ETF vs. Mutual Fund: Which One is Right for Your Portfolio?

When it comes to your investment portfolio, diversification is the best strategy.

ETF vs. Mutual Fund

Unfortunately, many people struggle when it comes to finding diversified investments that meet their financial goals. According to a Bankrate survey, 23% of Americans listed cash as the best way to invest money they wouldn’t need for a while, compared with just 17% who prefer stocks.

One of the troubles is deciding which types of investments to include for the best performance. Consider the two popular options: ETFs, or exchange-traded funds, and mutual funds.

ETF and Mutual Fund Comparison

Both ETFs and mutual funds involve pooling money and using it to buy a mix of different assets. Depending on the ETF or mutual fund you select, a single purchase could gain exposure to a broad range of various assets. When it comes to your portfolio, is an ETF or a mutual fund a better investment choice? In order to properly compare mutual funds and ETFs, it’s important to understand each investment individually.

What is an ETF?

An exchange-traded fund, or ETF, is a collection of securities bundled together in a single basket. Common assets you might see are stocks, bonds, and commodities, or some combination of the three. Grouping these different securities into a single basket makes them more attractive because it delivers an almost automatic diversification.

The redemption and creation of ETSs come in larget lots. The shares trade throughout the day directly between investors on the open market. This gives you the added value of transparency because their holdings are generally disclosed daily.

ETFs come in a wide variety, and you can use the different funds to accomplish clear investment goals. Two examples are market ETFs, which are designed around a particular index such as the S&P 500 or NASDAQ, and bond ETFs that provide exposure to bond investments like the ones you’ll find in the U.S. Treasury, corporate, international, and more.

What is a Mutual Fund?

Mutual funds are a collective pool of money used to invest in various securities like stocks and bonds. Once you buy shares, you get a claim to the profits from the investments contained in the fund. Due to the combined nature and the distribution of expenses, every shareholder in a mutual fund shares equally in the value of gains and losses.

Mutual funds aren’t bought and sold by individual investors, which is an added benefit of including them in your portfolio. Instead, a money manager who has the professional skill and time available to allocate your funds better, handles the funds.

The fund manager uses your money to buy into various securities according to your investment goals like long-term growth or fixed income. Some funds are riskier than others, but the diversity of assets in a mutual fund keeps the risk relatively low.

See Also: 15 Passive Income Ideas to Make Money While You Sleep

Pros and Cons of an ETF vs. Mutual Fund

Since both ETFs and mutual funds are made up of a mix of assets, the two are similar in structure. Though there’s no perfect fund, you need to understand the best and worst of each before deciding which is right for your portfolio.

Pros and Cons of ETFs

You can utilize ETFs for short-term trading, long-term trading, or a combination of both. Here are the advantages and disadvantages of including exchange-traded funds in your investment strategy.

ETFs

Pros and Cons of Mutual Funds

Buying a mutual fund is a relatively simple process. Banks and brokerage firms often have their own line of in-house options and include a wide range of asset classes and strategies. Here’s an overview of the pros and cons to consider with mutual funds.

ETFs

See Also: This Socially Conscious Company Helps You Invest in the Things That Matter

Differences Between ETFs vs. Mutual Funds

ETFs vs. Mutual Funds

Both ETFs and mutual funds are an easy avenue to invest in stocks and bonds. When deciding between the two, here are some of the factors you should consider before investing.

Management

Perhaps the most significant advantage of a mutual fund is that it’s more actively managed than most ETFs. With an actively managed fund, you gain access to the professional insight and skill of a professional money manager. They use their knowledge to attempt to beat the market and aim for a better return by buying and selling stocks on your behalf.

Actively managed ETFs exist, but they usually come at a much higher price. Most ETFs are passive, and they’re set up to automatically track an index such as the S&P 500 or the NASDAQ.

Trading

The best part of an ETF is the enhanced flexibility over mutual funds when it comes to trading. The investor and fund handle ETF sales directly rather than going through a professional manager.

ETF prices fluctuate throughout the day according to market demand. This is different than the cost of a mutual fund, which is set at the end of the business day when the net asset value (NAV) is determined.

Fees and Expenses

Mutual funds often come with higher fees because most are actively managed by an experienced person or group of professionals. The costs of owning an ETF are typically lower, though buying and selling can get expensive.

You can trade an ETF at any time during a trading day, and you’ll pay a commission for each trade you make. Mutual fund trading happens after the markets close, which leads to limited expenses.

Tax Efficiency

Investors have to pay taxes on capital gains and dividend income for mutual funds and ETFs since they’re both treated the same by the IRS. However, mutual funds are subject to more frequent taxable events than exchange-traded funds.

The manager of a mutual fund is continuously rebalancing the assets to distribute them properly or to accommodate shareholder redemptions. Asset sales, in this case, become a taxable event. For ETFs, the underlying securities aren’t sold because the shares are traded directly between investors. This process usually excludes the exchange as a taxable event, making them more tax efficient overall.

Investment Minimums

Many mutual funds have high investment minimums, making it a challenge to add them to your portfolio if you don’t have a lot of money saved. Even less experienced investors who are saving for specific goals through target-date mutual funds often have to meet a minimum investment of $1,000 or more.

ETFs typically don’t have a minimum investment requirement, and you can buy as little as a single share to add to your portfolio. This low barrier to entry makes it an excellent option for small investors who are looking to include ETFs in their portfolio.

Liquidity

Since the liquidity of a particular investment represents how quickly it can be converted to cash, ETFs are considered more liquid than mutual funds.

An ETF is adaptable to short-term trading, mostly due to a higher number of shares traded throughout the day and the ability to buy and sell at any time the exchange market is open. Having the option to enter and exit ETF positions quickly makes the liquidity of this type of fund higher.

Mutual funds are less flexible because the trading is done only once per day after the markets close. While this is a great option for long-term investors, this limited period to buy and sell mutual funds reduces the liquidity.

See Also: 7 Investment Strategies for 30 Year Olds and Tips to Get Started

ETF vs. Mutual Fund Performance FAQs

When considering an ETF or mutual fund, here are answers to some common questions about performance and safety you’ll ask yourself.

Do ETFs Pay Dividends?

If you own shares of an ETF, you receive dividends based on the number of shares you own relative to the number of shares in the fund. Some dividends pay interest instead, such as in fixed-income ETFs. However, most do offer a payout, and you’ll get a dividend each quarter.

Which is Safer, ETFs or Mutual Funds?

Whether an ETF or mutual fund is safer depends on your individual goals. There’s no such thing as a safe investment, but there are strategic advantages to each that you should consider.

To determine an investment’s safety, evaluate the mangament of the fund, the fees and expenses involved, the performance history and the types of underlying assets contained in the fund.

Which One is Better for Long-Term Investing?

There isn’t one clear winner when it comes to deciding if an ETF or mutual fund is better for long-term investing. ETFs are generally better for short-term investing because they can be traded multiple times during the day on an open market. Though their tax efficiencies make ETFs a good option for long-term investing, too.

Mutual funds can only be traded once per day after the market closes, making them less adaptable to short-term investing. But considering a short-term investment is one you hold for a year or less, you can easily apply this investing strategy to mutual funds.

ETF or Mutual Fund: Which Should You Choose?

When it comes to investing, there is no one-size-fits-all solution. Mutual funds and ETFs are both suitable choices to diversify your portfolio. You’ll want to consider your tax strategy, how much you can spend, and if you’re going to be more hands-on or would rather leave it to a professional money manager.

Overall, it depends on your individual investment goals. There’s more selection to choose from when it comes to buying a mutual fund, but ETFs have more flexibility because they’re traded like stocks. As you evaluate your options, you’ll see how each might impact your investment process. This will help you pick the perfect fund for your portfolio. Disney Plus

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401(k) vs. IRA: How to Choose The Best Retirement Account for You

Building a nest egg for retirement is like planting a tree.

401(k) vs. IRA

If you plant it early enough and regularly give it water, you can expect a full grown tree by the time you’re ready to retire.

But if you want that tree to grow as large as possible, you need to plant it in the right kind of soil. In other words, you need to choose the right kind of retirement plan before you start contributing. For most consumers, that means picking between a 401(k) vs. IRA.

The details of each type of retirement account may get a little complicated, but choosing the right fit is actually pretty simple. Here’s what you need to know.

Traditional 401(k) Roth 401(k) Roth IRA Traditional IRA
Limits $19,000 and an extra $6,000 for workers over 50. $19,000 and an extra $6,000 for workers over 50. $6,000 and an extra $1,000 for workers over 50. $6,000 and an extra $1,000 for workers over 50.
Key Pros Large contribution limit. Possibility of an employer match. Bigger contribution limit than IRAs. Withdrawals are tax-free in retirement. Tax-free retirement withdrawals. No RMDs in retirement. Contributions are tax-deductible.
Key Cons Fund options may be limited. No tax deduction. RMDs are required. Contributions are limited for those above a certain income. Contributions limited to $6,000 a year. Withdrawals are taxed.
Best For Employees with a company match and 100% vesting. Young workers who want to save more for retirement. Those who want to start investing but don’t have access to a 401(k). High-earners looking for more deductions or self-employed workers without access to a 401(k).

Individual Retirement Account (IRA)

An Individual Retirement Account (IRA) is a retirement account that any individual can contribute to. Any money contributed to an IRA must be earned while working a job. There are two types of IRAs, Roth and traditional.

Both types of IRA have the same maximum annual contribution limit of $6,000, and both allow an annual catch-up contribution of $1,000 for those 50 or older. IRAs are popular because customers can pick exactly what they want to invest in. They can choose between individual stocks, mutual funds or target date funds.

See Also: Roth vs. Traditional IRAs: What You Need to Know

Traditional IRA

A traditional IRA, like a traditional 401(k), allows investors to deduct contributions on their taxes. If you save the maximum $6,000 in your IRA, you can deduct $6,000 from your taxable income.

The tax deduction associated with a traditional IRA is the main advantage over a Roth IRA. Consumers with high incomes or business owners who want to decrease their taxable income will benefit the most from a traditional IRA. Because traditional IRA users get a tax break now, they have to pay income tax on their traditional IRA withdrawals in retirement.

A major drawback to traditional IRAs is their required minimum withdrawal (RMD). An RMD is how much you’re legally obligated to withdraw from your traditional IRA every year after you turn 70.5. The annual amount changes based on your total traditional IRA balance, your age, if you’re married, who your main beneficiary is, and how old your spouse is.

