Apparently they had a system glitch of some sort that caused them not to credit interest earned on CDs in 2011 to some customers. There have apparently been a number of reports of this, and they are dealing with it on a case-by-case basis.

In other words, if you’re affected, it might not get fixed if you don’t spot the error and complain. For the record, I’ve double-checked our accounts and all is well.

Source: DepositAccounts via The Finance Buff

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As such articles sometimes (but not always) point out, stocks are not bonds, and they’re sure as heck not CDs or savings accounts. Stocks have an entirely different risk profile and, no matter how high their yield, they’re not a reasonable replacement for fixed income investments or cash equivalents.

Think about it… If you’ve been holding cash, there’s probably a good reason for it. And that reason is almost certainly not compatible with putting your money in the stock market.

Yes, high yield stocks can be good income producers, but they can also be very volatile. Don’t believe me? Check this out…

From it’s peak in the summer of 2007 to it’s low point in the spring of 2009, the S&P Dividend ETF (SDY) plummeted from $65.89 to $27.53 — a loss of 58.2% in less than two years. As of today, it’s back up to a bit over $55, which is still more than 15% below it’s peak.

Sure, it currently yields a little over 3.1%, and yes, some dividend stocks yield more or perform better than average (though others yield less and/or perform worse). Regardless… Yikes! Does that sound like a reasonable alternative for holding your cash?

Here’s my advice… If you need (or want) to hold a cash equivalent in your portfolio, then hold your nose and do so. There is no such thing as a free lunch. If you chase higher yields, you increase your risk.

Yes, inflation is a concern, and I’m not suggesting that you shun the stock market in favor of the alternatives. But don’t go putting money that you might need in the near term in the stock market simply because your savings account is paying a pittance.

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When is the last time you were inside your bank? It’s probably been awhile. With ATMs and online banking, and mobile banking, there’s rarely ever a need to visit a teller.

And with the growing number of banking apps, we can virtually carry our banks in our pockets and purses. But at what cost?

Mobile banking grew 20% in the first quarter of 2010, according to Nielsen, a New York City market research firm. Although transactions are limited and vary by bank, more are increasing these capabilities and adding apps day by day.

With the added convenience has come more concern about safety. Now our smart phones harbor details on our finances, including account information, passwords and other valuable data that is vulnerable to criminals.

If you’re thinking that it just couldn’t be that easy to steal this information off your smart phone or to breach a banking app, think again.

Although customer information is typically not saved on a smart phone after the transaction is completed, that’s not always the case with downloadable bank apps. In the past, some have been found to store critical banking information in a text format right on the phone, including user names, passwords, and banking transactions.

Part of the problem is that this technology is evolving so rapidly, and it can be difficult to address all of the vulnerabilities in a timely manner. Because the opportunity is there, many say it is only a matter of time before breaches are found and capitalized on by criminals.

App stores don’t typically review apps for security, and you most likely have not installed security software on your phone like that which is on your computer; this can spell disaster if your phone falls into the wrong hands. And, if you don’t have a passcode set up on your smart phone, you may be handing over your banking information to criminals who gain access to your phone.

Mobile banking on the fly is tempting, but when you tap into free WiFi at your local coffee shop, at a hotel, or in an airport, the network is not secure and your information can be more easily lifted.

If the easy access and convenience of banking via smart phone are just too tempting, there are a number of steps you can take to more closely safeguard your finances.

First, it is important to treat your phone like you would a credit card. Be careful not to lose or misplace it. And make sure others don’t have access to it.

SMS, or short messaging service, is the least secure way to exchange banking information and should be avoided. It’s possible to request account details by sending a message code, which tells your financial institution that the request comes from your phone. However, if you lose or loan the phone, this information is no longer confidential. Also, scammers can pose as the bank to try and obtain account details via SMS. When utilizing this method, never send out passwords, account numbers or other sensitive information.

Mobile web methods utilize Internet browsers to access bank web sites like with a computer. Most banks now have web pages formatted for mobile screens for easy browsing. However, just like on a computer, mobile browsers are vulnerable to security breaches. As this technology becomes more prevalent for smart phones, viruses and Trojan horses are being created by criminals determined to capitalize on the lack of safeguards for mobile banking. Use the same security methods as you would on a computer, avoiding e-mailed bank links that could be fake and saving the bank’s login page as a web link bookmark to ensure it is accurate.

Many banks now offer client apps that can be installed on smart phones, which will connect you directly with the bank’s servers. This makes it faster and easier to connect to your financial institution and can be simpler to navigate. These proprietary apps are probably the most secure way to bank via smart phone. Be aware, however, that sensitive information may still be stored on the phone, and it’s important to log out of the app right after using it. Also, make sure the program is downloaded from a trusted source so you don’t reveal sensitive information to an unknown party.

Bank apps and mobile sites typically require logging in with the same username and password you’d use on your computer. Make sure the programs on your smart phone don’t automatically log you into the bank account, or your information can be lifted if the phone is stolen.

Bottom line… Common sense should always prevail. Do not share passwords, account numbers, PINs or any personal information, and make sure these are not saved on the phone. Most importantly, immediately notify the bank and mobile phone company if your phone is lost or stolen.

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Part of being a parent is providing our children with the financial knowledge and experience that will help them succeed in life.

Easier said than done, right? When it comes to money matters, it can be particularly difficult determining what age and maturity level is appropriate for handling checking accounts. Is your teen ready for the responsibility?

It seems that more teens today have access to debit and credit cards. However, checking accounts provide the ultimate in accountability. When your child is writing out a check and recording the amount in the ledger, the reality of money being spent really hits home.

Deciding when is the right time for your teen to become a checking account holder depends on a number of factors.

First, if your child has successfully mastered their own savings account, they may be ready to move up to a checking account. If your teen has had full access to their money and behaved responsibly, this is a good sign.

Also, if your teen has a job, they are probably a good candidate for their own account. Not only could they possibly benefit from direct deposit of their paychecks, but this account may make it easier to save a portion of their paychecks each period.

If your teen is paying bills for certain things, such as a car, car insurance, and credit cards, a checking account provides them with an easy, direct method to take care of these financial obligations.

And if you have an older teen who is at college or will be in the near future, establishing a joint checking account can make life easier for you. Instead of sending a check through the mail, you can deposit money directly into the account and have your child be responsible for making sure their debts are paid. Call it an investment in their financial future. Your teen is learning valuable money management skills, and you are putting your trust in them to be responsible with the account and your hard-earned cash.

When you’ve determined that your teen is ready to handle a checking account of their own, or a joint account with you, then it’s time to search out the best bank to do business with. This can be a challenge, since not all banks provide checking accounts for minors because they cannot be legally held to a contract. Obviously, this becomes a problem if there are unpaid overdrafts, for example.

If you’re having trouble finding a bank that provides these types of accounts, keep in mind that credit unions and local community mutual banks typically offer options for the younger set.

Also, each bank typically offers different types of checking accounts that you can choose from. Your best bet is to find out what’s available for teens under 18 years old and compare the features. Start with your current bank. First, ask if they offer teen checking accounts. If not, check to see if you can co-sign on their account or open one jointly.

In addition, it’s important to consider all banking fees your teen will incur before committing to an account. Are there fees if your child goes below a minimum balance? Will they be charged for using a teller? Is there a monthly ATM card fee?

Once you choose both the bank and type of checking account, there are a number of other considerations. Will you allow your teen to have a debit or ATM card tied to the account? This will probably depend on your child’s spending habits and whether they will be disciplined in controlling its use.

It’s also a good idea to teach your child not only how important it is to keep track of checking account transactions, but also about balancing their checkbook monthly. These invaluable lessons will help ensure your teen makes good financial decisions by keeping track of their money.

Check with their bank to see if they provide any materials or educational opportunities for your teen. There also are online tools, such as Facebook’s My Money application and other apps that can help your child keep track of their finances.

Realize that it’s important to keep close tabs on your child’s account. Set limits before the account is active. Some banks will allow you to do so automatically. Consider foregoing debit cards and allocating checks early on to limit withdrawals. Look at their statements each month, closely monitor debit card use, and regulate each withdrawal, especially in the beginning. Ensure your teen is being responsible from the get go. If not, don’t hesitate to close the account.

Checking accounts are a great tool for teaching your teen money handling skills. Learning to manage money at a young age will help set up your child with the skill set to make smart financial decisions in the future.

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If you’re anything like me, you pay the vast majority of your bills online. What’s not to love? It’s convenient, and it saves money on postage, check printing, etc.

Well, let me let you in on a little secret… Banks don’t offer these services out of the kindness of their hearts. Rather, they do it to lock down their customers. Don’t believe me? Then consider this…

According to a study commissioned by Fiserv, which develops online billpay systems, using the internet to pay bills, send electronic checks, etc. can reduce customer turnover by up to 95%. Why? Because it’s a hassle to re-create your system at another bank.

This shift to online banking has made it easier for banks to make customer-unfriendly decisions — like instituting fee increases — comfortable in the knowledge that people are largely unwilling to break their online banking ties.

According to Emmett Higdon, a consultant who managed Citibank’s online billpay system from 2004-2007, “For the consumer, it’s a double-edged sword.” Yes, it’s convenient, but industry insiders knew “that it would be a powerful retention tool. That’s why online bill paying went free in the first place. Inertia is powerful in the banking industry.”

In fact, online billpay usage has increased 38% over the past five years, and it’s expected to increase another 25% — to 55M households — by 2016. At the same time, a survey by Javelin Strategy and Research has revealed that few consumers are switching banks.

In other words, it’s working.

But guess what? It’s not actually that hard to change banks. Yes, it will take some time, but there’s relatively little effort involved. You will, of course, have to open a new account, and you’ll need to spend a few hours switching your direct deposits, ordering checks, and configuring your billpay/auto-debit options. But beyond that, it’s mostly a matter of waiting a month or two for things to settle out.

What about you? Do you use your bank’s online billpay services? If so, do you think this make you less likely to change banks? Or would you be willing to pick up and move the moment your bank steps on your toes?

As for me, I’d have to say that the convenience of our bank’s system does make it less likely that I’d switch, though it certainly wouldn’t stop me if our bank did something too egregious.

Of course, there’s nothing stopping the next bank from making customer-unfriendly moves once you get there. If we had convenient access to a good credit union, we’d probably go that route. But we don’t, so we just make the best of it.

Source: NYTimes.com

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The recent news that banks were planning to charge monthly debit card fees was not well-received by recession-weary Americans. The rising costs of fuel, food and living in general when unemployment is at an all-time high means the timing couldn’t have been worse to hit up our pocketbooks some more.

When will it all stop?

Well, banks have since backed off on the debit card fees, but that doesn’t mean they’ve stopped looking for ways to nickel and dime our pocketbooks into oblivion. It’s up to the Consumer Financial Protection Bureau to keep these bank fees in check.

