Showing posts with label FinancialPlanning. Show all posts
Showing posts with label FinancialPlanning. Show all posts

Tuesday, November 3, 2026

6 Benefits of a Business Bank Account

According to the U.S. Census Bureau, Americans submitted nearly 5.5 million new business applications in 2023 — a record high that indicates booming entrepreneurship. Whether you’re building your side hustle from scratch or scaling up and hiring employees, handling your finances properly is critical, and opening a business bank account is an essential first step. As a freelancer who runs my own business, I’ve found that the benefits of a business bank account are numerous for companies of all sizes….Continue reading….

By Kat Tretina

Source:  FinanceBuzz

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All transaction accounts offer itemised lists of all financial transactions, either through a bank statement or a passbook. A transaction account allows the account holder to make or receive payments by:

  • ATM cards (withdraw cash at any Automated Teller Machine)
  • Debit card (cashless direct payment at a store or merchant)
  • Cash (deposit and withdrawal of coins and banknotes at a branch)
  • Cheque and money order (paper instruction to pay)
  • Direct debit (pre-authorized debit)
  • Standing order (automatic regular funds transfers)
  • Electronic funds transfers (transfer funds electronically to another account)
  • Online banking (transfer funds directly to another person via internet banking facility)

Banks offering transactional accounts may allow an account to go into overdraft if that has been previously arranged. If an account has a negative balance, money is being borrowed from the bank and interest and overdraft fees as normally charged. In the United Kingdom and other countries with a UK banking heritage, transaction accounts are known as current accounts.

These offer various flexible payment methods to allow customers to distribute money directly. One of the main differences between a UK current account and an American checking account is that they earn considerable interest, sometimes comparable to a savings account, and there is generally no charge for withdrawals at cashpoints (ATMs), other than charges by third party owners of such machines. Certain modes of payment are country-specific:

  • Giro (funds transfer, direct deposit in European countries)
  • In the United Kingdom, Faster Payments Service offers near immediate transfer, BACS offers giros that clear in a matter of days while CHAPS is done on the same day.
  • Canada has an Interac e-Transfer service
  • In India, NEFT and RTGS services are available to clear funds in a day.

The Regulation (EU) n. 655/2014 has introduced the European Account Preservation Order, a new procedure of asset freezing in order “to facilitate cross-border debt recovery in civil and commercial matters.”Customers may need to attend a bank branch for a wide range of banking transactions including cash withdrawals and financial advice. There may be restrictions on cash withdrawals, even at a branch. For example, withdrawals of cash above a threshold figure may require notice.

Many transactions that previously could only be performed at a branch can now be done in others ways, such as use of ATMs, online, mobile and telephone banking. Cheques were the traditional method of making withdrawals from a transaction account. Automated teller machines (ATMs) enable customers of a financial institution to perform financial transactions without attending a branch.

This enables, for example, cash to be withdrawn from an account outside normal branch trading hours. However, ATMs usually have quite low limits for cash withdrawals, and there may be daily limits to cash withdrawals other than at a branch. With the introduction of mobile banking; a customer may perform banking transactions and payments, view balances and statements, and use various other services using their mobile phone. 

In the UK this has become the leading way people manage their finances, as mobile banking has overtaken internet banking as the most popular way to bank. Internet or online banking enables a customer to perform banking transactions and payments, to view balances and statements, and various other facilities. This can be convenient especially when a bank is not open and enables banking transactions to be effected from anywhere Internet access is available.

Online banking avoids the time spent travelling to a branch and standing in queues there. However, there are usually limits on the value of funds that can be transferred electronically on any day, making it necessary to use a cheque to effect such transfers when those limits are being reached. Telephone banking provides access to banking transactions over the telephone. In many cases telephone banking opening times are considerably longer than branch times.

A financial institution may allow its customers to deposit cheques into their account by mail. Mail banking can be used by customers of virtual banks (as they may not offer branches or ATMs that accept deposits) and by customers who live too far from a branch. Most stores and merchants now have to accept debit card access for purchasing goods if they want to continue operating, especially now that some people only use electronic means of purchase.

