If you are interested in opening a new brokerage account, you will now have more time to qualify for TradeKing’s $50 new account bonus. The promotion was originally slated to end this week, but the brokerage has decided to extend the $50 bonus through November.

In order to qualify, open a new account at TradeKing using a link within this post, fund the account with $2,500 within 30 days (you can leave your money in the default money market fund if you’re not ready to delve into stocks), and trade at least once within 180 days. Trades are relatively inexpensive at $4.95 each. There are only a few discount brokerages that offer trades at lower prices.

When you visit TradeKing’s application, make sure you see this icon in the top right of the screen. This is how you can verify whether you are offered the $50 bonus.

SmartMoney rated TradeKing the best brokerage in customer satisfaction this year.

It must be a sign of the times. This year I’ve seen at least one commercial advertising a retailer’s layaway plan. These have been out of style for at least as long as I’ve been an adult consumer. The theory is that rather than paying up front for a large item, a Christmas gift for example, with cash, you can offer the store a deposit and the store will hold the item for you.

Every week, you can continue making payments until the item is paid in full; at this point, you can take the purchase home. There may be a small fee to participate in a layaway program, but the store does not charge interest. As Kimberly Palmer from US News & World Report notes, if your layaway purchase is a holiday present for your children, having the store hold the gift while you make your payments would make it more difficult for the intended recipients to discover their hidden present.

Layaway seems to be a reasonable solution for making large purchases without credit cards. The fees are low and customers won’t get trapped into debt. In a retail environment when supplies of the most popular items can’t match demand, it’s an advantage to have the ability to reserve your purchase ahead of time while you pay over time.

Not every retailer thinks this is a profitable plan. Wal-Mart and a few other stores refuse to participate in layaway programs. If you plan on shopping at K-Mart, TJ-Maxx, or Marshall’s, layaway programs will be available.

Layaway Programs Come Back Into Style, Kimberly Palmer, US News & World Report, October 28, 2008

The Federal Reserve Board responded to the economy yesterday by lowering the target for the federal funds rate to 1% and the discount rate to 1.25%.

The first number is the rate usually in the news. The federal funds rate is the interest rate that banks charge to lend their balances to one another. If one bank wants to loan $30m to another bank, the two companies can negotiate the rate and the lending back and charge the borrowing back the rate agreed upon. By lowering the federal funds rate target, the Fed is saying they’d like to see this interest rate around 1%. The true lending interest rate is controlled by the market, guided by the Fed.

When banks borrow money from the Federal Reserve, the discount rate serves as the interest rate for the loan.

The federal funds target rate hasn’t been as low as 1% since June 29, 2004, having reached that level over a year before on June 25, 2003. A low target rate, and the ensuing availability of easy credit, possibly contributed to today’s credit crisis. But today’s low target rate will have a different effect, according to the policy makers. They believe low rates will increase liquidity between banks and encourage more—but sensible—consumer lending.

It might not be enough. Here’s the important part of the Federal Reserve’s statement yesterday:

Recent policy actions, including today’s rate reduction, coordinated interest rate cuts by central banks, extraordinary liquidity measures, and official steps to strengthen financial systems, should help over time to improve credit conditions and promote a return to moderate economic growth. Nevertheless, downside risks to growth remain. The Committee will monitor economic and financial developments carefully and will act as needed to promote sustainable economic growth and price stability.

“Downside risks” and “will act as needed” probably signal more rate cuts to come in the future. But there isn’t much further you can go from here. The Federal Reserve could cut the target rate to 0%, but that would be a first, I believe. If banks still aren’t lending to each other at that point, the only other option is simply printing money.

Inflation would increase, making it more difficult to afford the same living standards unless inflation is accompanied by growth in salaries. The current jobs market doesn’t make salary growth seem likely.

So what does this mean for me?

The moves by the Federal Reserve don’t affect interest rates on consumer loans. Rates on long-term mortgages will not change dramatically due to changes in the federal funds rate or the discount rate. Adjustable rate mortgages might see a decrease in interest rates. Many ARMs are tied to a different rate entirely, the LIBOR. The LIBOR has been slowly decreasing, as well.

Savers are in for bad news. Interest rates offered by banks for savings account usually follow the movements of the federal funds target rate, but some banks may follow the LIBOR movements. A number of banks have decreased their interest rates recently, and I expect that to continue.

The Financial Services Roundtable and the Consumer Federation of America asked the Department of the Treasury today for a piece of the Emergency Economic Stabilization Act money, the bailout money, to help banks and card issuers reduce the credit card balances for borrowers who don’t qualify for other government assistance like repayment plans.

So far, the Treasury spent $125 billion of the bailout money to buy stock in banks and bank holding companies:

• Citibank: $25 billion
• JP Morgan Chase: $25 billion
• Wells Fargo: $25 billion
• Bank of America and Merrill Lynch: $25 billion
• Goldman Sachs: $10 billion
• Morgan Stanley: $10 billion
• Bank of New York Mellon: $3 billion
• State Street: $2 billion

Should the government also provide money to credit card issuers to forgive debt for consumers who don’t have the means to pay? If so, the most likely recipients will be Discover and Capital One, as well as Citibank, Bank of America, and JP Morgan Chase, who have already received a portion of the bailout.

Update: According to more recent news reports, the groups did not ask for a piece of the bailout money; they petitioned the Treasury to allow the banks to forgive a portion of the debt. In return, the banks would be allowed to write down their losses over a long period of time.

