Your bank doesn’t simply have to be a place where you make transactions and go about your day. If you want to make the most out of your banking experience, think of your bank less as a place and more as a tool.
“What does that mean?”
Well, bankers are equipped with all the banking knowledge you need to help you make better financial decisions. So in a sense, they can double as financial advisors to help you with any questions you may have.
However, not all banks will become this personal. You’ll first want to choose a bank, such as Cornerstone Bank, that will act as a guide rather than an institution that’s only in it for the money.
If you’re not sure where to start, here are a few questions you should ask your banker to take full advantage of the expertise he or she offers.
Questions to ask a banker: Personal Banking
1. Should I have more than one bank account?
The short answer? Yes, you should strive to have more than one bank account! However, the question lies in how many bank accounts. That answer depends on two main factors: (1) your personal financial situation and (2) how you want to organize your money. Remember, banking is supposed to make your life easier, not harder. So you probably don’t want to open a bank account for every little thing. Imagine trying to keep up with dozens of bank accounts; that could cause quite the headache.
For a lot of people, we often say one checking account and one savings account works just fine. It’s a simple way to put some money aside while keeping the majority of your spending money in one account. However, always speak to your banker about your goals and where you want to be. In some cases, you may want multiple savings accounts or even multiple checking accounts.
If you’re not sure how to start saving money, that’s okay! You can also talk to your banker about strategies to put aside small amounts of money (based on your budget, of course!) to slowly build up your savings.
2. Which savings account is right for me?
Once you’re ready to open a savings account, the next question to ask a banker is which kind of savings account will give you the most benefit. The main factor that comes into play here is why you are opening a savings account. Are you saving for your child’s college tuition? Do you want to jumpstart your retirement plan? Are you planning on making a large purchase down the road?
If you want your funds to be more “liquid,” meaning you can easily access your money at any time, a traditional personal savings account might be best. Traditional savings are a great way to put money aside without worrying about not having access to it for emergencies. Plus, the minimum opening balances are typically a lot smaller than other savings options.
Another savings option is a certificate of deposit (CD). CDs are another great saving option, but they do require you to stay away from your money for a certain amount of time. These “terms” can range anywhere from a few months to a few years, depending on what you choose. As a general rule, the longer the term, the higher the interest rate. That means, the longer you keep your money in a CD without touching it, the more you’ll receive on your return. Once your CD matures, you can take out the full amount without worrying about incurring any fees.
CDs work great for college tuition planning, especially if you start in early childhood. As your child gets older, the amount in the CD will increase (thanks to interest) even if you don’t put in future deposits. You can also get a short-term CD, which people often use to save for large purchases or even dream vacations.
We recommend CDs for people who have a little more leeway and stability to put money aside without fear of needing it in the near future. You should also expect to start off with a larger initial deposit amount than a personal savings account. For example, at Cornerstone Bank, our personal savings accounts require a $100 opening balance while our CDs require an $1,000 opening balance.
For retirement savings, you may want to look into an individual retirement account (IRA). Unlike a 401k, an IRA account goes directly through your bank instead of your employer. Many times, a 401k isn’t enough to reach your retirement goals, and an IRA can help fill in those gaps.
3. Do I need a personal loan?
Even with a savings account, there comes a time when you may need a personal loan for extra funds. There are a variety of reasons people seek out personal loans such as home renovations, buying a new car, or sending their child to college. However, understanding whether or not you need a loan is key to properly managing your finances.
The first thing you want to consider is your goal; then, whether or not the loan aligns with that goal. Remember that a loan isn’t a quick fix that will solve all your problems; you will still have to pay the money back. If monthly payments from your loan are easier to manage than trying to hash out thousands of dollars at once, then applying for a loan could be your next step.
Talking to your banker can help you determine your goal, how a loan can help, and the amount of money you should take out (without hurting your budget). The great thing about taking advantage of the advice of your local banker in Kansas City is that you don’t have to go through the process alone. Taking out a personal loan is a big deal, and you should want the help of an expert to guide you along the way.
4. When should I apply for a mortgage?
A mortgage works a little differently than a personal loan since they’re exclusive to buying a home. Oftentimes, you won’t be able to borrow more than a certain percentage of your annual gross income. So you definitely want to talk to your banker to help you get the most out of your mortgage.
Before you apply for a loan, you’ll want to work on the following steps:
- Improving your credit score
- Obtaining your credit report
- Finalizing how much money you need
- Getting preapproved for that amount
- Going through the types of mortgages with your bank
- Preparing necessary paperwork
We recommend that you get preapproved for a home loan before you start looking for houses. This allows you to know what your budget will be and the types of homes you can afford. You don’t want to find your dream home, only to find out you wouldn’t be able to get a loan for it. As a bonus, sellers often prioritize buyers who are already pre approved, which can help you look more competitive.
