Getting into credit card debt can be very debilitating to your finances.  This post shows you how to do it the right way.  Cut your expenses as much as you can, work your butt off and put any extra payments towards the debt.  If you’re not willing to make the big changes, that debt will always haunt you.

–Marriage and money: the financial implications by Color Me Frugal:  Marriage is a big step on so many levels, and is definitely a big financial step.  If a couple have very different views on finances, there can be some things that need to be worked out.  Getting both partners on the same page is imperative.

 

Much thanks to the following bloggers who shared my work on their pages:

–Carnival of Financial Independence at Reach Financial Independence

–Personal Finance Carnival at Aspiring Blogger

–Yakezie Carnival at Faithful With a Few

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Is your Savings Account Awesome?

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There are two ways to get wealthy: Make a boatload of money all at once or consistently save a portion of what you earn.  Most people dream and struggle (but mostly dream) about getting rich with the first method.  You must be EXTREMELY motivated and EXTREMELY lucky for that to happen.  You pretty much have to give up whatever you’re doing right now, and devote your blood, sweat and tears to make this happen.  Now, most people are not willing or able to do this, so the second path to wealth is much more attainable.  Saving a portion of what you make is not only much more attainable for most people, it is downright EASY compared to forming a million dollar business.

Having a good savings account is essential on the path to wealth.  Scratch that, having an AWESOME savings account is even better.  In an ideal situation, savings should be a mix of short and long term savings.  Short term savings includes funds that might have to be used within a year or sooner.  Examples would be an emergency fund or saving for the newest Xbox which you can smash in front of all those people waiting in line on Black Friday (have secretly wanted to do this).  Long term savings include retirement accounts and college savings accounts.  It’s mainly for stuff that is very important when the time comes, but it is a while away.

A savings account is a great place to store short term savings.  Whether they know it or not, pretty much everybody has access to a savings account.  Most people who have a checking account are able to sign up for a savings account with the same bank.  But not all savings accounts are created equal.  In fact, some of them are not really that useful.  Here are some things to look for in a savings account:

-Make sure it is separate from your checking account.  Many people focus on interest rates when it comes to savings accounts.  They are important, but not nearly as important as having your savings account at a different bank from your checking account.  Having it at the same bank would actually defeat the purpose of having a savings account altogether.  Your emergency fund, for example, should be easy to tap in case you need to, but not so easy that you can transfer money out of there in a second.  You want to think about it for a second when you withdraw something from savings.  Having it at a different account gives you about 2-3 business days to think about it.

Having your savings account separate from your checking also makes it easier to save automatically.  Just set up an automatic withdrawal from your checking to your savings every month, and it’s like you never see the money.  This is the key to building up your savings and avoiding lifestyle inflation because if you see the account all the time, you start to think that you can spend it whenever you like.

-Choose one that allows you to easily make sub-category accounts.  Piling your money into a savings account is definitely a good move, but most people have different short term savings needs.  There can be an emergency fund, saving for a laptop, vacation etc.  Being able to make separate savings accounts and have separate goals for each can make it crystal clear how much you have to save.  If you want to save $1,000 for a vacation next year, just set up a vacation account and put in $100/month.  Anything that makes your financial decisions easier and more automatic is a great thing.  Surprisingly, not all savings accounts are able to do this, so find out before you sign up for one.

–Interest rates should be taken into consideration as well.  While rates are not as high as they have been in years past, you should still try to get the best rate you can.  Online savings accounts almost always have better rates than big banks.  According to the Bank of America website, their regular savings account has an interest rate of 0.01%.  That’s literally almost nothing!  It would be foolish to use an account like this when you can find an online savings account with rates around .5% (That’s 50 times better).  Because interest rates are at a relative low point, jumping around from account to account to snag the best interest rate is most likely a waste of time.  Find an account you are comfortable using that has a good rate and stick with it.

-Be on the lookout for fees as well.  The Bank of America account I mentioned has a $5 monthly fee and some hoops to jump through to get rid of it.  Don’t bother with that as there are plenty of savings accounts with no minimum deposit requirements or hoops to jump through.  One thing to keep in mind though is that many account limit the amount of withdrawals you can make per month.  If you go past that number, you can be hit with a penalty.  Since you’re saving for things in the future, you shouldn’t have a problem with this.

So does your current savings account have all of these features?  If not, it might be time to switch.  From reading my previous posts, you can probably tell I’m a huge fan of online banking.  Savings accounts are no exception.  In fact, online savings accounts are light years ahead of big bank savings accounts in terms of ease of use and interest rates.  Do yourself a favor and switch to an online savings account.  I’ve had CapitalOne 360 Savings (formerly ING Direct) for years and absolutely love it.  It makes saving super easy and automatic, which is the most important factor.

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