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Georgia United Credit Union Review: Checking, Savings, CD, Money Market and IRA Accounts

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Year Established1958
Total Assets$1.3B
LEARN MORE on Georgia United Credit Union’s secure websiteNCUA Insured

Georgia United Credit Union is one of the biggest in its home state, with over 150,000 members and 19 branches. Founded in 1958, the credit union is headquartered in Duluth, Ga.

Membership qualifications are location specific — you need to reside or work in certain Georgia counties, study or work at select Georgia schools, or be a member of the Catholic community in its home territory. You’ll also need to open a share savings account plus pay a one-time $5 membership fee to join. The credit union is part of the CO-OP shared branching network. Members also get access to over 100,000 surcharge-free ATMs through the Allpoint, Plus and CU24 network.

If you qualify and want to see if Georgia United Credit Union’s deposit accounts are worth it, read on to find out our take on them.

Georgia United Credit Union’s Most Popular Accounts

APY

Account Type

Account Name

Compare Rates from Similar Accounts

0.10%

Savings

Georgia United Credit Union Share Savings Account

2.00%

American Express National Bank High Yield Savings Account

on American Express National Bank’s secure website

Member FDIC

1.00%

CD Rates

Georgia United Credit Union 1 Year CD

2.65%

Goldman Sachs Bank USA High-yield 12 Month CD

on Goldman Sachs Bank USA’s secure website

Member FDIC

1.50%

CD Rates

Georgia United Credit Union 3 Year CD

2.85%

Synchrony Bank 36 Month CD

on Synchrony Bank’s secure website

Member FDIC

2.25%

CD Rates

Georgia United Credit Union 5 Year CD

3.10%

Goldman Sachs Bank USA High-yield 5 Year CD

on Goldman Sachs Bank USA’s secure website

Member FDIC

Georgia United Credit Union’s checking account options

Unified Checking

Earn a competitive APY and up to $10 in ATM refunds if you meet Georgia United Credit Union’s requirements.
APYMinimum Balance to Earn APY
1.00%$0.01 (if you meet qualifications)
0.10%$15,000
*A lower APY will be applied if you don’t meet the qualifications for the rates above.
  • Minimum opening deposit: $0
  • Monthly account maintenance fee: $0
  • ATM fee: $0.75 for out-of-network ATMs plus any surcharge fees determined by the ATM’s owner
  • ATM fee refund: Up to $10 each month (if you meet qualifications)
  • Overdraft fee: $30

This account offers a pretty decent rate if you’re able to meet Georgia Credit Union’s requirements. To qualify for their enhanced perks — a higher APY and up to $10 in ATM refunds a month — you’ll need to have at least $500 in direct deposits, enroll in e-statements and make at least 15 debit or credit card transactions each month.

Even if you don’t meet the above requirements, you’ll still get features like a Visa debit card, free identity theft services, online and mobile banking. You can also link to your savings account for overdraft protection, which will set you back $4 for each transfer.

How to get the Unified Checking account

You can stop by any one of Georgia United Credit Union’s branches or fill out an online application form to open an account. If doing so online, you’ll need to agree to open a Prime Share account with a $5 opening deposit and a nonrefundable one-time $5 membership fee. The form will also ask you for personal details such as your name, address, Social Security number and state-issued ID. Then, you can fund both accounts.

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on Georgia United Credit Union’s secure website

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Restart Checking

This account is meant for people who don’t qualify for the Unified Checking account.
  • Minimum opening deposit: $25
  • Monthly account maintenance fee: $12
  • ATM fee: $0.75 for out-of-network ATMs plus any surcharge fees determined by the ATM’s owner
  • ATM fee refund: None
  • Overdraft fee: $30

This account is best for those who have had issues in the past with deposit accounts or don’t otherwise qualify for a regular checking account. However, the monthly maintenance fee is pretty steep, and you are required to make direct deposits to keep the account open. As for how much interest you can earn, you’ll need to contact Georgia United Credit Union as the rates aren’t advertised on their website.

Unfortunately, you can’t waive the monthly maintenance fee but you can switch to a Unified Checking account — which doesn’t have any monthly fees — if you can prove to Georgia United Credit Union you can maintain your account in good standing. This means you’ll need to make regular direct deposits and ensure your account doesn’t go into overdraft. There isn’t a time frame as to when you can switch accounts. When we contacted the credit union, customer service representatives recommend making a request after three months of account opening.

How to get the Restart Checking account

In order to open the Restart Checking account, you’ll need to apply at a Georgia United Credit Union branch. Bring along information such as your Social Security number, state-issued ID and direct deposit details. If you’re not already a member, you’ll need to open a Prime Share account with a minimum of $5 and pay the one-time $5 membership fee.

LEARN MORE Secured

on Georgia United Credit Union’s secure website

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Money Masters Teen Club

Children between 12 and 17 years old can open this account to start learning how to manage their money.
  • Minimum opening deposit: $5
  • Monthly account maintenance fee: $0
  • ATM fee: $0.75 for out-of-network ATMs plus any surcharge fees determined by the ATM’s owner
  • ATM fee refund: None
  • Overdraft fee: $30

This account is best for parents or guardians who want to help their child learn how to manage money and have them be rewarded for their efforts in school. Upon parental approval, your child can get a Visa debit card and access their account online or via the mobile app. The rates aren’t advertised on Georgia United Credit Union’s website, so you’ll need to contact customer service to find out what they are.

Your child can earn money through a few incentives. If he earns an “A” in certain subjects, Georgia United Credit Union will deposit $2 into their account for each grade, up to $10 per report card or $20 per academic year. Your child can also receive up to $10 — a total of $20 per year — for 10 hours of volunteer service and after submitting an essay about why it’s important to give back to the community.

On your child’s 18th birthday, the account will be converted to a Unified Checking account.

How to get the Money Masters Teen Club account

You and your child will both need to head to the nearest branch to open an account. If you’re not a member, you’ll need to become one by opening a Prime Share account and paying the one-time $5 membership fee. Both of you will need to provide information such as your address and Social Security number, plus a method to fund the account.

LEARN MORE Secured

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How Georgia United Credit Union’s checking accounts compare

The rate for the Unified Checking account — if you qualify — is on par with some of the best accounts out there. We also like that there are no minimum balance requirements and you get ATM refunds. We can’t comment on the rates for the rest of Georgia United Credit Union’s offerings, but we like that the Money Masters Teen Club offers younger people opportunities to earn money. Furthermore, we think the monthly maintenance fee for the Restart Checking account is steep, but you may be low on options if you can’t qualify for other accounts.

Opening any of these checking accounts requires you to become a member of the credit union. It has some pretty strict requirements, so you may have no choice but to consider one of the alternatives on our list of the best online checking accounts.

Georgia United Credit Union’s savings account options

Prime Share

You need to open this account to become a member of Georgia United Credit Union.
APYMinimum Balance to Earn APY
0.10% $100
0.15%$1,000
0.20%$5,000
  • Minimum opening deposit: $5
  • Minimum balance to earn APY: $100
  • Quarterly account maintenance fee: $2 (this can be waived)
  • ATM fee: $0.75 for out-of-network ATMs plus any surcharge fees determined by the ATM’s owner
  • ATM fee refund: None
  • Overdraft fee: N/A

Also referred to as a share savings account, anyone who wants to become a Georgia United Credit Union member needs to open a Prime Share account. You get e-statements, an ATM card and online and mobile banking. There is a quarterly maintenance fee, but you can get it waived if you keep at least $5 in the account.

Once you open this account, you can open a secondary savings account which the credit union calls a “You Name It” account. For either account, Regulation D limits you up to six certain withdrawals/transfers a month. Account holders can make two free withdrawals each month or else there will be a $2 fee per transaction. If you try to make more than six, your transaction may be denied.

How to get the Prime Share account

You can open the Prime Share account by filling out an online application form. It’ll ask you to fill in personal details such as your name, address and Social Security number. Afterward, you’ll need to pay the one-time $5 membership fee to fund your new account.

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Christmas and Vacation Club

Use this account to set aside money for the holidays or a short-term savings goal.
  • Minimum opening deposit: None
  • Minimum balance to earn APY: $25 (Christmas Club) or $100 (Vacation Club)
  • Monthly account maintenance fee: $0
  • ATM fee: N/A
  • ATM fee refund: N/A
  • Overdraft fee: N/A

Both the Christmas and Vacation Club accounts are best for people who want a separate savings account to set aside money for their short-term goals. With both accounts, you can make deposits in any amount and as often as you want. To find out what the rates are, contact Georgia United Credit Union, as they’re currently not advertised on their website.

You can open the Christmas Club account at any time and any savings you incur will be automatically deposited into your Prime Share account on Nov. 1. You can make unlimited withdrawals between November and Jan. 1. If you do so outside of those times, you’ll be charged a $5 early withdrawal fee.

The Vacation Club account allows you to make one withdrawal each quarter. Otherwise, you’ll need to fork over a $5 excessive withdrawal fee. You can also open this account any time of the year.

How to get the Christmas or Vacation Club account

Both the Christmas and Vacation Club account can be opened by heading to a branch. Bring along information such as your state-issued ID and Social Security number. If you’re not already a member, you’ll need to open a Prime Share account and pay a $5 one-time membership fee.

LEARN MORE Secured

on Georgia United Credit Union’s secure website

NCUA Insured

The Money Mammals Saving Money is Fun Kids Club

This savings account encourages your child to save by providing incentives and access to an interactive website.
  • Minimum opening deposit: $10
  • Minimum balance to earn APY: $5
  • Monthly account maintenance fee: $0
  • ATM fee: N/A
  • ATM fee refund: N/A
  • Overdraft fee: N/A

This account is for kids up to 11 years old, and a parent or legal guardian needs to be the joint owner. There is no ATM card for this account, so the only way for your child to access their money is online or in person. By the way, rates aren’t advertised on the Georgia United Credit Union’s website, so check with customer service to see what they are.

The Money Mammals is a website linked to the credit union that offers games, coloring pages and an app that teaches your child how to manage their money. Upon account opening, your child will get a free welcome bag plus a $5 refund back into their account. Each account also comes with a Savings Reward card — your child can earn a punch on the card for every $5 deposit your child makes in person. These can be redeemed for a toy (6 punches) or a $1 deposit (12 punches).

Once your child turns 12, the account will be converted to a Money Masters Teen Club account.

How to get the The Money Mammals Saving Money is Fun Kids Club account

You and your child will need to apply for an account in person. You’ll need to become a member by opening a Prime Share account with $5, plus pay an additional $5 for a one-time membership fee. Make sure you bring your state-issued ID and Social Security number for both you and your child as you’ll need those to open the account.

LEARN MORE Secured

on Georgia United Credit Union’s secure website

NCUA Insured

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How Georgia United Credit Union’s savings accounts compare

We can’t comment on the kid’s or club savings account rates as they’re not advertised online. However, the Prime Share account is extremely low compared with others such as the ones on our list of the best online savings accounts. We like that there is ATM access and incentives for kids to save, but there are much better rates elsewhere.

Georgia United Credit Union’s CD rates

Certificate of Deposit

There are a wide range of terms to choose from, but the rates aren’t that great.
TermAPY
91 days0.20%
182 days0.75%
7 months (new money only)1.50%
1 year1.00%
2 years1.25%
27 months (new money only)2.50%
3 years1.50%
4 years1.75%
5 years2.25%
  • Minimum opening deposit: $1,000
  • Minimum balance amount to earn APY: $1,000
  • Early withdrawal penalty: Depends on length of term
    • 1 year or less- 90 days’ interest
    • More than 1 year- 180 days’ interest

These CDs could offer higher rates than the club accounts and may be a better choice if you don’t intend on withdrawing your money until maturity. To make sure they are indeed better, contact Georgia United Credit Union for their club account rates to do a side-by-side comparison.

