From radio spots and junk mail to television and newspaper ads, American consumers are bombarded with invitations to utilize various banking and checking services. And even though they come with the obligatory fine print, so much of it remains a mystery to most of us. So how can you really know whether you are better off staying where you are at, or switching to a new service? From checking accounts to home loans, and a whole lot in between, here are some answers.



Checking

You can save more than $100 a year in fees by selecting a checking account with a low (or no) minimum balance requirement. There are usually stipulations attached so make sure you can meet them. Request a list of these and other fees that are charged on these accounts and compare carefully. In addition, banking institutions often will drop or lower checking fees if paychecks are directly deposited by your employer. Direct deposit offers the additional advantages of convenience, security, and immediate access to your money, so look into it if you don't already have it.

Savings and Investment Products

Before opening a savings or investment account with a bank or other financial institution, find out whether the account is insured by the federal government (FDIC or NCUA). An increasing number of products offered by these institutions, including mutual stock funds and annuities, are not insured, which means you absorb 100% of the risk.

To earn the highest return on savings (annual percentage yield) with little or no risk, consider certificates of deposit (CDs) and treasury bills or notes. These are not liquid (easily accessible) investments and need to be left alone until they reach maturity, but they do carry a better return than a traditional savings account. Plan accordingly.

Once you select a type of savings or investment product, compare rates and fees offered by different institutions. These rates can vary a lot and, over time, can significantly affect interest earnings.

Credit Cards

You can save as much as a thousand dollars or more each year in lower credit card interest charges by paying off your entire bill each month. If you are unable to pay off a large balance, pay as much as you can and switch to a credit card with a low annual percentage rate (APR). For a modest fee, RAM Research Corp. (800-344-7714) will send you a list of low-rate cards. You can obtain a list of low-rate cards by accessing "www.ramresearch.com" on the Internet. In addition, you can reduce credit card fees, which may add up to more than $100 a year, by getting rid of all but one or two cards, and by avoiding late payment and over-the-credit-limit fees.

When shopping for a credit card, look for more than just the low interest rate. Compare other fees (such as over-the-credit-limit or late payment) and also look at the billing cycles. Some cards have a 28-day billing cycle instead of a monthly one, which can really throw off your budgeting. Also, you know all the "freebies" that the credit card companies offer you-like cash back, airline miles, etc.? You pay for them in the form of a higher interest rate, so decide whether they are really worth it!

Auto Loans

If you have significant savings earning a low interest rate, consider making a large down payment or even paying for the car in cash. This could save you as much as several thousand dollars in finance charges. Think about it-you could be earning minimal interest by keeping that money in the bank, or saving yourself substantial interest by paying cash up front.

If you need to finance your auto, you can save as much as hundreds of dollars in finance charges by shopping for the cheapest loan. Contact several banks, your credit union, and the auto manufacturer's own finance company. Get the lowest interest rate for the shortest amount of time that you can.

First Mortgage Loans

Although your monthly payment may be higher, you can save tens of thousands of dollars in interest charges by shopping for the shortest-term mortgage you can afford. On a $100,000 fixed-rate loan at 8% annual percentage rate (APR), for example, you will pay $90,000 less in interest on a 15-year mortgage than on a 30-year mortgage.

You can also save thousands of dollars in interest charges by shopping for the lowest-rate mortgage with the fewest points. On a 15-year, $100,000 fixed-rate mortgage, just lowering the APR from 8.5% to 8.0% can save you more than $5,000 in interest charges. On this mortgage, paying two points instead of three would save you an additional $1,000.

If your local newspaper does not periodically run mortgage rate surveys, call at least six lenders for information about their rates (APRs), points, and fees. Then ask an accountant to compute precisely how much each mortgage option will cost and its tax implications.

If you are considering an adjustable rate mortgage loan (ARM), be aware that the interest rate on most ARMs can vary a great deal over the lifetime of the mortgage. Most ARMs lock you into a rate for 3-7 years, and then begin varying. An increase of several percentage points might raise payments by hundreds of dollars per month. If you know you will only own your home for just a few years, an ARM might work for you if you plan to sell before you move into the variable period.

Mortgage Refinancing

Consider refinancing your mortgage if you can get a rate that is at least one percentage point lower than your existing mortgage rate and plan to keep the new mortgage for several years or more. Ask an accountant to calculate precisely how much your new mortgage (including up-front fees) will cost and whether, in the long run, it will cost less than your current mortgage. Keep in mind that most refinancing loans reset your mortgage length to 15 or 30 years, not to where you are currently.

Home Equity Loans

Be cautious in taking out home equity loans. Although the financing industry touts these loans as a great solution to debt or as a way to get what you want right now (vacation, remodel, etc.), these loans reduce the equity that you have built up in your home. If you are unable to make payments, you could lose your home.

Compare home equity loans offered by at least four banking institutions. In comparing these loans, consider not only the annual percentage rate (APR) but also points, closing costs, other fees, and the index for any variable rate changes. Your home is probably one of your greatest assets, so take this kind of a loan very seriously.

In Conclusion

As is the case with most things, a little investment of time can save you quite a bit of money on your banking and credit services. However, your time is valuable, too, and the cheapest option may not always provide the services you need. Consider your options and make the best choice for your individual situation.