banking

What Are the Different Types of Bank Accounts I Can Choose From?

Scarsdale tax preparer Paul Herman of Herman & Company CPA’s has all the answers to your personal finance questions!  Bank Account Choices from Scarsdale Accountant

What are the different types of bank accounts I can choose from?

Checking Accounts

Checking accounts provide you with quick, convenient access to your funds. You are able to make deposits as often as you wish, and most banks provide you with an ATM card to access your funds, or to charge debits at stores. Of course, you can also use the conventional method of writing checks.

Some checking accounts pay interest. These are called negotiable order of withdrawal (NOW) accounts. The more commonly used type, a demand deposit account, does not pay interest.

There are several fees that are associated with checking accounts, other than the check printing fees. These will vary depending on the bank you choose. Some will charge a monthly maintenance fee regardless of your balance, others will charge a monthly fee if your balance drops below a certain point. Further, some institutions charge you based on the transactions you make, such as each ATM withdrawal, or each check you write.

Money Market Deposit Accounts (MMDA)

An MMDA is basically an account that accumulates interest. You can also write checks from it. The rate of interest is usually higher than that of checking or savings accounts. However, they require a higher minimum balance in order to earn that interest. The higher your balance becomes, the higher your interest rate may rise.

However, it is less convenient to withdraw money from an MMDA than it is from a checking account. You are limited to six transfers from the account a month, and only three of these can be through writing a check. Also, there are usually transaction fees associated with these accounts.

Savings accounts

You may make withdrawals from savings accounts, but there is less flexibility than with a checking account. Like an MMDA, the number of withdrawals or transfers may be limited.

There are a few different types of savings accounts. The two most common are passbook and statement. Passbook accounts involve a record book that tracks all deposits and withdrawals and must be presented upon making these transactions. With a statement savings account, you are mailed a statement showing all withdrawals and deposits.

Minimum balance fees may also be charged on savings accounts.

Credit Union Accounts

These accounts are similar to those of banks, but with a different title. In a credit union, you would have a share draft account (a checking account), a share account (savings account), or a share certificate account (certificate of deposit account).

The great thing about credit unions is that they usually charge less for banking services than banks do. If you have access to one, use it!

Certificates of Deposit (CD)

CDs are time deposits. They offer a guaranteed rate of interest for a specified term which can be as short as a few days or as long as several years.

When you pick the term you generally can’t withdraw your money until the term expires. In some cases the bank will let you withdraw the interest you have earned on the CD. Because CDs are for a set amount of time, the rate of return is usually higher – and the longer the term, the higher the annual percentage yield.

A penalty can be issued if you withdraw your funds before the maturity of your term. Sometimes the penalty can be quite high, eating into your interest earned as well as your principal investment.

Your bank will notify you before your CD matures, but often CDs renew automatically. You should keep track of your maturity date if you would like to take out your funds before the CD rolls over into a new term.

Scarsdale accountant Paul Herman is here for all your financial needs. Please contact us for all inquiries and to receive your free personal finance consultation!

Herman and Company CPA’s proudly serves Scarsdale NY, Bedford NY, Mount Kisco NY, Purchase NY, Harrison NY and beyond.

Photo Credit: Tax Credits cc

ATM Transaction FAQ’s

Scarsdale tax preparer Paul Herman of Herman & Company CPA’s has all the answers to your personal finance questions! Banking ATM FAQs from Scarsdale Tax Preparer

 

As tax professionals, our Westchester CPA firm sees firsthand many shared financial questions and concerns. In our “FAQ Series,” we will discuss these common topics and share our insight.

How do ATM transactions work? 

There are a variety of electronic transactions one can execute:

  • ATMs allow you to bank electronically, get cash, make deposits, pay bills, or transfer funds between accounts. These machines are used with a debit or ATM card and a personal identification number.
  • Point of Sale Transactions. Some ATM cards and debit cards can be used in stores to charge merchandise. Money is electronically drawn from your account and paid to the store.
  • Pre-authorized transfers. This is allowing for the automatic deposit of fund or withdrawal of funds to or from your account. For example, one can authorize the direct deposit of wages, social security, or dividends directly to their account. You can also pre-authorize your bank to make automatic transfers for bill paying.
  • Telephone transfers. You can transfer funds from one of your accounts to the other, or order bill payments over the phone.
  • Most ATMs provide you with a receipt for the transaction, as do point of sale purchases. These receipts are the records of your electronic transactions and should be kept. Additionally, your periodic bank statement will show all the electronic transfers performed. This monthly statement is your proof of payment to another party and is your record for tax and other purposes. Any inconsistencies can be taken up with your bank.

▼ What should I do if I find an error on an EFT or ATM transaction?

Call your bank as soon as possible, or within 60 days of the error. They may ask you to submit your account information and the alleged error in writing. Generally they have 10 business days to investigate the error, and if they fail to come up with an answer your funds should be reimbursed. If the funds in questions were withdrawn from a point-of-service debit or a foreign electronic transfer, the bank may be allowed more time to investigate the error. In the meantime, however, you should have full access to the funds in question.

Your bank should notify you immediately of their findings. If you were correct about the error, they must immediately finalize the re-credit to your account. If there was no error, they must present in writing the findings of their investigation, and notify you of any funds they have deducted after you had been re-credited.

▼ What if my ATM card is lost or stolen?

It’s important to note the difference in how you will be reimbursed for credit cards vs. ATM or debit cards. For a credit card your loss is limited to $50.