The promo rates you see above require new money to open. This means funds currently not on deposit at the credit union. Interest is compounded and credited to your account daily if you choose to keep whatever you earn in the CD. Otherwise, you can choose to have the daily compounded interest paid out via check or deposited into your Georgia United Credit Union account each month or quarter.

When your account matures, you’ll have a seven-day grace period where you can make changes if you wish. Otherwise it’ll automatically be renewed for the same term. The only exceptions are the promo rates — the 7 month CD will automatically be renewed to a 6 month CD and the 27 month CD will be renewed into a 2 year CD at their current APY.

How to get Georgia United Credit Union’s CDs

You can either call customer service at 1-888-493-4328 or stop by your local branch to open an account. If you’re not already a member, you’ll be asked to become one by opening a Prime Share account (a $5 minimum deposit) and paying a one-time $5 membership fee.

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How Georgia United Credit Union’s CD rates compare

The rates for these CDs are better than most major banks but they’re not the best we’ve seen. It depends on the term you choose, but competitors’ rates are either on par with or much higher than what Georgia United Credit Union is offering. That, and some competitors offer lower opening deposit requirements.

Coupled with the strict membership requirements, we think you’d be better off looking at alternatives such as this list of the best CD rates on the market.

Georgia United Credit Union’s money market account options

Sterling Fund Money Market

You need a high minimum balance to earn their highest rate.
APYMinimum Balance to Earn APY
0.40%$0.01
0.50%$10,000
0.55%$25,000
0.65%$100,000
  • Minimum opening deposit: $1,000
  • Minimum balance to earn APY: $0.01
  • Monthly account maintenance fee: $5 (this can be waived)
  • ATM fee: N/A
  • ATM fee refund: N/A
  • Overdraft fee: N/A

While the money market account offers a higher rate than the Prime Share account, they’re both much lower than what’s being offered elsewhere. Aside from the lowest tier, the minimum balance amounts are quite high considering you’re not earning great rates.

Features of the account include limited check-writing capabilities, e-statements and online and mobile banking. The monthly maintenance fee can be waived if you maintain a $1,000 minimum daily balance. Since this is technically a savings account, Regulation D limits you up to six certain withdrawals a month. However, you’re only allowed three free withdrawals a month at Georgia United Credit Union, or else you’ll need to pay a $2 fee for each one you go over.

How to get the Sterling Fund Money Market account

Head to a Georgia United Credit Union branch or call customer service 1-888-493-4328 at to open an account. You’ll need to provide details such as your name, address and Social Security number. You’ll also need to become a member by paying a $5 one-time fee as well as open a Prime Share account.

LEARN MORE Secured

on Georgia United Credit Union’s secure website

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How Georgia United Credit Union’s money market account compares

There are a few reasons we’ll pass on this account. One, the rates are quite low compared with some of the best money market accounts we’ve come across. Two, you need a high minimum amount to waive the monthly maintenance fee. Three, other financial institutions allow you to make up to six withdrawals month for free whereas you’re only allowed three with this one.

We think you’ll do better elsewhere if you want to maximize your savings.

Georgia United Credit Union’s IRA account options

IRA Certificate

Georgia United Credit Union’s IRA CDs offers some OK rates.
TermAPY
1 year1.00%
2 years1.25%
27 month (new money)2.50%
3 years1.50%
4 years1.75%
5 years 2.25%
  • Minimum opening deposit: $1,000
  • Minimum balance amount to earn APY: $1,000
  • Early withdrawal penalty: Depends on length of term
    • 1 year or less- 90 days’ interest
    • More than 1 year- 180 days’ interest

If the thought of investing in the stock market makes you nervous, consider putting your retirement savings into an IRA CD instead. These accounts compound and credit interest daily. Unlike the regular CDs, you must keep all interest earned in the IRA CD until maturity. Most of these rates are much lower than competitors, except for the 27 month promo rate. However, Georgia United Credit Union will only let you open the account with new money, meaning funds currently not on deposit at the credit union.

When you hit the CD’s maturity, your IRA CD will automatically renew unless you make changes during the seven-day grace period. The 27 month promo CD will automatically be renewed into a 2 year CD at Georgia United Credit Union’s current APY.

How to get Georgia United Credit Union’s IRA CDs

Go to the nearest branch to open an IRA CD. If you’re not already a member, you’ll need to pay a one-time $5 membership fee and open a Prime Share account. Don’t forget to bring along information such as your Social Security number and state-issued ID.

LEARN MORE Secured

on Georgia United Credit Union’s secure website

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IRA savings account

We like that there are tiered rates, helping you earn more interest if you have more on deposit.
APYMinimum Balance to Earn APY
0.10%$100
0.15%$1,000
0.20%$5,000
  • Minimum opening deposit: $500
  • Minimum balance to earn APY: $100
  • Monthly account maintenance fee: $0
  • ATM fee: N/A
  • ATM fee refund: N/A
  • Overdraft fee: N/A

The IRA savings account is best for people looking for a place to park their retirement funds without needing to lock it in like the IRA CDs. There is no ATM access — you’ll need to go in person or by logging into your account online to access funds.

If you decide to make withdrawals, keep in mind that you may need to pay IRS penalties and/or taxes. It’s best to check with the current rules and regulations so you’re aware of your options.

How to get Georgia United Credit Union’s IRA savings account

You need to head to the nearest branch to open an account. Bring along information such as your Social Security number and a method to fund the account. If you’re not an existing member, you’ll need to open a Prime Share account plus pay a one-time $5 membership fee.

LEARN MORE Secured

on Georgia United Credit Union’s secure website

NCUA Insured

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How Georgia United Credit Union’s IRA accounts compare

The IRA CD rates are much lower — by as much as one percentage point — than ones on our list of the best IRA CD rates. However, Georgia United Credit Union’s promo rate isn’t terrible but it’s not worth opening one if you’re not already member as you need to open a Prime Share account and maintain a membership for the privilege.

Overall review of Georgia United Credit Union’s banking products

The Unified Checking account stands out, as it has one of the highest APYs out there. However, you need to meet the credit union’s requirements or else your rate will drop by quite a bit. The rest of Georgia United Credit Union’s banking products aren’t truly worth considering. They offer low rates and you need to pay monthly fees (although you can get those waived). However, if you have children, the minor accounts aren’t too shabby, as your child can earn actual cash as a reward for good grades and sound financial behaviors.

If you can meet Georgia United Credit Union’s membership requirements, consider either the minor or Unified Checking accounts. Otherwise, we think you’ll do better shopping around.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Sarah Li Cain
Sarah Li Cain |

Sarah Li Cain is a writer at MagnifyMoney. You can email Sarah Li here

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Auto Loan

Buying a Car Out of State: The Complete Guide

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Buying a car out of state
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If you’ve found a car out of state that you want to buy or if you’re thinking about shopping for one, you might have a few questions. What taxes do you pay, and to which state? What about emission requirements, loan approvals or getting the car shipped to you?

To help you know what goes on behind the thick curtain of car buying and the government, we will go over the basics of how to buy a car out of state and what you should look for.

Why buy a car in another state?

Why even attempt this feat in the first place? The short answer is that buying a car out of state could be the best way to get what you want and a good deal.

Dealer incentives. You might live close to a state border. A dealership right over the line could have great customer incentives that dealers in your state don’t have, like two years of free maintenance or a lifetime powertrain warranty.

Rebates. Car manufacturers establish rebates based on supply and demand in different markets, so different places will have different rebates. It might be that in your state, the car you want doesn’t have any rebates, but a couple states over has $4,000 worth of rebates on it.

Online shopping. You could have found the car you wanted online, either from a site like Carvana or from a private seller who offered the best deal. Only after you fell in love with the car did you realize it was in another state. You can look here for tips on how to buy a car online.

What to know before buying a car out of state

Here are some things to keep in mind, all of which will affect the bottom line of what you’ll pay. If budget is a concern for you, check out our story on how much car you can afford.

Taxes
Car taxes depend on where you will register the car, not where you buy the car. You register the car based on your residential address. So you’re in luck if you live in a sales tax-free state and find your one-true-love of a vehicle outside state lines. On the other hand, if you live in California and you’re thinking of buying a car in Alaska to skip out on sales tax, you’re out of luck. You’ll still have to pay California sales tax.

Your tax rate is also dependent on your city and county, too. Pennsylvania charges a 6% sales tax, but Philadelphia County charges 2% on top that for an effective rate of 8%. You can look up the taxes and fees you’ll have to pay by going to your state’s DMV website.

Inspections and emissions requirements
Like taxes, the inspections and emissions requirements your car must meet depend on the state where you live. Certain states have inspections and emissions requirements, others don’t. It’s a good idea to make sure the car can pass the necessary inspections before you buy it, since the vehicle must pass the tests before you can register it. California has very strict emissions requirements in particular. You could run into some major trouble in registering car if it does not pass the requirements. You can see more here from the California Air Resources Board.

Insurance requirements
Most states require all drivers to get auto insurance. How much insurance you are required to have can differ. Also, if you are getting an auto loan to purchase the car, most lenders require that you keep “full coverage” auto insurance as well. Check with the dealership, the lender or the auto insurance company for more information so you can meet all requirements. Make sure to note which state you will register the car in so they can provide the correct information.

Shipping
If you are not driving the car back home, you’ll need to pay someone else to transport it. Some car-buying websites charge a flat fee. Other transport companies charge based on the distance the vehicle needs to go and its size and weight.

How do I handle the paperwork for buying a car out of state?

If you are getting the car from a dealership, the salesperson or finance manager should tell you what to do and what’s going on as you slog through the paperwork. But if you are getting the car in a private sale, you might need to be more knowledgeable.

Who needs to sign what?
The buyer and the seller both need to both sign most, if not all, paperwork.

Who is the buyer?
As you’re filling out the paperwork for buying a car out of state, the buyer is the person who is either paying for the vehicle or wants to be registered as the vehicle owner. Usually this is straightforward, but it can get confusing sometimes. For example, if a father is buying a car for his daughter, paying for it himself, but wants his daughter to be registered as an owner of the car as well, both father and daughter would sign the paperwork as buyers.

Who is the seller?
The seller is the person listed as the owner on the title of the vehicle for sale. A daughter wouldn’t be able to legally sell her father’s car if she is not listed on the title. You can’t sell something that doesn’t belong to you. Ask to see the seller’s driver’s license to make sure it matches the name that is on the title.

There are exceptions to this in cases where the owner has died or the other person has power of attorney, but we recommend consulting a lawyer or finding another car in these cases.

What if there are two names on the title?
If there are two names listed on the car’s title, look at how they are listed. If the word “and” is between the names, you will need both people to sign over the title. If the word “or” is between the names, you only need one of the owners to sign over the title.

Is there special paperwork for buying a car out of state?

Sometimes. Again, a dealership will take care of all of this, but you’ll need to make sure you have everything in order if you’re buying a car from another person instead. Check with your state’s DMV site to confirm exactly what you’ll need (links are below), but here are the most common things you’ll need to sign when buying a car out of state. Most are required for any car sale. Don’t head back home until you have them all.

Title
A vehicle’s title is the official form that says who owns that exact vehicle. Both the buyer and the seller need to sign it.

Title application
To officially change the title to your name and register the vehicle with you as the owner, you’ll have to fill out a title application form. Some states, such as Texas, require that the buyer and seller sign the title application as well at the title. Other states, such as Virginia, only require that the buyer signs the title application.

VIN verification
VIN stands for vehicle identification number, and every vehicle in the U.S. has one. A VIN verification or a VIN inspection form confirm exactly what is being sold.