Let’s say you have $1,000,000 in your traditional IRA. You’re 71 years old and your spouse is also 71. According to the Vanguard RMD calculator, your RMD for 2019 would be $51,282.

Whichever investment company you use to hold your traditional IRA should be able to tell you how much your RMD is for each year. Not taking your RMD or taking less than is required will result in a penalty that’s 50% of the difference between what you withdrew and what your RMD was.

Roth IRA

A Roth IRA is a retirement account that provides tax-free withdrawals in retirement. Investors who contribute to a Roth IRA won’t receive a tax break while they contribute, but they won’t have to pay taxes on their withdrawals later on.

Roth IRAs also don’t have RMDs and are the only retirement account on this list without them. The Roth IRA is extremely popular because it allows investors to avoid taxes in retirement while they’re living on a fixed income.

Unfortunately, the IRS limits Roth IRA contributions to those who earn below a certain amount. Those filing single can contribute to a Roth IRA if they earn below $122,000 a year. Contributions start to phase out for individuals earning between $122,000 and $137,000. Anyone making $137,000 a year or more isn’t eligible to contribute to a Roth IRA.

Married couples filing jointly who make less than $193,000 a year can contribute to a Roth IRA, and contributions begin to phase out for incomes between $193,000 and $203,000. Couples making more than $203,000 are excluded from contributing to a Roth IRA.

Employer 401(k)

A 401(k) is an employer-sponsored retirement account available to employees as a company benefit, used to encourage employees to save money for retirement. Like health insurance and paid time off, individual companies have the right to decide if they want to offer a 401(k).

There are two types of 401(k)s, Roth and traditional. Like with IRAs, a traditional 401(k) has tax-deductible contributions and a Roth 401(k) has tax-free withdrawals in retirement.

The most important advantage with a 401(k) is the possibility of a company match. Some employers will contribute money to their employees’ 401(k) account. This is basically free money that an employee can use for retirement.

Matching contributions vary based on company policy. Some companies require that employees contribute a certain amount before the employer match kicks in. Others contribute to 401(k)s without an employee requirement.

Many companies have a vesting period, which dictates when employer contributions become the employee’s legal property. A five-year graded vesting schedule means an employee has to stay five years to earn 100% of the employer contributions. If they leave two years in, they’ll earn 40% of the contributions and forfeit the rest.

401(k)s come with a huge annual contribution limit. That limit is $19,000 in 2019, with those 50 or older able to contribute an extra $6,000 a year. That makes it one of the largest contribution limits available for all retirement accounts.

One disadvantage of 401(k)s is that the employer has complete control over what funds are available. Companies can offer a small handful of funds or a large variety. It’s also common for 401(k) funds to have high fees that eat away at investor profits. The only way to avoid bad fund options is to petition your HR department to offer a better variety.

Another drawback is the vesting schedule, which can keep an employee tethered to a job longer than they want.

Traditional 401(k)

A traditional 401(k) can decrease your taxable income and reduce how much you pay in taxes. That’s why people with high incomes opt for a traditional 401(k) in lieu of a Roth.

Employees will still owe taxes on withdrawals. Like traditional IRAs, individuals 70.5 or older must start taking RMDs.

Roth 401(k)

The Roth 401(k) is a relatively new product, and many employers still don’t offer them. It combines the best aspects of a Roth IRA and a 401(k) – the tax-free withdrawals in retirement offered by a Roth IRA and the higher contribution limit of a 401(k).

Unlike Roth IRAs, Roth 401(k)s do have RMDs when the retiree turns 70.5. These can be avoided by converting the Roth 401(k) into a Roth IRA. Make sure to do this before you turn 70.5.

See Also: 7 Investment Strategies for 30-Year-Olds and Tips to Get Started

Opening Both an IRA and 401(k) May Be the Best Option

Choosing between an IRA and 401(k) can seem difficult to a novice investor, but there’s no wrong decision here. There are benefits to both plans, and many investors find it useful to have an IRA and 401(k). If you’re struggling to decide between a Roth or traditional plan, you can also have one of each and contribute to both.

Some investors will contribute enough to a 401(k) to earn a company match and then open an IRA. For example, if your employer contributes 50% of what you put in, up to 6% of your salary, you can contribute that amount to get the company match. If you still have money left over, you can open an IRA and put any extra funds there.

The only truly wrong decision is to wait and delay picking a plan because you’re not sure which one is the best. When it comes to saving for retirement, the most important thing is contributing early and often.

If you’re having trouble deciding on your own, you can hire a financial planner to explain what your options are and what makes the most sense. They’ll be able to design a strategy that fits your specific situation.

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Roth IRA vs. Traditional IRA: What You Need to Know

Roth vs. traditional: How to choose

The biggest difference between a Roth and a traditional IRA is how and when you get a tax break: The tax advantage of a traditional IRA is that your contributions are tax-deductible in the year they are made. The tax advantage of a Roth IRA is that your withdrawals in retirement are not taxed.

Thus most advice on the Roth IRA versus traditional IRA topic begins with a question: Do you think your tax rate will be higher or lower in the future?

If you can answer that question definitively, you can theoretically choose the type of IRA that will give you the biggest tax savings: If you expect your tax rate to be higher in retirement, choose a Roth IRA and its delayed tax benefit. If you expect lower rates in retirement, choose a traditional IRA and its upfront tax advantage.

One problem: It’s hard to anticipate what your tax rate will be in retirement, particularly if you’re decades away from leaving the workforce.

Fortunately, there are other ways to determine whether a Roth or traditional IRA is best for you.

With so many options to choose from, it can be hard for even seasoned financial experts to figure out the best route. For many consumers, it’s better to just open a retirement account through your employer and be done with it.

But that’s not an option for everyone. With more than 50% of the American workforce predicted to become freelance workers in the next decade, there’s a very real need for solid, standalone retirement savings options. That’s why the Individual Retirement Account (IRA) has become so popular.

An IRA allows you to plan for retirement without the backing of an employer, making it perfect for freelance IT experts, consultants, writers, gig economy workers, and almost anyone else with a nontraditional employment situation. Some consumers even opt to use an IRA instead of an employer-sponsored plan with lackluster investing options.

The IRA comes in two flavors: Roth IRA vs. traditional IRA. Here’s what you need to know about both.

What is an IRA?

An IRA, or individual retirement account, is a retirement savings plan that any person can open on their own. Unlike a 401(k), an IRA doesn’t have to be sponsored by an employer. That makes them especially popular with the self-employed and gig economy workers.

Consumers usually open IRAs because they don’t have access to an employer account, or because their 401(k) has poor investment options. Some open IRAs because they need to roll over a 401(k) from a former employer into a new account and aren’t yet eligible for a 401(k) from their new company.

Contribution limits for IRAs in 2019 are $6,000 per year and usually come with cost-of-living increases every year. Investors 50 or older can contribute an extra $1,000 per year.

Money contributed to an IRA must be earned income, and your salary must equal or exceed your contribution. If you only make $5,000 a year, for instance, you can’t contribute the full $6,000 limit.

Parents can open an IRA for their children, as long as the child contributes his or her own earned money. If your kid is 15 and works as a lifeguard at the pool, for example, they can contribute that money to an IRA. The parent will have access to the account until the child becomes a legal adult.

Opening an IRA is like opening a new bank account. First, you need to choose an investment firm. The most popular companies are Charles Schwab, Morgan Stanley, Fidelity, and Vanguard.

Robo advisors such as Betterment, Wealthfront, and Wealth Simple also provide IRAs if you want a more hands-off approach. These companies will choose which funds to invest in and may even suggest how much you should save for retirement. Some robo advisors even offer phone consultations with a human financial advisor for those who don’t want to completely entrust their wealth to an algorithm.

You can also pick a target-date fund, which is based on when you hope to retire. A target-date fund rebalances your portfolio over time. A 30-year-old who picks a 2055 target-date fund will start off with a fund mostly invested in stocks. As he or she gets older, the fund will rebalance to invest more heavily in bonds.

To fund your IRA, you can link your bank account and set up regular automatic contributions to a mutual fund, stock, or exchange-traded fund.

Roth IRA vs. Traditional IRA

Roth IRA vs. Traditional IRA

If you’ve decided to open an IRA, the next step is to choose between a Roth IRA or a traditional IRA.

Roth IRA

The best part of choosing a Roth IRA is knowing that you won’t owe taxes when you withdraw funds in retirement. Contributing to a Roth IRA is like delayed gratification. You don’t get an immediate tax break, but you’ll get a boost when you start taking money out in retirement.

Another advantage to the Roth IRA is its usefulness as a wealth transfer tool. If you leave a Roth IRA in your will, your heirs won’t have to pay income tax on the funds as long as the account was open for more than five years.

A Roth IRA is only available for those below a certain income threshold. In 2019, married couples earning less than $193,000 can contribute the full $12,000 limit. Those earning between $193,000 and $203,000 can contribute a lesser amount. Couples earning more than $203,000 can’t contribute to a Roth IRA at all.

Those filing single and head of household can contribute the maximum if they earn less than $122,000. Contribution amounts phase out for individuals making between $122,000 and $137,000, and go away completely for salaries over $137,000.

Traditional IRA

There are no income limits for traditional IRAs, but you must be 70.5 or younger to open an account. Investors choose to open a traditional IRA either because they make too much for a Roth IRA or because they want the tax benefit.

One of the biggest drawbacks to choosing a traditional IRA is taking required minimum withdrawals (RMDs). The RMD is based on your age, the age of your primary beneficiary, how much your balance is worth and if your spouse is your primary beneficiary.

Your brokerage firm can help you calculate the RMD amount so you don’t take out more than necessary. Some can set up RMD payments that are automatically deposited to your bank account. See our review of the best online brokers to find a firm that fits your needs.

Even if you’re still working or receive enough money through Social Security benefits, you have to take an RMD. Failure to do so results in a penalty, which will be 50% of the difference between what you withdrew and your RMD.

A Side-by-Side Comparison for 2019

Roth Traditional
Qualifications to contribute $203,000 or less for married couples; $137,000 or less for individuals None
Yearly contribution limitations $6,000 and an extra $1,000 for those 50 or older $6,000 and an extra $1,000 for those 50 or older
Withdrawal requirements None Retirees must withdraw money from a traditional IRA starting at age 70.5
Immediate tax benefits None Contributions are tax-deductible
Future tax benefits Withdrawals won’t be taxed in retirement None
Limits to withdrawals Withdraw contributions at any time; 10% penalty if you take withdrawals before 59.5 10% penalty if you take withdrawals before 59.5
Note: The penalty may be waived if you have a financial hardship, such as paying for college expenses or high medical bills or buying a new home.

