Broke Millennial by Erin Lowry: Thoughts on Chapter 5

Chapter 5: Picking the Right Financial Products

Right at the start, Lowry already makes two good points that stood out to me. One being banking where my parents did (they actually set it up), and the second being you can earn 0.1% interest on savings instead of 0.01% interest. She actually says you should get at least 0.75%!

• I've thought about joining another bank many times, but I never really looked into it. There were just so many factors to consider. For me, I wanted another bank to open another credit card to expand my credit line. That's it. Only motivation, which isn't a really strong one. In the end, I didn't know if it truly made a difference on which bank you went to. Maybe there is. I'll have to keep reading. 
• I've heard that Ally bank is good for savings interest. However, I always hesitated because it's an online only bank. But Lowry makes a good point, we are "oddly fixated on needing a physical bank to store our money." So true. I've been inside a bank two or three times. First time was to open an account, and the second time to reset my PIN. All other times, I used the drive-up ATM. So honestly, there's no need for a physical bank location, at least for me. 

Understanding what FDIC Insurance Means

Lowry says that your bank should always be FDIC insured. Agreed. It's stupid not to. Otherwise, you'll lose your money if that bank ever collapses. Fortunately, I think all the big, popular ones are FDIC insured, so I'm not worried about that. 

• I'll have to check for the online banks though. Some are popular, so I'm sure they are insured. However, it doesn't hurt to double check. I definitely will just because I'm still a little uncertain about them even though I've heard so many great things about a select few. 

Apparently FDIC insures $250,000 per bank. It's not by account, which I thought it was. I hope that one day that will be a problem. It'll be nice to have that much money just sitting there. Also, that amount doesn't cover investments. For me, that would be annuities, which are "invested lump sums of cash that are meant to provide a monthly stream of income in the future, usually in retirement." 

• Uh oh. I want my retirement protected!! But that's good to know. I guess it makes sense. My annuities would be the 401k and IRA (I think). Those are through Fidelity, which isn't a bank. They're like an investment hub/broker? No idea, but not a bank.

Checking Accounts: Time to Ditch Those Banking Fees

• Fortunately, I haven't paid any banking fees so far. I would like to keep it that way. I know there are some monthly fees that are waived because of my status with the bank, but it would be nice if they never existed. I have had to pay ATM fees on occasion. That was back in college when I really need money that moment. For some reason, I didn't think about going to my bank's ATM. I just went to a general ATM, and that did have a couple dollar withdrawal fee. Total scam in my opinion. 

Lowry says to avoid overdraft-protection fee. It's where the bank charges you to take money from your savings account and put it in your checking account.

• I've heard about this. I don't think I pay it. Fortunately, I was never in a situation where I overdrew my checking account. I do think that is terrible fee. It's all my money in the end no matter which account it's in. Oh well. I'll made sure to keep that in mind for the future. 

Savings Accounts: You Deserve More Than 0.01% APY

Not sure what my APY (annual percentage yield) is. I will need to check, but I'm pretty sure it's around 0.01%. Again, this is why I hear a lot about why online banks are so great. They usually have higher APY. 

Lowry recommends looking up "highest-interest savings accounts" and start searching from there.

• It's so simple. I feel dumb for not doing that. I think I'll add that for my Get My Life in Shape Update next week. Research banks with high APY. Gold star for joining!
• Also, I need to check what my minimum required balance is for my original bank account. I don't want to close it because my credit card is linked there. Maybe that would affect my credit score? Anyways, I want to keep it for now, so I can't move all my money over to the new bank (darn minimum balence requirement!)

Find Rewards That Work for You. But Don't Spend for the Rewards

Lowry "exclusively used credit cards to build [her] credit score"! 

• Yay! I do too! Glad someone else is doing so. I wasn't sure if that was a good move or not, but I don't know how else because I don't have loans. So happy to hear this is a valid way to build my credit score! 

Also, apparently a "flat-rate card is the easier to use and often a solid beginner card." There are other types of cards like rotating categories and sign-on bonus. 

• I've heard of all three. I would prefer the flat-rate (have this one)
•  and the rotating categories. I feel like a sign-on bonus is kinda like a trick. If the rewards after the bonus are still good, then I think it'll be ok to have. In general, that's not my thing though. 

According to Lowry, a basic rewards card "earning a minimum of 1.5% is a strong foundation." Then, you can add other cards with higher rewards for certain categories.

• Well, I only get 1%.........looks like I need to do some looking around. I don't know how I feel about getting cards for certain categories. That's certainly a valid structure, but it feels strange to me. I personally would like a different type of card. For example, one card gives cash back; the other card gives travel points. Something like that. Also a card without a foreign transaction fee. That would be nice. I want to buy from other countries without paying a fee!