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Personal Finances Advice Thread

TwoQuestionsTwoQuestions Registered User regular
edited February 2011 in Help / Advice Forum
I hear constantly how young people misuse their money because they're too ignorant to know when to spend their money, and what to spend it on.

As a newly-minted college grad with a decent job, I'd like to avoid falling into that trap. I get the feeling I'm not doing something that I need to be doing to make myself financially safe in the future, or doing something stupid that I need to stop doing right now.

I'm putting some money away right now every month into a savings account, and I don't go into the red anymore.

Does anyone know where I can find out how not to be dumb with money?

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    bowenbowen How you doin'? Registered User regular
    edited February 2011
    Don't buy a new car if a used car works.
    Don't go out just because your friends go out. Don't order lobster if your friends order lobster
    Don't buy things you can't afford.

    That's pretty much the basic idea. Budget for unforseen expenses like medical or your car blowing up.

    bowen on
    not a doctor, not a lawyer, examples I use may not be fully researched so don't take out of context plz, don't @ me
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    twmjrtwmjr Registered User regular
    edited February 2011
    Only thing I'd add (that you already seem to be doing) is save as much as you can. It doesn't hurt to set up a savings account and set your direct deposit (if you have it) to automatically put a smallish percentage of your pay away every check, and then put more away manually if you can.

    If your job offers a 401k USE IT. Find out how much they match, and put in as much as they will match per check. Get every penny you can out of this.

    twmjr on
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    FeatherBladeFeatherBlade Registered User regular
    edited February 2011
    Sounds like you have a good start.

    Here are some other things you can consider:

    Make a written plan for how you're going to spend your next paycheck, make sure that you're paying for your base living expenses (lights, water, food, shelter, transportation) before you spend on frivolities like cable, internet, and beer.

    You can save money by eating at home and brown-bagging your work meals.

    Do you have debt? It's a good idea to pay that off because no debt leaves you with more money to spend on other things like retirement.

    Save up enough money to cover 3- 6 months worth of living expenses in case you lose your job.

    Get enough life insurance to cover your funeral expenses and any debts you may leave when you die. Term life insurance is pretty cheap: if you are fairly healthy you can probably get $150K for less than $300 per year.

    Write a will. It'll save money and trouble in sorting out your estate when you die.


    Forethought and consideration are the hallmark of a responsible adult.

    FeatherBlade on
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    adytumadytum The Inevitable Rise And FallRegistered User regular
    edited February 2011
    There are a lot of personal finance blogs online that you can read.

    Get signed up with mint.com so you can start tracking your personal finances. It really helps to be able to see and compare the numbers in front of you.

    You really don't need to waste time and money writing a will as a single twentysomething.

    adytum on
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    Reverend_ChaosReverend_Chaos Suit Up! Spokane WARegistered User regular
    edited February 2011
    twmjr wrote: »
    If your job offers a 401k USE IT. Find out how much they match, and put in as much as they will match per check. Get every penny you can out of this.

    For retirement, it is not the ammount of money you put in, its the length of time it's in. The money you put in right now, could be a difference of over a MILLION Freaking dollars when you retire....I feel like a moron for waiting until I was 29 - and I have plenty of time to put money away. Start ASAP - and if your employer matches, put in whatever they match, MINIMUM!!(It's FREE MONEY!!!) And if you get a raise, I would reccomend bumping it up another percent or two (or three), when you won't notice the increase. I went from 3% (what my company matches) to 5% when I got my last raise, and it makes a big difference in my 401k. If your employer does not offer a 401k, then you can set one up yourself, most banks have a 401k program I believe.

    Also set up a budget and stick to it, and you will always be able to cover your bills, you will always put an ammount into savings (which you already do, good work!) and then you allot yourself a specific ammount of "spending money" on frivolous purchases, like movies, games, whatever. For bigger "frivoulous" purchases you might have to save up your "spending money" - this keeps you within your budget, and a nice side affect to this is you will appreciate the value of your purchase more than if you just blew money out of savings. This usually means you'll take better care of it, it will last longer and you won't waste money replacing it. I do a lot of online research before I make purchases, like TV, laptop, camera, MP3 player. I make sure that I am getting a good deal for a solid product. If you waste money on crap, even if it's a lot cheaper, you will spend more in the long run.

    Reverend_Chaos on
    “Think of me like Yoda, but instead of being little and green I wear suits and I'm awesome. I'm your bro—I'm Broda!”
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    TwoQuestionsTwoQuestions Registered User regular
    edited February 2011
    I'm bugging my HR person about the 401k now.