Choosing a Roth IRA vs. Traditional IRA Doesn’t Need to be Complicated

Picking between a Roth or traditional IRA can seem intimidating, but it’s mostly a simple decision. A general rule of thumb is to choose a Roth IRA if you’re young, at the beginning of your career, or if you can afford to go without the tax deduction. Older folks or self-employed people might prefer a traditional IRA because they want the tax deduction to decrease their taxable income.

Here’s another easy way to think about it: do you think you’ll be in a higher tax bracket now or in retirement? If you think you’ll be paying fewer taxes in retirement, use a traditional IRA now to get the tax break. If you think you’ll be paying more taxes in retirement than you are now, use a Roth IRA.

There’s no way to accurately predict tax rates because the tax code can change every year. Choosing a Roth IRA now because you think your tax bracket will be higher in retirement is merely a guess based on the current tax laws.

Investors who truly can’t decide which one to use can open and contribute to both, but your total contributions must still be under the annual limit. For example, if you have a Roth and traditional IRA, you can contribute $3,000 to your Roth and $3,000 to your traditional for a total of $6,000. Married couples can have one spouse contribute to a Roth and the other contribute to a traditional.

If you want to make the best decision, consult a financial planner. They’ll be able to analyze your retirement account and tax situation to suggest an individualized strategy. They can also help you to adjust your investment strategy as your life circumstances change throughout the years.

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Best Online Brokers for Buying and Selling Stocks

With today’s digital innovations, investors are no longer limited to the brick-and-mortar brokerage firms that their parents used. But how can you find the best Online Broker for you?

Instead, online brokers
have enabled investors to go outside the boundaries of traditional trading
institutions. By circumventing the proverbial middle man, individual investors
can start investing in the stock market all on their
own.

But how do you find the
best online brokerage firm? And should you tackle investing alone?

They’re important
questions, and the answers to them will determine which is the best online
broker for you.

What Is a Brokerage
Account and Can I Use It to Buy Stocks?

A brokerage account,
including many of the apps that allow you to set up accounts, are investment
accounts that allow you to invest in the stock market. The returns your
investments generate are a form of taxable income. Yes, that’s right — you will
be taxed on any income you earn from online stock trading.

The way it works is simple.
Start by opening and funding an account with a cash deposit or ACH transfer.
After your deposit funds clear, you can immediately begin purchasing stocks.
Many online brokers will charge you a fee to make trades, even if you are
purchasing for the first time.

You can then monitor the
stocks you’ve purchased until you are ready to sell. If you choose to sell,
you’ll have the option to keep the funds in your brokerage account [for future
purchases], or you can transfer the balance back into your primary funding
account.

How to Find the Best
Online Broker for You

Learning how to start investing, especially if you’re a total beginner, can be overwhelming. Taking your money and investing it into the stock market is something a majority of people haven’t done on their own. Complicating things further is the fact that you’ll be responsible for preventing mistakes, doing your own research, and avoiding trading-oriented fees.

Then again, there’s the
legitimate appeal of not having to pay a steep management fee for someone to
invest your money.

For investors looking to
buy and sell stocks, there are many online brokers to choose from. Depending on
what your specific needs are, a broker that’s a great fit for someone else
might not be the best choice for you.

The DollarSprout team has
spent dozens of hours compiling research on all of the top brokers. We’ve
sifted through each company’s pricing models, functionalities, online reviews,
and more, and came up with a list of what we feel are the best online
brokerages for stock trading.

Below are the highlights of
our findings, along with links to more in-depth reviews and additional
resources.

Comparing the Best Online
Brokers

Editorial Disclaimer:
Please note that, although we regularly update this page, you should research a
broker’s website to get the most up to date information available (including
pricing and promotional info). Some of the links from this page are from paid
partners of DollarSprout. Here’s how we make
money
.

 

$0

Cost per trade

$0

Account minimum

5/5

Your Rating

Summary:

Founded in 1971, Charles Schwab is a full service investment firm. They offer a suite of investment options as well as several different types of accounts. They are a trusted name in the brokerage industry with fees and pricing now competitive with Vanguard, Fidelity, and other low cost brokerage firms. Their customer service can’t be beat.

Pros:

  • Free to trade
  • Offers fractional investing and no hidden fees
  • You can borrow against your portfolio in some instances
  • Automates investing and rebalancing

Cons:

  • They do not offer tax loss harvesting
  • They only offer stocks and ETFs; no mutual funds

Best For:

Hands off investors who want
the benefit of a robo-advisor
with $0 per trade. Also, it’s best
for people who want to invest in
stocks and ETFs,not mutual
funds.

$0

Cost per trade

$100

Account minimum

4.5/5

Your Rating

Summary:

Ally Invest is the investing portion of Ally Bank, an online only bank with no brick and mortar locations. Ally acquired Trade King in 2017 and now offers a suite of investment options. This platform is great for active day traders, but it’s also easy for a beginner to get started. Ally is well regarded in the financial space, and they have a good reputation.

Pros:

Managed Accounts 

  • No advisory fees.
  • Automated investing.
  • $100 account minimum.
  • Interest-earning cash buffer.

 
Self-Directed Accounts

  •  Commission-free trading on U.S. listed stocks and ETFs.
  •  Transfer fee reimbursement.
  •  $0 account minimum.
  •  Up to $3,500 cash bonus.

Cons:

Managed Accounts 

  • No tax loss harvesting.
  • No human advisor.
  • No physical branch.
  • No existing promotions.

 
Self-Directed Accounts

  • No automatic rebalancing.
  • Mutual funds carry transaction fees.
  • No human advisor.
  • No physical branch.

Best For:

  • Managed accounts are best for beginners looking for low-fee, completely automated investing.
  • Self-directed accounts are best for active traders, forex traders, day traders, and options traders.

$0

Cost per trade

$100

Account minimum

4/5

Your Rating

Summary:

M1 Finance is a combination online brokerage and robo advisor. It’s very highly rated across the personal finance community for it’s interface, fund availability, and low costs. They offer investment portfolio templates you can choose from, and you can invest completely free.

Pros:

  • Free to trade
  • Offers fractional investing and no hidden fees
  • You can borrow against your portfolio in some instances
  • Automates investing and rebalancing

Cons:

  • They do not offer tax loss harvesting
  • They only offer stocks and ETFs; no mutual funds

Best For:

Hands off investors who want the benefit of a robo-advisor with $0 per trade. Also, it’s best for people who want to invest in stocks and ETFs, not mutual funds.

$0

Cost per trade

$0

Account minimum

5/5

Your Rating

Summary:

Fidelity is a well known, multinational financial services company that offers a variety of different types of financial products from credit cards to taxable investment accounts to retirement accounts. They are competitive with other low cost brokers like Charles Schwab and Vanguard.

Pros:

  • Did away with almost all account fees
  • First broker to have mutual funds with no expense ratios
  • Has significant research available to customers to learn from
  • Great customer service and online tools

Cons:

  • Fees are higher if you need the help of a broker to make a trade
  • Some tools/products are only for active traders or people with large amounts invested

Best For:

People who want to invest for retirement and active investors as well. Also good for people looking for low cost funds.

What should you look for
in an online broker?

Here are some questions you
should always ask before deciding on an online brokerage for investing:

What are the account
minimums?

Most brokers will allow you
to start small, but be sure to check the account minimums to ensure you
qualify.

Do the tools fit my needs?

If you need access to
high-end tools for research and active trading, a platform designed for
beginners won’t be right for you.

How much do trades cost?

This is especially
important for smaller accounts and for people who trade often. Fees will always
eat into your returns, so this is an important consideration.

How is the customer
service?

Helpful customer service
will never go out of style.

What About Online
Investment Apps?

If you want to go further
than just exploring the best online brokerages, and would like to explore an
area where younger investors are flocking to, check out our research on the best investment apps.

At a glance:

  • Acorns
    Best overall
  • Stash – Best for values-based
    investing
  • Betterment – Best investing app for long
    term investors
  • M1 Finance – Best commission free
    investing app
  • Ally Invest – Best app for do-it-yourself
    investors
  • Fundrise – Best real estate investment
    app
  • Stockpile – Best for buying fractional
    shares
  • Robinhood – Best for options and crypto trading

Each of these apps and
services are specialized and meet the needs of a different kind of trader.

To get started with one,
you’ll need a well-balanced investing strategy; one that considers your entire
financial outlook.

If you do not have a sound
fiscal budget in place, an area where many younger, inexperienced investors
struggle, you’ll end up pouring too much money into rigid investment accounts
(with penalized withdrawals), instead of servicing high interest debt or paying
essential bills.

The Best
App for Investing Depends on Your Goals

Some investors may find Betterment a great option because the app is a
better fit for long term investment strategies. Patience is the name of the
game here, and the robo-advisor is the best in the industry for long term
investors.

Other investors, such as those who are looking to invest and utilize
option and cryptocurrency trading, may prefer Robinhood. This commission-free,
high tech app has all the bells and whistles needed to get started in the
crypto and options markets.

Getting Started is the
Most Important Step

If this is your first time
investing, not to worry. With so many trading platforms available, including
ones that require no minimum balance and no trading fees, you can learn on your
own and use our resources to guide you every step of the way.

Investing with an online
broker, even one of the best online brokers, doesn’t guarantee anything — the
stock market is not an exact science. Instead, the stock market sways and
shifts every single day and is deeply impacted by a myriad of factors that
range from everything between politics, news, weather, and the actions of other
traders.

The more time your
investments must mature, the more money you will end up having in retirement. That
means that the best time to start is now, even if you start small. The rise of
mobile has made tracking and growing your money easier than ever.

With any one of the
investment apps listed above, it’s easier than ever to get started with
investing today.

How DollarSprout Rates
Online Brokers

The Editorial Team at
DollarSprout looks at multiple factors when determining a 1-5 star rating for
online brokers. Here are the most important factors that weigh into our
ratings:

  • Cost
    per trade
  • Availability
    of commission free ETFs
  • Access
    to research
  • Fees, and the likelihood that a
    user will incur them
  • Account
    balance requirements
  • Customer
    service
  • Mobile
    app reviews

In addition to assigning a
1-5 star rating for each broker we research, we also aim to find the best
broker for certain types of investors, such as:

  • Best
    broker for beginner investors
  • Best
    broker for active traders
  • Best broker for index fund
    investors
  • Etc.
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Best Investing Apps for Beginner Investors

Editorial Disclaimer: Please note that, although we regularly update this page, you should research a bank’s website to get the most up to date information available (including information on annual percentage yields). Some of the links on this page may be from our partners. Here’s how we make money.