Created by Congress in 2010, the CFPB and opened its doors in July 2011. The CFPB’s job is to help put a stop to unfair and/or abusive practices when it comes to financial products and services. According to its website, the agency’s central mission is to “make markets for consumer financial products and services work for Americans.” Among other things, this means protecting credit card holders, bank customers, etc. from unreasonable fees.

For consumers, education is key.

Not only is it the CFPB’s job to gather and analyze information to better understand consumers, but the agency also ensures that Americans receive the information they need to make smart financial decisions in an easy-to-understand format. This means nothing should be buried in fine print, direct comparisons can be made, and financial service providers cannot be deceptive or unfair.

The CFPB’s initiatives in the last year have sought to simplify a number of processes and to make critical information more accessible and easier to decipher. For example, Know Before You Owe combines two federally-required mortgage disclosures into one simple format so consumers are better equipped to understand the costs and risks of a loan.

The agency also commissioned a survey to explore how Americans perceived the Card Act, a credit card holders’ bill of rights that touts fairness and transparency that was signed into law by President Obama in May 2009 and instituted in February 2010.

More recently, the CFPB has set its sights on checking account overdraft fees. It’s no wonder, as the banking industry is said to have taken in record amounts of overdraft fees, well into the billions of dollars, that some contend has been acquired through unfair processing and fees, along with unclear disclosure information.

The skepticism about overdraft fees is not new. A 2008 Federal Deposit Insurance Corp. (FDIC) report found that three-quarters of all banks automatically enrolled consumers in overdraft protection, sometimes without their knowledge.

Following the FDIC report, the Federal Reserve developed rules requiring banks to ask customers whether or not they wanted to enroll in overdraft coverage.

The CFPB’s goal is to take another look at bank overdraft programs and attempt to clarify the cost of free checking accounts. This means consumers will be better informed about overdraft fees and the impact on their bank accounts.

Consumer advocates are counting on the CFPB to crack down in other areas, as well. For example, some are calling for more policing of check-cashing operations and their high fees. Others are looking for increased regulations regarding prepaid debit cards, which can be more expensive and less secure than traditional deposit accounts.

For-profit debt settlement companies, which have been further regulated by the FTC recently, are also under fire by advocates, who charge that these firms target and exploit desperate consumers.

Granted, the CFPB has its work cut out for it, but at least they no longer have to take a look at that $60 annual debit card fee. Hopefully, by keeping the consumer in mind when making their rulings, the agency can stop other abuses, provide consumers with better insight into their financial transactions and obligations, and positively impact the economic climate overall. Every penny counts.

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Last summer I mentioned that ING Direct was about to roll out the ability for customers to deposit checks electronically. Unfortunately, that still hasn’t happened. Yes, their website still says that “depositing check is about to get a whole lot easier,” but I’m not holding my breath.

Perhaps they ran into technical difficulties, or perhaps the takeover by Capital One has delayed things indefinitely. Who knows? But what I do know is this… Another major player in the online banking space — Ally Bank — has added the ability to deposit checks remotely.

The new feature is called “Ally eCheck Deposit,” and it involves scanning an uploading your check from the comfort of your home. You can either use their scanning wizard, or you can scan it on your own and upload the image manually. Apparently your deposit will be processed on the next business day, so it’s way faster (and easier) than mailing in a check.

Funds availability is governed by their standard deposit agreement, which states that:

For all other checks drawn on any U.S. financial institution other than Ally Bank, state or local government checks that are payable to you, Cashier’s, Certified, Teller’s or traveler’s cheques that are payable to you, and Federal Reserve Bank checks, Federal Home Loan Bank checks, and postal money orders, if these items are payable to you, $100 is available on the first business day after the day of your deposit and the remaining funds on the second business day after the day of your deposit.

Though longer delays may be applicable if, for example, you deposit checks totaling more than $5k in a single day or you have a history of overdrafts.

I haven’t tried this myself, but it looks reasonably efficient. It would be nice if you could just snap a pic with a smartphone and tap the screen to upload, but still… This beats the heck out of mailing a check or driving across town to a brick and mortar bank.

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As I alluded to in yesterday’s post about the Everbank signup bonus, Bank of America has decided against implementing a $5 monthly fee for debit card usage. This reversal occurred against a backdrop of consumer rage that spawned Bank Transfer Day, which is focused on getting people to move their money from big banks to a credit union.

According to David Darnell, co-COO of Bank of America:

“We have listened to our customers very closely over the last few weeks and recognize their concern with our proposed debit usage fee. Our customers’ voices are most important to us. As a result, we are not currently charging the fee and will not be moving forward with any additional plans to do so.”

Good for them – thought it doesn’t take a genius to predict that customers would be furious over a fee like this. Also, their words about valuing their customers’ voices wouldn’t ring so hollow if they weren’t the last one to the party… By the time that Bank of America made their announcement, Chase, Wells Fargo, SunTrust, and Regions Bank had all dropped their plans to institute similar fees.

Interestingly, when I ran a poll about this last month, 47% of the respondents who were facing increased fees of this sort stated that they were planning on switching banks. For their part, Bank of America hasn’t yet indicated whether or not they’ve seen an uptick in account closures, though the fees weren’t scheduled to go into effect until January 2012.

Of course, when one fee disappears, another typically takes its place. In this case, we’re talking about billions of dollars in foregone fees, so it will be interesting to see what they wind up doing to fill this revenue gap. Given the bad press that they’ve received, I’d be willing to bet that they’ll avoid high profile fees, but they will almost certainly make up the difference elsewhere.

So, dear readers… What do you think? If you were planning on making a change in response to these fees, will the reversal be enough to get you to sit tight? Or are you still planning on taking your business elsewhere?

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“Why would you pay $60 a year to use your debit card? We’ll pay you $60 to switch.”

Their Yield Pledge Checking requires a $1500 minimum balance to open an account and has no monthly account fees. They also offer free check deposits from home and, as long as you maintain a $5k average daily balance, they’ll refund any ATM fees that you incur. Thus, even f you don’t have any nearby locations, you should be able to take advantage of their services.

If you’re interested, click here to open an account. But don’t dawdle, as Bank of America has had second thoughts and won’t be adding charging the debit card fee after all. I’m not sure what impact this will have on Everbank’s promo, but you never know…

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Last spring I wrote about a credit union that changed the terms of their existing CDs. The institution in question was Fort Knox Credit Union in Radcliff, KY. Today, I want to follow up on that story and provide an update.

The change in this case was an increase in the early withdrawal penalty on all CDs with terms of 24 months or longer. They wound up raising the penalty from 90 days of interest up to a full six months. Ouch. From the bank’s (or credit union’s) perspective, this change helps to mitigate the risks associated with customers breaking their CDs early when rates rise.

From the consumer’s perspective, this change effectively decreases the interest rate of your CD if you decide to break it early. Not good if you’ve been hedging your bets by buying long-term CDs with the intent of cashing them in if/when rates rise.

According to a recent article over at DepositAccounts, at least one Fort Knox CU customer lodged a complaint with the NCUA, but the NCUA ruled against the customer because Fort Knox had reserved the right to change terms with 30 days written notice.

To be clear, customers still had the option of breaking their CDs under the old terms, but they had to do so within that 30 day window. If they waited, the new policy would have gone into effect, and the penalty would have already doubled from 90 days to six months.

In contrast, most other banks (including BofA, PenFed, and OneWest) have only applied such changes to newly-issued CDs, and have left existing CDs alone. Whether or not this practice of changing the rules on existing CDs will spread remains to be seen. But I, for one, certainly hope that it doesn’t.

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Much has been made of the recent reports of debit card fee increases, monthly fees for formerly free checking accounts, and so on. Consumers are understandably upset, and many are threatening to switch banks. But will they? Will you?

I’m curious, so I thought this would make for a good poll topic. Truth be told, switching banks isn’t all that hard. Sure, it takes a bit of time and effort, but there’s really nothing standing in your way. Except, perhaps, inertia. While switching banks isn’t hard, standing pat is far easier.

While I’m annoyed by all of these extra fees, they won’t actually impact us. Yes, we bank with BofA, but we don’t use our debit cards — other than for ATM transactions, which are free — and we aren’t facing any other fees. At the same time, I like having access to our bank and a huge network of ATMs when we travel.

Thus, we’re not planning on switching. What about you?

As always, please feel free to leave a comment to add some context to your response. And please be honest. If you’re made as heck, but too lazy to do anything about it, be sure to ‘fess up.

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As a followup to Friday’s post about Bank of America’s new debit card fees, I wanted to share something that I learned over the weekend…

According to a BofA rep, you can convert your debit card back into a plain old ATM card if you want. Since the fees are only for debit card usage (i.e., swiping your card at the point of sale like you do with a credit card) this will protect you from grabbing the wrong card and getting hit with a $5 fee. You have to contact them to make this happen.

Obviously, this doesn’t help if you regularly use your debit card, but if you don’t, then making the switch might provide some peace of mind.

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With the unwelcome news that many of the nation’s biggest banks will soon be charging fees for debit cards usage — on top of lots of other fees — you may be thinking of switching banks. Ugh. What a chore. But you can save a nice chunk of change on an ongoing basis by sucking it up and moving to a better bank.

Here’s an eight step plan for making it happen…

Step zero: make up your mind

For starters, you need to decide whether or not you really want to make the change. If, for example, you place a high value on having access to a nationally-available ATM network, then switching to a local bank or credit union might not be such a great idea.

Another potential concern here is that the new bank that you’re targeting may be planning on adding fees, but hasn’t announced the changes yet. Thus, it might pay to wait a few months to see how things shake out.

Step one: find a new bank

Once you’ve decided to make the change, it’s time to find a new bank and open an account. Using the thought exercise you went through above, decide what you do and don’t like about your current banking relationship and then find a replacement that offers what you love while fixing the things that you hate.

Of course, you may not be able to find the 100% perfect solution here, so you may need to rank your criteria and settle for the lesser of several evils. Once you know the lay of the land, you might also want to re-visit step zero and be sure that you really want to make the switch.

Step two: change your direct deposits

Next, you’ll want to contact your employer and update your direct deposit information. It could take a couple of pay cycles to sort this out, so do this right away.

Step three: re-establish links to outside account

After you’ve talked to your employer about direct deposit, you’ll need to work your way through your other financial institutions and re-establish any linkages that will be broken when you finally close your old account. This could include links between your bank and an investment company, an online savings account, PayPal, etc.

Step four: move your billpay transactions

Now that you won’t have any money flowing into your old account, you better make sure you’re not still paying bills from there. Go through your billpay interface and move everything over to the new account. You should also be sure to check for auto-debits. For example, the company that picks up our trash auto-debits our checking account every three months.

Another big area, and one that’s easy to miss since they may only take out money once per year, is things like life insurance premiums. In some cases, you’ll need to make these changes through the payee instead of through your bank, so devote some time to getting these things sorted out.