Bill of sale
The bill of sale lists the buyer, the seller, the car and the car’s purchase price. The bill of sale serves as both a contract and a receipt.

Odometer statement
The odometer on a car keeps track of how many miles the car has been driven. This is important because vehicles only last so many miles, and the mileage will affect how much it’s worth and whether it’s still under warranty. The odometer can also tip you off on how likely the car may break down or need repairs.

Proof of insurance
When getting insurance for the car, ask for the auto insurance company to send proof of insurance. The declaration page shows the vehicle, the name(s) of the insured driver(s) and how much the car is insured for. At least one of the people who is buying the car needs to be an insured driver of the car.

How do I get the forms?

The seller needs to have the title. Everything else you should be able to find on your state’s DMV website. Download and print a couple of copies of the forms so that both you and the seller can have copies, and maybe take some extras in case anyone makes a wrong mark somewhere.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Jenn Jones
Jenn Jones |

Jenn Jones is a writer at MagnifyMoney. You can email Jenn at jennifer@magnifymoney.com

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Reviews

The Berkshire Bank Review: Checking, Savings, CD, Money Market and IRA Accounts

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Year Established1989
Total Assets$0.7B
LEARN MORE on The Berkshire Bank’s secure websiteMember FDIC

The Berkshire Bank is a small community bank serving New York and New Jersey residents. Originally known as Goshen Savings Bank, this company has been in operation since 1871. It has 10 branches in New York and one in New Jersey.

We’ve reviewed all the personal banking products offered by The Berkshire Bank and compared them to some of our favorites. While The Berkshire Bank fared relatively well, they can’t claim the highest rates or the lowest fees.

The Berkshire Bank’s Most Popular Accounts

APY

Account Type

Account Name

Compare Rates from Similar Accounts

0.20%

Savings

The Berkshire Bank Statement Savings

2.00%

American Express National Bank High Yield Savings Account

on American Express National Bank’s secure website

Member FDIC

0.30%

CD Rates

The Berkshire Bank 12 Month CD

2.65%

Goldman Sachs Bank USA High-yield 12 Month CD

on Goldman Sachs Bank USA’s secure website

Member FDIC

0.50%

CD Rates

The Berkshire Bank 24 Month CD

2.85%

Synchrony Bank 36 Month CD

on Synchrony Bank’s secure website

Member FDIC

0.45%

CD Rates

The Berkshire Bank 36 Month CD

3.10%

Goldman Sachs Bank USA High-yield 5 Year CD

on Goldman Sachs Bank USA’s secure website

Member FDIC

The Berkshire Bank’s checking account options

Regular Checking

This entry-level account has a lot of fees and doesn’t earn interest.
  • Minimum opening deposit: $100
  • Monthly account maintenance fee: $8 (this can be waived)
  • ATM fee: $1 at non-The Berkshire Bank ATMs; at The Berkshire Bank ATMs, the first 25 withdrawals are free each month ($1 each after that)
  • ATM fee refund: None
  • Overdraft fee: $30

The Berkshire Bank’s Regular Checking account has a fairly steep minimum opening deposit considering the account’s very basic features. This checking account does not earn interest, and it charges a monthly service fee unless you maintain an average daily balance of $1,200.

You’ll also have to pay out-of-network ATM fees. Even at The Berkshire Bank ATMs, you’re only allowed 25 free withdrawals a month. If you use its ATMs more than 25 times in a month, you’ll have to pay an ATM fee. Finally, you’re allowed a maximum of 75 debits or withdrawals per month at no charge; after that, you’ll be charged 25 cents per transaction.

While it’s possible to use this account in a way that minimizes fees, it requires you to carefully track your daily balance and monthly transactions — and doesn’t offer much in return.

How to get The Berkshire Bank’s Regular Checking account

There is no option to apply for any of The Berkshire Bank’s accounts online. Instead, you’ll have to visit a branch.

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NOW Checking

In exchange for a higher monthly service fee, you’ll earn interest on this account.
APYMinimum Balance to Earn APY
0.30%
$1,500
0.40%
$25,000
0.50%
$1,000,000
  • Minimum opening deposit: $100
  • Monthly account maintenance fee: $10 (this can be waived)
  • ATM fee: $1 at non-The Berkshire Bank ATMs; at The Berkshire Bank ATMs, the first 25 withdrawals are free each month ($1 each after that)
  • ATM fee refund: None
  • Overdraft fee: $30

If you’re looking for a checking account that earns interest, The Berkshire Bank’s NOW Checking account will at least pay a little. This account earns tiered interest, meaning the interest rate you earn depends on your balance. The minimum balance required to earn interest is quite high, though, and the interest rates are less than impressive.

This account also charges a monthly service fee that’s even higher than that charged by the Regular Checking account. To waive the fee, you’ll have to maintain an average daily balance of at least $1,500. Many may find this difficult to do on a regular basis. This account only allows 50 debits or withdrawals per month at no charge. If you exceed that number, you’ll have to pay 25 cents per transaction.

How to get The Berkshire Bank’s NOW Checking account

You cannot apply for The Berkshire Bank’s checking accounts online. To open an account, you’ll have to visit a branch.

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on The Berkshire Bank’s secure website

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Ultimate College Checking

A free checking account for college students.
  • Minimum opening deposit: $100
  • Monthly account maintenance fee: None
  • ATM fee: $1 at non-The Berkshire Bank ATMs; at The Berkshire Bank ATMs, the first 25 withdrawals are free each month ($1 each after that)
  • ATM fee refund: None
  • Overdraft fee: $30

If you’re a college student between the ages of 18 and 24, you can qualify for The Berkshire Bank’s Ultimate College Checking account. This is one of only two checking accounts offered by The Berkshire Bank that doesn’t charge a monthly service fee. You’ll also get unlimited debits and withdrawals at no charge, while almost all this bank’s other accounts have a monthly cap.

You won’t earn interest with this account, and you will still incur ATM fees at all non-The Berkshire Bank ATMs. Like this bank’s other checking accounts, you’re only allowed 25 free ATM withdrawals at The Berkshire Bank ATMs per month. But if you qualify for this checking account, it’s one of the low-fee checking accounts offered.

How to get The Berkshire Bank’s Ultimate College Checking account

You will need to provide proof that you are a student with your application for this account. You can open an account at any The Berkshire Bank branch.

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Super Security Checking

Earn a competitive interest rate if you get monthly direct deposits from Social Security.
APYMinimum Balance to Earn APY
0.75%
$500
  • Minimum opening deposit: $100
  • Monthly account maintenance fee: $10 (this can be waived)
  • ATM fee: $1 at non-The Berkshire Bank ATMs; at The Berkshire Bank ATMs, the first 25 withdrawals are free each month ($1 each after that)
  • ATM fee refund: None
  • Overdraft fee: $30

This checking account comes with a monthly service fee that can only be waived by maintaining an average daily balance of at least $500. While we prefer checking accounts with no monthly service fee, the requirements for waiving the fee on this account are lower than those required by other checking accounts at The Berkshire Bank.

The Super Security Checking account is designed for customers who receive monthly direct deposits from Social Security. If you do, and if you can maintain a minimum daily balance of at least $500, you’ll qualify for this account’s interest rate. For a checking account, this  rate is quite competitive.

You’ll only get 50 fee-free withdrawals and debits per month with a Super Security Checking account. After that, you’ll be charged a 25 cents fee for each transaction.

How to get The Berkshire Bank’s Super Security Checking account

To qualify for this account, you need to receive monthly direct deposits from Social Security. You can apply in a branch.

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Premier Checking

This account charges a monthly fee unless you can maintain a very high account balance.
  • Minimum opening deposit: $100
  • Monthly account maintenance fee: $10 (this can be waived)
  • ATM fee: $1 at non-The Berkshire ATMs; at The Berkshire Bank ATMs, the first 25 withdrawals are free each month ($1 each after that)
  • ATM fee refund: None
  • Overdraft fee: $30

The Premier Checking account is a non-interest-bearing account. Like most of The Berkshire Bank’s checking products, this account charges a monthly maintenance fee. You’ll need to maintain at least $25,000 in combined account balances to waive the monthly service fee, and this minimum is also required to qualify for Premier Checking anyway.

But you’re only allowed 25 debits or withdrawals per month at no charge. If you use your debit card more than 25 times per month, you’ll be charged 25 cents for each additional transaction. You also will not earn interest on this account. Ultimately, there are few features that make this account’s monthly maintenance fee and high balance requirements worthwhile.

How to get The Berkshire Bank’s Premier Checking account

You can open a Premier Checking account by visiting a branch and applying in person. There are no online applications.

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60 & Better Checking

Designed for customers 60 or older, this account has no monthly maintenance fee.
  • Minimum opening deposit: $100
  • Monthly account maintenance fee: None
  • ATM fee: $1 at non-The Berkshire Bank ATMs; at The Berkshire Bank ATMs, the first 25 withdrawals are free each month ($1 each after that)
  • ATM fee refund: None
  • Overdraft fee: $30

You won’t earn any interest with this checking account, but it’s one of only two checking accounts at The Berkshire Bank that doesn’t charge a monthly service fee. The minimum opening deposit requirement is higher than most other banks, but it’s still feasible.

You will still have to pay ATM fees at non-The Berkshire Bank ATMs, and this account only allows 50 free debits or withdrawals per month. If you exceed that limit, you’ll be charged 25 cents per transaction.

How to get The Berkshire Bank’s 60 & Better Checking account

You can apply for a 60 & Better Checking account by visiting a The Berkshire Bank branch.

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on The Berkshire Bank’s secure website

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Basic Banking

The Berkshire Bank’s most basic checking account has lower fees, but it is open to New York residents only.
  • Minimum opening deposit: $25
  • Monthly account maintenance fee: $3 (cannot be waived)
  • ATM fee: $1 at non-The Berkshire Bank ATMs; at The Berkshire Bank ATMs, the first 25 withdrawals are free each month ($1 each after that)
  • ATM fee refund: None
  • Overdraft fee: $30

The Berkshire Bank’s Basic Banking account has a low monthly maintenance fee, but it cannot be waived. It also has the lowest minimum opening deposit requirement of any checking account offered by this bank. The account does not earn interest, and ATM fees aren’t refunded.

There are some serious limitations that come with the Basic Banking account. First, you’re only allowed eight free debits or withdrawals per month at no charge, and you can’t exceed that number. You must be a New York resident to open this account, and you can’t have any other transactional accounts with The Berkshire Bank or any other financial institution if you hold this account. This account has little practical purpose for most people.

How to get The Berkshire Bank’s Basic Banking account

You can apply for a Basic Banking account at any of The Berkshire Bank’s New York locations.

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New Jersey Consumer Checking

New Jersey residents qualify for this low-fee checking account.
  • Minimum opening deposit: $50
  • Monthly account maintenance fee: $3 (cannot be waived)
  • ATM fee: $1 at non-The Berkshire Bank ATMs; at Berkshire ATMs, the first 25 withdrawals are free each month ($1 each after that)
  • ATM fee refund: None
  • Overdraft fee: $30

Like the Basic Banking account but for New Jersey residents, this checking account charges a low monthly maintenance fee that cannot be waived. It doesn’t earn interest, and you will have to pay ATM fees on non-The Berkshire Bank ATMs.

You can only use your account for up to eight debits or withdrawals per month, which is pretty limiting. The account is only open to New Jersey residents, and you can’t hold this account if you have any other transactional accounts with The Berkshire Bank or other financial institutions.

How to get The Berkshire Bank’s New Jersey Consumer Checking account

You can apply for this account at any of The Berkshire Bank’s New Jersey branches.

