Beware of checking-account bonuses
Here are three of the week's top pieces of financial advice, gathered from around the web:
Beware checking-account bonuses
Banks and credit unions are drawing in customers with cash bonuses for new checking accounts, said Susan Tompor at the Detroit Free Press. But this "easy money" usually comes with a catch. Chase recently offered $400 to select customers who opened a Premier Plus Checking account. The fine print: Account holders have to keep an average daily balance of $15,000 or else pay a $25 monthly fee. Some banks require making a minimum number of purchases, or direct deposits. Others will even take bonuses back if you close an account too soon. Finally, "the bonus cash is treated as taxable interest." So if you're in the 25 percent tax bracket, a $100 bonus is really worth $75.
Summer job, spring taxes
Young people with summer jobs face tax returns that are often as complicated as their parents', said Laura Saunders at The Wall Street Journal. "One common complication is the need for multiple state returns if a young person's home is in one state, a college or on-campus job is in another, and a summer job is in a third." Master the basics to avoid a surprise bill come April 15. For dependents, $6,300 of earned income in 2016 is the threshold for having to pay federal income tax. Young workers should also check whether they are classified as employees or independent contractors, which affects whether income and payroll taxes are withheld from each paycheck. Young people may also qualify for the American Opportunity Tax Credit, which can be used to offset up to $2,500 of taxes to pay for college expenses.
More reasons to love index funds
"Already rock-bottom fees among index funds have been falling to practically subterranean levels," said Elizabeth Leary at Kiplinger. In June, Fidelity announced fee cuts on 27 of its index funds and indexed exchange-traded funds, with its cheapest fund now charging just 0.015 percent, or 15 cents a year per $1,000 invested. That follows similar cuts at the likes of Vanguard, BlackRock, and Charles Schwab. While index funds often outperform actively managed funds, low expenses may actually be their biggest advantage. Even though the percentage differences may seem small, that can add up to hundreds of thousands of dollars more in fees over time. For example, if an investor pays 1.78 percent in total expenses each year on an actively managed fund that earns 7 percent annually, that represents "more than one-fourth of his annual return."