If you have a large sum of money that you need to deposit into a bank account, it’s important that you do your research in order to make the most of your money. Don’t make these 18 mistakes for deposits of $10K or more, or you could lose out.
Ignoring Bank Reporting Requirements
According to U.S. News, “depositing a big amount of cash that is $10,000 or more means your bank or credit union will report it to the federal government.” This limit is to stop money laundering or other illegal activities, so failing to understand this can lead to suspicions and potential legal issues.
Overlooking Potential Fees
Some banks charge for large deposits or require you to leave your money in the account for a certain period of time in order to not be charged fees. To avoid this, make sure you do your research on your bank and the specific type of savings account you plan to use.
Failing to Plan for Taxes
Large deposits can have tax implications, especially if they generate interest and increase your income for the year. In order to make sure you have planned for this, speak with a tax advisor to understand any potential liabilities and the requirements for reporting income.
Neglecting Interest Rate Opportunities
According to CNBC, “High-yield savings accounts reward you with higher interest rates than traditional savings accounts and your money grows even faster thanks to compound interest—which lets you earn interest on interest.” Shopping around for the best rates can maximize your return on your money.
Forgetting to Establish a Paper Trail
While it may seem outdated, keeping a record of documentation, paper and all, is important to ensure you avoid any legal or tax complications later down the line. It will help you prove the legitimacy of transactions and deposits, should you need it.
Disregarding Relationship Benefits
Some banks will offer existing customers perks or better interest rates if you make substantial deposits with them. Before making a decision on the savings account for your cash, make sure you speak to your existing banks to ensure you make the most of valuable offers.
Underestimating Fraud Risks
Making large deposits can attract unwanted attention from fraudsters, so it’s important to make sure your account has robust security measures in place to protect your funds. You should also regularly monitor the account for suspicious activity or transactions.
Ignoring Investment Alternatives
Saving a large sum of money is a safe way to store it, but it can be beneficial to invest it instead and potentially grow it further. Investopedia says, “Investing has the potential for higher returns than savings accounts, the ability to grow your wealth over time through compounding and reinvestment, and the opportunity to help you achieve long-term financial goals.”
Overlooking the Impact on Loan Qualifications
If you want to apply for a loan or mortgage in the future, making big deposits now might impact it. When it comes to the borrowing application process, your bank may require you to explain why you’ve made significant deposits in the past and ask you to demonstrate the provenance of the money.
Forgetting to Consider Accessibility
Choosing a high-interest account is a great way to make the most of your cash, but make sure you look into how accessible your money is once deposited. Some accounts won’t let you make withdrawals within a certain time period or will limit the number of withdrawals you make. If you need access to your cash, this is an important factor to consider.
Neglecting Financial Goals Alignment
Making a large deposit is a great opportunity to reassess your goals and plans for your finances. It should align with your overall plan for savings, investments, and spending and support your progress toward your financial objectives.
Overlooking Account Type Suitability
Banks have lots of different types of savings accounts on offer, and it’s important to choose the right one for you. The Telegraph says, “Some of the key things to consider include the interest rate paid, whether there is a notice period, any “minimum deposit” requirements, and tax you might have to pay on the savings interest you earn.”
Not Considering Economic Conditions
The climate of the economy is changing all the time, and it can really affect how much your money is worth. Before you make a large deposit, consider the current inflation and interest rates and use this to choose the best type of savings account or investment for your money.
Failing to Review Account Terms Regularly
While the account might suit you when you first open it, it’s important to regularly review it, as banks can change the terms, interest rates, or fees, which could have a significant impact on your money. Staying informed allows you to make changes to how you store your money if necessary.
Ignoring Mobile and Online Banking Features
Online and mobile banking allow you to monitor and manage your account effectively, offering tools such as account information, alerts, and fraud protection features straight to your device no matter where you are. By not using this, fraudulent activity may go unnoticed for a longer period of time.
Not Verifying Account Insurance Limits
It’s important that you make sure your bank account will insure your deposit. According to the Federal Deposit Insurance Corporation (FDIC), “the standard deposit insurance coverage limit is $250,000 per depositor, per FDIC-insured bank, per ownership category.” Depositing more than this means your money is not protected, and you could lose it if your bank fails.
Neglecting to Plan for Estate Considerations
When you are making a large deposit that you have not previously accounted for, it’s important to consider its impact on your estate planning. You’ll need to ensure the account aligns with your estate planning goals and that it has designated beneficiaries so that your assets can be distributed according to your wishes in the event of your death.
Forgetting About Currency Exchange Risks
If your deposit is in a foreign currency, make sure you do your research on your bank’s policies, as you could be at risk of foreign deposit fees or fluctuations in the currency value. This could significantly impact the value of your deposit, so take time to understand and manage these risks.
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