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on The Berkshire Bank’s secure website

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Blue Ribbon Checking

This account comes with a monthly maintenance fee that is easier to waive for customers who open a Blue Ribbon Savings account.
  • Minimum opening deposit: $100
  • Monthly account maintenance fee: $8 (this can be waived)
  • ATM fee: $1 at non-The Berkshire Bank ATMs; at Berkshire ATMs, the first 25 withdrawals are free each month ($1 each after that)
  • ATM fee refund: None
  • Overdraft fee: $30

This account does not bear interest. But it requires that you open a Blue Ribbon Savings account to go with it, which does earn interest. You’ll need to maintain an average daily balance of at least $800 to waive the monthly service fee, which is lower than the requirements for most other checking accounts at The Berkshire Bank.

This account has the same ATM fees as the rest of The Berkshire Bank’s checking accounts. Unlike most of this bank’s checking accounts, though, the Blue Ribbon Checking account allows unlimited fee-free transactions.

While this is one of The Berkshire Bank’s better checking account offerings, it still comes with monthly maintenance and ATM fees, which can be avoided at other banks.

How to get The Berkshire Bank’s Blue Ribbon Checking account

You’ll need to open a Blue Ribbon Savings account to qualify for this checking account. You can open both at a branch.

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How The Berkshire Bank’s checking accounts compare

While The Berkshire Bank offers a very wide range of checking account options, none of them can compete with the best online checking accounts. Most of these accounts have higher interest rates and no monthly service fees, and many of them also reimburse ATM fees.

In comparison, almost all the checking accounts at The Berkshire Bank charge monthly service fees, and they aren’t so easy to waive. Most of its accounts also come with some odd limitations, such as limits on holding accounts with other institutions, on the number of debit transactions you can complete per month and on the number of times you can use The Berkshire Bank ATMs for free per month.

Most banks don’t limit customers on any of those fronts. Also, while the interest-earning checking accounts at The Berkshire Bank do earn rates higher than what you might find at bigger traditional banks, they still aren’t as high as what you’ll get from our favorite online checking accounts.

The Berkshire Bank’s savings account options

Blue Ribbon Savings

This is an interest-earning savings account for Blue Ribbon Checking customers.
APYMinimum Balance to Earn APY
0.20%
$10,000
0.30%
$50,000
0.70%
$250,000
0.75%
$1,000,000
0.75%
$4,000,000
  • Minimum opening deposit: $100
  • Minimum balance to earn APY: $10,000
  • Monthly account maintenance fee: None
  • ATM fee: $1 at non-The Berkshire Bank ATMs; at Berkshire ATMs, the first 25 withdrawals are free each month ($1 each after that)
  • ATM fee refund: None
  • Overdraft fee: $30

This savings account requires that you also sign up for a Blue Ribbon Checking account. With the two accounts paired together, you’ll get free unlimited check-writing, as well as your first order of checks.

With the Blue Ribbon Savings account, you’ll earn better interest rates than you would at many traditional banks, but it’s still possible to find significantly higher rates at online banks. With The Berkshire Bank’s savings accounts, this account is the best option for balances of $250,000 or more. Customers with balances that fall in the lower tiers may want to consider other savings options with The Berkshire Bank that offer a slightly higher APY.

Per Federal Reserve Regulation D, you’re allowed a maximum of six certain withdrawals a month. After that, a fee is exacted by the bank.

How to get The Berkshire Bank’s Blue Ribbon Savings account

You can apply for Blue Ribbon Savings and Blue Ribbon Checking accounts by visiting one of The Berkshire Bank’s branches.

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on The Berkshire Bank’s secure website

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Platinum Super Savings

This savings account earns interest on balances of $10,000 or more.
APYMinimum Balance to Earn APY
0.20%
$10,000
0.45%
$50,000
0.50%
$250,000
0.60%
$1,000,000
0.10%
$5,000,000
  • Minimum opening deposit: $100
  • Minimum balance to earn APY: $10,000
  • Monthly account maintenance fee: None
  • ATM fee: $1 at non-The Berkshire Bank ATMs; at The Berkshire Bank ATMs, the first 25 withdrawals are free each month ($1 each after that)
  • ATM fee refund: None
  • Overdraft fee: $30

The Platinum Super Savings account offers decent rates, but you do have to maintain a sizable minimum balance to earn interest. It’s not the best option The Berkshire Bank offers for customers with balances in the highest and lowest tiers, but if you plan to maintain a balance of $50,000, the Platinum Super Savings account is a good alternative to Blue Ribbon Savings because it doesn’t require you to maintain any specific checking account with The Berkshire Bank.

You’re only allowed to complete up to six certain withdrawals per month. If you complete more, you’ll be charged a fee by the bank. This is the case with all savings accounts due to Federal Reserve Regulation D.

How to get The Berkshire Bank’s Platinum Super Savings account

You can visit any The Berkshire Bank branch to open a Platinum Super Savings account.

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Statement Super Savings

This savings account has a high minimum balance required to earn interest.
APYMinimum Balance to Earn APY
0.40%
$15,000
0.50%
$1,000,000
0.75%
$5,000,000
0.70%
$10,000,000
  • Minimum opening deposit: $100
  • Minimum balance to earn APY: $15,000
  • Monthly account maintenance fee: None
  • ATM fee: $1 at non-The Berkshire Bank ATMs; at The Berkshire Bank ATMs, the first 25 withdrawals are free each month ($1 each after that)
  • ATM fee refund: None
  • Overdraft fee: $30

This account requires a slightly higher minimum balance to begin earning interest than the others. But of The Berkshire Bank’s savings accounts, it offers the best interest rate for balances in the lowest tier. More specifically, this account is best if you plan to maintain a balance between $15,000 and $499,999.99.

As with any savings account, you are limited up to six certain withdrawals a month due to Federal Reserve Regulation D. If you exceed this amount, you’ll be charged a fee for each transaction by the bank.

How to get The Berkshire Bank’s Statement Super Savings

If you’re interested in opening one of The Berkshire Bank’s savings accounts, you can do so by visiting a branch or calling their customer service line.

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on The Berkshire Bank’s secure website

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Statement Savings

The Statement Savings account has the lowest minimum balance to earn APY.
APYMinimum Balance to Earn APY
0.20%
$300
0.30%
$10,000
0.50%
$100,000
0.20%
$3,000,000
  • Minimum opening deposit: $100
  • Minimum balance to earn APY: $300
  • Monthly account maintenance fee: $5 (this can be waived)
  • ATM fee: $1 at non-The Berkshire Bank ATMs; at The Berkshire Bank ATMs, the first 25 withdrawals are free each month ($1 each after that)
  • ATM fee refund: None
  • Overdraft fee: $30

This account is ideal for customers who don’t plan to deposit a lot of money into their savings account. It’s the only savings account at The Berkshire Bank that earns interest on balances below $10,000, although the rate is low. It actually offers the best rates of any of The Berkshire Bank savings accounts for balances below $250,000. After that, you’ll want to switch to one of its other savings options.

The Statement Savings account is also the only savings account at The Berkshire Bank that charges a monthly maintenance fee. While it can be waived by maintaining an average daily balance of $300 or more, there are plenty of other banks that offer fee-free savings accounts.

As per Federal Reserve Regulation D, you’re allowed a maximum of six certain withdrawals. After that, a fee is exacted by the bank.

How to get The Berkshire Bank’s Statement Savings account

To open a Statement Savings account, you’ll need to visit a branch. Accounts cannot be opened online.

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How The Berkshire Bank’s savings accounts compare

The Berkshire Bank offers a range of different savings options, although they’re all very similar. The main difference between each savings account is the rates. While these savings accounts do offer decent interest rates, the best online savings accounts offer rates that are more than double what The Berkshire Bank provides.

Most of these online savings accounts don’t come with any monthly maintenance fees. Only two of The Berkshire Bank’s four savings options compare on fees, as one has a monthly service fee and the other requires you to open a checking account that comes with a monthly service fee.

The Berkshire Bank offers middle-of-the-road options when it comes to savings accounts. They’re better than many savings accounts offered by traditional banks, but they don’t come close to competing with the best online savings accounts.

The Berkshire Bank’s CD rates

Certificates of Deposit

Lots of short-term options, but very low rates.
$1,000 to $9,999$10,000 to 499,999.99
Term APYTermAPY
1 month0.05%
1 month0.10%
2 months0.05%
2 months0.10%
3 months0.15%
3 months0.25%
4 months0.15%
4 months0.25%
6 months0.40%
6 months0.80%
9 months0.40%
9 months0.90%
12 months0.30%
12 months2.00%
14 months0.50%
14 months1.75%
18 months0.50%
18 months2.25%
2.20%0.50%
24 months2.25%
36 months0.45%
36 months1.05%
  • Minimum opening deposit: $1,000
  • Minimum balance amount to earn APY: $1,000
  • Early withdrawal penalty: Half of the interest that would have been earned over the entire term of the CD

The Berkshire Bank offers many short-term CDs that can be hard to find at other financial institutions, allowing you to choose term lengths as short as one month. There are a wide variety of options for people who prefer flexibility, but its offerings fall short when it comes to long-term CDs. The longest term length available is three years, while most banks offer up to five years.

The rates offered by most of these CDs are also less than impressive, especially if you don’t plan to make a large deposit. That being said, if you plan to deposit $10,000 or more, the rates offered for the six month, nine month, 12 month, 14 month, 18 month and 24 month CDs are closer to those offered by the competition. The minimum opening deposit is fairly low.

How to get The Berkshire Bank’s CDs

You can open a certificate of deposit with The Berkshire Bank at any of its branches.

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How The Berkshire Bank’s CD rates compare

If you’re looking for short-term CDs of less than six months, The Berkshire Bank offers some unique options. The 2 month and 4 month CDs stand out as products that very few banks offer. The 14 month CD is also hard to find.

That being said, The Berkshire Bank’s short-term CDs barely offer better rates than a regular savings account. All its CDs have rates that are notably lower than the best CD rates, and the rates on the 36 month CD drop far below the competition. If you want a CD for longer than three years, The Berkshire Bank doesn’t even offer the option. The penalty is also steep, particularly if you have a longer CD.

The Berkshire Bank’s money market account option

Money Market Checking

This account has pretty steep minimum balances to earn interest.
APYMinimum Balance to Earn APY
0.10%
$2,500
0.20%
$25,000
0.25%
$50,000
0.30%
$100,000
0.10%
$1,000,000
  • Minimum opening deposit: $100
  • Minimum balance to earn APY: $2,500
  • Monthly account maintenance fee: $10 (this can be waived)
  • ATM fee: $1 at non-The Berkshire Bank ATMs; at The Berkshire Bank ATMs, the first 25 withdrawals are free each month ($1 each after that)
  • ATM fee refund: None
  • Overdraft fee: $30

The Money Market Checking account requires a minimum balance to earn interest that might not be attainable for some customers. Also, the interest rate on this account is quite low, and any interest accumulated is likely to be unnoticeable.

You’ll also have to pay a monthly maintenance fee on this account unless you can meet the requirements to get it waived. To do that, you have to keep an average daily balance of at least $2,500.

Federal Reserve Regulation D limits savings accounts to six certain withdrawals a month. If you make more than six withdrawals from your money market account in one month, you’ll be charged a fee by the bank for each additional withdrawal.

How to get The Berkshire Bank’s Money Market Checking account

You can apply for a money market account at any The Berkshire Bank branch.

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How The Berkshire Bank’s money market accounts compare

The rates offered by The Berkshire Bank’s money market accounts are much lower than those offered by the best money market accounts. That being said, they are more accessible than many of the money market accounts with the highest rates due to their low minimum balance amount.