5. What are some helpful tips to manage my credit score?
It goes without saying that your credit score is crucial when it comes to any loan you pull out. Fortunately, your banker has a close ear to the banking industry and insight on your personal finances. As a result, he or she can talk to you about your spending habits and how you could boost your credit.
Here are a few of our general tips to help you manage your credit:
Pay your balances on time. It may be an obvious answer, but paying your balance on time each month is super important. Whether it be a credit card, mortgage, or personal loan, you should strive to never make late payments. Typically, a late payment will show on your credit 30 days after the due date.
Go beyond the minimum. Along with on time payments, it’s always better to pay more than the minimum whenever you can. Since interest can accumulate, paying larger amounts helps actually reduce your balance instead of staying in a cycle.
Check your credit score. Guessing what your credit score could be doesn’t do much help. That may only lead you to believe your credit is in good standing when it’s not. There are a variety of free tools available on the internet, but a key question to ask your banker is which tools are trustworthy.
Only borrow what’s necessary. All too often, people accept loans for way too much money, leaving them with balances they can’t realistically pay off. Whenever you get a loan, only borrow the amount you need, which may not necessarily be the same amount as what you want.
Questions to ask a banker: Commercial Banking
1. How can I improve my business’s cash flow?
Don’t wait until you have cash flow issues to talk to your bank. Believe it or not, a great banker can help you make proactive decisions to keep your operations running smoothly. At Cornerstone Bank, we can partner with you to look at your accounts, including employee pay and other expenditures. From there, we can help you determine the best tools to streamline cash flow faster and more efficiently.
While you’d want to speak with your banker directly for more specifics, we can offer some general things to avoid when trying to improve your cash flow.
- Not preparing for slow seasons
- Trying to force business growth by overspending (i.e. too much marketing)
- Poor internal organization
- Overestimating future sales
2. How can you help my business reach its goals?
For businesses, a bank can be so much more than a place that holds your money. Especially if you bank locally, a banker understands what it takes to run a business in your area. As a result, not only can your banker offer financial advice, they can also offer effective strategies to push your business further.
Think of your bank as an advisor. Together you can analyze your accounts to see exactly how much you’re spending versus bringing in. That allows your banker to help you brainstorm ways you can save money so that your profit increases the following year.
Plus, your bank can act as your advocate in the community (that’s where the benefits of banking locally come into play). If a trusted community bank vouches for your company, it can really help you build credibility and a relationship with those around you.
3. What are the benefits of a money market account?
In many cases, a money market account has a higher interest rate that a bank pays to the account holder than a traditional business savings account. But unlike a savings account, you have easier access to your funds if you ever needed to pull out money. That’s because a money market account is like a checking and savings account combined. For you, that means you can use the account to withdraw and even write checks all while accumulating interest.
Keep in mind that you’ll often have to put more money down toward an initial deposit than if you were to open a savings account. So make sure you have included that amount in your monthly financial plan. Also, depending on the bank there may be a six-transaction limit per month. We highly recommend that businesses use a money market account as an extension to their savings plan rather than solely using it for transaction purposes. If you need an account mainly for transactions, you should stick with a business checking account.
4. Should I get a line of credit or business loan?
When deciding between a line of credit or business loan, don’t neglect to bring questions to ask your banker. Your banker can often give you insight that your internal team may not have. To start, let’s briefly talk about the difference between the two.
A loan is pretty straightforward. You apply for your commercial loan, and once you’re approved, the bank disperses your money in a lump sum. Typically, you start paying off that loan right away, though there may be some variation with that.
On the other hand, a line of credit acts almost like a credit card. You have a credit limit and can make withdrawals based on that limit. As long as you continue paying off your balance, you can continue using your credit.
Determining which option is best greatly depending on your business needs. If you know exactly how much money you need and why you need it, then a loan might be the option you choose. However, if you don’t need a large chunk all at once or you might need more money down the road, having that open line of credit could be beneficial. Basically, a loan works great for specific, one-off expenses. Lines of credit are better for ongoing expenses and emergencies.
When you sit down with your banker, he or she can help you gauge which option would be better to reach your goals. This conversation also opens the door to figure out the best ways to manage the money you’ve borrowed.
Our bankers at Cornerstone Bank are here to help.
Since 2001, Cornerstone Bank has put our customers first, and that means giving them the best banking has to offer. We don’t believe in simple banking, rather, we go above and beyond to help our customers make their money work for them.
For more information about our bank or if you have questions to ask our bankers, visit our Overland Park office or give us a call at 913-239-8100 to let us know how we can help.