Step five: get new checks

In most cases, you’ll a free set of starter checks from our new bank. But if you don’t, or if you don’t get enough, you’ll need to buy some yourself. In general, it pays to shop around. While I’ve recently been able to get free checks from our bank, it wasn’t always this way. In fact, it’s often far cheaper to buy checks online than through your bank.

Step six: sit and wait

Ahhh. Everything is now done. Right? Well, hopefully. But maybe you missed something, so it’s best to sit and wait to be sure that all of your transactions are hitting your new account, and that you didn’t forget anything.

It’s also important to double-check that all of your checks have cleared. Right now, for example, I’m still waiting on a measly $7 check from last April to clear. I could follow up with the payee, but it went to a school group, and I’m honestly not sure who was in charge. So, for now, I wait.

You’ll obviously want to leave a cash cushion during this process in case anything pops up.

Step seven: close your old account

This is the most unnerving step because there’s always a chance, no matter how small, that you forgot something. After you’ve waited a few months and are satisfied that your old account is now totally dormant, go ahead and take the plunge. Draw your balance down to zero and close your account.

Ahhhh… There, doesn’t that feel better?

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» New Debit Card Fees on the Horizon
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The big news in the consumer banking industry yesterday was that Bank of America intends to roll out a $5/month service fee for customers who make purchases with their debit cards. Yikes! Five dollars? Per month? That’s a lot. And it won’t matter if you use your card just once or dozens of times.

The good news is that you’ll still be able to use ATMs without facing the new charge, but still. Five bucks. Per month. Ouch. The change will go into effect at the beginning of next year.

And Bank of America isn’t alone in this… Wells Fargo will be testing a $3 monthly fee in certain states starting in October, and Chase has been likewise testing a $3 monthly fee.

These changes are coming in response to new limits on swipe fees that banks can charge merchants when a customer pays with a debit card that will go into effect tomorrow (October 1st). Unfortunately, it looks like these fees are the wave of the future — at least at big banks — so it may be time to start looking at your options.

One possibility would be to find a new bank or credit union that doesn’t charge these fees — at least not yet. Another possibility would be to switch from debit cards to credit cards.

What do you think? Would you switch banks to avoid these fees? Or switch how you pay for things?

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With record gas prices, rising food costs, and stagnant (or declining) salaries, it’s difficult to save money these days. If you’re like me, when I come across extra money to sock away, I want it to be accessible, secure and earning the highest interest rate possible.

I’ve found that both money markets and certificates of deposits are great options to consider for the investment-weary, although interest rates have been frustratingly low for the past several years. There are, however, important differences that will determine which is right for you.

Here is a short primer on both, including the pros and cons.

Certificates of deposit (CDs)

Certificates of deposit, or CDs, tie up your money for a specified length of time, ranging from a few short months to several years. During this time, your money typically earns a fixed interest rate that largely depends on the length of the CD term. The longer the money is locked away, the higher the rate you will receive.

If you withdraw your money before the CD maturity date, there is a penalty in terms of the number of days of interest — typically 60 days on the low end up to 6 months on the high end. In general terms, you want to avoid early withdrawal because that penalty will eat into your earnings. And if the penalty exceeds the amount of interest earned as of the date of withdrawal, the difference may be deducted from your principal.

The upside is that you can determine your earnings with CDs beforehand, so you’ll know exactly what you’re getting. Also, this is a very safe investment choice. Your money is insured up to the current FDIC insurance limits. However, those who opt for longer maturity time frames will also lose access to this money for a long time period, and will face interest rate risk.

One of the most important factors in purchasing your CD should be interest rate. This amount varies depending on the current interest rate, how much money is being invested, the maturity length of the CD and the bank you are using. Another important factor are the penalty terms. If the penalty is low enough and the rate (vs. your alternatives) is high enough, you might even consider using a long-term CD as a short-term investment vehicle.

When CD shopping be sure to pay close attention to the terminology — especially distinctions like annual percentage yield (APY) vs. annual percentage rate (APR). The number that you’re ultimately interested in is the APY, which tells you the rate at which your earnings will grow each year. APR doesn’t include the effects of compounding, so you’ll have to be sure the other terms are equivalent if comparing based on APR.

As an example, if you invest $5,000 in a CD that’s paying 5% APY, then you will earn $250 in your first year. And then the next year, you will earn 5% on the new balance of $5,250 — and so on.

In addition to banks, credit unions and full-service brokerage firms sell federally-insured CDs. Since brokers shop the entire country for high yields, brokered CDs may be a good option, though you’ll need to be careful to be sure you don’t exceed FDIC limits (if you buy through a broker, the CD still counts against your FDIC limit at the issuing bank), and there may also be limitations on your ability to withdraw your funds early.

There are also other flavors of CDs, like equity-indexed CDs, which base their returns in part on the performance of the stock market. Minimum investments are often higher for indexed CDs, and you are typically required to hold them to maturity, with no option for early withdrawal. In addition, your upside potential is typically capped in return for the relative security that a CD can offer. This means that, even if the stock market takes off, you will only enjoy a limited gain.

Money markets

There are two main types of money markets. Money market deposit accounts (MMDAs) are a cross between a checking and a savings account. Although earning more than interest-bearing checking accounts, you are restricted in the number of withdrawals each month. Offered by banks, the deposit is insured by the FDIC, so both the principal and interest are 100% guaranteed.

In contrast, money market mutual funds (MMMFs), are typically offered by mutual fund families and are not FDIC insured. These funds offer market-based interest rates and the average maturity of securities is 90 days or less. These funds typically seek to maintain a stable value of $1/share, with dividends being paid out monthly. There are, however, no guarantees and the lack of FDIC protection means that MMMFs are riskier than MMDAs and other bank accounts.

Although money market accounts are more accessible than CDs, banks are required to limit you to six withdrawals per month, and they may also require a steep minimum balance or they will charge you a monthly service fee. The interest rates associated with these accounts is also often determined by the amount of money deposited. The more money put in, the higher the rate of return.

Making the Decision

When choosing between a CD and money market account, it’s best to first determine your needs. Will this money be saved for short-term or long-term expenses? If you’re looking to use it for a vacation, car repairs, or a home expense within the next six months or less, a money market would be your best bet.

For rainy-day or more long-term savings, such as to cover expenses during a job loss or for a new house, a CD may be a better choice — especially if create a ladder of CDs with varying maturities such that you’ll have one coming due every 6-12 months.

Because CDs and money market funds are both safe short-term investment options, both are worth considering for money you don’t want to tie up or risk in the stock or bond markets. Just be sure to do your homework to see which banks offer the best rates and terms before committing to an account.

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While paying my bills recently online through my bank, I had a sudden flash of concern. How safe was my transaction? Was I at risk of identity theft or, even worse, the pilfering of my accounts?

Although experts say online banking is safer than the traditional method of using paper statements, it turns out that my worry is not completely unfounded.

Although there are currently no reliable studies showing how much money is lost through online banking alone, there are a number of reports that have put this problem at the forefront.

Incredibly, about $3.2 billion was lost to phishing attacks in 2007, which affected 3.6 million people that year, according to a survey by Gartner, a technology research firm. Reports indicate that this is a growing problem.

The Sinowal Trojan, a virus that injects legitimate-looking pages on your browser, then steals your login credentials, compromised 300,000 online bank accounts and 250,000 credit and debit card accounts over three years, according to a study published in October by California’s RSA FraudAction Research Lab.

With the use of online banking on the rise, and the service heavily promoted by most financial institutions, this issue most likely will become even more widespread.

So how can those of us who use online banking safeguard ourselves?

Although there is no silver bullet, there are ways to bank smart online that can help minimize your risk of fraud.

Protecting your online banking info

The first rule of thumb is to confirm that the online banking site is legitimate. An easy way to do this is to log onto the site directly, not through a third party or unsolicited email. Otherwise, it’s easy to be duped by copycat websites that have been designed to capture your information.

When deciding on passwords and PINs, the more complex, the better. Never use the obvious, such as names or birth dates. The most secure passwords use a combination of letters and numbers (and special characters, if allowed). Change your passwords and PINs often, and vary your credentials from account to account.

Also, keep passwords and account information in a secure place, and don’t share them under any circumstances. This includes providing this information during unsolicited phone calls or in emails.

You should also familiarize yourself with your bank’s privacy policy, which will detail what information the bank has about you and what it shares with other companies. And be sure to confirm that your deposits are federally insured by the FDIC. The ‘About Us’ section on most bank websites will typically provide this information.

It’s best if your information is encrypted when being sent between your computer and your online bank (and back). Look for the lock or key icon in your web browser to be sure that your data is secure.

Don’t use a public computer, such as those located in hotels or cybercafés, to access your accounts, and be wary of using public or unsecured wifi networks. Otherwise, it will be relatively easy for fraudsters to steal your data.

Finally, any computer used for banking should have a virus protection program and firewall that are updated regularly, and be sure to perform virus scans daily. Warning signs that your computer has been compromised include slow or sluggish response times, frozen screens, and/or an inordinate number of unsolicited pop-ups.

Closing thoughts

Given that it’s nearly impossible to completely secure a computer, the more safeguards that you implement, the better off you will be.

By being proactive, keeping a close eye on account balances and transactions, and instituting safer online banking procedures, you will minimize your risk of theft.

It’s important never to let your guard down, especially when banking online.

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» Money Poll #7: Online Banking
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It’s that time again… Time to order more checks. I’ve mentioned this in the past, but despite doing most of our banking online, we still need to write a decent number of checks, mostly for things related to our school-age kids.

The last time we had to order checks was back in October 2006. At that time, we bought 700 checks. That means we’re writing somewhere around 140 checks per year – not including checks sent through online billpay.

For the sake of comparison, I ran a poll on poll on check writing frequency about a year ago. Of the 360+ respondents, 24% reported writing no checks in a typical month, and 47% reported writing 1-3 checks/month, and 19% reported writing 4-6 checks/month. Obviously, we’re on the high side.

Okay, with that as a backdrop, let’s get back to the issue of ordering checks…

When I last wrote about this, Rule #1 was to avoid ordering them from your bank since most banks charge a premium. Rule #2 was to avoid the no-name check printers. Sure, they might be fine, but you probably shouldn’t entrust your banking info to a fly-by-night operation.

At the time, our bank (Bank of America) was charging $63.00 (!) for two boxes of checks with free shipping. At the other end of the spectrum, Sam’s Club was charging $23.26 with free shipping for four four boxes of duplicate checks. Wal-Mart and Current were in the middle, coming in around $35 for four boxes.

Well, guess what? After pricing the competition, I decided to check with Bank of America and was pleased to learn that we’re now eligible for free checks – up to 300 per order, with free shipping*. The other options were priced similarly to what they were 4-5 years ago, though Sam’s Club has added a handling fee that brings their price up to a little under $30.