It’s still possible to find money market accounts with low balance requirements — some as low as $0 — that offer much higher rates than what’s offered by The Berkshire Bank. Also, several of them don’t charge monthly maintenance fees or ATM fees.

The Berkshire Bank’s IRA account options

IRA CD

The Berkshire Bank says it offers “a variety of rates and terms.”
  • Minimum opening deposit: $1,000
  • Minimum balance amount to earn APY: $1,000
  • Early withdrawal penalty: Half of the interest that would have been earned over the entire term of the CD

To check the most current rates on The Berkshire Bank’s IRAs, you’ll have to give them a call. According to a customer service representative, they match the rates on their regular CDs.

While there are a wide range of short-term IRAs available at The Berkshire Bank, the longest term they offer is 18 months. The early withdrawal penalty can be sizeable if you have a larger balance and a longer term.

How to get The Berkshire Bank’s IRA CDs

You can open an IRA with The Berkshire Bank at any of its branches.

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How The Berkshire Bank’s IRA CD rates compare

You’ll have to call The Berkshire Bank to get the latest rates on their IRA CDs. You can then compare those with the best IRA CD rates before making a decision.

The Berkshire Bank does offer a wide range of IRA CD terms, especially if you’re looking for something under 6 months. They also have a low minimum opening deposit requirement. However, many of the best IRA CD rates have minimum opening deposit requirements that are the same or even lower.

Overall review of The Berkshire Bank’s banking products

With nine different checking accounts and a handful of savings accounts, The Berkshire Bank offers a wide range of personal banking options for customers in all stages of life. We like that it offers low-cost options like its Basic Banking account, Ultimate College Checking and 60 & Better Checking, as well as interest-bearing options such as NOW Checking and Super Security Checking.

In the end, though, the majority of its checking accounts charge monthly service fees and ATM fees, and most of them place strict limits on the number of monthly transactions you can complete for free. We always prefer checking accounts without such limitations, and it’s not hard to find fee-free checking accounts online.

When it comes to its savings, CD and money market options, The Berkshire Bank offers better rates than many large traditional banks. But its rates are still significantly lower than those offered by the banks with the best rates.

If you prefer small banks with branches in the New York City area and great customer service, The Berkshire Bank might be a good choice for you. But if you’re looking for the lowest fees and the best rates, there are better options.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Elizabeth Aldrich |

Elizabeth Aldrich is a writer at MagnifyMoney. You can email Elizabeth here

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College Students and Recent Grads

How to Refinance Student Loans With a Cosigner

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

If you thought you were too grown up for a cosigner, think again.

Even if you’re already living on your own and making some money, a cosigner could help you score a lower interest rate on a refinanced student loan. Here are five steps to follow if you’re looking to refinance student loans with a cosigner:

1. Confirm that you’d benefit from a cosigner

If you’ve been nudged to find a cosigner after getting rejected on your student loan refinancing application, you might already understand why. Maybe your credit score is too low, or perhaps your debt-to-income (DTI) ratio tilts in the wrong direction.

Regardless of where you are in the application process, the first step is to consider the holes in your background that could be filled by a cosigner. Examples include:

Credit score

Most top-rated lenders require a minimum score in the high 600s, although you’d need an even stronger score to unlock their lowest rate offerings.

Also, you might need a higher score if you’re applying solo. Splash Financial, for example, requires a 700 if you’re applying on your own, but 670 if you’re piggybacking on another borrower.

Income

Lenders might also set a baseline for your income before even considering your application. EdvestinU, for example, requires that you bring in at least $30,000 per year.

DTI

Refinancing companies eye borrowers with a DTI of less than 40%. You can calculate your ratio by dividing your monthly debt payments by your monthly gross income.

If you have credit card debt weighing you down, for example, your DTI could take a big hit. Compare your numbers with lenders’ requirements to see where you might be falling short. If you need a cosigner to help you qualify — or lower your rate further — then move onto the next step…

2. Find lenders that fit your needs

Think about what you most want in a student loan refinance company. If you’re fed up with the customer service of your current lenders, for example, you might prioritize an online lender that’s known for its helpfulness, or a brick-and-mortar bank that offers in-person assistance.

Here are other questions to weigh when imagining your ideal lender:

  • Does it advertise competitive interest rates?
  • Does it have repayment term lengths that fit your future budget?
  • Does it charge excessive loan fees or impose unnecessary penalties?
  • Does it offer forbearance if you were to lose your job?
  • Does it feature any additional perks, such as rate discounts or community borrower programs?

Once you’ve found one or more lenders that check off these boxes, ensure that they check off one more: Does it allow cosigners? If it doesn’t, move to the next lender on your list. Ideally, you’ll identify at least a few that meet most or all of your needs.

3. Lock in your cosigner

A good cosigner is someone you’re comfortable talking to about money. You can put a cosigner candidate to the test by asking about their credit score and income. You’ll need to know these numbers anyway to ensure they’re creditworthy enough to serve in a cosigning capacity.

Once you’ve found someone with the financial chops to be your cosigner — it could be a parent or even a friend — ensure they understand the responsibilities of the role. Chiefly, they should know they’d be on the hook for repayment if you default on the loan. They might also want to understand how serving as your cosigner could affect their ability to borrow for their own financial goals.

To get your cosigner on board, you might lay out a potential repayment schedule, proving your ability to repay the loan on your own and keeping them in the background. Alternatively, if your cosigner has agreed to help more directly with payments, it’s best to make these plans in advance.

With the more difficult talks out of the way, you might also explain the concept of cosigner release. This feature, which is offered by some (but not all) top-rated lenders, allows you to remove the cosigner from your loan agreement once you’ve made a specified number of prompt payments. If you refinance with LendKey, for example, you might be able to release your cosigner after 12 to 36 months of payments.

4. Ready your cosigner for applications

Be aware that student loan refinancing companies have different application processes for borrowers and their cosigners.

Some lenders, such as Laurel Road Bank and ELFI, ask you and your cosigner to apply in succession. You would note on your application that you’re applying with this de facto sponsor. Then you’d add their name and email address to the application.

Your cosigner would be notified via email and asked to complete their end of the application. At Laurel Road, for example, your cosigner might be asked to upload digital copies of two recent pay stubs and their driver’s license or state ID, as well as a copy of their social security card.

Others lenders, including SoFi, encourages you to apply on your own before including a cosigner the second time around. SoFi says on its website that applications which include cosigners could take one to two weeks longer to process.

Watch out for your chosen lender’s application rules. At Education Loan Refinance, for instance, you and your cosigner must apply with different email addresses. And at SoFi, your cosigner has to consent to cosign before either of you can see the interest rates for which you’ve qualified.

5. Make a final decision alongside your cosigner

Hopefully, you and your cosigner found multiple lenders offering the loan terms that fit your borrowing situation. It’s best to apply to at least a few lenders so that you can compare offers.

Although interest rate will be a top factor when choosing a lender, don’t forget about other elements. It might be important to your cosigner that the lender offers a pathway to forbearance in case you need to pause your repayment. They might also be interested in lenders offering cosigner release.

Both you and your cosigner will need to be on board with the choice of lender. Be prepared to face a decision between a lender offering the lowest rate and a lender offering greater loan protections. It might not be an easy decision, but, hey, you now have a teammate with whom you can talk it through.

What lenders look for in a cosigner

When it comes to cosigners, lenders are seeking exceptionally reliable borrowers. They’re also looking for someone who has what you lack, whether it’s a thicker credit file or more cash coming in every month.

More specifically, here are three things that lenders want to see from your cosigner:

Strong credit history and credit score

Aside from not sporting black marks like a prior bankruptcy, your cosigner should have a history of repaying their debt on time. A credit score in the 700s goes a long way, too — it might even be a necessity.

If you’re refinancing up to $150,000 at Splash Financial, for example, your cosigner must have a score of at least 720 (plus an income of $42,000 or more).

A debt-to-income ratio that’s not out of whack

It’s OK if your cosigner has debt of their own — but having too much debt is another story.

Lenders like to see a DTI of less than 40%. You can calculate your cosigner’s DTI by dividing their monthly debt payments by their monthly gross income.

Stable employment history

High income could be keeping your cosigner’s DTI in check, but that’s not the only employment factor under consideration. Lenders also want to see that your cosigner has held jobs for consistent periods and isn’t a huge risk to suddenly find themselves out of a paycheck.

Lenders need to know that if your cosigner is called upon, they could repay your debt without trouble. They also want to ensure the cosigner would be willing to do so. Your cosigner can expect to sign a host of loan documents explaining their responsibilities.

On your end, you still might be taken aback by your need for a cosigner. After all, student loan refinancing typically offers borrowers reduced interest rates and the ability to remove cosigners from old loans.

The truth is that it’s possible you’ll need this new cosigner — or another assist from your original one — to unlock the lowest of low rates. But don’t worry, even grownups need a hand once in a while.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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Small Business

How Does a Business Loan Work? Here’s What to Know

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Small business loans
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Most new businesses need an influx of funding to get going, and for many founders, using personal savings is not going to be enough. The modern landscape offers a range of financing options like venture capital from investors and crowdfunding. But when you need to fund a fledgling business and you want to keep total control, it’s time for a small business loan. Let’s take a look at a how business loan works.

Types of business loans

To apply for any of the following loan types, you’ll need to provide the following basics: your driver’s license, a voided business check, and bank statements. The descriptions will tell you what else you need to apply, as well as factors like minimum annual revenues and loan amount ranges.

Long-term loans

A term loan allows businesses to borrow funds for a specified term — usually one to five years — for uses like real estate or equipment. And it can be a significant amount, five figures up to $500,000. These are typically only an option for established businesses with very good credit and a large down payment. Long-term loans usually have the best rates, like 10% APR or less, but are the most difficult to get approved for. You’ll need to show a balance sheet, profit and loss statements, a credit score, and both business and personal tax returns.

Short-term loans

For businesses that need cash fast, these loans can provide it (from $2,500 to $250,000), but must be repaid within three to 18 months. They’re easy: very little paperwork, and even bad credit will work. However, the associated costs are higher than with long-term loans. There are times when short-term loans might make sense, like if you need extra funds to fill a big order and can then pay it off right away. You will have to supply the lender with proof of ownership, a credit score and personal tax returns.

Equipment financing

Also called heavy equipment financing, this type of financing is used when a business needs to make a major equipment purchase, such as for construction vehicles. To apply you will need your credit score, business tax returns and a quote for the equipment you wish to buy.

Invoice financing

Also called accounts receivable financing, this involves financing companies advancing cash with your outstanding invoices as collateral. This is another option that often costs more than traditional financing. When applying for invoice financing, you will need your credit score and those unpaid invoices.

SBA loans

If you don’t have luck getting a traditional business loan, options still abound in the form of Small Business Administration-guaranteed loans. The banks extend these loans because they’re less risky, as they are guaranteed by the SBA. Applicants will need to show a balance sheet, profit and loss statements, business tax returns, personal tax returns, a business plan and a business debt schedule.

Business lines of credit

A business line of credit works similar to the credit card model: it offers a business funds to borrow up to a certain amount, but they only pay interest on the amount that is borrowed. You will need to be in business a minimum of six months with a minimum of $25,000 in annual revenue to qualify. The loans are usually from $5,000 to $150,000. To apply, you’ll need to supply a balance sheet, profit and loss statements, business tax returns and personal tax returns.