Any cost or fees charged by the financial institution that maintains the account, whether as a single monthly maintenance charge or for each financial transaction, will depend on a variety of factors, including the country’s regulations and overall interest rates for lending and saving, as well as the financial institution’s size and number of channels of access offered. This is why a direct bank can afford to offer low-cost or free banking, as well as why in some countries, transaction fees do not exist but extremely high lending rates are the norm.

This is the case in the United Kingdom, where they have had free banking since 1984 when the then Midland Bank, in a bid to grab market share, scrapped current account charges. It was so successful that all other banks had no choice but offer the same or continue losing customers. Free banking account holders are now charged only if they use an add-on service such as an overdraft. Financial transaction fees may be charged either per item or for a flat rate covering a certain number of transactions.

Often, youths, students, senior citizens or high-valued customers do not pay fees for basic financial transactions. Some offer free transactions for maintaining a very high average balance in their account. Other service charges are applicable for overdraft, non-sufficient funds, the use of an external interbank network, etc.

In countries where there are no service charges for transaction fees, there are, on the other hand, other recurring service charges such as a debit card annual fee. In the United States, there are checking account options that do not require monthly maintenance fees and this can keep costs down. While a majority of U.S. checking accounts do charge monthly maintenance fees, about one-third of accounts do not charge those fees.

A survey of monthly checking account maintenance fees shows the average cost to be $13.47 per month or $161.64 per year. Unlike savings accounts, for which the primary reason for depositing money is to generate interest, the main function of a transactional account is transactional. Therefore, most providers pay little or no interest on credit balances. Formerly, in the United States, Regulation Q (12 CFR 217) and the Banking Acts of 1933 and 1935 (12 USC 371a) prohibited a member of the Federal Reserve system from paying interest on demand deposit accounts.

In the United Kingdom, some online banks offer rates higher as many savings accounts, along with free banking (no charges for transactions) as institutions that offer centralised services (telephone, internet or postal based) tend to pay higher levels of interest. The same holds true for banks within the EURO currency zone. High-yield accounts pay a higher interest rate than typical NOW accounts and frequently function as loss-leaders to drive relationship banking. Accounts can lend money in two ways: overdraft and offset mortgage.

An overdraft occurs when withdrawals from a bank account exceed the available balance. This gives the account a negative balance and in effect means the account provider is providing credit. If there is a prior agreement with the account provider for an overdraft facility, and the amount overdrawn is within this authorised overdraft, then interest is normally charged at the agreed rate. If the balance exceeds the agreed facility then fees may be charged and a higher interest rate might apply.

In North America, overdraft protection is an optional feature of a chequing account. An account holder may either apply for a permanent one, or the financial institution may, at its discretion, provide a temporary overdraft on an ad hoc basis. In the UK, virtually all current accounts offer a pre-agreed overdraft facility the size of which is based upon affordability and credit history. This overdraft facility can be used at any time without consulting the bank and can be maintained indefinitely (subject to ad hoc reviews).

Although an overdraft facility may be authorised, technically the money is repayable on demand by the bank. In reality this is a rare occurrence as the overdrafts are profitable for the bank and expensive for the customer. In the United States, some consumer reporting agencies such as ChexSystems, Early Warning Services, and TeleCheck track how people manage their checking accounts. Banks use the agencies to screen checking account applicants.

Those with low debit scores are denied checking accounts because a bank cannot afford an account to be overdrawn.

You are under digital arrest! How fake cop scams draining victims’ bank accounts The Economic Times 04:20 

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Wednesday, October 21, 2026

What Does It Mean to Be “Vested”?

People who put money into an employer-sponsored retirement plan should be aware of an important word: “vested.” When you’re vested in a retirement plan, it means you own some or all of the money in your account. So, if you’re 100% vested, you own 100% of your retirement funds. But if you’re 20% vested, you’re entitled to all of the money you’ve contributed and just 20% of your employer’s matching contributions. Knowing what it means to be vested can make a difference in how much money you’ll have in your account for retirement or when you leave the company. Follow along to find out more about vesting………Continue reading..

By John Egan

Source: Experian

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Pensions should not be confused with severance pay; the former is usually paid in regular amounts for life after retirement, while the latter is typically paid as a fixed amount after involuntary termination of employment before retirement. The terms “retirement plan” and “superannuation” tend to refer to a pension granted upon retirement of the individual; the terminology varies between countries.