In these digital times,
investing in stock can be done right at your fingertips with a click of a
button. Investing apps are becoming the new norm for investors of all levels.
While you used to have to pick up the phone to place an investment or make a
trade, you can now download an app and start putting your money to work
instantly.

With dozens of stock
trading apps currently on the market, it can be tricky to separate the good
from the bad.

To help you find the right
one for you, we put together this list of the best investment apps for
beginners in 2019.

Our Editorial Team has
researched all of the best investing apps available and evaluated each one in
several different areas in order to narrow this list down to the few that we
think will help you the most.

Comparing the Best
Investing Apps

Editorial Disclaimer:
Please note that, although we regularly update this page, you should research
an app’s website to get the most up to date information available (including
pricing and promotional info). Some of the links from this page are from paid
partners of DollarSprout.
Here’s how we make money.

At a glance:

  • Acorns – Best overall 
  • Stash– Best for values-based investing
  • Betterment – Best investing app for long term investors
  • M1 Finance – Best commission free investing app

  • Ally – Best app for do-it-yourself
    investors
  • Fundrise – Best real
    estate investment app
  • Stockpile – Best for
    buying fractional shares
  • Robinhood – Best for options and crypto
    trading

Everyone’s financial
situation is different. We all have different goals, amounts to invest,
tolerance for risk and knowledge about investing.

Whether you have lots of
extra money to invest, or just want to get started with a small amount of
money, you should be able to find something useful for you on this list.

Note: Before you start using an investing
app, you should already have a monthly household budget and a plan in place to pay off your
debt, if you have any. 

 

 

 

 

 

 

 

 

Best Overall App for Beginners:
Acorns

$0

Account minimum

$1-$3/mo

Monthly Fees

4/5

Your Rating


Open Account

How Acorns stands out:

The Acorns app is very easy to use, which is perfect for new investors who
are learning the ropes. Users’ everyday purchases are rounded
up and the change is invested, which makes investing a daily habit.

  • Open an account in under 5 minutes, with no minimum investment required.
  • Answer a few questions about your age, risk tolerance, etc.
  • There are several ways to add to your account, including depositing your “spare change” (the app will round up your debit card purchases to the nearest dollar and move the extra few cents into your Acorns account).
  • You can also make lump-sum deposits and use Acorns’ “Found Money” program, which is essentially a cash-back program that rewards you with bonuses when you shop with one of their Found Money partners.

Best Values-Based Investing App: Stash

$5

Account Minimum

$1-9/mo

Monthly Fees

5/5

Your Rating

Stash

Open Account

How Stash stands out:

Stash is a simple investing app that makes it easy to start putting
money to work, even if you’re only looking to invest a small
amount of money. Stash allows you to invest money online
by letting you choose from 150+ stocks or investment “themes”;
pick from the best options for your goals, interests, and beliefs.
Each theme includes a group of companies to invest in rather than just one.

  • You can open your account with as little as $5.
  • Stash allows you to invest money online by letting you choose from 150+ stocks or investment “themes”; pick from the best options for your goals, interests, and beliefs.
  • Each theme includes a group of companies to invest in rather than just one.
  • Each week you can make a small automatic deposit into your Stash account to invest (even just $5 a week).

Best App for Long Term Investors: Betterment

$0

Account Minimum

$0

Annual Fee

5/5

Your Rating



Open Account

How Betterment stands out:

Betterment is one of the most well popular robo-advisors and investment apps in the industry. The sign up process is very easy, they offer tax loss harvesting, simple asset management, good retirement calculators, low management fees, and the option to use a human advisor.

Betterment is more than just an investment app — it’s designed to be a one stop shop for all of your investing needs. It’s focused primarily on long term investing, and the platform caters to a “set it and forget it” investing style (which is perfect for beginners). 

  • Answer a few questions about your age, risk tolerance, etc. You’ll be asked about your goals and what you are investing for.
  • Based on your answers, Betterment will put together a portfolio that suits your needs. As time goes on, Betterment handles portfolio rebalancing so your asset allocation stays in line with your goals.
  • If you have investment accounts outside of Betterment, you can still use the app to track all of your assets in one place.

Best Commission-Free
Investing App: M1 Finance

$0

Cost per trade

$100

Account minimum

4/5

Your Rating



Open Account

Summary:

M1 Finance is a combination online brokerage and robo advisor. It’s very highly rated across the personal finance community for it’s interface, fund availability, and low costs. They offer investment portfolio templates you can choose from, and you can invest completely free.

Pros:

  • Free to trade
  • Offers fractional investing and no hidden fees
  • You can borrow against your portfolio in some instances
  • Automates investing and rebalancing

Cons:

  • They do not offer tax loss harvesting
  • They only offer stocks and ETFs; no mutual funds

Best App for
Do-It-Yourself Investors: Ally Invest

$0

Cost per trade

$100

Account minimum

4.5/5

Your Rating



Open Account

Summary:

Ally Invest is the investing portion of Ally Bank, an online only bank with no brick and mortar locations. Ally acquired Trade King in 2017 and now offers a suite of investment options. This platform is great for active day traders, but it’s also easy for a beginner to get started. Ally is well regarded in the financial space, and they have a good reputation.

Pros:

Managed Accounts 

  • No advisory fees.
  • Automated investing.
  • $100 account minimum.
  • Interest-earning cash buffer.

Self-Directed Accounts

  •  Commission-free trading on U.S. listed stocks and ETFs.
  •  Transfer fee reimbursement.
  •  $0 account minimum.
  •  Up to $3,500 cash bonus.

Cons:

Managed Accounts 

  • No tax loss harvesting.
  • No human advisor.
  • No physical branch.
  • No existing promotions.

Self-Directed Accounts

  • No automatic rebalancing.
  • Mutual funds carry transaction fees.
  • No human advisor.
  • No physical branch.

Best Real Estate Investing
App: Fundrise

$500

Account minimum

0.85%

Management Fee

4/5

Your Rating



Open Account

How Fundrise stands out:

Fundrise is a platform designed exclusively for crowdsourced real estate investing. It offers diversification, access to experts to ask questions, and several options for balanced investing, long term growth investing or supplemental income investing.

Cons:

  • Limited liquidity
  • Methodology hasn’t been tested in a strong market downturn yet

Account Types:

  • Taxable accounts
  • IRAs (account min. is $1,000)
  • Low, 0.15% annual investment advisory fee, which may be waived under certain circumstances

Best App for Buying
Fractional Shares: Stockpile

$5

Account minimum

$0.99

Cost per trade

5/5

Your Rating



Open Account

How Stockpile stands out:

Stockpile allows investors to buy fractional shares of stocks and ETFs, which makes investing in high priced securities more accessible. Instead of paying $1,000+ for a single share of Amazon stock, you can buy just 0.05 shares for a more affordable price. This app is great for beginning investors or anyone interested in teaching kids about the stock market.

Cons:

  • Only offers individual stocks and ETFs
  • No pre-made portfolios

Account Types:

  • Taxable investment accounts
  • Custodial accounts

Best App for Option &
Crypto Trading: Robinhood

$0

Account minimum

$0

Cost per trade

3/5

Your Rating



Open Account

How Robinhood stands out:

Commission free trades and high tech app makes it Robinhood an easy to use investing app. You can trade ETFs, stocks, options, and cryptocurrency without incurring extra charges, which makes it a great fit for investors with small account balances. By design, the app has very few bells and whistles.

Cons:

  • Access to research costs $5 per month
  • Mobile app only; no desktop version
  • Does not always sync with basic expense tracking software like Mint, Personal Capital, etc.

Account Types:

  • Taxable investment accounts

Time is on your side

If you haven’t started
investing yet, don’t fret — it’s not entirely your fault.

It’s not like we crawl out
of the womb knowing what a 401(k) is or how you should start saving for
retirement
.

We aren’t born knowing the
ins and outs of trading stocks, and basic personal finance still isn’t being
taught in schools.

But to make this work, you
need to start tucking away some of your money into the stock market as soon as
possible. You need to start now while time is still on your side.

With any one of the
investment apps listed above, it’s easier than ever to get started with
investing. Even if you are a complete beginner!

The more time your
investments have to grow, the more money you will end up having in retirement.
That means that you need to start doing this now, even if you start small. The
rise of mobile has made tracking and growing your money easier than ever.

This list has, in our
opinion, the best investing apps that will allow you to realistically and
responsibly invest money online. Whether you’re looking for more hands-on
investing, or more of a “set it and forget it” approach, there is an investing
app out there for you.

Which App is Right For
You?

  • Acorns – Best overall 
  • Stash– Best for values-based investing
  • Betterment – Best
    investing app for long term investors
  • M1 Finance – Best commission free
    investing app
  • Ally
    – Best app for
    do-it-yourself investors
  • Fundrise – Best real estate investment
    app
  • Stockpile – Best for buying fractional
    shares
  • Robinhood – Best for options and crypto
    trading

How DollarSprout Rates
Investing Apps

The Editorial Team at
DollarSprout looks at multiple factors when determining a 1-5 star rating for
investing apps. Here are the most important factors that weigh into our
ratings:

  • Ease
    of use
  • Mobile
    app reviews
  • Cost
    per trade
  • Availability
    of commission free ETFs
  • Access
    to research
  • Compatibility
    with other financial apps
  • Fees, and the likelihood that a
    user will incur them
  • Account
    balance requirements
  • Customer
    service

In addition to assigning a
1-5 star rating for each broker we research, we also aim to find the best
broker for certain types of investors, such as:

  • Best
    app for total beginners
  • Best
    app for active traders
  • Best
    app for cryptocurrency investors
  • Etc.
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10 Best Personal Finance Books to Read in 2020

The best investing books are a great way to introduce yourself to new strategies and expert opinions.

They can also help you gain insight and increase your chance of earning a good return without paying someone else.

Investing requires skill, strategy, and intuition. Time can help alleviate short-term losses, but there’s no substitute for experience. Pick up a book and educate yourself instead of settling for the idea that you’re “just not good” at investing.

Even if you’re a seasoned investor, there’s always more to learn. The best books on personal investing are full of experience and insights from financial experts.