    Holy hell mint.com is awesome.

    TwoQuestions on
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    bowenbowen How you doin'? Registered User regular
    edited February 2011
    I'm bugging my HR person about the 401k now.

    Holy hell mint.com is awesome.

    bowen on
    not a doctor, not a lawyer, examples I use may not be fully researched so don't take out of context plz, don't @ me
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    OnTheLastCastleOnTheLastCastle let's keep it haimish for the peripatetic Registered User regular
    edited February 2011
    Yes, use mint. It will tell you where your money is going. After a few months with a handle on where it's going, you can trim or expand.

    One important thing I think young people overdo is don't get into too many obligations. An iPhone is cool but it's $75-100 a month. I pay $20 for unlimited texting and way more minutes than I can use. Likewise, your car payment, insurance, rent, phone, etc. (or like Bowen said a new car vs. a used one) all adds up. If you get stuck with too many things you don't really need, you can't save and you're stuck living paycheck to paycheck let alone saving for retirement.

    It leads to credit card debt and an even larger black hole to escape from.

    OnTheLastCastle on
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    ThundyrkatzThundyrkatz Registered User regular
    edited February 2011
    401k's are employer sponsored plans only. Banks won't offer them.

    You are thinking of an IRA or a ROTH IRA.Both good idea's to supplement your 401k. Keep in mind that any money you put into a tax deferred savings plan is essentially unavailable until you retire. (Doing so early will cost you taxes and a penalty)

    If you have 6 months of bills saved in a liquid investment like a savings account or a money Market Deposit Account. the you could consider opening an IRA. Before that it may be a little risky.

    Get some credit history. Get a store credit card where you shop a lot. Try to get a credit card, or a car loan. Be good with it, use it and pay it off each month.

    Some day you will want credit to buy a car or a house or something, and the only thing worse then bad credit is no credit.

    Thundyrkatz on
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    schussschuss Registered User regular
    edited February 2011
    Yes, take out the max matching amount (at a minimum) from the very beginning. For me, that's 7%. If you never saw that money IN your paycheck, it doesn't feel like you lose anything. If your employer does any level of matching funds, that's FREE money. Free as in instant gains of 50-100% (which you won't make in stocks).
    If you haven't yet - learn to cook some basic stuff. You'll save a ton and eat healthier/better (the better part comes after you've cooked for a bit, prepare to screw up some early).
    Cars - Buy something WELL within your price range. Total price of half your yearly salary or less.
    Toys - Toys (such as motorcycles/boats/sportscars/skis etc.) are bought with cash. No credit.
    Stuff - Unless you plan on actively using it, you don't need stuff. It's cool to finally have money, but don't buy things you don't need.

    schuss on
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    ThanatosThanatos Registered User regular
    edited February 2011
    Do you have debt? It's a good idea to pay that off because no debt leaves you with more money to spend on other things like retirement.
    This depends upon the debt.

    If we're talking about low-interest student loans or a mortgage, you're almost certainly better off putting that money into retirement than you are paying down the principle on the debt (since the principle isn't tax-deductible, and you're likely to be paying a higher tax rate later in life (which means the interest gets cheaper as time goes on), those sorts of debts are generally good to keep longer).

    Thanatos on
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    OnTheLastCastleOnTheLastCastle let's keep it haimish for the peripatetic Registered User regular
    edited February 2011
    Interest for student loans and mortgages is tax deductible as well. Paying off most debts ASAP is important, but tax-deductible ones can keep going while you also save for retirement.

    OnTheLastCastle on
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    bowenbowen How you doin'? Registered User regular
    edited February 2011
    If you have private student loans, pay the shit out of them as fast as possible. Federal ones? Do as thanatos said. My federal ones are at like 4% interest, my private ones are at 15%. So yeah, I might as well just have put my entire education on my credit card.

    bowen on
    not a doctor, not a lawyer, examples I use may not be fully researched so don't take out of context plz, don't @ me
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    kedinikkedinik Captain of Industry Registered User regular
    edited February 2011
    Protect your credit like it were your life.

    Better credit scores make it cheaper and easier to buy cars, houses, etc in the future.

    kedinik on
    I made a game! Hotline Maui. Requires mouse and keyboard.
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    ThanatosThanatos Registered User regular
    edited February 2011
    bowen wrote: »
    If you have private student loans, pay the shit out of them as fast as possible. Federal ones? Do as thanatos said. My federal ones are at like 4% interest, my private ones are at 15%. So yeah, I might as well just have put my entire education on my credit card.
    Depends on the interest rate.