Needless to say, I ordered from the bank, and will likely place a second order when these arrive – no sense in waiting until we truly need them, only to find out that the bank is charging again.

*Note: Only the plain blue “security” checks were free – if we wanted a fancier design, we would’ve had to pay. Also, I’m pretty sure that this free check offer is tied to our specific account type, so your mileage may vary. Oh, and while I opted for free shipping, they had a number of shipping options that ranged as high as $25.

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In a move that’s sure to bring a smile to the face of many customers, ING Direct is now offering paper checks to go along with their formerly-paperless “Electric Orange” checking account. According to reports, they’ve been notifying customers of this feature, though I haven’t yet received notification.

Be that as it may, a review of their FAQs reveals this:

After my Electric Orange checking is opened, will I receive paper checks to write?

You won’t automatically receive checks to write, but you can order a checkbook of 50 checks for $5.00. If you prefer to pay electronically, you’ll still be able to make payments online or use your debit card for purchases.

Apparently these checks will include additional security features like extra digits that ensure only “valid” checks will be processed. I’m guessing that this means you’ll have no choice but to buy your check from ING as opposed to buying checks online.

While many of you may scoff at the need for paper checks, we still use them for all sorts of things. Sure, you can use online billpay to send a paper check to a payee that doesn’t accept electronic payments, but that doesn’t work very well for school fundraisers, sports registrations, etc.

For us, the lack of an online checking account with actual checks meant that we couldn’t completely ditch our local bank. Sure, we could keep most of our savings online to take advantage of the higher interest rates, but we still needed a “real” checking account.

Now if only they could get that remote deposit thing worked out. They’ve been hinting at it for months now, but they haven’t rolled it out yet. Need more evidence that remote deposit is on the horizon? Log into your account and click the “Transfers & Deposits” tab. From there, select “Deposit Checks” and you’ll be greeted with a message that states:

Depositing checks is about to get a whole lot easier.

Hang tight … we’re just dotting the i’s and crossing the t’s.

In the meantime, continue depositing checks the same ol’ way.

The same ol’ way refers to either depositing the check in a local bank and then transferring the funds electronically, or depositing checks by mail (click link for details). The first option is what I’ve always used, but it requires a local bank. The second way is workable, but slow.

Once they get the whole remote deposit thing figured out, we’ll have little use for a local bank, and may end up transitioning to an entirely online banking process. Until then, however, we’ll maintain the status quo. What about you?

Hat tip: Consumerism Commentary

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» Zurich Direct Class Action Settlement Finally Arrived
» Converting Paper Savings Bonds to Electronic Form With SmartExchange
» How to Order Checks Without Getting Ripped Off

Are you tired of earning a pittance on your hard earned savings? Not too long ago you could earn 3%, 4%, 5% or more by sticking your cash in a high yield savings account. But today? Not even close. Interest rates now top out in the low 1% range, and it seems like there’s no light at the end of the tunnel.

So what’s a savvy saver to do? Well, you could just accept the low rates as an unavoidable consequence of the current economic landscape, or… You could get creative and get at least a bit more bang for your buck. Here are three ways to get a better rate for your savings.

High yield (rewards) checking accounts

While savings accounts were once home to the highest interest rates, checking accounts are now getting in on the action. Be forewarned that you may have to jump through some hoops – like setting up direct deposit and making a minimum number of debit card transactions per month – but if you’re up to the challenge, you can score a great rate.

For example, MoneyRates.com currently lists reward checking accounts with rates as high as 5.01% APY. Note that many of these offers are regional, so you may have to shop around a bit, but there are some killer deals out there for the taking.

Long-term CDs with low penalties

I’ve mentioned this one in the past, but if you can find a bank with a low penalty for early withdrawal, you can use long-term CDs to get a higher interest with minimal downside risk. For example, Ally Bank has a 60 day interest penalty if you break their CDs early.

Given that Ally’s five year CD rates are paying roughly double what you can get from an online savings account, the break-even point is roughly four months. Beyond that point, you’ll come out ahead relative to having your money in a savings account, even if you have to access the money before the CD matures. And if rates rise dramatically, you can simply break your CD and re-invest.

If you go this route, here’s a tip: Split your money into multiple CDs. That way you can access just a portion of it without paying a penalty for early withdrawal of the full amount.

Series I savings bonds

Another solid option is to use Series I savings bonds, which are inflation-indexed bonds offered by the U.S. government. Rates on I bonds are updated semi-annually in May and November. As of right now, newly-issued I bonds are paying 4.6%, though that number will fluctuate over time depending on the inflation rate.

The downside here is that I bonds cannot be redeemed during the first 12 months, so they’re not a great vehicle for your emergency fund – or at least not for your entire emergency fund. But once that 12 months is up, you can redeem them. Between 1-5 years after they’re issued, there’s a 90 day interest penalty, and after five years you can redeem them penalty free.

Beyond offering a decent interest rate (at least relative to a savings account), interest that you earn from I bonds isn’t taxed until redemption (i.e., it’s tax deferred) and it’s also exempt from state income taxes – as well as federal taxes if you use the proceed to for eligible education expenses.

But don’t get greedy…

And now… A word to the wise. In general terms, if you’re holding cash, you probably want if to be both safe and reasonably liquid. You should thus avoid locking it up or taking unnecessary risks with it. In this vein, I would recommend shying away from things like peer lending.

While outfits like Lending Club tout 8-10% annual returns, and you sometimes see them mentioned in discussions related to improving your interest rates, the reality is that they are neither risk-free nor liquid. While investments like this may have their place in your portfolio, they’re far from being a cash equivalent.

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This is a guest post from Lisa White.

With all the publicity in recent years on the exorbitant fees big banks are charging, along with the dissolution of more and more community and neighborhood banks, I have been re-evaluating where to do my banking.

It is not easy switching banks to begin with, especially for those of us with more than one account, CDs and a mortgage tied into it. Throw in my online bank account, and I’m probably looking at a day’s worth of work to cover my bases.

However, having banked with the same institution, albeit one that has changed hands several times over the last 25 years, it probably is a good idea to make myself aware of the positives and negatives of dealing with a larger bank such as mine vs. a smaller, local bank.

I have minimal experience when it comes to small banks, having opened a small business account to keep funds handy for tax purposes and business expenses. Unfortunately, I found out too late that its location, which only allows right-hand turns upon leaving, is not the most convenient. However, because they don’t charge me a monthly fee, unlike the larger bank that I deal with, I’ve found that it’s worth doubling back through town when leaving.

Unfortunately, I also recently discovered that the smaller bank’s drive thru hours on Saturday are a half-day shorter than my larger bank. This means that the paycheck I’ve been waiting on cannot be deposited until Monday.

In contrast, the larger bank seems to provide convenient access to locations in almost every town I frequent. This makes it convenient to grab cash fee-free or deposit that check on my way to the store or while running errands.

With big banks in a multitude of locations, I’m saving money, not only on ATM charges, but also on gas. And, come to think of it, my big bank is directly next to my gas station.

If I move, I don’t need to worry about switching banks, since my larger institution is national.

Still, there is the issue of customer service. My smaller business bank has a smaller number of employees, and there are a couple that call me every so often to check in. Yes, I am happy with your services, but just wish I could turn left when I leave to go home!

With the big bank, I don’t get phone calls, only lots of promotional materials soliciting me to open more accounts, apply for a loan or use checks against my credit card account for ‘instant cash.’

If you’re deciding on changing from a big bank to a small bank or vice versa, consider what’s most important to you…

• Will you be visiting the bank location frequently? If so, consider its hours.
• Is the bank conveniently located? This is important if you need to make many ATM visits during the week. Those fees can add up.
• If you’re like me and have a variety of accounts, shop around for the bank that best fits your needs. Realize that while business accounts at some banks charge a monthly fee, other banks (in my case a smaller financial institution) will provide free small business accounts.
• Especially with smaller institutions, make sure the bank you choose is FDIC approved so your funds are guaranteed if the bank goes out of business.

Customer service at smaller banks tends to be more personal, which is important when you’re dealing with money issues.

This brings to mind an incident I had at a former larger bank with a business account. Although I had opened the account under my corporation’s name, the checks I was receiving from clients were under my name. This wasn’t a problem until three years after I opened my account, after depositing numerous checks during this time. The teller refused to allow me to deposit checks made out to me, even though my account had my name and the name of my corporation attached to it. Even calling the bank’s corporate customer service line did no good.

I ended up leaving this bank and moving to the smaller bank that I now use. The staff here was eager to assist me in setting up my account and seeing to my banking needs.

Although the economy has proven that not all small banks are up to par, I’ve found that the exceptional customer service and fee-free accounts make them worth considering for my banking needs.

If I see any more banking fees on my big-bank statements, I may take the time to move the rest of my money from my large bank to the smaller one. These days, a little inconvenience is worth the extra cash in my pocket.

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I’m guessing that the vast majority of your are familiar with the concept of a CD ladder, wherein you invest in a series of overlapping CDs with a certain maturity. For example, you might own 12 x 1 year CDs with one maturing every month, or 5 x 5 year CDs with one maturing every year.

The primary advantage of laddering your CDs is that it gives you access to the best CD rates while ensuring that at least a portion of your money will be available on a regular basis. But what if your goals are different? What if you’re saving up for an expense that you will incur all at once, at some point in the future?

Enter the reverse CD ladder, wherein you buy a series of CDs over time, each of which has a progressively shorter term. In this case, you’ll wind up with multiple CDs maturing at once – perfect for covering that one-time, future expense.

Let’s say that you’re saving for a house down payment, and that it will take you five years to save enough. With such a short timeframe, you really want to stick with safe investments, but you don’t want to earn paltry savings account interest rates.

In this case, you might take whatever you have saved up right now and buy a five year CD. Next year, after you’ve saved some more, plow your balance into a four year CD. And so on until you reach the target date in the future, when all of your CDs will mature simultaneously.

Alternatively, let’s say it will take you two and a half years to reach your goal. In this case, you can simply save up everything that you can for six months and then buy a two year CD. Six months later, buy an 18 month CD, and so on. Once again, when your target date arrives, your CDs will mature all at once, and you’ll be good to go.

While the interest rates will decline on each successive CD because you’re locking it in for less time, you’ll still earn more interest (on average) than you would be leaving your money in a regular old savings account. Of course, if you’re in a rising rate environment, it’s possible that this plan could backfire – i.e., savings rates could rise to the where they’re higher than CD rates.

If you’re interested in pursuing this strategy, you might consider finding a bank with minimal penalties for early withdrawal. That way, if rates rise dramatically, you can get out of your CD and re-lock at a higher. As I’ve noted in the past, I typically use Ally Bank for this sort of thing, as their rates are competitive and they have only a 60 day interest penalty for early withdrawal.