Merchant cash advances

Proceed with great caution when it comes to merchant cash advances. The MCA is an unsecured offer of cash in exchange for either a percentage of future sales, or else you repay it with daily or weekly bank account debits. It’s available to companies that have been in business for at least five months, with more than $75,000 in annual revenue. You will need to supply your credit score, but it’s probably not going to be an issue, as scores of 400 and up are accepted, as well as business tax returns and credit card processing statements. The steep fees associated with this can be crippling to a small business — think triple-digit APRs, or paying $70,000 for a $50,000 MCA over three to 12 months. There are numerous downsides to the MCA, so be sure to do your research if you’re considering it, and to investigate all options open to your business.

How the business loan application process works

To ensure you’re asking to borrow the right amount, and to present the best case to your lender, you’re going to need to prepare some paperwork, sometimes including:

  • a business plan, which usually come in the form of traditional, more longer form plan, or lean startup, which may be only a page long
  • an expense sheet, where you show your startup costs including things like office space, insurance, employee salaries and inventory
  • five years’ worth of financial projections

Once these documents are gathered, the SBA recommends contacting multiple banks and credit unions so you can make an informed decision and get the best terms.

Austin Schlenker is an international and export sales strategy expert who started out in business at a young age, so he didn’t have a track record or significant credit history. What worked in his case was putting up securities to open a small business line of credit.

While his initial experience won’t necessarily mirror that of other small business owners, his overall takeaway can be widely applied: “Build a relationship [with your bank], go into a branch and introduce yourself and your business. Allow the bank to see the value in working with you.”

Consider the types of loans you will qualify for

Factors like your business’ creditworthiness, amount of time in business, and annual revenue are going to determine both the types of loans you will qualify for and the rates you are offered.

If you’re choosing an option with a factor rate, be sure you understand what it works out to in APR.

The bottom line

There are many choices for small businesses that need funds, both from traditional banks and online lenders to infuse funds to a small business. This means that there are many different ways to the question, “how does a business loan work?” Knowing the ins and outs of your options will help you narrow down those choices and apply only to the ones that are a good fit for your situation.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Colleen Kane
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Colleen Kane is a writer at MagnifyMoney. You can email Colleen here

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Small Business

Best Equipment Financing Companies: Where to Find Them in 2019

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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You may have the best team in place to run your small business, but you won’t get far without the equipment you need to operate. Whether it’s office furniture, software or heavy machinery, these pieces can be essential to your success.

If you don’t have enough cash on hand to purchase equipment outright, you can turn to equipment financing to help with the transaction. Small business owners can find equipment financing options at their local bank and equipment financing companies, many of which operate online.

When shopping for equipment financing, LendingTree can be a useful starting point. You can compare leases and loans from several equipment financing companies to help you figure out which is best for you. (LendingTree is the parent company of MagnifyMoney.) Before you get started, we’ll help you understand why you might need equipment financing and what funding options are available to you.

What is equipment financing?

Whether buying something new or replacing an outdated piece of equipment, small business owners typically do not have money on hand to cover the purchase, said Michael Aversa, partner and head of the Private Business Services Group at advisory firm EisnerAmper. To finance equipment, you would need to obtain a lease or a loan from a traditional bank or an equipment finance company. No matter which one you choose, the equipment itself usually serves as collateral. If you fall behind on payments, the lender would take the equipment. With any type of business loan, collateral or a personal guarantee is typically required, reducing the risk to the lender.

Where can you find equipment financing?

Finance companies often specialize in certain types of equipment and they may be more willing to lend to you than a bank, said Mike Toglia, CEO and executive director of the National Equipment Finance Association. Financing companies usually have different eligibility criteria than banks and they’re often less strict.

“They’re willing to advance more money against the collateral because they’re more comfortable with the collateral,” Toglia said.

Financing through the equipment vendor. Most small business owners have the piece of equipment picked out before they go to their bank or a finance company to seek funding, Toglia said. The equipment vendor may offer a financing package, just like a car dealership would offer financing when you purchase a new car. However, you’re free to obtain financing from any institution or company of your choice, Toglia said.

“A small business owner should look around and see what else they can get,” Toglia said. “They should be shopping for expertise and competitive rates.”

Equipment loan vs. lease

Do you want to own a particular piece of equipment or would you be better off leasing it instead? Here’s how to understand the difference.

Equipment loan

A loan typically requires a down payment, usually 10 to 20% of the total cost of the equipment. You would finance the remaining balance and pay your debt with interest for a specific period of time.

Because equipment is used as collateral, equipment loans tend to have relatively low interest rates and manageable payments. Terms typically range from six months to 10 years, making a loan a good option if you will be using your equipment for a long time. But if the equipment quickly becomes obsolete or needs to be replaced, you would still have to pay the loan in full.

To qualify for an equipment loan, you need to have good personal credit. In addition to a down payment, you may have to pay an origination fee, application fee or appraisal fee, depending on your loan agreement. The fees would depend on the loan offering from a bank or online lender.

Equipment lease

An equipment lease from a financing company may be a good option if you need assets that don’t have a long shelf life. An equipment lease typically does not require a down payment, plus monthly payments are usually lower than those of an equipment loan. You may have the option to purchase your equipment at the end of the lease term for residual value or trade out equipment for a newer version in the middle of your contract.

The interest rate would be built into the total lease amount, and high rates tend to make leases more expensive overall than term loans, Aversa said. However, you wouldn’t have to meet high credit requirements to qualify for a lease like you would if you were seeking a loan and you wouldn’t be stuck with a potentially obsolete piece of equipment.

“There are a lot of companies that don’t have bank financing and the lease is the only way to go because their credit isn’t good enough,” Aversa said.

Two types of equipment leases

One of the main differences between the leases is how you record them in your books, Aversa said. A capital lease would appear as an asset on your balance sheet, while an operating lease would not appear on your balance sheet.

  1. Operating lease: These are generally used for short-term leasing. They don’t involve transfer of ownership at the end of the lease term, making them similar to renting, which is why they would be treated as an operating expense, not a loan, on your balance sheet.
  2. Capital leases: These are typically used to lease longer-term assets, and ownership can be transferred to the lessee at the end of the term. A capital lease could also present the option for the lessee to purchase the equipment at the end of the term for a discounted price. Because a capital lease involves the transfer of ownership, it is considered a loan on your balance sheet and you would have to record interest expenses.

However, rules from the Financial Accounting Standards Board that go into effect in 2020 will require all leases to be recorded on balance sheets. The change could lessen the appeal of equipment leases compared with loans, Aversa said. “That could have a dramatic impact on a lease versus buy scenario.”

Best equipment financing companies

Celtic Commercial Finance

Celtic Commercial Finance offers equipment leases ranging from $100,000 to $10,000,000. Leases spanning 24 to 120 months are available to finance a variety of equipment, including machinery, software and computers. Celtic Commercial Finance issues operating leases and capital leases, as well as several specialized leases and purchase/leasebacks. Celtic works with businesses that have $20 million to $250 million in annual revenue and at least three years in business. No down payment is required but Celtic does ask for one month’s payment upfront, as well as a documentation fee. You can submit an application online.

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Crest Capital

Crest Capital offers several equipment loans and leases. Many Crest Capital leases come with purchase options to give you full ownership of your equipment at the end of the lease term. Crest Capital also offers flexible payment plans. Crest Capital provides 100% financing for transactions between $5,000 and $500,000. Applying for a Crest Capital loan or lease won’t impact your personal credit and you could be approved in a matter of hours.

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National Funding

National Funding offers up to $150,000 in equipment leasing for new and pre-owned assets. National Funding requires just six months in business and a personal credit score of 620, as well as a quote from your equipment vendor. Businesses owners could obtain a lease for a range of items, from construction equipment, fitness equipment, office equipment and commercial vehicles. For customers who pay off their balance early, National Funding takes 6% off their total remaining balance.

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Reliant Funding

Reliant Funding helps business owners lease new or used equipment, including software, work vehicles, office furniture and other fixtures. Borrowers can apply online and could be approved within one month. After approval, it takes three to five days to receive funding. Reliant Funding considers the type of equipment and your credit rating when determining the cost of your lease. Reliant Funding finances between $5,000 and $500,000 and works with businesses in a range of industries, including construction, restaurants, health care and transportation.

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CIT Equipment Finance

CIT Equipment Finance funds small-ticket transactions up to $500,000, as well as larger deals ranging from $3 million to $100,000 million. CIT offers equipment financing for small businesses, equipment manufacturers, franchisers and commercial entities. CIT’s core markets are technology, office imaging, health care, industrial and franchise finance. The company’s loan programs include capital leases, operating leases and loans, and are tailored to the specific borrower and their industry.

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What you need to apply

When shopping for equipment financing, it’s important to do your due diligence to make sure you’re choosing a trustworthy finance company if you’re not borrowing from a bank. After you submit an application, the company will also make sure you can be trusted as a borrower during the underwriting process, Aversa said.

“Depending on how your company has done and is doing, it can a be a very straightforward or very difficult,” he said.

In addition to your application, the finance company will likely want to see a few documents:

  • Business license, Employer Identification Number or statement of incorporation to prove ownership
  • Profit and loss statements
  • Recent tax returns
  • Business plan
  • Personal or business credit report

Business owners should think about the future when applying for equipment financing, Toglia said. You’ll likely need additional equipment in the future, and if you maintain a good relationship with the finance company, you would have a better chance of being approved again next time, he said.

“Look for a finance company that can help with your equipment needs today and tomorrow,” Toglia said.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Melissa Wylie
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Melissa Wylie is a writer at MagnifyMoney. You can email Melissa at melissa@magnifymoney.com

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College Students and Recent Grads

Can You Settle Student Loan Debt for Less Than You Owe?

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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If you fail to qualify for student loan forgiveness, discharge or cancellation, you might have already considered what might seem like the next best strategy: offering your lender less than what you owe and hope that suffices.

However, student loan settlement isn’t easy, and it isn’t right for every borrower.

Can you settle student loans?

Unlike loan forgiveness, no forms of debt settlement erase your balance. By settling, you’d negotiate with your lender, loan servicer or collection agency to pay a majority percentage of your outstanding dues.

You would also typically have to be in default — that is, 270 days late on federal loans, or usually 120 on private loans — to be eligible for settlement. If you’re not in default, it’s wise to consider better alternatives, such as:

  • If you have federal loans: Switch your federal loans to an income-driven repayment plan.
  • If you’ve fallen on hard times: Apply for deferment or forbearance to pause payments.
  • If you have good credit:Refinance your total education debt into a consolidated loan with a lower interest rate.

But if you’re already in default, then the short answer is yes, you can settle student loans. You’ll need a willing negotiating partner on the other side of the table, however.

When you can’t settle student loan debt

Settling student loan debt becomes impossible if you’re ineligible. Here are three circumstances that could disqualify you right off the bat:

  1. You’re attempting a “strategic default” — that is, you’re defaulting purposely in hopes of settling. It’s a risky move and could harm your credit score. Plus, your lender or collection agent will likely discover your ploy when they review your finances.
  2. You’ve already been taken to court, either by the Department of Justice or your private lender. At that point, hiring a student loan lawyer could help you review your options, bankruptcy being among them.
  3. You have enough cash to pay off your debt in one fell swoop. It’s an unlikely scenario if you’re in default, and as with a strategic default, your lender or collections agency will learn about your wherewithal to repay your debt when reviewing your settlement offer.

How to settle student loan debt

When you’re attempting to settle student loan debt, start gathering all records connected to your repayment. If you receive a threatening letter from a collection agency, for example, file it away for safekeeping.

Once you have all your documents, you might consider hiring a student loan lawyer to help negotiate a settlement or look at other options. A professional would tell you there are very different processes for settling federal and private loans.

Federal loan settlement

If you have defaulted on your loans, the government probably won’t be inclined to offer you a settlement or accept your proposal for one. That’s because it could take a variety of steps to collect your dues anyway, including:

  • Garnishing your wages or Social Security benefits
  • Withholding your income tax return
  • Revoking your professional licenses

The Department of Education (DOE) considers settlement to be a “last resort,” publishing little guidance on how to qualify.