    Even at, say, 10% interest, it may be worth it to invest in retirement instead (depending upon your expected returns), because sticking money in a tax-deferred retirement account costs you probably $.85 per $1.00 you get in there (which is effectively an instant 18% return), and your actual interest rate on your student loan is only 8.5%, since said interest is tax-deductible (and if it's fixed-rate, is going to go down over time as your top tax bracket rate goes up).

    Thanatos on
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    DisrupterDisrupter Registered User regular
    edited February 2011
    Drinks, Dinner and Fast good will absolutely crush you.

    I make a ton more money then i need to live, im convinced i should save like 1k a month and yet i barely save anything right now because of the above items.

    Brown bagging it and what not is the best solution. The problem I run into is I always go "well what do I want to eat?" then I cant figure it out so i go "screw it ill grab something at lunch."

    Or with dinner, I get bored of the same 2-3 things I can cook so I end up going 'eh i dont want to cook any of that.' And I end up eating the same 2-3 meals out because its easier.

    Blah. So, watch that. Its the small items that add up that can kill you rather then the big purchases.

    Disrupter on
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    spool32spool32 Contrary Library Registered User regular
    edited February 2011
    One thing you should be considering is an emergency fund... if you lost your job tomorrow, how long could you live? Figure out how much you spend in a month, total, and aim for 6x that in an account that you never touch... a safety net to fall back on should be your first priority.

    spool32 on
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    bowenbowen How you doin'? Registered User regular
    edited February 2011
    Disrupter wrote: »
    Drinks, Dinner and Fast good will absolutely crush you.

    I make a ton more money then i need to live, im convinced i should save like 1k a month and yet i barely save anything right now because of the above items.

    Brown bagging it and what not is the best solution. The problem I run into is I always go "well what do I want to eat?" then I cant figure it out so i go "screw it ill grab something at lunch."

    Or with dinner, I get bored of the same 2-3 things I can cook so I end up going 'eh i dont want to cook any of that.' And I end up eating the same 2-3 meals out because its easier.

    Blah. So, watch that. Its the small items that add up that can kill you rather then the big purchases.

    This. This is how most people fuck themselves.

    bowen on
    not a doctor, not a lawyer, examples I use may not be fully researched so don't take out of context plz, don't @ me
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    OnTheLastCastleOnTheLastCastle let's keep it haimish for the peripatetic Registered User regular
    edited February 2011
    And Mint can take care of that easy.

    I have four budgets for food:
    Groceries
    Fast Food (lunch I get at work)
    Restaurants (lunch/dinner I eat on my own time)
    Alcohol

    Helped me cut the fast food budget way down though I still enjoy eating out because it's DELICIOUS.

    OnTheLastCastle on
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    TwoQuestionsTwoQuestions Registered User regular
    edited February 2011
    I have a credit card that I pay gas/incidentals for, and pay it off every month.

    Working on my emergency fund, putting away $300/month.

    Hot damn I spend way too much stuff on lunch, especially when I can bring sandwich stuff/chips to work and eat that.

    TwoQuestions on
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    bowenbowen How you doin'? Registered User regular
    edited February 2011
    It was shocking how much I spent on fast food/restaurants.

    bowen on
    not a doctor, not a lawyer, examples I use may not be fully researched so don't take out of context plz, don't @ me
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    ThundyrkatzThundyrkatz Registered User regular
    edited February 2011
    For saving, try to have an automatic withdrawal of some amount each week. Personal experience has taught me that saving "whatever is left" at the end of each month is a losing proposition. However, paying my savings account like its a bill works every time.

    Before you know it, a year will have flown by and you will be like... "Holy Crap! look at all this money I have saved!" :)

    Thundyrkatz on
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    bowenbowen How you doin'? Registered User regular
    edited February 2011
    My suggestion is to get a savings account at a different bank than your checking. Overdraft protection causes you do to some stupid things. Like paying more than you can afford because your savings has money.

    bowen on
    not a doctor, not a lawyer, examples I use may not be fully researched so don't take out of context plz, don't @ me
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    The Crowing OneThe Crowing One Registered User regular
    edited February 2011
    The best advice has already been given: live under your means.

    Unfortunately that's not always possible. I work in the broad field of financial planning/assistance for people who are in over their heads with debt and expenses or who have had a reduction in income.