Table of Contents

10 Best Investment Books to Add to Your Reading List

With so many titles available, narrowing your reading selection is no easy task. This collection ranges from stock market books for beginners to books about overall investing strategies.

1. The Little Book of Common Sense Investing

This classic guide has useful advice on how to get more from your funds, and it’s a top stock market book for beginners.

Advanced investors may recognize author John Bogle as the founder and former CEO of Vanguard. Bogle’s investment company is one of the largest in the world and has more than $5.2 trillion in assets under management.

Investment gurus are quick to share complicated strategies, yet Bogle says the best solution is often the simplest one. He believes the average investor can add millions to their portfolio just by minimizing fees as much as possible.

The Little Book of Common Sense Investing is one of the best investing books to consider if you’re looking for real-world advice in an easy-to-understand format. This most recent edition includes two extra chapters and updated data that can help you maintain a long-term perspective in the market.

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Related: Best Investing Apps for Beginner Investors

2. The Intelligent Investor

This book contains a practical approach to investing which makes it one of the best investment books for investors at all levels. Author Benjamin Graham expands on the concept of “value investing” that helps you avoid costly investment mistakes, which is a much better strategy than timing the market.

Besides value investing, The Intelligent Investor covers topics like portfolio policy, asset allocation, diversification, and dividends. The content is so valuable that Warren Buffett calls it “the best book on investing ever written.”

First published in 1949, it’s had several updates to make it relevant for the current market. This book is a must-read for every investor no matter their level of expertise.

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3. One Up on Wall Street

Author Peter Lynch shares his investing secrets and teaches you how to research companies before buying their stock in his book, One Up on Wall Street. Lynch is a well-known mutual fund manager on Wall Street. His long-standing record of outperforming the stock market makes him somewhat of a legend.

His philosophy is that rising stock prices aren’t enough to base your decision on because numbers don’t tell the whole truth. You need to look beyond the balance sheet to understand why a company is a good business and why you should invest in it.

If you’re new to the market, One Up on Wall Street is one of the best books to learn stock investing. It encourages you to stick with industries you’re familiar with, listen to your intuition and ignore the so-called experts.

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4. The Essays of Warren Buffett

No list of the best investing books would be complete without the notable Warren Buffett. Author Lawrence A. Cunningham lets you in on Buffett’s expertise as an investor and business leader in his book, “The Essays of Warren Buffett: Lessons for Corporate America.”

This book is an excellent choice, even if you’re a new investor and not a high-level executive. The insight in the book goes beyond the corporate landscape to help you understand the relationship between corporations and their stockholders.

Cunningham expands on Buffett’s many years of investing wisdom. The Essays of Warren Buffett is about how to make money in the stock market using real-world advice.

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Related: 10 Best Business Books of All Time

5. Common Sense on Mutual Funds

Another outstanding book by the founder and former CEO of Vanguard, Common Sense on Mutual Funds by John Bogle is essential reading for every investor. The content provides an in-depth take on investing strategies and how to handle fluctuating share prices.

Bogle encourages you to focus on long-term investing and ignore short-term changes in the market. This advice isn’t rocket science, but the book guides you through understanding the role of speculators in short-term changes and how they can increase your profit margin.

From there, Bogle takes you through more advanced principles such as asset allocation, equity styles, global investing, and fund selection.

Common Sense on Mutual Funds is a breath of fresh air in the investment industry. If you enjoyed The Little Book of Common Sense Investing, this book should be next on your list.

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6. The Millionaire Next Door

What separates the typical middle-class individual from millionaires? That’s the question authors Thomas J. Stanley and William D. Danko set out to answer in The Millionaire Next Door.

You’ll find this classic book on nearly every list of the best personal finance books because the teachings expand beyond basic money management. Stanley and Danko present an inside look at the thoughts and behaviors of wealthy individuals.

They share observations from a study of more than 1,000 self-made millionaires over a 20-year time and break the data down to provide actionable advice to help you become a millionaire as well.

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7. The Four Pillars of Investing

You need a solid understanding of investing fundamentals to make money in the stock market. It’s this underlying principle that author William Bernstein discusses in what many readers agree is one of the best investing books of all time, The Four Pillars of Investing: Lessons for Building a Winning Portfolio.

Whether you’re a beginning or expert investor, the detailed analysis of investments in this book can help you build your portfolio, even though Bernstein is more conservative in his approach.

Reading about the history of investing and the psychology behind it can help you make more lucrative choices.

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8. You Can Be a Stock Market Genius

Although the title sounds like a too-good-to-be-true sales pitch, it’s a good choice to get unique ideas to grow your nest egg.

Author Joel Greenblatt, founder of Gotham Capital, might be better known for his New York Times bestseller, The Little Book That Beats the Market. But the real-world examples in You Can Be a Stock Market Genius: Uncover the Secret Hiding Places of Stock Market Profits are insightful and useful for those struggling with investing.

This book is perfect for average investors who want to understand complex situations. You could become a stock market genius by applying Greenblatt’s advice to your strategies.

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9. Beating the Street

In Beating the Street, author Peter Lynch includes his own strategies for investing to help you build a profitable portfolio.

A beginner investor will appreciate the straightforward explanations in this book. If you’re more experienced, you’ll still get value from the lessons Lynch includes with his personal history.

In Beating the Street, Lynch outlines a practical approach to take your investing to the next level.

You can’t time the market or predict when a company’s stock will rise and fall. But knowing when to buy or sell stock is a valuable skill as an investor.

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10. Security Analysis

After the Wall Street Crash and the Great Depression, investors learned a lot of painful — and expensive — lessons. The unprecedented losses at the time led Benjamin Graham and David Dodd to publish one of the best books on personal investing, Security Analysis.

The authors introduced a new concept at the time called “value investing.” It’s a strategy still used today to determine if an investment has the potential to deliver a reasonable return.

Security Analysis goes beyond stock investing to explain how to analyze bonds and other types of investments. You’ll want to keep this book on hand for reference and as a refresher on investing fundamentals.

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Related: Best Online Brokers for Buying and Selling Stocks

Start Your Investing Journey with The Best Books on Personal Investing

Many people get overwhelmed with the idea of investing, and some can’t afford to hire a financial advisor to tell them what to do. Reading these books can help you educate yourself before you see a professional. The information in these books is valuable and can help you if you’re not sure where to start.

Even if you’re an expert investor, it’s still good to read the latest literature. If you always stay educated, you’ll be ahead of the curve.

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Synchrony Bank Review: Zero Fees and Top-Tier Interest Rates

In this Synchrony Bank review, we discuss the online bank’s account types and whether it is the right bank for your needs.

Synchrony Bank is an online bank that offers a variety of savings products to its customers. Unlike typical banks, Synchrony does not offer a checking account. Therefore, it’s best suited for people who are looking to separate their savings from their spending money or who want to earn the most interest possible on their extra cash.

Table of Contents

  • Synchrony Bank Review at a Glance
  • Synchrony High-Yield Savings Account
  • Synchrony CDs
  • Synchrony Money Market Accounts
  • Other Things to Know About Synchrony Bank
    • Customer Service
    • Phone Number
    • Fees
    • App
    • Loyalty Perks
    • Interest Rates
    • Other Services
  • Synchrony Bank Review Summary

Synchrony Bank Review at a Glance

Pros

  • Online bank that you can access from anywhere
  • High interest rates
  • Loyalty perks

Cons

  • No checking or spending account options
  • More difficult to deposit cash
  • No Synchrony Bank app

The Bottom Line: If you’re looking for a place to put extra cash so that it can earn savings and grow, Synchrony Bank is a good choice. If you want a full-service online bank that can handle your savings, checking, lending, and investing needs, then you’ll need to work with another bank in addition to or instead of Synchrony.

Synchrony High-Yield Savings Account

The savings account is one of the most basic types of bank account. You deposit money to the account and the bank keeps it safe for you. Each month, the bank pays you interest on the balance of your account. In this way, your savings will slowly grow over time.

This makes savings accounts great both for keeping extra money safe and for saving towards specific goals, such as going on vacation or making a down payment on a house.

Synchrony Bank’s High Yield Savings Account is a standard online savings account. There aren’t many notable features to talk about.

Like most online savings accounts, it offers a rate of interest that is far higher than the rates offered by traditional brick-and-mortar banks. If your goal is to grow your savings, then this is a great account to use.

One downside of online savings accounts is that they can be more difficult to access than savings accounts offered by brick-and-mortar banks. Since there are no physical locations, it can be difficult to make a cash withdrawal or a deposit. However, Synchrony Bank breaks that mold, offering a number of ways to access your account.

You can make online transfers or deposit checks using your phone. The bank also offers the ability to make cash deposits, which is unusual for online banks. If you visit a Plus or ACCEL network ATM that accepts deposits, you can easily deposit cash to your Synchrony Bank High Yield Savings Account.

Withdrawals are simple. Log into your account from your phone or computer to transfer money to your checking account. You can also visit an ATM and use your debit card to withdraw cash, though a fee may apply.

Keep in mind that federal regulations limit the number of withdrawals that you can make in a statement period. If you make more than six withdrawals in one period, you may have to pay a fee. ATM withdrawals are excluded from this limit, so you won’t be punished for regular ATM visits.

Synchrony CDs

Certificates of Deposit (CDs) are designed to let you save your money for a set period of time. Unlike savings accounts, which have interest rates that can change at any time, CDs let you lock in your interest rate for the full term of the CD.

This can be useful if interest rates fall after you deposit money to a CD, as your money will continue to earn the same amount. However, if rates rise, you’ll lose out as you’ll be stuck with the lower rate.

You can’t simply withdraw money from a CD and open a new one to get the higher rate. Withdrawing money from a CD before it matures will incur a fee, which could wipe out any additional interest you would earn.

Synchrony Bank CDs keep pace with other online banks, offering rates that are far higher than those of traditional banks. They also offer a wide variety of CD terms, ranging from 3 to 60 months.

The early withdrawal penalties for Synchrony Bank CDs are as follows.

CD Term Early Withdrawal Penalty
12 months or less 90 days’ interest
13 to 47 months 180 days’ interest
48 months or more 365 days’ interest

The exception to this penalty is withdrawing interest. You can withdraw the interest you earn at any time.

CDs are best for people who want to save toward a goal that will happen at a specific time. They’re also great if you want to lock in a guaranteed interest rate and return.

If you’re looking to save for retirement, Synchrony Bank also offers IRA CDs.