Retirement plans may be set up by employers, insurance companies, the government, or other institutions such as employer associations or trade unions. Called retirement plans in the United States, they are commonly known as pension schemes in the United Kingdom and Ireland and superannuation plans (or super) in Australia and New Zealand. Retirement pensions are typically in the form of a guaranteed life annuity, thus insuring against the risk of longevity.

The common use of the term pension is to describe the payments a person receives upon retirement, usually under predetermined legal or contractual terms. A recipient of a retirement pension is known as a pensioner or retiree. A retirement plan is an arrangement to provide people with an income during retirement when they are no longer earning a steady income from employment.

Often retirement plans require both the employer and employee to contribute money to a fund during their employment in order to receive defined benefits upon retirement. It is a tax deferred savings vehicle that allows for the tax-free accumulation of a fund for later use as retirement income. Funding can be provided in other ways, such as from labor unions, government agencies, or self-funded schemes. Pension plans are therefore a form of “deferred compensation”.

A SSAS is a type of employment-based Pension in the UK. The 401(k) is the iconic self-funded retirement plan that many Americans rely on for much of their retirement income; these sometimes include money from an employer, but are usually mostly or entirely funded by the individual using an elaborate scheme where money from the employee’s paycheck is withheld, at their direction, to be contributed by their employer to the employee’s plan. This money can be tax-deferred or not, depending on the exact nature of the plan.

Some countries also grant pensions to military veterans. Military pensions are overseen by the government; an example of a standing agency is the United States Department of Veterans Affairs. Ad hoc committees may also be formed to investigate specific tasks, such as the U.S. Commission on Veterans’ Pensions (commonly known as the “Bradley Commission”) in 1955–56. Pensions may extend past the death of the veteran himself, continuing to be paid to the widow.

Many countries have created funds for their citizens and residents to provide income when they retire (or in some cases become disabled). Typically this requires payments throughout the citizen’s working life in order to qualify for benefits later on. A basic state pension is a “contribution based” benefit, and depends on an individual’s contribution history. For examples, see National Insurance in the UK, or Social Security in the United States of America.

Many countries have also put in place a “social pension”. These are regular, tax-funded non-contributory cash transfers paid to older people. Over 80 countries have social pensions. Some are universal benefits, given to all older people regardless of income, assets or employment record. Examples of universal pensions include New Zealand Superannuation and the Basic Retirement Pension of Mauritius. Most social pensions, though, are means-tested, such as Supplemental Security Income in the United States of America or the “older person’s grant” in South Africa.

Some pension plans will provide for members in the event they suffer a disability. This may take the form of early entry into a retirement plan for a disabled member below the normal retirement age. The benefits of defined benefit and defined contribution plans differ based on the degree of financial security provided to the retiree. With defined benefit plans, retirees receive a guaranteed payout at retirement, determined by a fixed formula based on factors such as salary and years of service.

The risk and responsibility of ensuring sufficient funding through retirement is borne by the employer or plan managers. This type of plan provides a level of financial security for retirees, ensuring they will receive a specific amount of income throughout their retirement years. However this income is not usually guaranteed to keep up with inflation, so its purchasing power may decline over the years.

On the other hand, defined contribution plans are dependent upon the amount of money contributed and the performance of the investment vehicles used. Employees are responsible for ensuring that their contributions are sufficient to provide for their retirement needs, and they face the risk of market fluctuations that could reduce their retirement savings. However, defined contribution plans provide more flexibility for employees, who can choose how much to contribute and how to invest their funds.

Hybrid plans, such as cash balance and pension equity plans, combine features of both defined benefit and defined contribution plans. These plans have become increasingly popular in the U.S. since the 1990s. Cash balance plans, for example, provide a guaranteed benefit like a defined benefit plan, but the benefit is expressed as an account balance, like a defined contribution plan. Pension equity plans are a type of cash balance plan that credits employee accounts with a percentage of their pay each year, similar to a defined contribution plan.

A Defined Benefit (DB) pension plan is a plan in which workers accrue pension rights during their time at a firm and upon retirement the firm pays them a benefit that is a function of that worker’s tenure at the firm and of their earnings. In other words, a DB plan is a plan in which the benefit on retirement is determined by a set formula, rather than depending on investment returns. Government pensions such as Social Security in the United States are a type of defined benefit pension plan.

