Many people overlook a valuable service offered by banks: the overdraft protection line of credit. This type of service is most valuable to a self-employed individual whose business is seasonal. If there are times during the year when you have cash flow problems, the overdraft protection line of credit can save you headaches-and at a lower interest rate than other forms of borrowing. Don't neglect to inquire about this service if it would suit your situation.
Truth In Savings
The Truth in Savings Act, a federal law, requires depository institutions to disclose to you the important terms of their consumer deposit accounts. Institutions must tell you:
- The annual percentage yield and interest rate;
- Cost information, such as fees that may be charged; and
- Information about other features such as any minimum balance amount required to earn interest or to avoid fees.
To help you shop for the best accounts, an institution must give you information about any consumer deposit account the institution offers, if you ask for it. You will also get disclosures before you actually open an account.
In addition, the Truth in Savings Act generally requires that interest and fee information be provided on any periodic statements sent to you. And if you have a roll-over CD that is longer than one month, the law requires also that you get a renewal notice before the CD matures.
Federal Deposit Insurance
Only deposit accounts at federally insured depository institutions are protected by federal deposit insurance. Generally, the government protects the money you have on deposit to a limit of $100,000. If an account is in trust or co-owned, there may be an effect on the amount of insurance coverage you have.
Planning Aid: See Bank Financial Condition Ratings. This site provides ratings on the financial conditions of banks so that you can evaluate your institution.
You can also check out the financial condition of your bank if you are concerned about protection for balances over $100,000.
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