A man walks into a local bank and opens an account. This may sound like the beginning of a joke, but I have a hard time laughing about losing money. The bank offered me an introductory rate that was well over 4 percent, but when it expired in a few months, I knew it was going to be ugly. The definition of ugly became .88 percent — just terrible! When I noticed how passively everything changed to that terrible rate, it made me wonder how many people have a lot of money tied up in accounts earning little to no interest. It turns out that lots of people face this dilemma. I spoke to “The Money Coach,” Lynnette Khalfani-Cox, who made some suggestions:
1) SHOP AROUND
Use Web sites such as bankrate.com and find the best rates out there. Play with the option of getting higher introductory rates, but remember to check back before they drop.
2) LOOK AT CREDIT UNIONS OR YOUR NEIGHBORHOOD BANK
Smaller facilities might be hungrier for your business and because of that offer better rates. Research credit unions at: cuna.org.
3) NEGOTIATE WITH YOUR BANK
Tell them you plan to move your money and see how they react.
4) TURBO CHARGE YOUR SAVINGS WITH AN IDA
Individual Development Accounts are set up to help lower-income families save, often adding $2 or even $3 for every dollar you add. I know this sounds too good to be true (200 to 300 percent interest), but IDAs are funded by corporate and government sponsors. The only catch is: the IDA will have to hold your money for a period of time (perhaps 12 months) before you can get to it. Entry into an IDA is based upon your income and is reserved for people (families) who are living just above the poverty line (i.e., for a single person you must earn approximately $20,800 or less to qualify). You can get more information about IDAs at idanetwork.org.
5) CONSIDER LONGER TERM CDs
This is for people not as worried about having immediate access to their cash. If you get terms of three years or more, there are rates available above 4 percent (yeah — you beat inflation). For research you can also check bankrate.com.
As for my account, I went back to the bank and did some negotiating. After only a few seconds, the bank guy increased my rate to 2 percent. Then the bank extended it another .35 percent. Clearly I can do better with another bank, and will be exploring some other options.