Synchrony Money Market Accounts

Synchrony Bank’s Money Market Account combines the benefits of savings and checking. With this account, you can earn one of the highest interest rates available while maintaining ease of access and flexibility with your money.

However, at Synchrony Bank, there aren’t many reasons that you would want to open a money market account.

Synchrony makes it easy to access the money you have in your savings account, so the only additional benefit of opening a money market account is the ability to write checks. Otherwise, you can access your account in all the same ways as you can your checking account.

In exchange for the ability to write checks, you give up a significant amount of interest, earning less on a Synchrony Bank Money Market Account than a Synchrony Bank Savings Account. You’ll almost certainly be better off with the savings account.

Other Things to Know About Synchrony Bank

Here are a few more details to consider when deciding if a Synchrony Bank account is right for you.

See Also: DollarSprout’s Best Online Savings Accounts

Customer Service

One common concern that people have about online banks is their customer service. When you can’t visit a branch and speak to someone face to face, you want to feel confident that you can get help when you need it.

Synchrony offers multiple ways to contact the bank when you need help. Online chat services make it easy to get support right from your computer. It also offers customer service via phone seven days a week, so you can call for help regardless of your schedule.

Phone Number

Should you require immediate assistance with your accounts, you can reach Synchrony Bank’s customer service department by calling this phone number 1-866-226-5638.

Fees

One of the biggest benefits of working with an online bank is the fact that online banks don’t charge many fees. They cost far less to run than traditional banks, and they’re able to pass those savings on to customers by offering higher rates and charging fewer fees.

Synchrony Bank does not charge any account maintenance or similar fees. In fact, the only fees you’re likely to pay are ATM withdrawal fees. To help offset those costs, Synchrony Bank offers up to $5 in ATM fee refunds per statement.

App

One thing to know about Synchrony Bank is that, unlike other banks, it does not offer a smartphone app that you can use to manage your account. Instead, you’ll need to log in to your account through your computer or phone’s web browser to do all of your account management.

Loyalty Perks

Synchrony Bank provides loyalty rewards to account holders based on both their account balance and how long they’ve had an account with Synchrony Bank. You can advance through five loyalty tiers.

Loyalty Tier Requirements
Basic Less than $10,000 AND tenure less than 1 year
Silver $10,000 – $49,999.99 AND tenure of at least 1 year
Gold $50,000 – $99,999.99 AND tenure of at least 2 years
Platinum $100,000 – $249,999.99 OR tenure of at least 3 years
Diamond $250,000 or more AND tenure of at least 5 years

Some of the perks that you can earn include:

  • A dedicated customer support phone line
  • Access to special webinars
  • Free wire transfers
  • Unlimited ATM fee reimbursements

Interest Rates

Here are the interest rates that you can earn on Synchrony Bank’s accounts.

Account Interest Rate (APY)
High Yield Savings Account 2.20%
Money Market Account 1.20%
3-month CD .75%
6-month CD 1.00%
9-month CD 1.25%
12-month CD 2.75%
18-month CD 2.75%
24-month CD 2.90%
36-month CD 2.90%
48-month CD 3.00%
60-month CD 3.10%

Other Services

Though Synchrony Bank doesn’t offer other banking services, such as checking accounts, Synchrony is known for another type of financial product. It provides many popular store credit cards, including the Amazon store card, Walmart Personal Mastercard, and the JCPenney card.

While there are no benefits to holding Synchrony bank accounts and credit cards at the same time, it is good to know that you’re working with the same company if you have both.

Synchrony Bank Review Summary

Synchrony Bank’s savings account and CDs are both great deals that pay high interest rates with few or no fees. If you’re looking for a good bank to use just for your savings, Synchrony Bank is a great choice. If you want a full-service online bank, you’ll have to look elsewhere.

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Discover Bank Review: Online Savings, Checking, CDs, and MMA

In this Discover Bank Review, we’re going to cover the pros and cons of Discover’s four main banking products:

  • Online Savings Account
  • Cash Back Checking
  • Certificates of Deposit (CDs)
  • Money Market Account (MMA)

I don’t ask for much in a bank.

Basically, I want my money to be safe, and I’d prefer not to have to pay exorbitant monthly fees to access my cash.

It’d also be helpful if I could get some cash back or earn more interest than a mere $0.02 per statement (or less).

You’d think that what I’m asking for would be commonplace, but the big banks’ towering skyscrapers and 7 and 8 figure executive salaries don’t pay themselves.

As a result, they squeeze their account holders for every last dime, and they make it seem like they’re doing us a favor by holding onto our cash for us.

I realized not long ago that if I wanted fair treatment, I had to ditch the brick and mortar banking establishments and look elsewhere.

Online banks are the way to go, but I kissed a few frogs before I opened an account with Discover. And now, I won’t bank anywhere else.

Despite what is about to be an overall glowing review, Discover Bank is not without its flaws. So, I’ll be honest, and in this review, I’ll tell you where I think they’re doing an excellent job for their customers, and where they could use some improvement.

Table of Contents

  • Is Discover Safe?
    • Is Discover Bank Federally Insured?
    • What About Hackers?
    • Discover Bank BBB Rating
  • Online Discover Bank Savings Account
    • APY
    • No Maintenance Fees or Minimum Balance Requirements
    • Discover Bank Savings Account Bonus
    • Discover Bank Locations and ATMs
    • Fee Forgiveness
  • Checking Account
    • Cash Back on Debit Card Purchases
    • No Monthly Fees or Minimum Deposits
    • No Fees for Bank Checks
    • No Fees for Returned Deposits
    • Ease of Getting Started
    • Excellent Discover Bank App
  • Certificates of Deposit (CDs)
    • Discover Bank CD Rates
    • FDIC-Insured
    • No Risk
  • Money Market Account (MMA)
    • APY
  • Discover Bank Review Conclusion
    • Pros of Discover Bank
    • Discover Bank Cons

Is Discover Safe?

What I appreciate most about Discover is that I know my money is safe with them. In the early 2000s, a lot of suspicious-looking banks opened their virtual doors, and the Internet was a Wild, Wild West of scammers and Nigerian princes.

Since Discover is an established institution with a history of serving credit card customers since 1985, there’s a sense of security when you store your money with them.

If you are wondering what bank owns Discover, it’s Discover Financial Services, Inc. This is the same for many card companies. For example, the “real” AmEx cards are backed by American Express Centurion Bank.

Is Discover Bank Federally Insured?

While they are relative newcomers to the banking industry, you can rest assured that your funds are FDIC-insured up to the maximum allowed by law, which at the time of this publication is $250,000.

But, before you get too excited about the security of your money, FDIC insurance (Federal Deposit Insurance Corporation) only kicks in if the bank goes under.

It’s most relevant during extreme financial crises like The Great Depression and the 2008 Financial Crisis. In 2008, 25 banks failed. However, it doesn’t apply to theft or hackers.

What About Hackers?

Knowing that Discover Bank isn’t likely to fail, the biggest concern in my mind is what happens if there’s a security breach and hackers steal my money. This isn’t just me being paranoid, either.

Hacking and digital theft are on the rise, and many major corporations have had their customers’ information compromised. Fortunately, Discover Bank has private insurance if unscrupulous computer thieves steal your information and cash.

In this Discover Bank review, I’ll discuss four of their main banking products, and share what I think about each one.

Discover Bank BBB Rating

Discover Bank holds an A+ rating with the Better Business Bureau (BBB) with 58 years of continuous business served.

Online Discover Bank Savings Account

Discover’s savings account was named one of our best savings accounts for 2019, and it’s easy to see why. Discover stays ahead of other companies with their lack of fees and high APY (annual percentage yield). It’s important to have a good understanding of how APY works if you don’t already.

APY

Discover has one of the highest APYs in the online banking world, which is a huge perk. Brick and mortar banks typically give about 0.01% to 0.05% APY, but with the low overhead of an online bank, those savings get passed onto the consumer.

Interest rates fluctuate regularly, so it’s best to check Discover’s website for the most up to date figure.

No Maintenance Fees or Minimum Balance Requirements

To me, not having to pay for the privilege of storing my money is even more important than the interest rate.

We’ve all had a financial emergency at one time or another. Whether it’s a significant car repair, an unexpected medical expense, a tuition hike, or an irresistible pair of Jimmy Choo’s, a temporary dip in the bank account is normal.

What’s not normal is being punished for it. As the saying goes, life isn’t fair, but I still think maintenance fees and requirements for a minimum balance stink.

This is another reason that I love Discover Bank. No monthly maintenance fee or minimum deposit makes it easy for anyone to open and maintain an account.

Discover Bank Savings Account Bonus

If you have a large amount of money you want to deposit in a Discover Bank savings account, their savings account bonus puts them ahead of most other options.

Although Discover does not have a minimum you must deposit for opening a savings account, you do have a minimum you must deposit in order to get the Discover savings account bonus. This offer varies, so check out Discover’s online savings account for current bonus opportunities.

Discover Bank Locations and ATMs

One of the significant tradeoffs of Internet banking is not having access to an ATM since there are no physical branches.

Discover technically has one branch in Delaware, and that happens to be the only place you can deposit cash into your account. So, unless you happen to live near that office, you won’t be able to put cash directly into your account. Because there are no Discover Bank locations outside of the one in Delaware, you’ll be limited to check deposits or wire transfers only. If you run a cash-based business, this may be a deal breaker for you.

However, you still have access to 415,000 ATMs. Watch out for fees, though. The average transaction fee is $2.77, and only 60,000 of the ATMs in Discover’s network waive the fee. There’s also a limit of six withdrawals per month, but that’s universal across all online savings accounts, not just Discover’s. If you exceed the withdrawal frequency, you’ll have to pay for each incident over the limit.

There’s another way to get cash back without paying for it. If you open a checking account and get a debit card, you’ll get cash back with no transaction fees on some purchases.

Fee Forgiveness

As of June 16th, 2019, Discover’s online savings accounts, checking accounts, and money market accounts have all converted to fee-free structures.

This means no fees for stop-orders on checks, no overdraft fees, and no minimum balance fees.

With such fees typically ranging from $15 to $30, Discover has taken the industry lead in eliminating pesky fees that otherwise plague consumer balances.

To sum up: If you’re actively trying to save money, then Discover Bank is the clear winner for a high-interest online savings account. You get some of the highest interest rates around, and you never have to worry about paying fees to store your cash.