Source: Managing CD Rates on MoneyRates.com

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As a followup to the recent news that Capital One is buying ING Direct, which was met with mixed reactions, I thought I’d share some positive news about ING Direct…

According to a series of Twitter exchanges, remote deposit of scanned checks is on the way. For example, back in December when they were asked if remote deposit was on the way, they replied:

Mailing checks is sooo 90’s – Don’t worry, remote deposit is on the way. It’ll be a dream come true.

And in March, when they were asked if it was still “on the way,” they replied:

You bet, but still no ETA. We’re forecasting nothing but smooth sailing once released.

And finally… Earlier this month, when asked again about remote deposit, they hinted that it might be available by the 4th of July:

Let us ease the pain… you’ll be seeing some easier ways to deposit checks before you’re declaring your independence.

As far as I’m concerned, this is great news… I’d love to be able to snap a photo of a check – or at least run it through my scanner – and deposit from afar. As things stand, PayPal is currently the only financial institution that I deal with that allows for remote deposit.

Source: @INGDIRECT via The Happy Rock

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Remember when I reported a rumor that Ally Financial (parent company of Ally Bank) was interested in buying ING Direct? Well, that rumor turned out to be wrong. Instead, it was recently revealed that Capital One will be acquiring ING Direct for a reported $9B – with $6.2B in cash, and $2.8B in stock.

This move will make Capital One the 5th biggest bank in terms of US deposits, up from 8th place, and it will also give them a strong presence in the online banking world. It remains to be seen what effect this acquisition will have on existing ING Direct customers.

Will Capital One leave well enough alone? Or will they start tinkering around with ING’s business model? Only time will tell.

Source: Bloomberg via Bargaineering

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Well, ING Direct now has an answer to those concerns… Read-only account access credentials that you can hand out to whatever online services you might use to track your finances. If someone manages to steal this info, they’ll be unable to pilfer your hard earned savings.

To create a read-only code, log in to your account, click “My Info” in the top navigation bar, then scroll to the bottom right where you’ll find a section titled “Personal Finance Access Code.” Click the link to create it and you’ll be given a customer number and access code (password) that you can give to the aggregator.

As far as I’m concerned, this is a great idea, and I hope other banks follow suit.

Source: Bargaineering.com

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According to the New York Post, Ally Financial (the parent company of Ally Bank) is in talks to buy ING Direct. Ally is reportedly making this move in hopes of boosting their deposit base as they wind down their troubled mortgage assets. Discussions regarding this acquisition are apparently “far along,” and rumor has it that the sale of ING Direct could fetch as much as $10B.

What do you think? Good news? Bad news? Or much ado about nothing?

Personally, I like both banks, though I’m not crazy about the possibility of Ally mucking around with ING’s excellent interface, or the possibility of Ally adopting ING’s typically lower rate structure. More generally, competition is a good thing, and I’d like to see as many good options in the banking space as possible.

Source: NY Post via MarketWatch via Jim Wang

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» Ally Bank Raises Savings Account Interest Rate
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Have you ever dealt with a foreign check? Until about two weeks ago, I had never received one. But then it happened… I opened my mailbox to fund a check from the United Kingdom for some consulting work that I had done. It was payable to me, but it was in pounds sterling (GBP) as opposed the usual dollar-denominated checks that I deal with. Unsure of how to handle it, I stuffed it into my pocket until my next trip to the bank.

About a week later, I found myself near our local Bank of America branch, so I stopped in. They had just opened for the day, and I was unsure of how to proceed, so I asked one of the “Personal Bankers” that was milling about near the front door. He responded that I should just head over to the counter and they’d take care of me.

When I approached the teller, I had several questions… How much would it cost for them to process a foreign check? How long would they hold the funds? And how much (in terms of USD) was my check worth? I was pleasantly surprised with her answers to the first two questions, and only mildly disappointed with the last one.

As it turns out, there’s no fee associated with depositing a foreign check at Bank of America – or at least not with our account type. Also, there was no hold placed on my deposit, so the funds were available immediately. This was a bit surprising, as I’ve heard horror stories about foreign checks being held for weeks and weeks. Regardless, I was happy to know that I wouldn’t have to wait.

As for that final question, I was told that my £500 check was worth right around $800 based on the prevailing conversion rate. Having already checked the Google currency converter, I had been expecting closer to $820. Oh well, it’s not like I had a boatload of options, so I just went ahead with the deposit.

I’m still not sure if the Google currency converter was using stale data, or if Bank of America was lowballing the conversion rate to make up for the lack of fees. Either way, I was in and out of the bank in about three minutes and I no longer have that check burning a hole in my pocket. If you have any tips for handling foreign checks, I’d love to hear them.

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If you’re anything like me, you’re always on the lookout for ways to get more from your money. Unfortunately, recent years haven’t been kind to savers, with saving account interest rates averaging just 0.15% nationally. The good news is that it’s not hard to find to find a better deal.

As evidence, I offer a recent article titled “America’s Best Rates” from Richard Barrington of MoneyRates.com. For those that are unaware, MoneyRates does a quarterly roundup of banks with the best savings account and money market rates.

During the first quarter of 2011, they found seven banks whose savings accounts paid an average of at least 1% (annualized) throughout the quarter. Here they are:

• American Express Bank (1.269%)
• Discover Bank (1.224%)
• Capital One Bank (1.221%)
• Zions Bank (1.087%)
• Ally Bank (1.070%)
• Cashmere Valley Bank (1.066%)
• ING Direct (1.063%)

We actually have accounts with three of these seven banks – Discover Bank, Ally Bank, and ING Direct. We do most of our “regular” banking with Discover and ING. As for Ally, we like them for their high CD rates and the associated low early withdrawal penalties.

It’s also worth noting that all three of these banks (along with Capital One, Zions, and Cashmere Valley) were near the top back in Q4 of 2010, so they’ve been fairly consistent with their rate offerings. Not only that, but both Ally Bank and Discover Bank were featured in last year’s post about banks with consistently high interest rates thanks to their two year (plus) history of paying the highest rates.

Are you a rate chaser?

I’ve long since given up chasing rates and am now content to let our money sit at banks that consistently pay high rates, even if they’re not the absolute highest available. What about you? Are you a rate chaser? Whether you are or not, I’d love to hear which banks you prefer and why.

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» Fed Cuts Interest Rates to Record Low
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» Watch for Falling Rates: HSBC, ING Reduce APY

In short, they’ve decided to increase the early withdrawal penalty on all 24 month and longer CDs from 90 days to a full six months. They claim to be able to do this because they’ve reserved the right (in their membership agreement) to make such changes with 30 days notice.

The big concern here is that an increase in the early withdrawal penalty effectively reduces your interest rate if you break your CD early. While I don’t own any Fort Knox Credit Union CDs, I do own some five year CDs from Ally Bank that have a low (60 day) penalty, which means I can easily break them early if rates rise.

Fortunately, Ally has assured customers that they’ll honor the existing penalties at least until their CDs mature. Rather, if they were to make a change, it would be with 30 days notice, and it would only apply to new CDs. Nonetheless, this is just one more thing to keep in mind when comparing CD rates across banks.

Hat tip: The Finance Buff

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Lending money to family or friends can be an awkward decision. On the one hand, you want to help out a loved one in need, but will you ever get your money back? If you want to help, but think that helping them out with a loan will only make things worse, then here are some things that can help improve a stressful situation.

Give a smaller gift

If you don’t feel comfortable lending money to people in your life, then consider gifting them a more acceptable amount. When you give a gift, you’re not expecting to see the money again, so you don’t have to figure out a payment plan or worry that they won’t pay you back.

Benefits

By giving a smaller amount, you won’t be putting your finances in danger when giving a smaller amount. Also, by making it a gift, there are no strings attached, so there won’t be any reason for hard feelings down the road.

Offer to help with a budget

If you honestly feel like this is a situation that will repeat itself, then you may want to offer help with budgeting. Perhaps you could show them how you’ve been able to improve your finances with some simple tricks.

If they don’t want to open up about their finances with you, you could offer some other helpful gifts:

• Quicken: This is a great piece of software and if they are tech inclined, it could help their finances tremendously by streamlining it. They can do cash flow projections, budgets, and track their investments and savings. It’s a very handy gift to share.
• The Total Money Makeover by Dave Ramsey: This is a wonderful guide on how to get out of debt, get started on savings, invest for retirement and college, etc. Dave Ramsey’s method works, so if you want to help jumpstart someone’s finances, this is a great book. I’ve given this book out to others and, while some don’t follow it (“it’s too hard!”), many of them have picked up some tips that have helped.
• I Will Teach You to Be Rich by Ramit Sethi: This book, like The Total Money Makeover, is more than theory; it shows you step-by-step how to organize finances into an extremely manageable system. There are actual scripts that can be used to get fees waived at the bank, interest rates lowered on their credit cards, and so on. It’s also very pointed, so it may be the kick in the pants that they need.

I also recommend Your Money or Your Life and The Millionaire Next Door as great gifts, but they are more food for thought. When your relative has gotten out of their current crisis, they may be more inclined to sit down and examine the big picture when it comes to money.

Benefits

By giving these sorts of gifts, you’re teaching your family or friends to fish rather than buying them fish every time they’re hungry. If they respond to what you show them, then you can help them improve their finances.

Empowering loved ones to understand and use basic money principles can not only keep them from asking for money, but it can also help your relationship. They’ll be more independent and in control.

If they don’t listen, at least you’ll know that you gave them the tools to succeed. Every time they ask for a bailout, you could ask them if they used the software or read the book. You’ll then have a better idea if this is a situation where you want to help them or not.

Lend money on your terms

Perhaps you’ve decided that you want to help out by lending them some money, but you want to make sure that you’ll get paid – and that you won’t have to be the bad guy if things don’t work out as planned. Consider encouraging them to borrow via a peer lending platform.

Lending Club

While it might seem strange to use a third party to broker the loan, this might be the perfect solution. Lending Club can vet their application, and also help to reduce your financial commitment – after all, other “investors” will have the option to pitch in and help out.

Advise your would-be borrower to fill out the paperwork and apply for a loan. Lending Club will be able to measure objectively whether or not they are a good candidate for a loan.

What if they get rejected? That could be a sign that simply lending them money won’t help to solve their financial problems. You can then decide if you still want to go ahead and lend them the money on your own – probably not a good idea – or choose another path. It may be a jolt to their ego if they get rejected, but it’ll also give them a chance to see their financial situation clearly.

Just say no…

This can be hard to do, but sometimes saying “no” is the best way to wake someone up to their financial problems. If you think that saying no is too harsh, here’s a suggestion that can help you get your relative to a more proactive role in their finances…

SmartyPig

If your relative is hard up for money, you might want to turn them on to SmartyPig, which is essentially a high yield savings accounts with a social component.

Not only do they give you bonuses if you’re saving for purchases at specific retailers, but they also provide a mechanism for sending gifts. Gifting a small amount into their account can be a great way for you to get them started on their way and to encourage them to save for their goals.