Traditionally, defined benefit plans for employers have been administered by institutions which exist specifically for that purpose, by large businesses, or, for government workers, by the government itself. A traditional form of defined benefit plan is the final salary plan, under which the pension paid is equal to the number of years worked, multiplied by the member’s salary at retirement, multiplied by a factor known as the accrual rate. The final accrued amount is available as a monthly pension or a lump sum, but usually monthly.

In the US, 26 U.S.C. § 414 specifies a defined benefit plan to be any pension plan that is not a defined contribution plan (see below) where a defined contribution plan is any plan with individual accounts. A traditional pension plan that defines a benefit for an employee upon that employee’s retirement is a defined benefit plan. In the U.S., corporate defined benefit plans, along with many other types of defined benefit plans, are governed by the Employee Retirement Income Security Act of 1974 (ERISA).

If the pension plan allows for early retirement, payments are often reduced to recognize that the retirees will receive the payouts for longer periods of time. In the United States, under the Employee Retirement Income Security Act of 1974, any reduction factor less than or equal to the actuarial early retirement reduction factor is acceptable.

Many DB plans include early retirement provisions to encourage employees to retire early, before the attainment of normal retirement age (usually age 65). Companies would rather hire younger employees at lower wages. Some of those provisions come in the form of additional temporary or supplemental benefits, which are payable to a certain age, usually before attaining normal retirement age. Due to changes in pensions over the years, many pension systems, including those in Alabama, California, Indiana, and New York, have shifted to a tiered system.

For a simplified example, suppose there are three employees that pay into a state pension system: Sam, Veronica, and Jessica. The state pension system has three tiers: Tier I, Tier II, and Tier III. These three tiers are based on the employee’s hire date (i.e. Tier I covers 1 January 1980 (and before) to 1 January 1995, Tier II 2 January 1995 to 1 January 2010, and Tier III 1 January 2010 to present) and have different benefit provisions (e.g. Tier I employees can retire at age 50 with 80% benefits or wait until 55 with full benefits, Tier II employees can retire at age 55 with 80% benefits or wait until 60 for full benefits, Tier III employees can retire at age 65 with full benefits).

Therefore, Sam, hired in June 1983, would be subject to the provisions of the Tier I scheme, whereas Veronica, hired in August 1995, would be permitted to retire at age 60 with full benefits and Jessica, hired in December 2014, would not be able to retire with full benefits until she became 65. In an unfunded defined benefit pension, no assets are set aside and the benefits are paid for by the employer or other pension sponsor as and when they are paid. Pension arrangements provided by the state in most countries in the world are unfunded, with benefits paid directly from current workers’ contributions and taxes.

This method of financing is known as pay-as-you-go, or PAYGO. The social security systems of many European countries are unfunded, having benefits paid directly out of current taxes and social security contributions, although several countries have hybrid systems which are partially funded. Spain set up the Social Security Reserve Fund and France set up the Pensions Reserve Fund; in Canada the wage-based retirement plan (CPP) is partially funded, with assets managed by the CPP Investment Board while the U.S. Social Security system is partially funded by investment in special U.S. Treasury Bonds.

In a funded plan, contributions from the employer, and sometimes also from plan members, are invested in a fund towards meeting the benefits. All plans must be funded in some way, even if they are pay-as-you-go, so this type of plan is more accurately known as pre-funded or fully-funded. The future returns on the investments, and the future benefits to be paid, are not known in advance, so there is no guarantee that a given level of contributions will be enough to meet the benefits.

Typically, the contributions to be paid are regularly reviewed in a valuation of the plan’s assets and liabilities, carried out by an actuary to ensure that the pension fund will meet future payment obligations. This means that in a defined benefit pension, investment risk and investment rewards are typically assumed by the sponsor/employer and not by the individual. If a plan is not well-funded, the plan sponsor may not have the financial resources to continue funding the plan.

Auto-Portability Providers Racing to Close Retirement Plan Gap JD Supra 20:56 Fri, 17 May 
DOL Unveils Long-Delayed Abandoned Retirement Plan Rules Law360 01:27 Fri, 17 May 

CentraCare Workers Announce $800,000 Retirement Plan Settlement Bloomberg Law 17:07 Thu, 16 May 

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