    At the end of the day it comes down to a few things: Be thrifty, be future-focused, and do not incur avoidable debt. That's not to say that you should live a Spartan lifestyle, but that the biggest issue in this world is that money costs money. Want to buy a new TV? Cool! but make sure you pay with money you already have. Credit is criminally expensive, and a vast majority of clients I work with went from bad (loss of a job, etc.) to worse (living off credit to pay bills).

    Having credit is important. If you have a credit card be a "deadbeat", as the industry calls it. I generally use my card to buy something scheduled, like filling my gas tank, at which point I immediately make a payment to my credit card company to cover the debt. It grows your credit and keeps the card active without reliance.

    The Crowing One on
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    TwoQuestionsTwoQuestions Registered User regular
    edited February 2011
    For saving, try to have an automatic withdrawal of some amount each week. Personal experience has taught me that saving "whatever is left" at the end of each month is a losing proposition. However, paying my savings account like its a bill works every time.

    Before you know it, a year will have flown by and you will be like... "Holy Crap! look at all this money I have saved!" :)

    Not enough lime for this.

    When I set up my bank to automagically take money away from my video-game buying checking account and put it into my somewhat-harder-to-get-to savings, there was an immediate effect on my finances and ability to cope with sudden bills. It was awesome, and I can't recommend it enough.

    The Crowing One, I read from Pony and others that used to work for credit card companies, and they said the same thing you said, and that's what I'm doing now.

    TwoQuestions on
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    The Crowing OneThe Crowing One Registered User regular
    edited February 2011
    I'm actually, as a finance professional, rather wary of any sort of automatic transfers or payments. If you routinely have PLENTY of money in a checking account, the dangers are slim. All it takes is one unexpected expense (like having work done on a car, etc.) and a little forgetfulness (because it's automatic!) to overdraw and incur fees that you don't need to incur.

    The exception to this would be if you keep a specific account for specific, non-general, purposes. Like if you kept a checking account solely for media purchases, etc.

    The idea is rock sold, though. I usually have a target number of monthly savings and manually transfer at the end of the month. This gives me the flexibility to deal with unexpected expenses.

    The Crowing One on
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    TejsTejs Registered User regular
    edited February 2011
    I'd recommend putting all of your recurring bills on a credit card, particularly if it has rewards. In addition, get a checking account with a high interest rate attached to it (they exist). This way, you get rewards for your purchases on the credit card, and you gain interest on the money that you actually spent on the credit card until the credit card bill comes in.

    HOWEVER, only do this if you are able to fully pay off your credit card bill each month. Failure to do this and your finances will quickly get unbalanced.

    Tejs on
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    TwoQuestionsTwoQuestions Registered User regular
    edited February 2011
    Tejs wrote: »
    I'd recommend putting all of your recurring bills on a credit card, particularly if it has rewards. In addition, get a checking account with a high interest rate attached to it (they exist). This way, you get rewards for your purchases on the credit card, and you gain interest on the money that you actually spent on the credit card until the credit card bill comes in.

    HOWEVER, only do this if you are able to fully pay off your credit card bill each month. Failure to do this and your finances will quickly get unbalanced.

    Yellowed for question. I checked my bank's web site, and they offer Kasasa, which is heavily advertised on the radio for their checking and savings accounts.

    Anyone have experience with them, because they set off my (admittedly easily tripped) bullshit detector, and I'm wondering if I should consider them, because my current checking account doesn't get interest.

    TwoQuestions on
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    The Crowing OneThe Crowing One Registered User regular
    edited February 2011
    If you're at the point where you can make money off of bank account interest, your money is in the wrong place. While high interest is always good on a savings account, the return is really pretty minimal until you reach levels of liquidity that would be far, far better served in a conservative mutual fund or similar.

    The Crowing One on
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    DjeetDjeet Registered User regular
    edited February 2011
    That Kasasa thing looks like it might be legit. To qualify for the higher interest rate you have to do 12 debit transactions a month. They're making money off of the fees they're charging retailers on debit transactions.

    Djeet on
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    The Crowing OneThe Crowing One Registered User regular
    edited February 2011
    Djeet wrote: »
    That Kasasa thing looks like it might be legit. To qualify for the higher interest rate you have to do 12 debit transactions a month. They're making money off of the fees they're charging retailers on debit transactions.

    That actually caught my eye as well.

    I, for the life of me, couldn't find any reference to what those "MASSIVE RATES OF INTEREST" actually would be, as there aren't any banks participating in my area. Did you find any actual numbers? Knowing banking, "massive" in this case probably means 5-6% (I guess, but I could be wrong as I haven't looked into savings IRs in awhile), which is nothing to go crazy over.