Your thoughts on lending to family

Have you ever given a loan to a family member or friend? If so, was it for a significant amount? How did it work out? Did you get your money back? Were there any hard feelings? And would you do it again in the future?

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» Thoughts on Lending Money
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The past few years haven’t been kind to savers. Interest rates have plummeted, and the typical online savings account is now paying just a bit more than 1% APY. Sure, CD rates are a little better, but you have to lock up your money for a relatively long period of time to do much better than a savings account. Or do you?

Today I want to share with you a little trick that we’ve been using to eke a bit more out of our “liquid” savings… Buy long term CDs from a bank with a small penalty for early withdrawal.

While many banks charge six months, or even a year of interest if you break your CD early, institutions such as Ally Bank have a short 60 day interest penalty. When you couple that with a decent five year CD rate, you can supercharge your savings with minimal risk.

Here’s how it works:

Start by opening an account with Ally Bank and then buy one or more five year CDs. These are currently paying 2.39% APY, which is roughly double what you’ll get with a high yield savings account.

If you want more flexibility, split your money into multiple CDs so you can access it a little at a time if the need arises. If you’re funding your CDs from a savings account, just be aware of the six withdrawal limit so you don’t incur any penalties for making too many transfers in a month.

You should also be aware that Ally’s 60 day interest penalty will eat into your principal if you break your CD in under 60 days, so don’t be too aggressive with this strategy. Once you hit the two month mark, you’ll be free to break the CD without any loss of principal, though you won’t have anything to show for your trouble.

At the four month mark, you’ll break even with prevailing savings account interest rates and, from that point forward, it’s all gravy… For example, using the current rate of 2.39% APY, your effective interest rate after 12 months will be just shy of 2% after deducting the early withdrawal penalty.

When interest rates eventually rise (they can’t get much lower!), you can simply break your CDs and reinvest the money at the new rates, or doing something entirely different with it.

Note that this strategy differs from a CD ladder, which involves buying CDs of varying lengths (e.g., 1 year, 2 year, 3 year, 4 year, and 5 year) and then renewing each of them into the longest term at maturity. While this is a great strategy, short term CD rates are abysmal right now, so you’ll pay a price to get the ball rolling.

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As I noted earlier in the week, I’ve recently spent some time cleaning up and organizing our finances. As part of this process, I closed our FNBO Direct savings account. Today I want to share the steps for closing an account at another online bank that used to offer a competitive rate – DollarSavingsDirect.

For starters, you should start by transferring your money out of your account. If you don’t, you’ll have to wait for them to send you a check with your remaining balance. Note that DSD will keep your unearned interest if you close your account before it posts, so make sure you don’t have a bunch of unpaid interest before you proceed.

Once you’ve cleared out your account, simply follow these steps:

• Click the customer service link at the top
• Click the button to compose a new message
• Choose any topic – e.g., “I have a question about my account(s)”
• Select your account from the pulldown menu
• Submit a short message asking them to close your account

That’s it. You should receive a response within a day or two saying that they’ve closed your account. We still have accounts with a few more online banks, but I’m done closing accounts for the time being. If you’d like to see which banks we’re still using, be sure to check out our financial network map.

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As part of our New Year’s reorganization, I’ve been closing extraneous accounts that we’re no longer using. One of these is our old FNBO Direct savings account, which has been sitting dormant with a dollar plus a few cents of interest for the past year.

This is one of several online savings accounts that I opened back when banks were actually competing with each other for business. Nowadays, it almost seems like they’re trying to drive customers away with repeated rate cuts.

Anyway… I logged in and sent a quick message to Customer Service inquiring about how to close my account. The next day, I received the following message:

Thank you for contacting FNBO Direct. To request the closure of your account, please follow the steps below:

1. From the bottom of any page, select the ‘Contact Us’ link.
2. Select ‘Account Closing Request’ from the options on the left side of the page.
3. Fill out the form accordingly and click ‘Submit’.

Please keep in mind you may keep your Online Savings Account open with a zero balance. If you decide at a later time to have an open account with us, you would need to fill out a new application.

If you have any additional questions, please visit our FAQ’s at www.fnbodirect.com or send us an email.

Sounds easy enough, but I hit a small snag…

Before closing our account, I wanted to transfer the small amount of remaining money out, but guess what? FNBO Direct doesn’t let you transfer less than $10 online. Seems like a weird policy, but it is what it is.

So… Instead of transferring a dollar something out of our account, I had to request a check during the account closing process. I did this all about a week ago, and I received the check Friday. Now that our account is closed, I can free up whatever small amount of brain power that I was using to keep track of this account.

As an aside, I’m not really interested in keeping extraneous accounts open even if I can do so with a zero balance. Not only do I not want to keep track of this stuff, but the existence of extra accounts also represents a small security risk – especially if they’re still linked up to active bank accounts.

A word of warning…

I’m not sure how FNBO Direct handles this, but I know that some banks will keep any unpaid interest if you close your account mid-month. Thus, it’s probably safest to wait until your current interest posts before closing your account. If you’d like to get your hands on your balance sooner, transfer it out but leave the account open until the accrued interest gets paid out.

Note: While writing this up, I noticed that my pal Jim is hosting Spring Cleaning Week over on his site, so be sure to check it out if you’re interested in freshening up your finances.

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Two years ago, I set up a CD ladder at Ally Bank, though they were still technically GMAC Bank at the time. I did this by buying a one, two, three, four, and five year CD and have been renewing each “rung” on the ladder into a new 5 year CD every November.

While CD rates have been awful over the past couple of years, we’ve been receiving a nice little bonus from Ally in the form of a 0.25% bonus for renewing our CDs each time.

It works like this: When your CD matures, simply leave it alone and it will auto-renew into a CD of the same term at the prevailing rate + 0.25%. If you’d like to change the term or add money, you have ten days to do so and you will still get the bonus.

Note that the bonus isn’t cumulative, so you can’t just leave your CDs in place year after year and keep accruing bonus on top of bonus. Rather, as long as this offer is in place, you’ll get a 0.25% bonus on top of the prevailing market rate.

Another nice aspect of Ally Bank CDs is that their early withdrawal penalty is only 60 days of interest, so you’re not risking much if you lock in a longer term CD and rates end up rising.

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This offer runs from October 1st through November 30th, and your cash back will post the 15th of the following month.

Here’s a rundown of transactions that are not eligible:

• Any purchase that posts to your account for greater than $50
• Any transaction where you request cash back or obtain a cash advance
• Any gambling related purchase like lottery tickets, casino chips, or bets
• Items that are returned
• Unauthorized transactions
• ATM withdrawals, wire transfers or money orders
• Finance charges or tax payments

Aside from that, have at it. 1% isn’t a lot, but it’s certainly better than nothing.

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This sort of remote deposit has been around for awhile, though it’s been limited to a relatively small number of banks and credit unions. With this latest development, however, you have the ability to do remote deposit whether or not your bank supports it.

The key is that you have to have a PayPal account to do this, but… With over 87 million people using PayPal, chances are good that you already do. Once you’ve linked your PayPal account to a bank account, then it’s a simple (albeit somewhat slow) two-step to deposit your check and then transfer it to your bank.

Here’s how it works:

Step 1: Launch the app, login, and tap “Add Money From Checks.”

Step 2: Tap the “Continue” button to dismiss the welcome screen.

Step 3: Take a picture of the front of your check*.

Step 4: Take a picture of the back of your check*.

Step 5: Enter the amount of the check.

Step 6: Patiently wait… Up to six business days.

That’s it. It’s a very simple process, though it’s a bit disappointing that the check approval process takes so long. I’m not sure why it’s so slow, but I suspect it has to do with PayPal just being the middle man. In other words, they presumably need to work through their own bank to get the check cleared.

When you add the time required to transfer the money from PayPal to your bank, you may be looking at close to two weeks to get the money from your phone to your bank. Not great, but there are still times that I can envision using it – e.g., to deposit a check when I’m on the road and don’t have access to the bank.

Of course, once our bank adds remote deposit functionality to their iPhone app, I’ll probably never deposit another check into my PayPal account. But until then, it’s a potentially handy alternative to have.

*Note: The actual pictures are much clearer than this. These are just screenshots from my phone, and are thus a bit blurry.

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What is a CD ladder?

For starters, a certificate of deposit (CD) is a savings instrument that allows you to deposit your savings with a bank or credit union for a set period of time. You’ll get a higher rate than with liquid savings, but will also face a penalty for early withdrawal.

Building a CD ladder simply entails buying CDs in a staggered (overlapping) fashion. Because longer term CDs have higher rates, you can maximize your interest earnings while still having periodic access to a portion of your funds.

You can build a CD ladder on whatever timescale you wish, whether it’s a 12 month ladder with 12 one year CDs, with one expiring/renewing per month, or a five year ladder with 5 five year CDs, one coming due each year.

Benefits of having CDs

Why would anyone want to use a CD ladder over a regular savings account? There are some distinct advantages to using a CD ladder rather just savings or just putting all of your money in one big CD.

• CDs can provide you with access to higher interest rates. If you’re looking for a better return than what many savings accounts offer right now, CDs may be your solution.
• A CD ladder provides you with flexibility. The disadvantage of CDs is that, while longer terms (perhaps up to 5, 7, or 10 years) offer better interest rates, your money is locked in for that period of time. What if rates rise or you need the money? There are some no penalty CDs available at some banks, but you usually have to settle for a lower rate.
• A CD ladder simplifies the process of finding solid interest rates. Having a CD ladder can unburden you from constantly rate chasing the latest deal. You know that some of your savings will be available once a year, so you’ll periodically be able to grab a better deal, but you don’t have to be on the constant lookout.
• A CD ladder helps you ride out periods of low interest rates. Since your money is staggered over time, a longer term CD ladder can help smooth out the inevitable ups and downs in interest rates. While buying a CD right now might be painful due to the low interest rates, those that you bought in the past will still be carrying a higher rate, helping to average things out.

How to set up a CD ladder

Setting up a ladder isn’t complicated at all. It does take some some hunting if you want to find the highest rates on the market, but a number of websites (including this one!) aggregate the best CD rates.

Once you choose a bank or credit union, it’s time to get started. For this example I’ll assume that a person has $10,000 to put away and I’ll use current rates at Navy Federal Credit Union.

I’ll label the individual CDs A-E for clarity, and I’ll assume that you’re setting up a five year CD ladder. In the first year, here’s how you could deposit your money.

• (A) – $2,000 in a CD that matures in 1 year with 1.10% APY
• (B) – $2,000 in a CD that matures in 2 years with 1.55% APY
• (C) – $2,000 in a CD that matures in 3 years with 2.05% APY
• (D) – $2,000 in a CD that matures in 4 years with 2.35% APY
• (E) – $2,000 in a CD that matures in 5 years with 2.80% APY

In the second year, it shifts a bit.