Checking Account

Checking accounts with consumer-friendly policies are even harder to come by than savings accounts. This is because banks know that checking accounts are likely to have lower balances and more activity than a savings account.

You’re paying bills from this account and potentially using a debit card. All that activity can be expensive to track.

In my opinion, the checking account department is where Discover Bank really shines. Here’s why:

Cash Back on Debit Card Purchases

I think many of us like to take advantage of ways to make money fast.

With cash back bonuses, you’re not going to get rich. However, only a handful of banks offer rewards on debit card purchases, so this makes Discover stand out.

No Monthly Fees or Minimum Deposits

Again, if it’s the end of the month and my balance is low until my next paycheck gets deposited, I don’t have to pay a “maintenance” fee. There’s no denying that having a checking account is a convenience, so it’s refreshing not to have to pay for the privilege.

No Fees for Bank Checks

Also known as cashier’s checks.

At my last greedy bank, I had to pay $8. It’s not something you need every day, but it seems insane to charge that much.

No Fees for Returned Deposits

If you’ve ever cashed a check somewhere and had it bounce, you might have been charged $15 to $35 for something that you have no control over and isn’t your fault.

If you’re on a tight budget, that could also lead to an overdraft, which is another fee. That’s why I appreciate Discover because there’s no fee for someone else’s check bouncing.

Ease of Getting Started

Have you ever opened a checking account in person? It’s a long process that feels like a mix of an invasive doctor’s appointment and a trip to the DMV.

There’s a lot of paperwork, questions to answer and tons of waiting. And whenever I’m sitting in a bank, I begin second guessing every single one of my financial decisions.

When you open a bank account online, there’s no judgment about how much you plan to fund your account with. It’s three easy (and painless) steps.

Excellent Discover Bank App

Other online banking apps have been a nightmare to use. One app crashed every time I tried to deposit a check. And, more often than not, it would tell me that it couldn’t read the sum I deposited, even though it was typed out and not scrawled in illegible ink.

The Discover Banking app has a 4.8 rating and a whopping 1.66 million reviews. To say it works like it’s supposed to is an understatement.

It is expected that the Discover Mobile App will remain excellent and up-to-date since there is only one Discover Bank location. Most transactions are meant to be completed online or on your smartphone and therefore the company relies on a top quality banking app.

To sum up: Unless you’re in a situation with your checking account physically handcuffed to other assets that make closing it down impossible, I highly recommend using Discover for your checking and debit card needs.

Certificates of Deposit (CDs)

If you know you won’t need to touch your money for a while, a CD is a safe way to collect a higher interest rate than a bank account.

Discover Bank CD Rates

At the time of this publication, only a couple of banks came close to paying what a Discover Bank CD rate paid. Some factors that play into what kind of CD rate you can get include:

  • The length of time before your CD rate matures
  • The current interest rate environment
  • How much your bank anticipates they can make with the money you deposited

FDIC-Insured

I love CDs because when I have extra cash, I can put it to work with zero risks because the funds are FDIC-insured.

Let’s say I have a summer European vacation planned next year, and I’d like to have an extra $1,000 on hand to take along. I can use Discover’s online calculator to figure out exactly how much money I’d have to set aside, and how long it would take to reach my goal.

No Risk

What’s most useful about Discover’s CDs is that I don’t even have to plan far in advance to benefit.

For example, you already know that a bank account can pay over 1.5% interest. But keeping that same amount secure in a CD for just 12 months, I can earn a higher rate. It’s like having free money, and there’s virtually no risk.

To sum up: If you have even a little bit of extra cash that you know you don’t need immediately, a CD is a no-brainer. If only I had discovered these financial instruments sooner… Like when I was five. Like the checking account, you can also open a Discover CD online in three easy steps.

Money Market Account (MMA)

Our Discover Bank review would not be complete without talking about Discover MMAs. A money market account is nearly identical to a bank account with a few exceptions:

  1. First, the best money market accounts generally have high interest rates.
  2. Second, it generally requires a higher minimum deposit to open.

With Discover, the minimum opening amount is $2,500. There’s no fee for dropping below that point, but you’ll need at least that much cash on hand to get started.

APY

Here’s where things get a bit odd, though. There are two listed APYs for money market accounts (one for balances under $100,000 and one for balances over $100,000), but both rates are less than the regular online savings account.

I found there’s no discernible difference other than the money market account being more restrictive and paying less interest, which means there may be better options out there if you are specifically looking for a money market account.

Discover Bank Review Conclusion

Overall, my Discover Bank review is positive. They offer competitively high rates, no fees on most products, a fantastic app, and easy access to your funds.

Discover Bank customer service is top-notch and they are backed by the FDIC. There are some cons (like anything in life), but these certainly do not outweigh the benefits.

Pros of Discover Bank

  • The rates are competitive. You’ll get more interest and more cash back than just about anywhere else.
  • No fee savings, checking and money market products. No maintenance fees, low or no minimum balances, and no fees for routine services make Discover a top choice for anyone’s banking needs.
  • Easy access to your money. With nearly half a million ATMs, you’ll be able to get cash almost anywhere.
  • An out-of-this-world app. Thankfully, apps, in general, have gotten better over the years, but several in the banking industry still need improvements. The Discover Mobile app is indisputably first class.
  • Discover Bank customer service. The company employs a U.S.-based customer service team. If you’ve tried discussing anything complicated or had to repeat a string of 16 digits over and over again because of bad phone connections, delays, or a poorly trained staff, you know how frustrating that can be.

Discover Bank Cons

  • There is only one Discover bank location. If you do need to do any in-person banking, you may decide to go with another institution.
  • No overdraft credit line. Consumers can’t borrow from other accounts to cover temporary shortfalls outside of non-saving, checking and money market accounts. 

Disclosure:

ATM transactions, the purchase of money orders or other cash equivalents, cash over portions of point-of-sale transactions, Peer-to-Peer (P2P) payments (such as Apple Pay Cash), and loan payments or account funding made with your debit card are not eligible for cash back rewards. In addition, purchases made using third-party payment accounts (services such as Venmo® and PayPal™, who also provide P2P payments) may not be eligible for cash back rewards. Apple, the Apple logo and Apple Pay are trademarks of Apple Inc., registered in the U.S. and other countries.  

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CIT Bank Savings Builder Account Review – Pros & Cons

In this review of the CIT Bank Savings Builder Account, we discuss the pros and cons of this savings account and how it can fit into your savings strategy.

Everybody should have a savings account, but not everyone does. A savings account serves as a convenient place to store extra cash which you might need on short notice. That makes them ideal for storing an emergency fund. They’re also a great way to set money aside for a goal such as going on vacation or buying a car.

Once you have a savings account, you need to find a way to get money into the account and to help the account’s balance grow. There are two ways to grow your savings account’s balance: earning interest and making an additional deposit.

The CIT Bank Savings Builder Account aims to help you grow your savings both ways.

Table of Contents

  • CIT Bank Savings Builder Account Review at a Glance
  • CIT Bank Savings Builder Account
    • Fees
    • Interest Rates
    • How the Top APY Works
    • Taking Advantage of the Top APY
  • Other Things to Know About CIT Bank
    • Customer Service
    • Other CIT Bank Services
  • CIT Bank Savings Builder Account FAQs
    • Is CIT Bank Safe?
    • Where is CIT Bank Located?
    • How Does the Savings Builder Account Differ from a Normal Savings Account?
  • CIT Bank Savings Builder Review Summary

CIT Bank Savings Builder Account Review at a Glance

Pros

  • No monthly fees
  • Competitive interest rates
  • $100 minimum deposit

Cons

  • Must maintain a $25,000 balance or make $100 monthly deposits to earn the best rate
  • Online-only bank – no physical locations

The Bottom Line:The CIT Bank Savings Builder Account is a great savings account for people who can meet its $25,000 balance requirement or who are able to make regular contributions to the account. It pays one of the best rates on the market and charges no fees. If you cannot meet the requirements, another online savings account will get you a reasonable rate of interest.

CIT Bank Savings Builder Account

The CIT Bank Savings Builder Account is a standard bank account offered by CIT Bank. The Savings Builder title represents how the account is designed to help people grow their savings over time.

Because it is a savings account, you should consider all of the things you usually look at when comparing savings accounts.

Fees

One of the biggest draws of most online banks is their fee structure.

Banks can be very expensive businesses to run, and one of their biggest expenses is running physical branches.

Some of the costs included in running a single branch of a bank are rent, utilities, furniture, security, maintenance, and staffing.

By avoiding branches and moving operations online, online banks can avoid a lot of those costs, or minimize them by centralizing their operations. That allows online banks to charge fewer or lower fees than their physical competitors.

CIT Bank follows that pattern, charging very few fees on the Savings Builder Account. There is no fee to open the account or keep it open. It’s also almost always free to make transfers into or out of the account. Federal regulations require that outgoing transfers after the sixth in a statement incur a fee.

The only thing that you need to keep in mind when opening the account is that you must provide a $100 opening deposit. This is a large minimum deposit requirement when compared to other online banks. However, the benefits can be worth it.

See Also: The Pros and Cons of Online Banking in Today’s Tech-Filled World

Interest Rates

The other reason most people turn to an online bank is their interest rates. Physical banks tend to offer poor interest rates, which limit your earning potential. Online banks like CIT Bank offer more significant interest rates that help your savings to grow over time.

There are two interest rates available for the CIT Bank Savings Builder Account.

The base APY is lower than the rates offered by most online banks. However, the top APY is higher than the rate offered by most online banks. Therefore, you should do your best to ensure that you qualify for the top APY tier.

How the Top APY Works

So, how does the top APY work?

In order to earn the top APY on your Savings Builder Account, you must meet one of two requirements during each month’s Evaluation Day. If you do, you’ll earn the top APY during the next Evaluation Period.

The requirements are:

  • Have a balance of $25,000 in the account

OR

  • Make at least one deposit of $100 or more

Meeting either of those requirements will qualify your account for the top APY.

The Evaluation Day is the fourth business day before the end of the month, and the Evaluation Period runs from the day after an Evaluation Day through 4 PM on the next month’s Evaluation Day.

Put simply, all you have to do is have $25,000 in your account or make a deposit of $100 (in addition to the minimum $100 to open the account) before the fourth business day before the end of the month you opened the account.

From the time you open an account through the first Evaluation Day, you’ll automatically earn the top APY. If you continue to meet at least one of these two requirements, then you’ll keep earning the highest APY available.