    The Crowing One on
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    adytumadytum The Inevitable Rise And FallRegistered User regular
    edited February 2011
    Just sign up with ING. They're an amazing online bank, and always offer among the best interest rates of any banks nationwide with no strings attached.

    They're the only bank I've ever used that I actually like.

    adytum on
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    WezoinWezoin Registered User regular
    edited February 2011
    See if your online banking site has a finance tracker. Mine lets me set budgets based on different categories and e-mails me when I go over them. Each store is organized into a category (electronics, groceries, etc). Live a month how you do now with one of those, see the results at the end, find your biggest expense and set your budget to about 5% less for it. Repeat every month until you're happy with your savings level.

    Wezoin on
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    bowenbowen How you doin'? Registered User regular
    edited February 2011
    Mint.com works too!

    bowen on
    not a doctor, not a lawyer, examples I use may not be fully researched so don't take out of context plz, don't @ me
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    OnTheLastCastleOnTheLastCastle let's keep it haimish for the peripatetic Registered User regular
    edited February 2011
    Wezoin wrote: »
    See if your online banking site has a finance tracker. Mine lets me set budgets based on different categories and e-mails me when I go over them. Each store is organized into a category (electronics, groceries, etc). Live a month how you do now with one of those, see the results at the end, find your biggest expense and set your budget to about 5% less for it. Repeat every month until you're happy with your savings level.

    This is totally right. Just like dieting you can't just say NO MORE SUGAR or NO MORE BBQ and stick with it. Because BBQ is delicious... and can be expensive.

    OnTheLastCastle on
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    The Crowing OneThe Crowing One Registered User regular
    edited February 2011
    bowen wrote: »
    Mint.com works too!

    I use Mint for my personal budgeting. It's pretty damn good.

    The Crowing One on
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    DjeetDjeet Registered User regular
    edited February 2011
    Djeet wrote: »
    That Kasasa thing looks like it might be legit. To qualify for the higher interest rate you have to do 12 debit transactions a month. They're making money off of the fees they're charging retailers on debit transactions.

    That actually caught my eye as well.

    I, for the life of me, couldn't find any reference to what those "MASSIVE RATES OF INTEREST" actually would be, as there aren't any banks participating in my area. Did you find any actual numbers? Knowing banking, "massive" in this case probably means 5-6% (I guess, but I could be wrong as I haven't looked into savings IRs in awhile), which is nothing to go crazy over.


    It links me a local bank (legit, I've heard of it before) offerring 4.11, and an additional .50 on balances over $10K. I'm considering it as BofA isn't really doing anything to keep my business. Default rate (if you don't meet the requirements) is .10, which is about average for a B&M megabank for checking balances under $25K.

    Djeet on
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    bowenbowen How you doin'? Registered User regular
    edited February 2011
    bowen wrote: »
    Mint.com works too!

    I use Mint for my personal budgeting. It's pretty damn good.

    I just started, oh my god is this thing awesome.

    bowen on
    not a doctor, not a lawyer, examples I use may not be fully researched so don't take out of context plz, don't @ me
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    The Crowing OneThe Crowing One Registered User regular
    edited February 2011
    Djeet wrote: »
    Djeet wrote: »
    That Kasasa thing looks like it might be legit. To qualify for the higher interest rate you have to do 12 debit transactions a month. They're making money off of the fees they're charging retailers on debit transactions.

    That actually caught my eye as well.

    I, for the life of me, couldn't find any reference to what those "MASSIVE RATES OF INTEREST" actually would be, as there aren't any banks participating in my area. Did you find any actual numbers? Knowing banking, "massive" in this case probably means 5-6% (I guess, but I could be wrong as I haven't looked into savings IRs in awhile), which is nothing to go crazy over.


    It links me a local bank (legit, I've heard of it before) offerring 4.11, and an additional .50 on balances over $10K. I'm considering it as BofA isn't really doing anything to keep my business. Default rate (if you don't meet the requirements) is .10, which is about average for a B&M megabank for checking balances under $25K.

    Yeah, while nice it's nothing to get too excited about.

    The Crowing One on
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    DjeetDjeet Registered User regular
    edited February 2011
    I'm curious as to who everyone's using for high interest checking/savings. I'm thinking for my spending/emergency fund account here. Cause ING offerring 1.1 on savings and a quarter on checking doesn't seem all that compelling to me. 4 is better than what I can get on a 5 year jumbo CD.

    Djeet on
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