• (B) – $2,000 will mature in 1 year with 1.55% APY
• (C) – $2,000 will mature in 2 years with 2.05% APY
• (D) – $2,000 will mature in 3 years with 2.35% APY
• (E) – $2,000 will mature in 4 years with 2.80% APY
• (A) – $2,000 matured and was reinvested into a 5 year CD at the going rate

In the third year, it shifts again.

• (C) – $2,000 will mature in 1 years with 2.05% APY
• (D) – $2,000 will mature in 2 years with 2.35% APY
• (E) – $2,000 will mature in 3 years with 2.80% APY
• (A) – $2,000 will mature in 4 years with 2.80% APY
• (B) – $2,000 matured and was reinvested into a 5 year CD at the going rate

In the fourth year, it shifts once again.

• (D) – $2,000 will mature in 1 years with 2.35% APY
• (E) – $2,000 will mature in 2 years with 2.80% APY
• (A) – $2,000 will mature in 3 years with 2.80% APY
• (B) – $2,000 will mature in 4 years with 2.80% APY
• (C) – $2,000 matured and was reinvested into a 5 year CD at the going rate

At the end of 4 years, all of the CDs will be set for 5 year maturity dates, giving you the highest return, but still having access to 20% of your funds each year.

You may find it handy to mark the maturity dates down on your calender. I advise using an electronic one to send you a reminder a month before the CD matures so you check rates and decide how to proceed.

If you’re using this strategy for your emergency fund, I would suggest having two or three months of living expenses available in a savings account, and you should also probably consider a shorter-term (one year) CD ladder.

A few caveats:

There’s no need to stick to just one bank. You can spread your money across multiple institutions to get the best interest rates at each maturity or time point, though doing so increases complexity.

Note that short term CD rates at some banks lag behind savings account interest rates at other banks. If you’re setting up a ladder, look around and see if investing your shortest “rungs” in CDs is really the best idea. In the example above, you could just hold the 12 month money (CD A) in an online savings accounts at a higher rate than what NFCU is offering (or you could find a better 12 month rate elsewhere).

Penalties vary across banks, so that’s an important factor to consider. If you need early access to the money, or if you want to break the CD and re-invest at higher rates when they rise in the future, you’ll want to minimize your penalties.

Finally, if you’re scared off by the low rates right now, just file this away for a later date. The good news is that, because your money is staggered, you’ll be able to take advantaged of higher rates as your CDs mature and you re-invest.

Your thoughts on CD Ladders

I’d love to hear your take. How many of you have a CD ladders? Have you had the resolve to maintain it over the past year or two, as interest rates have plummeted? And which banks (or credit unions) seem to offer the best deals?

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Related Articles at fivecentnickel.com:

» Another Fed Rate Cut – Time to Load up on CDs?
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» Ally Bank Ten Day CD Rate Guarantee
» How to Build a CD Ladder
» Ally Bank 0.25% CD Renewal Bonus
» What are “No Penalty” CDs?
» CD Ladders in a Low Interest Rate Environment
» Use a Reverse CD Ladder to Save for Future Expenses

Well, the site is now back up, along with a brief apology:

To our customers:

Please accept our apology for the difficulties that recently affected Chase.com.

Giving you 24-hour access to your banking is of the utmost importance to us. This was not the level of service we know you expect.

Thank you for your patience and for the opportunity to work harder to serve you in the future.

Ummm, thanks. But that doesn’t really tell us anything.

According to a Chase spokesman, as quoted in the Chicago Tribune, the problem was reportedly caused by:

“a third-party database company’s software [which] caused a corruption of systems information, disabling our ability to process customer log-ins to chase.com. This resulted in a long recovery process.”

He went on to say that:

“[Chase] will work with customers to refund any fees that were incurred as a result of this problem.”

That’s all well and good, but an outage of this magnitude doesn’t give me a lot of confidence in their system. To be fair, any bank with a heavy reliance on the web access is potentially susceptible to this sort of thing. In fact, I’ve seen this sort of thing before.

Perhaps this is a good reason to maintain accounts at more than one bank. As you can see from our financial network map, our financial life has a number of built-in redundancies.

While we mostly maintain these accounts to give us a bit of flexibility when it comes to chasing higher interest rates, they also provide some protection against extended downtime at any one bank.

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The backstory

A week ago this past Wednesday, I made a transfer from Bank A to Bank B. For a variety of reasons, none of which are very interesting, I had to do this by phone. So… I called Bank B, gave them the Bank A routing and account numbers along with the amount, and went merrily on my way.

The next day (Thursday), I decided to do another transfer in the same amount, so I again called Bank B, talked them through what I wanted to do, and once again went merrily on my way.

On Friday night, I checked both accounts. Much to my surprise, there were three deposits into my account at Bank B. Uh oh. It looks like one of the transfers got duplicated. Concerned, I checked Bank A. Two withdrawals had hit – was another one lingering out there in the ether?

Of course, we were heading into Labor Day weekend, so I’d have to wait extra long to find out. Isn’t that how it always works out?

Untangling the mess

Concerned that we’d get hit with a third transfer out of Bank A, I called both banks. Bank B said that they were only showing two transfer requests, and couldn’t explain the third deposit. Regardless, they promised to cover any fees that we might incur.

Over at Bank A, they were only showing two withdrawal requests so far. They further stated that, since there wasn’t enough in our account to cover the third transfer, it would simply be refused. We’d get hit with an NSF fee but, given the circumstances, they’d go ahead and waive it.

As of this writing, our banking situation still hasn’t been resolved. The third deposit is showing at Bank A, but the third debit has yet to hit Bank B. In other words, we’re currently sitting on a bunch of extra money. Great new, right? Well…

Resolving bank errors

As it turns out, even if a mistake such as this is entirely the bank’s fault, you’re not allowed to keep the misdirected funds. And if you try to do so, you might wind up getting yourself arrested. Seriously.

Here are three examples: one, two, three

When your bank figures out their mistake – and they eventually will – you’ll have to give the money back. Either that, or they’ll take it. Perhaps without warning. Thus, your best defense is to simply notify them of the error and leave the funds in place until things get straightened out.

Have you ever dealt with a bank error such as this?

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Upon noticing this discrepancy a week or so ago, I was likewise confused. A bit of Googling, however, pointed to a possible answer… It appears that Discover recently upgraded the savings accounts of some former E*Trade Bank customers whose accounts were transitioned over to Discover when E*Trade got out of the banking business.

It’s not entirely clear to me why some people got upgraded and others didn’t, but I suspect that it was due to account inactivity and a desire to convert these people into active Discover Bank customers. In our case, we’d had $1.02 sitting in our account since the transition, so we were likely part of their target audience.

Anyways… While going through the mail this afternoon, I ran across a letter from Discover Bank explaining the change, but not providing an explanation as to why. Here’s what they had to say:

Your Discover Online Savings Account was upgraded to a Premium Savings Account on 7/19/10 and is now earning an exceptional 1.50% APY! That’s more than 1.35% APY the current yield for Online Savings Accounts – and significantly better than the nation average of 0.24% APY. Take advantage of your new Premium Savings Account rate and see how much more valuable your money can become when you save with Discover.

So, if you have a Discover Bank savings account, you might want to log in and check to see if you’ve been upgraded. The 0.15% difference in APY isn’t a huge deal, but it’s better than nothing.

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Why these three? As many of you know, I love the convenience of ING Direct. They’re so good at so many things. Thus, we’re currently using ING as the “hub” of our online financial world.

Unfortunately, ING Direct has fallen back a bit in terms of interest rates, so we’ve kept Ally and Discover around because they have a history of paying competitive rates. We’re currently getting 1.50% APY at Discover vs. 1.10% with ING.

Now that I’ve identified the core pieces of our banking puzzle, the next step is to get them to work well together. As things stood earlier this week, certain accounts were linked up in a daisy chain fashion, where money had to move from A to B before it could get to C.

In the interest of creating a more efficient system, I decided to go spend a few minutes systematically linking the accounts to one another. Stealing a page from my pal Jim’s book, I’ve drawn up a simplified financial network map to illustrate how things are configured.

A few words about this map… The arrows indicate the direction of links. Some accounts (with double-headed arrows) are capable of pushing and pulling money from either side. In other cases, the arrow runs from the “master” account to the “servant” account.

For example, I can log into ING Direct and push/pull money to/from our Bank of America checking account. I could configure our BofA checking account to access ING Direct, but BofA charges fees for certain types of external transactions initiated from their end, so I haven’t bothered.

As you can see from the map, I can shuffle money around within BofA very easily. Once it’s in the checking account, it can be pulled out to any of our online savings accounts, and from there it can be shuffled back and forth at will.

Is this more complex than it needs to be? Sure. That BofA savings account isn’t strictly necessary, and we don’t really need three online savings accounts. At the same time, however, I like flexibility and being able to eek out a bit more in the way of interest earnings whenever I can. What can I say? I’m a maximizer.

Our true financial map is, of course, considerably more complex than this. For example, Lending Club is set up to push/pull money to/from our checking account, and our Vanguard accounts have access to both our checking account and ING Direct. I also haven’t drawn in our automatic billpay, all of which originates from checking.

Nonetheless, this should give you a pretty good picture of how we’ve set things up.

What about you? How streamlined is your banking system?

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According to the FDIC’s quarterly banking profile, more than one in ten US banks (829 out of 7830) are currently in trouble, and the number appears is climbing, with the number of banks on their “problem list” increased by 7% during the 2nd quarter.

In terms of bank failures, 118 banks have already under in 2010, compared to 140 in all of 2009, and just a handful per year prior to the current economic crisis. In other words, be sure to pay attention to FDIC limits when managing your bank accounts.

The good news is that, for the first time since 2006, the number of loans that are 90 or more days past due declined, falling nearly 5%. The same can be said of loans charged off by banks, which showed a slight year-over-year decline for the first time since the 4th quarter of 2006.

Interestingly, the 2nd quarter of 2010 also marked the first time in 38 years that the FDIC didn’t add any new banks.

Source: FDIC Quarterly Banking Report via WSJ.com

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Whenever I mention the (seemingly) ancient are of check writing, I always get a few comments from readers who have long since quit writing checks.

As much as I’d like to join the ranks of the non-check-writers, we still have a number of instances where we need to write a check. Note that I’m talking here about the physical act of writing a check, not using online billpay to send a check.

More often than not, our check writing needs stem from the fact that we have four school age kids. Thus, we write checks for fundraisers, to put money in their lunch accounts, and so on.

While we’ve been able to automate many of our check writing tasks through our bank, there are still numerous instances where we have to dash off a check for one thing or another — again, mostly kid-related.

Anyway, I thought this might make for an interesting poll topic, so… Here goes. Please keep in mind that I’m asking below about how often you actually grab the checkbook and physically write a check.

