In my book, I confessed that I bank at Bank of America. I also wrote about how I learned from my friend Melissa Scott all about compound interest. As far as I can tell (and this from talking to a rep at my local branch) Bank of America doesn't give compound interest if you just open a simple savings account, only if you open a CD (which involves locking up your money for a specified period of time, usually 6 months minimum.)
So my questions are:
1. Is there a better local bank than Bank of America? (Florence Savings Bank, Easthampton Savings, etc.) Or national branch?
2. Is it unusual for banks not to give compound interest on simple savings accounts?
3. Where Would Jesus Bank?
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- Nerissa Nields
- Eco-Friendly, Artsy, Western Massachusetts
- Musician, writer, life coach, wife, mother, lover of God, good books, some dogs, yoga, fresh local foods and her family.
9 comments:
Gayle says: if you want to make money from your money, don't put it in a bank.
Mike says: stick it in your mattress
Also, if you bank locally, your money goes to the local economy. (That's for the WWJB question."
Ruth says: what about co-operative banks and/or credit unions?
John says: when you get to 401Ks, I'll talk.
Credit unions are great. If you lived in the greater Boston area, Wainwright Bank is a cool little socially-conscious bank...
A lot of banks pay very little interest on ordinary savings accounts these days, and on those compounding tends to make little difference. (And where I am, most interest rates are advertised by APY-- annual percentage yield-- which already takes compounding, or the lack of it, into account.)
We actually use two banks, for different purposes. For day-to-day banking and short-term savings, we care more about accessing and managing our money conveniently than earning lots of interest on it. So we use a largish regional bank that has lots of ATMs and branches, online banking and bill-paying, automatic periodic savings transfers and loan payoffs, and reasonable customer service. Their interest rates for deposit accounts are so-so at best. On the other hand, we also have our home loan with them, and having an automated payment link from our bank accounts to the home loan gives us a discount on that loan's interest, which is much bigger than the interest we'd earn on our short-term savings.
For money we don't think we'll need for a while, we use a small online bank that pays high interest on money market accounts and CDs. We can transfer between the two banks online when we need to, and if we want to talk to someone at the online bank, we use email or phone, or we can drive about an hour to a branch if we really have to. There's nothing that says you have to do all your banking in one place.
As for Jesus, it sounds like he let Judas handle the money (see John 12:6), but I'm not sure if that's the example you want to follow... :-)
Not so sure about the compound interest aspect, but ING Direct has a high interest savings account. Doing better there than in my mutual funds right now.
http://home.ingdirect.com/products/products.asp?s=OrangeSavingsAccount
Oh, one point of clarification: if the interest gets paid into an account that itself pays interest, it *will* compound, inherently, at whatever rate payments are made.
(That is, if you're paid interest monthly, and the interest goes into an interest-bearing account-- which can be the same account, but doesn't have to be-- you'll get interest on the interest next month, so your interest is effectively compounded monthly.)
Accounts advertised as "compound interest" will typically compound interest more frequently than they pay it, and you'll see a slightly higher APY for a given base rate on more frequently compounding accounts. But even monthly or yearly compounding can have significant effects over long periods of time.
What Jen said about Ing Direct.
Compound interest just means that you're gaining interest on the interest you had previously earned.
Assume I start with $100, with a 1% monthly interest.
On Month 2, I'll get $1 in interest ( 1% of $100) for a total of $101.
At month 3, I'll get $1.01 in interest (1% of $101 ) for a total of $102.01.
At month 4, I'll get $1.02 in interest ( 1% of 102.01 ) for a total of 103.03.
Etc.. etc..
I find the claim that a bank doesn't let you collect interest on interest you already collected very suspect. ( But in today's world, who knows ).
I'll second Jen's recommendation for an ING account. I've been very happy w/ them.
Jesus would not bank at Greenfield Cooperative Bank. Their commercials may be catchy, but the ATM fees I pay are the plague. I'm thinking about switching to Florence Savings Bank when I run out of checks (hate to waste the paper and the time shredding them).
I second the Wainwright Bank, but unfortunately they are only in the Boston area. Local banks are definitely better (and the people inside of them are much nicer), but for large returns on savings accounts, my money savvy friends (for I am not) like these new-fangled online banks like ING Direct or if you have super-awesome credit HSBC Direct (from what I understand, if you have normal-good credit, they are not as worth it).
One of my local banks (Tioga State) is offering a whopping 4.75% interest on a checking account. That's right! I stocked it with as much available cash (that I wanted to keep available cash) as I could.
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