However, for an ATM or debit card the loss is limited to $50 if you notify your institution within 2 business days after the card is lost or stolen.

Keep in mind that the loss could be up to $500 if you do not tell your bank within two business days of the loss or theft.

If you do not report unauthorized transfers within 60 days of your statement being mailed to you, you run the risk of having unlimited loss on transfers made after the 60 days.

▼ Can I use my ATM card abroad?

Yes, there are plenty of ATMs all around the world, but it is wise to check beforehand. With Visa and MasterCard, you can pinpoint ATM locations worldwide on their website.

Often it is a good idea to travel with an ATM card because you can withdraw foreign currencies at a better exchange rate, and also if you lose your card and report it promptly you will not experiences the type of losses you would with cash. Be wary of fees your bank will charge you for each withdrawal – it may be wise to withdraw larger sums to minimize the frequency of transactions.

▼ How do I know when a pre-authorized credit has been deposited into my account?

Your institution may notify your employer, or you. Many times your bank may only notify the recipient if a scheduled credit does not come through. Often, you can check your statement online or call your bank to check on your credits.

▼ How do I cancel a pre-authorized payment?

You can call or write your bank, or often stop the payment by going to your bank’s website. Do this at least 3 days before the scheduled payment. It is a good idea to request a written confirmation of giving a telephone notice to stop the transfer.

Scarsdale accountant Paul Herman is here for all your financial needs. Please contact us for all inquiries and to receive your free personal finance consultation!

Herman and Company CPA’s proudly serves Scarsdale NY, White Plains NY, Mount Kisco NY, Pound Ridge NY, North Salem NY, Mamaroneck NY and beyond.

Photo Credit: redspotted via Photopin cc

Banking FAQ’s

Scarsdale tax preparer Paul Herman of Herman & Company CPA’s has all the answers to your personal finance questions!

Banking Tips from Scarsdale AccountantAs tax professionals, our Westchester CPA firm sees firsthand many shared financial questions and concerns, so we thought we’d address these FAQ’s beginning with banking:

▼ What can I do to raise money for my small business?

Although the process is complex and frustrating, raising capital is the most basic of all business activities. When looking for financing, there are various sources to consider. For most new businesses, the main source of capital comes from savings and other forms of personal resources. There are better options available than credit cards that are often used for financing, even a small business loan.

When beginning, entrepreneurs usually look to private sources like friends and family. Generally, the money is loaned at a low interest rate or interest free, which is very beneficial at the beginning.

The most common source of funding, not including personal resources, are credit unions and banks who will provide a loan if it is possible to show that your offer is worthwhile. Other sources are venture capital firms that aid businesses in exchange for partial or equity ownership.

▼ For business financing, what kinds of loans exist?

You must know the exact amount of money that you need, what your purpose is and how you will repay it in order to be successful in getting a loan. You must convince the lender in a written proposal that you are a good credit risk.

There are two basic kinds of loans, although terms vary by lender:

Short-term and long-term, maturity periods of up to one year are generally short-term, which include accounts receivable loans, working capital loans and lines of credit.

Maturities greater than a year and less than seven years is a typical long-term loan. Equipment and real estate loans can have maturity up to 25 years. Major business expenses such as purchasing real estate and facilities, durable equipment, construction, vehicles, furniture and fixtures, etc. are a few purposes for long-term loans.

▼ When considering a loan request, what do banks look for?

The bank official who reviews the loan request is focused on repayment. Most loan officers request a copy of your business credit report to determine your ability to repay.

The lending officer will consider the following issues while using the information you provided and the credit report:

  • Have you invested at least 25% or 50% of savings or personal equity into the business for the loan you are requesting? (Keep in mind that 100% of your business will not be financed by an investor.)
  • Do your work history, your credit report and letters of recommendation show a healthy record of credit worthiness? This is a key factor.
  • Do you have the training and experience necessary to operate a successful business?
  • Do your loan proposal and business plan document your knowledge of and dedication to the success of the business?
  • Is the cash flow of the business sufficient to make the monthly payments on the requested loan?

▼ What do I need to include in a good loan proposal?

The following main points should be contained in a good loan proposal:

General Information

  • Reason for the loan: the exact purpose of the loan and why it is necessary.
  • Amount needed: the specific amount needed to reach your goal.
  • Business name and address, names of officers and their social security numbers.

Description of Business

  • Describe the type of business you have, its age, current business assets, and number of employees.
  • Structure of ownership: describe the legal structure of the company.

Management Profile

  • Prepare a short statement that is focused on each principal in your business; give details about education, background, accomplishments and skills.

Market Information

  • State clearly the products of your company as well as its markets. Name the competition and explain how you plan to compete in the market. Describe what the business will do to satisfy the needs of its customers.

Financial Information

  • Submit your own personal financial statements as well as those of the principal business owners.
  • Financial statements: the income statements and balance sheets for the past three years. If you have a new business, provide the projected balance sheet and income statement.
  • Specify the collateral that you are able and willing to give as security for the loan.

Scarsdale accountant Paul Herman is here for all your financial needs. Please contact us for all inquiries and to receive your free personal finance consultation!

Herman and Company CPA’s proudly serves Scarsdale NY, Larchmont NY, Purchase NY, Mamaroneck NY, Bedford NY, Pound Ridge NY, Chappaqua NY and beyond.

Photo Credit: Philippe Put via Photopin cc

Any U.S. tax advice contained in the body of this website is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.