That said, the DOE does empower its 18 collection agencies to settle or compromise on your balance, and even to waive collection fees.

Three types of standard compromises include:

  1. Pay the principal balance, plus outstanding interest, minus collection fees
  2. Pay the principal balance and half of any outstanding interest
  3. Pay at least 90% of the principal and any outstanding interest

For a nonstandard compromise of anything less — say, 70% of the balance plus interest — the agency might have to run your offer by the Department of Education. Also consider that collections agencies work on commission, so they aren’t motivated to offer discounts.

If you’re able to swing a settlement, expect to pay the agreed-upon lump-sum amount within 90 days. You might be able to repay it in installments, but you would have to do so before the end of the government’s fiscal year on Sept. 30, according to FinAid.

A good place to get started is the DOE’s Default Resolution Group, which can connect you with your collection agency. If you’re seeking clarification before pursuing a settlement, consult the Federal Student Aid Ombudsman Group first.

Private loan settlement

If you’re hoping to settle private student loans, keep in mind that your lender can’t get its hands on your paycheck or other funds as easily as the government can. It must first drag you into the courtroom.

Still, private lenders hold leverage in settlement negotiations. Knowing that your debt would be difficult to discharge via bankruptcy, they likely won’t settle for less than a significant percentage of your outstanding balance.

You could tilt the leverage in your favor if your debt is far from new. Your state’s statute of limitations for the collection of unpaid debts might have already passed, for example.

“Once the statute of limitations passes, the borrower can’t be held legally liable for repayment of the debt through the court system,” said Jay Fleischman, a lawyer specializing in education debt. “In some states, expiration of the statute of limitations is a defense to a collection action. In other states, expiration of the statute of limitations is a bar to filing a collections case.”

You can learn more about your state’s statutes of limitation in this MagnifyMoney post.

If your collection agency is receptive to a settlement, Fleischman recommends you make the first dollar-and-cents offer. This way, you control the “timing” of the process. Some experts, however, argue that you should wait to hear your lender’s initial number, especially if you’re negotiating with little experience. You could make the mistake of offering too little, or worse, offering too much.

Whether you’re looking to settle federal or private loans, keep in mind that falling short of a final agreement might not be a total failure. You and your lender, servicer or agency might at least agree on adjusting your repayment plan to make it more affordable. Then you can start to work your way out of default.

Consider the costs of student loan settlement against the reward

Knowing what you know now, student loan settlement might sound a lot less appealing. Even if you’re successful, you’ll have to go through the painstaking process of negotiating with your creditor — and handing over a significant percentage, if not all, of what you owe.

If settling your student loan debt still sounds like the best step for your situation, however, consider two more potential drawbacks:

  • It could harm your credit: By defaulting and potentially having a loan in collections, your credit report was already impacted. By settling your debt, your credit score could fall further — unless you negotiate with your creditor to report your payoff as “paid as agreed” or, better yet, to remove your late payment history altogether.
  • It could increase your income tax: Uness your remaining debt still outnumbers your assets, expect to receive IRS Form 1099-C for any settlement of $600 or more. And it never goes without saying: It’s always wise to consult a tax professional before making a decision.

If you can tolerate all that, you’re left with the main attraction of student loan settlement — zeroing out your balance once and for all.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Andrew Pentis
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Investing

Understanding the Different Types of IRAs

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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Chances are you know how important it is to save for retirement — but you’re still behind. A recent MagnifyMoney study found that the median retirement savings for households headed by 30-somethings was about $23,000 — far below the recommended amount.

If you’re one of the many people with insufficient retirement savings, it’s important to explore all the retirement options available to you. That’s why it’s essential to know about retirement vehicles like 401(k)s and individual retirement accounts (IRAs).

What is an IRA?

The IRA was created by the Internal Revenue Service (IRS) to give individual investors another way to save for retirement. Rather than socking away your money in a savings account, you can contribute to an IRA, which allows you to take advantage of market gains, helping your money grow faster. There may even be some tax benefits to using an IRA.

There are several types of IRAs available:

  1. Traditional IRA
  2. Roth IRA
  3. SEP IRA
  4. SIMPLE IRA
  5. Rollover IRA
  6. Spousal IRA
  7. Nondeductible IRA
  8. Inherited IRA
  9. Education IRA

6 popular IRA types

While there are many different types of IRAs, you probably won’t use all of them. In fact, you’ll most likely use just one or two of the most common types in your lifetime. Below are six of the most popular IRA types available.

1. Traditional IRA

  • Who it’s best for: Ideal for workers who don’t have access to an employer-sponsored retirement plan.
  • Contribution limits: In 2019, you can contribute up to $6,000 per year (or $7,000 if you’re 50 or older).
  • Tax treatment: If you aren’t covered by a retirement plan at work, you can deduct the full amount of your contribution on your tax return.

A traditional IRA is one of the most common forms of IRAs. You can open and contribute to a traditional IRA until you reach the age of 70 and a half. You can open one as your sole retirement vehicle — as some self-employed people do — or as a supplement to a 401(k) plan. There’s no income limit, so you can contribute to a traditional IRA regardless of how much money you make.

According to Paul T. Joseph, an attorney and certified public accountant, a traditional IRA offers substantial benefits.

“The traditional IRA allows you to invest money into a tax-deferred account, which you can invest and allow to grow tax-sheltered until you withdraw the money or are compelled to withdraw the money at age 70 and a half,” said Joseph. “You receive a tax benefit upon the deposit into the account, and the account grows tax deferred until withdrawal.”

2. Roth IRA

  • Who it’s best for: Ideal for low- and middle-income workers.
  • Contribution limits: In 2019, you can contribute up to $6,000 per year (or $7,000 if you’re 50 or older).
  • Tax treatment: Funds are contributed post-tax, which means the withdrawals are not taxed in retirement.

Roth IRAs can be powerful savings tools, but they differ from traditional IRAs. When you open a Roth IRA, contributions are made after you pay taxes on the money. While you don’t get the upfront tax benefit, Roth IRAs offer a unique perk once you retire.

“When you decide you want to withdraw money from the Roth IRA account, any earnings made in the account are tax-free,” said Joseph. “The investment must stay in the account for at least five years to qualify. With a Roth IRA, you are not compelled to begin withdrawals at age 70 and a half.”

Not everyone can contribute to a Roth IRA. As of 2019, you can contribute the full amount only if you make under $193,000 and file a joint tax return (or are a qualifying widow or widower). If you make more than $193,000 but less than $203,000, you can contribute a reduced amount. If you make over $203,000, you’re ineligible for a Roth IRA altogether.

3. SEP IRA

  • Who it’s best for: Business owners who want to offer their employees a retirement plan as well as freelancers.
  • Contribution limits: In 2019, employers can contribute up to 25% of compensation or $56,000, whichever is less. Self-employed individuals can contribute up to 25% of their net earnings from self-employment (not including contributions for themselves), as much as $56,000.
  • Tax treatment: Contributions are tax-deductible.

A simplified employee pension (SEP) IRA is a tax-deferred retirement plan for small-business owners, self-employed individuals and freelancers. Generally, SEP IRAs are good accounts for business owners who want to contribute to their employees’ retirements. With these accounts, the employer contributes on the employee’s behalf.

4. SIMPLE IRA

  • Who it’s best for: Small-business owners who want to make tax-deferred contributions to an employee’s plan.
  • Contribution limits: In 2019, employers can contribute up to 3% of the employee’s compensation as an employer match, or 2% of the employee’s compensation if the employee doesn’t contribute. The employee contribution limit for 2019 is $13,000.
  • Tax treatment: Contributions are tax-deductible and required every year.

A savings incentive match plan for employees (SIMPLE) IRA is for small-business owners — businesses with 100 employees or fewer — who want to offer a tax-deferred retirement plan. A SIMPLE IRA requires contributions from the employer, which can be made on their own or to match an employee’s contributions.

Employees are eligible if they received at least $5,000 in compensation from the employer in any two preceding years and are expected to earn at least $5,000 in the current year.

5. Rollover IRA

  • Who it’s best for: Employees with 401(k) accounts from past employers.
  • Contribution limits: The same as the contribution limits for traditional IRAs: up to $6,000 per year in 2019 (or $7,000 if you’re 50 or older). You can roll over the full amount of your 401(k).
  • Tax treatment: Roll over your account balance, and all future contributions are tax-deferred.

Deciding exactly what you should do with a 401(k) when you leave a job can be tricky. Cashing it out causes you to lose money, so a better idea is to roll it over into an IRA. With this approach, you transfer the 401(k) funds into an IRA. The new rollover IRA allows you to keep the full balance and continue to contribute to your account. You can complete a rollover online within minutes through online investment companies.

6. Spousal IRA

  • Who it’s best for: Nonworking spouses.
  • Contribution limits: You can contribute up to $6,000 per year in 2019 (or $7,000 if you’re 50 or older).
  • Tax treatment: Contributions are tax-deductible.

It can feel like your retirement options are limited if you aren’t working. The IRS allows nonworking or low-income spouses to contribute household income into an IRA to save for the future.

“In some situations where a married couple only has one party earning income, they are still able to create a spousal IRA and place money into the IRA for the benefit of the nonworking spouse,” said Joseph. “Provided you don’t exceed your earned income, you can essentially double your contributions into an IRA through the use of a spousal IRA.”

A spousal IRA can be either a traditional IRA or Roth IRA, depending on your preference and income. Depending on the account you choose, you can deduct the amount you contribute and watch the money grow tax-deferred over time. It’s a powerful option that can help your retirement nest egg grow as a couple.

How to open an IRA

Opening an IRA is a relatively easy process. To get started, identify which type of IRA is best for you. Then choose a bank or financial institution to hold your investments. Companies like Vanguard, Fidelity, TD Ameritrade and Betterment all offer IRAs.

Depending on the company you choose, you may need anywhere from $500 to $1,000 to open an account. Once you open the account — which takes just a few minutes online — you can choose your mix of investments to design your portfolio.

Not sure which investments to choose? Learn about mutual funds and ETFs and which is best for you.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Kathryn Tretina |

Kathryn Tretina is a writer at MagnifyMoney. You can email Kathryn here

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Investing

10 Questions to Ask a Financial Advisor

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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If you’re considering hiring a financial advisor, you’re ahead of the game — almost half (45%) of adults ages 40 to 59 would rather make an appointment with a dentist than with a financial planner, according to a survey from AARP.

But getting your financial ducks in a row is a good idea. According to one study, perceived financial well-being — feeling that you’re on the right track and secure in the direction you’re headed — is a key predictor of overall well-being. And consulting with a financial professional can help you get there.

10 questions to ask a financial advisor

A financial advisor is a professional who can work with you to manage your investments or advise you on your financial life in general, from retirement savings and college funding to life insurance and estate planning. Choosing the right financial planner for you will depend on your particular needs and your planner’s individual style, so it’s important that you ask questions before you settle on a pro.

Here are some suggestions of what to ask a financial advisor.

1. Are you a fiduciary?

Being a fiduciary means a financial planner always must put the best interests of their client above their own. That means acting prudently and avoiding conflicts of interest, among other things. When someone is a fiduciary, they’ve essentially agreed to offer you their best advice.

“I think that’s important,” said Howard Pressman, a financial planner in Vienna, Virgina. “A fiduciary is sort of at the very top of what’s owed to the client.”