As always, please feel free to post a comment adding some context to your answer.

Interestingly, as recently as 2007, 54% of people were paying their bills by check.

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Because ING Direct doesn’t yet support the uploading of check images, I’ve typically deposited checks at my local bank and then initiated an ACH transfer. If you’d like to cut out that extra trip to the bank, then read on…

Depositing checks by mail

For starters, endorse the check. Before signing your name, you should write “For Deposit Only into Account {your acct #}” (fill in your real account number). On the memo line, you should also be sure to include your customer number.

Note: For those that are unaware, your customer number isn’t the same as your account number(s). Your customer number is like a username, though you can now create an alphanumeric username. Once logged in, you’ll see the numbers associated with your individual accounts.

If you’re uncomfortable including all of this information on the check, which will likely be returned (either physically or as a digital image) to the check writer, then you should simply write “For Deposit Only” above your signature on the back and enclose a note with your account number.

Either way, it’s a good idea to include your customer number on the check itself so they can track you down if something goes awry.

Once it’s ready, mail your check to:

ING DIRECT
P.O. Box 60
St. Cloud, MN 56302-0060

While it will take a few days to arrive, your check should be posted immediately upon receipt by ING Direct. Yes, you’ll have to pay for a stamp, but you’ll most likely save both gas and time.

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A brief history of remote deposit

USAA Bank become the first major bank to offer remote deposit to consumers when they rolled out their Deposit@Home service back in 2009. More recently, a growing number of institutions have begun offering similar services.

Remote deposit was actually first made possible by the Check Clearing for the 21st Century Act (Check 21 Act), which made digital images of checks legally acceptable for payment purposes.

While the Check 21 Act was primarily intended to keep American commerce rolling in the event that a catastrophe of some sort made long distance transport impossible, it also opened the door to the scanning and uploading of checks.

Banks and credit unions that accept scanned checks

While there are tons of banks and credit unions that offer remote deposit for commercial customers using specialized hardware, many fewer banks offer this service to consumers using standard scanners or cell phone cameras.

What follows is a list of banks and credit unions that definitely offer consumer-level remote deposit. Alongside each entry is an indication as to whether each institution supports desktop scans, Android photos, and/or iPhone photos of your checks.

• Addison Avenue Credit Union (scans)
• Alliant Credit Union (scans)
• Boeing Employees Credit Union (scans)
• Chase Bank (iPhone)
• Digital Federal Credit Union (scans/Android/iPhone)
• Everbank (scans)
• First Command Bank (scans)
• First Internet Bank of Indiana (scans)
• The Golden 1 Credit Union (scans)
• Hanscom Federal Credit Union (scans)
• NASA Federal Credit Union (scans)
• PenFed Credit Union (scans)
• Penn State Employees Credit Union (scans)
• Randolph Brooks Federal Credit Union (scans)
• Sharon Credit Union (scans)
• Service Credit Union (scans)
• Summit Bank (scans)
• Texas Security Bank (scans)
• USAA Bank (scans/Android/iPhone)
• Vystar Credit Union (scans)
• WV United Federal Credit Union (iPhone)

(Source: Paperless Office Wiki)

If you know of any other banks or credit unions that should be included on this list, please leave a comment with the pertinent details.

The future of check scanning

As for the future, US Bank will soon be rolling out their own consumer remote deposit service known as Deposit Express, and other major banks can’t be far behind. While I’m looking forward to Bank of America launching their own service, that’ll be just the tip of the iceberg.

Just think… When you combine ATM fee waivers with online check deposits at banks like ING Direct, most consumers will have very little need for a brick and mortar bank. It’ll be interesting to see how old school banks respond as more and more of their customers flee online.

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On Saturday morning, I read that the number of bank failures in 2010 had climbed to 108. For the sake of comparison, “just” 69 had failed at this point last year, and bank failures peaked at 12 in 2002 as a result of our last recession.

As you’re likely aware, FDIC insurance limits were increased from $100k to $250k per depositor per institution back in 2008. This increase was set to expire at the end of 2013, but it was made permanent with the recent passage of the financial reform bill.

The same goes for NCUA insurance coverage, which was likewise scheduled to fall back to the original $100k limit at the end of 2013. For those that are unaware, the NCUA is much like the FDIC, except that it protects credit union deposits.

Looking at the history of FDIC insurance limits, it seems perfectly reasonable to make the change permanent. After all, the limit has been at $100k ever since 1980. Accounting for inflation, that was the equivalent to $261,934 in 2008 dollars.

From the outside, virtually nothing will change. You’ll just no longer have to worry about the safety of your savings account, CDs, etc. come 2013 if your combined balance at a single bank is somewhere between $100k-$250k.

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As has been the case for years, the “hub” of our online banking system is ING Direct, so today I wanted to share the steps for linking additional accounts to ING. They actually offer two different ways of establishing links: online or via regular mail.

Before we get started, note that ING limits you to three linked accounts, so choose wisely. The good news is that you can remove accounts and establish new links at any time, so your decisions are reversible.

Adding a linked account online

Probably the easiest way to link a new account is to do so online. Here are the steps:

1. Sign in to your account
2. Click on “My Links“
3. Click on “Add Link“
4. Look for two small test deposits in the linked account (takes 2-4 days)
5. Return to “My Links” page, select “Unconfirmed,” and enter the amounts

This entire process takes just a few minutes, though you have to wait a few days in the middle. It’s also worth noting that this approach allows you to link a savings account (at least in theory), whereas the mail-in approach outline below is specific to checking accounts.

Adding a linked account by mail

Alternatively, you can link a new account by sending them a personal check from that account. The check must pre-printed with your name and address, payable to yourself, and made out for at least $1.00. Write your customer number and the word “Link” on the memo line of the check and sign it (but do not endorse it).

Mail your personal check to:

ING Direct
P.O. Box 60
St. Cloud, MN 56302-0060

Assuming that you add an account by mail, ING Direct will temporarily restrict transfers to the new account for five business days as a security measure.

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While this legislation seeks to put restrictions into place to prevent another financial meltdown, there are also a number of consumer protections included in the legislation, or proposed as amendments. For example…

The new legislation seeks to establish an independent “Consumer Financial Protection Bureau” within the Federal Reserve — the House calls for a standalone entity. This new bureau will oversee lenders (except possibly car dealers) and protect consumers against predatory and/or deceptive lending practices.

Other consumer-related changes include:

• Free access to your credit score. Thanks to prior legislation, you’ve had free access to your credit report for several years. You may soon gain similar access to your credit score — once per year from each agency.
• Making the FDIC insurance increase permanent. As most of you are aware, FDIC insurance limits were increased from $100k to $250k, but this increase is set to expire at the end of 2013.
• No credit checks for employment. As I’ve noted in the past, employers often check your credit before offering you a job. Under an amendment to the reform bill, this would no longer be allowed (with exception for jobs related to national security, etc.).
• Mortgage prepayment penalties. Believe it or not, some lenders still levy penalties if you pay off your mortgage early. The proposed legislation could restrict such penalties, and make them go away entirely in many cases.
• Mortgage compensation. Mortgage brokers won’t be allowed to accept compensation that varies depending on the loan type. This is intended to discourage brokers from putting borrowers in fee-laden products with disadvantageous terms.
• Debit card fees. A late addition to the legislation limits debit card fees that merchants pay, meaning that banks might wind up adding other fees to make up for the lost revenue. For their part, retailers argue that they’ll be able to afford more workers, and also pass savings along to consumers.
• Minimum transaction amounts. It’s fairly well known that stores aren’t allowed to set a minimum transaction amount for credit card purchases (see: Visa guidelines, MasterCard guidelines). Under the proposed law, such minimums would be allowed as long as they’re applied across the board.
• Credit card discounts. Stores would also be allowed to provide discounts based on what type of credit card you’re using. For example, they could offer a discount for using Visa or MasterCard instead of American Express. Cash and debit card discounts would also be allowed.
• Brokers and “best interests.” The House version of the bill requires investment brokers to act in their clients’ best interests. The Senate version requires only that they recommend “suitable investments,” with no “best interests” requirement.

Which of the above changes will make it into the final legislation remains to be seen, but there certainly seem to be a number of consumer-friendly measures under consideration. What do you think?

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These rankings were based on a number of factors, including account activities, account information, the bank facility, fees, problem resolution, and product offerings. It seems that the most common reasons that people switch banks are poor customer service and high fees.

Because they broke their data down regionally, it’s difficult to pull together overall rankings. However, by poking around in each region, some trends quickly becomes apparent. For example, the following three banks are consistently ranked amongst the worst:

• Chase/WaMu
• Bank of America
• Citibank

Hmmm… We actually have a relationship with all three of these banks. We do all of our local banking with Bank of America (though we keep the bulk of our cash in an online savings account), and we have credit cards with the other two — a Chase Freedom Visa, and a Citi Platinum Select MasterCard.

The top banks in each region, on the other hand, were generally smaller regional banks. In fact, I hadn’t even heard of many of them. There’s probably a lesson here…

If you’re looking for a better banking experience, you might want to avoid the big boys and find a local bank that focuses on service. Then again, we’ve never had a bad experience with any of the “worst” banks listed above, despite having used all of them for years.

What about you? Where do you bank, and have you been happy with your experiences? If not, are you unhappy enough that you’d consider moving to another bank?

Source: JD Power & Associates

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While this isn’t a huge increase, it’s certainly better than the regular rate cuts that we’ve seen from other online banks, and it places them near the top of the heap in terms of online savings rates.

They also have some decent (given the current market) CD rates, listed below:

• 12 months – 1.55% APY
• 36 months – 2.40% APY
• 60 months – 3.00% APY

Also… If you have a Upromise account, Sallie Mae will match up to 10% of your annual earnings (subject to some restrictions) as long as you have them deposited in your Sallie Mae savings account.

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While we’re still using a couple of these accounts, the others have fallen out of favor for one reason or another. The account that we’ve used the least in recent years has been HSBC Advance (formerly HSBC Direct) — largely due to their non-competitive interest rates. I therefore decided to go ahead and close this account.

Closing our HSBC account

The account closing process was actually quite easy. I logged in and transferred the residual balance out to our linked checking account. I then clicked on the “Bank Mail” tab, selected Savings Acct Inquiry, and sent the following message:

We have drawn our savings account balance down to zero (not including the interest earned in April which has not yet posted). We would like to close our account and have the outstanding interest mailed to the address on record:

{our address}

I then waited for a reply. Not long thereafter, an HSBC rep got back to us:

We have not processed your request to close the Online Savings Account. If you close your account before the interest is credited, you will not receive the accrued interest.

Hmmm. Good info, I didn’t know that. I thus waited a couple of days for the interest to post, and then wrote back to close the account. Shortly thereafter, we received a check in the mail for the interest that we would’ve otherwise lost.

One down, several to go…

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