Taking Advantage of the Top APY

If you open a CIT Bank Savings Builder Account, your priority should be to take advantage of the top APY as much as possible. The first step is ensuring that you qualify for the promotional rate every month.

If you have a lot of money to commit to the account, maintaining a $25,000 balance is the easiest way to do it. Just leave the money in the account and you’ll earn the top APY automatically.

If you don’t have that much money to commit, set up automatic savings transfers from your checking account. One $100 deposit is enough to qualify for the top APY.

This can be a great benefit for people who don’t have the $25,000 to keep in the account because it makes you think about saving. By forcing you to save every month, CIT Bank is helping you grow your account’s balance even faster than it would just by earning interest.

In the worst case, you can make the $100 deposit and then withdraw some money back to your checking account. You keep your access to the cash while still qualifying for the elevated rate of interest.

Other Things to Know About CIT Bank

If you’re considering opening a CIT Bank Savings Builder Account, here are some other things that you should know about the CIT Bank Savings Builder Account.

Customer Service

One of the most common concerns people have about online banks is the ability to get help when they need it.

CIT Bank has a team of great customer service representatives and is open seven days a week to assist customers. You can send secure messages to the customer support team at any time using your online account on your phone or computer.

If you’d rather speak to someone, you can call any day of the week during the following times.

  • Weekdays: 8 AM – 9 PM
  • Saturday: 9 AM – 5 PM
  • Sunday: 11 AM – 4 PM

All times Eastern

Other CIT Bank Services

The bank offers other savings services on top of its Savings Builder Account, including certificates of deposit and a money market account. You can also get home lending services from CIT Bank.

There’s no downside if you open the CIT Bank Savings Builder Account while keeping your checking and other accounts at another bank.

See Also: What is a Money Market Account and When Should You Use One?

CIT Bank Savings Builder Account FAQs

Here are some of the most common questions people have about CIT Bank and the Savings Builder Account.

Is CIT Bank Safe?

Many people worry about the security of online banks like CIT Bank. In truth, they are just as safe as physical banks.

Your account information is protected by state of the art encryption and online security software. The bank is also protected by the Federal Deposit Insurance Corporation, which insures balances up to $250,000. If CIT Bank closes and you can’t withdraw your money, the FDIC will reimburse you for the loss.

Where is CIT Bank Located?

CIT Bank is headquartered in Pasadena, California, but has no physical branches. It’s purely an online bank, so anyone in the United States can open an account.

How Does the Savings Builder Account Differ from a Normal Savings Account?

The Savings Builder Account is a savings account that offers the opportunity to earn a higher APY by meeting certain requirements. It functions just like a regular savings account would outside of earning a higher APY when meeting the special requirements.

CIT Bank Savings Builder Review Summary

The CIT Bank Savings Builder Account is a unique and useful savings account that can work well for most people. It offers one of the best interest rates on the market, so long as you’re able to maintain a $25,000 balance or make one $100 or more deposit each month.

By rewarding people who actively add to their savings, the CIT Bank Savings Builder Account helps people build their savings account’s balance while building good saving habits, giving it a strong leg up on the competition.

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Chime Bank Review: Checking, Savings, and Additional Features

In this Chime Bank review, we cover the services and accounts offered by the bank to help you decide whether it’s the right fit for you.

Chime Bank focuses on providing mobile banking services. As such, the bank operates no physical branches.

Because Chime is a mobile-only bank, it tends to focus on millennial customers looking for low fees and accounts that make digital payments easy.

If you like the idea of a fully digital bank account that you can access from your phone, then Chime might be the bank for you.

Table of Contents

Chime Bank Review at a Glance

Pros

  • No monthly fee
  • No overdraft fee
  • Automatic savings tools
  • Large ATM network
  • Early access to your paycheck

Cons

  • Low interest rates for an online bank
  • Difficult to deposit cash

The Bottom Line: Chime Bank is a mobile-only bank that will appeal to customers who want an easy way to do their banking from their phone. However, a more fully-featured online bank may offer higher interest rates and a similarly inexpensive fee structure.

Chime Checking Account

Chime styles its checking account as the Chime Spending Account. It works just like a normal checking account does, making it easy to access your cash when you need to by swiping your debit card or visiting an ATM.

Where the account differentiates itself is in its features. Chime positions itself as a low-cost bank, and its Spending account shows it. There are no foreign transaction fees, no monthly fees, and no overdraft fees. You can use the account to its fullest without having to pay for the privilege.

There are two fees that you should keep an eye out for. One is the out-of-network ATM fee. Chime Bank has a large ATM network thanks to partnerships with MoneyPass and the VisaPlus Alliance. You can use any of these ATMs free of charge.

If you use an ATM on another network, however, you’ll incur a $2.50 fee. This fee is in addition to the fee charged by the ATM’s owner.

You’ll also have to pay if you want to deposit cash to your account. If you have extra cash on hand, the only way to deposit it to your Chime account is to visit a local Green Dot cash deposit location. These businesses often charge fees for their services. Electronic check deposits and other transfers are free of charge.

The account also doesn’t offer a typical checkbook. This doesn’t mean that you cannot write checks. Chime will write and mail checks on your behalf up to $5,000 per check and $10,000 per month. There is no charge for this service.

Finally, the Chime Spending Account gives you early access to your paycheck. If you sign up for direct deposit, you can get access to your paycheck as early as two days before your normal payday because Chime will process your paycheck more quickly than other banks.

Chime Savings Account

Chime’s savings account is a standard savings account. It lets you store extra money that you may not need in the short term, offering interest to help your balance grow.

Unlike most online savings accounts, Chime’s savings account does not offer a high rate of interest. Most online banks handily beat traditional banks when it comes to interest rates due to their lower operating costs. Chime instead focuses its efforts on helping people put more of their own money into their savings accounts.

Chime offers three ways to make saving easier.

Automatic Savings

Chime’s automatic savings plan is the easiest to understand. Choose an amount you’d like to save every week or month and the day on which you’d like to save it. Chime will automatically move the money from your spending account to your savings account on the designated day.

If you decide that you want to save $100 on the last day of every month, Chime will make those transfers for you automatically. After a year, you’ll have $1,200 in your savings account.

Save When You Spend

The second way Chime makes saving easier is with their save when you spend feature.

If you enable the feature, money will be moved to your savings account every time you use your Chime debit card. The cost of every purchase you make will be rounded up to the next dollar and the difference transferred from your checking to your savings account. The more often you use your debit card, the more you’ll save.

These types of systems can be very helpful for people who shop regularly as it helps them save without thinking about it. However, they can also be a danger as they can help people justify their spending. Be careful that the idea of saving money time every time you swipe your debit card doesn’t make it easier for you to justify unnecessary purchases.

Save When You Get Paid

On top of giving you early access to your paycheck, signing up for direct deposit lets you take advantage of Chime’s automatic saving system based on when you receive your paycheck.

If you sign up for this service, Chime will automatically move 10% of your paycheck into your savings account on payday. If you receive $800 every payday, you’ll get $720 in your spending account and $80 in your savings account.

Overall, Chime’s automatic savings plans make it easier for people to save, but the low rate offered by its savings account is a disappointment.

See Also: How to Set Savings Goals and Crush Them Every Single Time

Other Things to Know About Chime Bank

Here are some other things you should know about Chime Bank.

Wide Eligibility

One advantage of Chime Bank is that its accounts are open to almost anyone. Many banks use tools like ChexSystems to check people’s financial history. If you’ve closed an account with a negative balance in the past, many banks won’t let you open a new bank account.

Chime doesn’t use many of these tools, making it a good bank for people who might not be able to open an account at a traditional bank. It calls this its “second Chance Banking” service.

Chime Bank Locations

Since it’s an online bank, Chime bank doesn’t have any physical branch locations. They do, however, boast of more than 38,000 fee-free ATMs. It’s important that the ATMs you visit are either MoneyPass or VisaPlus Alliance in order to benefit from free transactions.

If you prefer visiting your local bank to do banking transactions, then Chime Bank might not be your best option. But if online banking sounds like something you can get onboard with, then you can definitely save more money (and potentially earn more in interest) with Chime.

Chime Bank Customer Service

With an online bank, one of the things you should focus on is its customer service history. There are no branches to visit when you need help, so you’ll be relying on the bank’s customer support tools to get help if you have trouble with your account.

Chime Bank customer service aims to be easy to work with, offering support seven days a week. You can call Chime Monday through Saturday between 7 AM and 7 PM central time. On Sundays, the support line is open from 9 AM to 5 PM central time.

If you’d rather not speak to someone on the phone, you can browse the Chime Bank FAQ page to get answers to common questions or send an email to the customer support team.

Fees

Chime Bank prides itself on being a low-cost bank. It charges very few fees, even for services that many other banks typically charge for. Some common fees that don’t exist at Chime Bank include:

  • Account maintenance fees
  • Overdraft fees
  • Foreign transaction fees
  • Card replacement fees

The one fee that the bank does charge is the out-of-network ATM fee, which is $2.50.

The Chime Bank App

Chime is a mobile-only bank, so it’s understandable to worry about whether you’ll be able to do everything you need to through the bank’s app.

The upside of Chime Bank’s mobile focus is that it is able to dedicate its resources to providing a great mobile experience. You can download Chime’s mobile app for both iOS and Android phones. Both apps are highly rated by users on the App Store and Google Play store.

The app is intuitive, making it easy to view your account balances, make transfers, and interact with your account settings. If you have any trouble using the app, Chime’s support team is a phone call away.

Interest Rates

The biggest downside of Chime Bank is its low interest rates. Most online banks focus on providing great interest rates, but Chime pays a rate that is no better than a brick-and-mortar bank.

Account Interest Rate (APY)
Spending Account 0%
Savings Account .01%

If you’re looking to earn a return on your savings, you should consider another bank.

See Also: CIT Bank Review: The Premier High-Yield Savings Account

Other Services

Chime Bank does not offer any other banking services beyond its checking and savings account. Instead, it focuses on making its checking and savings offerings the best they can be.

If you want to work with a bank that can offer a full suite of services, including lending and investing services, you should consider another bank.

See Also: The Pros and Cons of Online Banking: Here’s What You Should Consider

Chime Bank Review Summary

Chime’s great fee structure and automatic savings tools make it a compelling choice of bank for many people, but other online banks offer similar tools with a wider array of services and better interest rates.

If you’re looking to get started with online banking or need help learning how to save, Chime is a solid choice. If you don’t have trouble saving money regularly, you will be better off with another bank that offers more interest.

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