2. What licenses or certifications do you have?

There are a variety of ways a financial planner can be trained, and it’s important that you understand what training yours has received. You might find, for instance:

  • CFA: chartered financial analyst (from the CFA Institute)
  • PFS: personal financial specialist (from the American Institute of Certified Public Accountants)
  • CFP: certified financial planner (from the CFP Board)

Many experts recommend finding a CFP, a designation that requires thousands of hours in education, testing and field experience to acquire.

“I think the CFP designation, for financial planning, is kind of the pinnacle of what you’re looking for with someone,” Pressman said. You can verify someone’s designation by checking with the issuing organization.

3. What services do you offer?

Some financial planners offer planning services, which means looking at your whole financial picture — assets, liabilities, insurance expenses and employee benefits, for instance — and helping you make a plan. Others offer investment management only, which means managing your investment portfolio without looking at the rest of your life.

“Certainly investment advice is part of a good financial plan, but we also need to be discussing risk management, things like life insurance, retirement income planning or retirement savings, saving for goals, estate planning, often tax planning,” Pressman said. “Things like that all need to be factored into what a financial plan is.”

4. How will you be paid?

Some advisors charge by the hour, while others charge a percentage of your investment portfolio each year or a fixed fee based on your portfolio’s value. Some planners also charge a flat fee for certain services, such as an annual checkup or portfolio overview. Some (nonfiduciary) planners receive commissions for recommending certain products.

“There are many different models by which financial planners charge their clients, and I don’t necessarily think any one is better than the other,” Pressman said. “But moreover, does the consumer understand how this person is being compensated and all the ways this person is being compensated?”

The average fee for those charging a percentage of assets under management is 1.02% for a $1 million account, according to a 2017 AdvisoryHQ study. The number gets slightly higher for smaller accounts (1.12% for a $100,000 account, for instance) and slightly lower for larger accounts. The average fee for those charging by the hour is typically $120 to $300 per hour, depending on where you live.

5. What is your typical client like?

Some advisors specialize in certain groups, such as people with portfolios worth at least $200,000 or people nearing retirement. You may be better off working with someone who understands the stage of life you’re in, so make sure your planner works with clients like you. If a planner tells you they typically work with clients who have six-figure assets and you’re 25 and just starting out, you may want to search for someone who’s more familiar with the issues you’re facing.

6. Why did your last client leave you?

The relationship between a planner and client should be a personal one, but it doesn’t always work out. It’s useful to hear why someone may have left the advisor’s services — and to know that your advisor is authentic enough to tell you about it.

“I had one client who decided to leave me because he felt that I was too conservative,” said Marguerita Cheng, a financial planner in Gaithersburg, Maryland. “I feel that if you are too aggressive with clients’ money early on and they lose money, it’s very hard to rebuild trust.”

In general, asking advisors this question will help you get a feel for their honesty and forthrightness. If a planner goes on the defensive or seems like they’re not being square with you, you may want to move along.

7. What’s your investing philosophy?

Each financial advisor has their own preferred style of investing, and you should make sure it fits yours. Cheng, for instance, doesn’t accept money for investment management unless she also can do planning for the client. And while she participates in both passive and active investing, she doesn’t do a lot of stock picking. “I don’t think I can do a good job for you managing your money if I don’t understand your goals,” Cheng said. “You’ve got to make sure that’s what you want.”

If your planner likes value investing — searching for equities they think are underpriced — and you’re a fan of a more basic approach to your portfolio, you have to decide if that’s the best place for you. Similarly, if you’re looking for someone who can guide you on socially responsible investing, you’d want someone who is familiar with environmental, social and governance (ESG) funds and knows how to help you invest in them. If you don’t agree with how a planner approaches investing, look elsewhere.

8. How did your clients fare during the downturn?

It’s helpful to hear how someone’s investment approach worked during the most recent recession, as there’s always the chance of another market dip. This question can help you get a read on what that planner learned (if anything) during the market fall and how they’re safeguarding clients against something similar happening in the future.

One study found that the vast majority of financial planners report some level of post-traumatic stress as a result of the recession, so if your planner can’t easily verbalize a strategy for weathering the next downturn, that could be a red flag.

9. Who will I be working with?

Sometimes you’ll have an initial consultation with one advisor at a firm and find yourself handed off to someone else for your regular planning needs. Or you’ll be handled by a different person during each check-in, depending on everyone’s workload.

Gauging an advisor’s response to this question is entirely personal: If you don’t care whom you work with, it doesn’t really matter. But if you like the planner you’re interviewing and you’d like to stick with them, you may not want to hear that you’ll be handed off to someone else at the firm.

10. How do you like to communicate?

Does your advisor prefer to speak to you on the phone, or will they email? Do they mind if you text them? How often will you hear from them? Make sure your communication style will complement the advisor’s.

“I have some clients I don’t really hear from, but they’ll text me,” Cheng said. “I just want people to be comfortable with their money and working with their advisor. That’s why it’s OK for them to send a quick text message. True story: Someone once texted, ‘I’m buying a Tesla. How do I pay for this?’”

In the end, it’s also important to trust your gut. Your planner may give satisfactory answers to all these questions, but you still might not have the best feeling about them — and that’s fine. “We, as humans, have very good gut instincts, but we tend to ignore them at times,” Pressman said. “It doesn’t matter if a friend referred you or if you read great things about this person. There are enough good financial planners out there that if this one isn’t hitting all the boxes, move on.”

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Kate Ashford |

Kate Ashford is a writer at MagnifyMoney. You can email Kate here

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Investing

Roth IRA vs. Roth 401(k)

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

young man planning for retirement
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We’ve said it before, and we’ll say it again: Saving for retirement is one of the most important financial goals you can tackle. One of the best ways to maximize your nest egg is by taking advantage of tax-free interest — and Roth investment accounts allow you to do just that.

Although Roth contributions won’t get you a tax break today, you do get to withdraw the money without paying taxes later. That means you’ll fully benefit from all the growth (compound interest) and keep every cent your money earns while invested.

Depending on your personal financial circumstances, however, you may be better served by either a Roth IRA or a Roth 401(k) — or by skipping the Roth option altogether and investing in a traditional retirement plan instead.

Roth or traditional: which is right for you?

Before we dive into the definition of each of these Roth accounts, let’s back up a step. How do you tell if a Roth or a traditional retirement account is best suited for your personal financial goals?

The difference between a Roth investment account and a traditional account all comes down to timing. You’re going to pay taxes on your contributions either way, but the question is, when?

In a traditional account, your contributions are tax-deductible and don’t count toward your annual income tax in the year they’re made. That means you get a nice tax break today but will pay taxes on your withdrawals as you make them later. And since the invested funds grow, that means you’ll also pay taxes on your earnings.

In a Roth account, on the other hand, your contributions are taxed now, but you get to withdraw the money tax-free later. That means you’ll get to keep the full amount of the earned through the market growth your investments see over time, which can make for a hefty retirement bonus.

A Roth account can be especially beneficial if you expect to be in a higher tax bracket at the time of your retirement than you are currently. For example, if you’re just starting your career and earning an entry-level salary, it makes more sense to pay the lower tax percentage today so you can skip paying a higher percentage later. Alternatively, higher earners may end up migrating to a lower tax bracket once they’re on a fixed retirement income, which means choosing a traditional, pretax retirement account could make more financial sense. Here’s more information on how to tell which type of retirement account will work best under your individual circumstances.

What is a Roth IRA?

A Roth IRA is a personal retirement account whose contributions are taxed today but withdrawn tax-free later. For 2019, you can contribute up to $6,000 per year to this type of account, or $7,000 including the $1,000 catch-up contribution for those aged 50 and over.

Roth IRAs carry some specific benefits that Roth 401(k)s do not. For instance, Roth IRAs are not subject to required minimum distributions, or RMDs, which means you can let your money grow indefinitely for as long as you live. Additionally, since you’ve already paid taxes on the money, you can make withdrawals from your Roth IRA contributions at any time without incurring additional taxes or penalties. (The growth you earn, however, would be subject to income tax and a 10% early withdrawal fee if you’re under the age of 59 and a half.)

Roth IRAs have a much lower maximum contribution limit than Roth 401(k)s, and income limits may keep you from participating if you make more than $137,000 per year (or $203,000 per year if you’re married filing jointly). As self-directed retirement accounts, IRAs also are ineligible for the employer match feature that can help make 401(k) plans so profitable.

When a Roth IRA makes sense
A Roth IRA is a good choice if your company doesn’t offer a 401(k) or if the company-sponsored plan leaves something to be desired. Contributions can be withdrawn at any time, causing some people to use a Roth 401(k) as a kind of emergency fund — although this is not an advisable strategy, according to Malik S. Lee, a certified financial planner with Felton & Peel Wealth Management in Atlanta.

Taking money out of your account means you’ll lose out on the benefits of compound interest, and since growth is still taxable, your financial paperwork can become a total mess if you don’t maintain proper records of your contributions.

What is a Roth 401(k)?

A Roth 401(k) is a company-sponsored retirement plan that allows you to make tax-free withdrawals on post-tax contributions. It’s a good idea to take advantage of company-sponsored Roth 401(k)s, especially if your employer matches your contributions. Even a 1% match means you’re earning free money toward your retirement at no additional cost to you.

Roth 401(k)s provide the opportunity to maximize your retirement fund with employer match programs and other nonelective deferrals. You can participate in your company’s Roth 401(k) no matter how much money you earn per year — which isn’t an option with Roth IRAs, as they do have an income threshold.

When a Roth 401(k) makes sense
There are some instances where it may make sense to skip your employer’s plan altogether. For instance, if the 401(k) carries a high management fee, it may end up costing you thousands of dollars in the long run. It’s also important to note that all employer match funds on Roth 401(k) contributions will be put into a traditional 401(k) to grow pretax.

Another consideration to keep in mind with a Roth 401(k) is that it may be subject to company- or custodian-specific limitations. For example, your Roth 401(k) may have restrictions on how often you can adjust allocations and contributions, which doesn’t apply to a self-directed account like an IRA.

Roth IRA vs. Roth 401(k): how they compare

Roth IRA vs. Roth 401(k) for 2019

Roth IRA

Roth 401(k)

Income Qualifications

Income limit of $137,000 (single) or $203,000 (married)

No income limit

Contribution Limits

$6,000 limit (or $7,000 including $1,000 catch-up contribution for savers aged 50 or over)

$19,000 in personal income; $56,000 including nonelective or employer contributions ($25,000 and $62,000 including $6,000 catch-up contribution for savers aged 50 and over)

Required Minimum Distributions

No requirement to take distributions during the account holder’s lifetime

Distributions must start no later than age 70 and a half unless the account holder is still working and not a 5% (or more) owner of the sponsor company

Withdrawal Requirements and Terms

Withdrawals of contributions and earnings are not taxed as long as the account has been held for five-plus years and the qualified distributions are made:

  • Because of disability or financial hardship

  • On or after the account holder’s death

  • On or after the account holder’s attainment of age 59 and a half

May also withdraw a qualified distribution for a first-time home purchase

Same withdrawal requirements and terms as a Roth IRA but no specific exception for first-time home purchases (although some plans may allow you to take out a loan against your 401(k) for this and other purposes)

Employer Match Availability

No

Yes

Where to Open Account

Any brokerage firm

Through your employer

Both Roth IRAs and Roth 401(k)s can help you take full advantage of compound interest to ensure you have an ample nest egg for retirement.

Depending on your specific financial circumstances and earnings, one account may make more sense than the other. If you’re looking to save aggressively, you might benefit from an investment account with a higher contribution limit, such as a 401(k). If your company doesn’t offer a 401(k), however, a Roth IRA might be your best option.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Jamie Cattanach
Jamie Cattanach |

Jamie Cattanach is a writer at MagnifyMoney. You can email Jamie here

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