Understanding Interest Rates: Decoding the Language of Interest Rates

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Posted On: October 14, 2024 by Peoples Bank of Kankakee County in: business Mortgages Personal Finances Retirement Saving

At Peoples Bank, we believe that understanding interest rates is crucial for making informed financial decisions. Whether you’re taking out a loan, opening a savings account, or investing in a new venture, the rates you encounter can significantly impact your financial health.

Let’s decode the language of interest rates and show you how they affect your financial journey!

What Are Interest Rates?

Simply put, interest rates are the cost of borrowing money or the return on your deposits. They are expressed as a percentage of the total amount borrowed or saved. Understanding how interest rates work can help you make better decisions about loans, savings accounts, and investments.

Types of Interest Rates

Fixed Interest Rates: Fixed interest rates stay the same for the entire term of the loan or deposit. This means your payments or earnings remain consistent, making it easier to budget and plan. For example, if you have a fixed-rate mortgage with a 4% interest rate, your payments will not change throughout the life of the loan. This stability can be comforting in fluctuating economic conditions.
Variable Interest Rates: Variable interest rates can change over time based on market conditions or a specific index. For instance, an adjustable-rate mortgage (ARM) might start with a lower rate that adjusts periodically. While this can offer lower initial rates, it also means your payments could increase if interest rates rise. Keeping an eye on the market can help you anticipate potential changes in your rates.
Annual Percentage Rate (APR): The APR represents the true cost of borrowing, including both the interest rate and any additional fees or costs. It provides a more comprehensive picture of what you'll pay over the life of a loan. For example, if you’re considering a home equity loan, comparing APRs from different lenders can help you find the best overall deal.
Annual Percentage Yield (APY): APY is used for deposit accounts like savings accounts and certificates of deposit (CDs). It reflects the total interest earned on your deposits over a year, including compound interest. For example, if your savings account has an APY of 2%, you’ll earn 2% interest on your balance annually, compounded monthly.

How Interest Rates Affect You

Loans and Mortgages: Higher interest rates mean higher monthly payments on loans and mortgages. Conversely, lower rates can reduce your monthly payments and the total cost of borrowing. At Peoples Bank, we offer a range of loan products with competitive interest rates to suit your needs. Whether you’re buying a home, starting a business, or making a large purchase, we can help you find a loan with terms that work for you.
Savings and Investments: Interest rates also impact how much you earn on your savings and investments. Higher rates mean more interest earned on your savings account or CD, which can help your money grow faster. Peoples Bank offers various savings and investment options with attractive interest rates to help you achieve your financial goals.
Financial Planning: Understanding interest rates is essential for effective financial planning. Whether you’re budgeting for a new purchase, planning for retirement, or saving for your child's education, knowing how interest rates will affect your plans can help you make smarter financial decisions.

How Peoples Bank Can Help

At Peoples Bank, we’re here to help you navigate the world of interest rates with confidence. Our team of experts can provide personalized advice on loans, savings accounts, and investment options to ensure you get the most out of your money.

Ready to explore your options?

Contact us today to discuss how our competitive interest rates and financial products can support your goals. Let us help you make informed decisions and achieve financial success!

The Bottom Line

Understanding interest rates is key to managing your finances effectively. By familiarizing yourself with fixed vs. variable rates, APR vs. APY, and their impacts on your loans and savings, you’ll be better equipped to make decisions that benefit your financial future.

At Peoples Bank, we’re dedicated to helping you decode the language of interest rates and guiding you toward a prosperous financial path.

Feel free to reach out to us with any questions or to start exploring your options. Your financial well-being is our priority.

An overdraft occurs when you do not have enough money in your account to cover a transaction, but we pay it anyway. We can cover your overdrafts in two different ways:

We have standard overdraft practices that are available after your account has been open for 30 days and as long as you maintain your account in good standing.
We also offer an overdraft protection plan, Overdraft Protection Sweep, a link to a savings account. It may be less expensive than our standard overdraft practices. To learn more, ask us about this plan.

This notice explains our standard overdraft practices.

What are the standard overdraft practices that come with my account?

After your account has been open for 30 days and as long as you maintain your account in good standing, we do authorize and pay overdrafts for the following types of transactions:

Checks and other transactions made using your checking account number
Automatic bill payments

We do not authorize and pay overdrafts for the following types of transactions unless you ask us to (see below):

ATM transactions
Everyday debit card transactions

We pay overdrafts at our discretion, which means we do not guarantee that we will always authorize and pay any type of transaction.

If we do not authorize and pay an overdraft, your transaction will be declined.

What fees will I be charged if Peoples Bank of Kankakee County pays my overdraft?

Under our standard overdraft practices:

We will charge you a fee of up to $30 each time we pay an overdraft.
The maximum daily overdraft fee per presentment or item paid using the Overdraft Reserve Program is $150.00 per day.
No per item handling fee will be charged on de minimis overdrafts. De minimis overdraft for this policy means transactions that overdraw your account by $30 or less.
There is an overdraft fee of $5 per day that will be charged beginning the 4th consecutive business day your account is overdrawn.

Nonsufficient funds (NSF) fees - if an item drafted by you (such as a check) or a transaction you set up (such as a preauthorized transfer) is presented for payment in an amount that is more than the amount of money in your account and we decide not to pay the item or transaction, you agree that we can charge you an NSF fee for returning the payment. Be aware that such an item or payment may be presented multiple times by the merchant or other payee until it is paid, and that we do not monitor or control the number of times a transaction is presented for payment. You agree that we may charge you an NSF fee each time a payment is presented if the amount of money in your account is not sufficient to cover the payment, regardless of the number of times the payment is presented.

PAYMENT ORDER OF ITEMS - The law permits us to pay items drawn on your account in any order (for purposes of this section "items" means checks, orders and electronic transactions). To assist you in handling your account with us, we are providing you with the following information regarding how we process those items. When processing checks and orders drawn on your account our policy is to pay lower numbered checks and orders in numerical sequence, but electronic transactions are paid first in the order received. The order in which items are paid is important if there is not enough money in your account to pay all of the items that are presented. There is no policy that is favorable in every instance. If the smallest items are paid first, you may have fewer NSF or overdraft fees, but the largest, and perhaps more important items (such as rent or mortgage payments) might not be paid. However, if the largest items are paid first, your most important items might be paid but it may increase the overdraft or NSF fees if funds are not available to pay all of the items. We think our policy attains a reasonable balance between minimizing additional costs to you and paying your more important items. We encourage you to make careful records and practice good account management. This will help you to avoid creating items without sufficient funds and incurring the resulting fees.

What if I want Peoples Bank of Kankakee County to authorize and pay overdrafts on my ATM and everyday debit card transactions?

If you also want us to authorize and pay overdrafts on ATM and everyday debit card transactions after your account has been open for 30 days, you may opt in.

You have an ongoing right to change this consent at any time. If your overdraft privilege has been revoked for any reason, the opt-in or opt-out selection may not apply. Please contact your nearest office for more information.

Alternate ways to Opt In/Out or make changes:

By Phone. Our Customer Care Representatives can be reached at 815-936-7600.
By Mail. Peoples Bank of Kankakee County, 333 E. Court Street, Kankakee, IL 60901
In Person. Please visit your local office and ask a representative to help you decide which plan is best for you.