Groups seek credit card debt forgiveness, Associated Press, October 29, 2008
Treasury makes first bailout payment, Associated Press, October 29, 2008

If you own a credit card from Bank of America, the bank is offering you a $75 bonus for opening a checking account with a minimum deposit of $25 before November 30. The bonus is available for Bank of America’s “MyAccess” checking account.

To qualify for the bonus, visit Bank of America’s website, select the option to open an account, select your state, and select the free MyAccess checking account. After confirming whether you are a current customer, you will be presented with the opportunity to enter an offer code. Use CH75EM1 to qualify for the $75 bonus.

If you have experience with Bank of America’s banking services, please share any stories. I do not have a bank account there nor do I have a Bank of America credit card.

Four months ago, I purchased a Hoover SteamVac and used the device to clean the carpets in my apartment. I was impressed then. In order to prepare for some company this coming weekend, I cleaned the carpets again this past weekend.

The results were just as great. I have a cat, and even though you normally can’t see how cat hair settles into the carpet, it’s amazing—and frankly somewhat disgusting—to see what comes up when you use a powerful cleaner. But rest assured, the carpet throughout the apartment is now quite clean.

Here are some links from around the web.

Million Dollar Journey shares the details about the new Canadian tax-free savings accounts launching for our northern neighbors in January 2009.

Before buying something, anything, Lazy Man and Money asks himself five questions. If he can answer all questions to his satisfaction, he will follow through with the purchase.

Stop Buying Crap has listed Kiplinger’s Personal Finance Magazine’s best online discount brokers.

Jim from Blueprint for Financial Prosperity has assembled 50 financial skills every person needs to know, whether or not the skill is used.

Planning a vacation outside the United States? Consider traveling to where the dollar is strong to get the most bang for your U.S. buck. I wouldn’t refuse a two-month vacation in Bali. Thanks to My Two Dollars for sharing this information.

Enter here to win a free copy of Quicken Premier 2009.

In his documentary film Overdrawn!, Karney Hatch mentions that banks often post your deposits and withdrawals to your bank account in such a way that they maximize the possibility of overdrafts. Even if you believe you have a large enough balance to cover your withdrawals thanks to recent deposits, the banks have a way of calculating debits and credits that can result in multiple overdrafts in one day.

Here is how this works, supposedly. This is the scenario: you know that you have an automatic electronic withdrawal that will be executed today, perhaps to pay your mortgage or cable bill. You realize that you may not have the money in your account so you run to the bank and make a cash deposit to cover the withdrawal. Or perhaps you are aware of the impending withdrawal the day before, so you execute a transfer from one account to another online. In your scenario, the final withdrawal and deposit are executed on the same day.

According to experience with many banks, no matter what time your withdrawals and deposits are processed on any one day, the bank will apply your withdrawals first, from largest to smallest, then apply your deposits. So if you have $100 in your account at the beginning of the day, and you have instructions to pay your mortgage of $1,500, your cable bill of $75, a cash withdrawal at an ATM during the day for $80, a debit card purchase at the grocery store for $10, and a scheduled ACH transfer for $2,000, the bank will process your mortgage first, dropping your account below zero and incurring your first overdraft fee.

The bank will then reduce your balance by the amount of the cash withdrawal. Even though you’re already below zero the bank will charge you a second overdraft fee. Next, the bank will process your cable bill, resulting in the third overdraft fee. Your debit card purchase will be posted next, incurring an average fee of $30 for your $10 purchase. You’ve now been charged $120 in overdraft fees alone.

Finally, the bank will apply your deposit, bringing your account balance positive again.

This technique has been observed, and banks have even admitted to this practice. Yesterday, Consumerism Commentary reader Steve claimed that this is not the policy at Wachovia, nor is it the policy at most banks. So I called Wachovia, Wells Fargo, Citibank, Commerce Bank and Chase to try to extract the official policies from the customer service representative or salesperson.

Here’s what I found:

Wells Fargo

Wells Fargo’s policy is to always post ATM withdrawals first, regardless of the time the transaction took place. After ATM withdrawals are posted, deposits and other credits are posted from highest to lowest amount, and finally checks and other debits are posted from highest to lowest. Interestingly, if your starting balance is $0 and you walk into the bank at 9:00 am to make a cash deposit of $100 and at 2:00 pm withdraw $40 from the ATM, according to this policy you could incur an overdraft fee.

Citibank

I don’t have complete faith in the answer I received from Citibank. The representative I talked to did not understand my questions at first and put me on hold for a long time, presumably to find someone who might know the answer, but returned with an answer that still did not match my questions. Eventually, she told me that cash deposits and ATM withdrawals are posted at the time of the deposit, but ACH and check deposits are posted first. Check payments are posted after all other deposits. It sounds like you’re in the clear with Citibank.

Chase

Chase will post your transactions to your account at the end of the day. The bank starts with deposits and ends with withdrawals, both from largest amount to smallest. This policy would avoid overdraft fees as long as at the end of the day you’ve deposited enough to cover your withdrawals.

Commerce Bank

Like Chase, Commerce Bank will post your deposits before your withdrawals. The policy is slightly different. Rather than processing your checks paid from largest amount to smallest, they are posted in the order of the check number, low to high. Commerce Bank assumes you want check number 1001 to pay before check number 1002.

The customer service representative at Commerce brought up an interesting point. First, keep in mind that there is a holding period when you deposit a check. The funds you deposit may not be available on the same day, even if the amount of the check is included in the balance listed online. Additionally, cash deposits have “next day availability,” so even cash deposits won’t be posted to your account until the next business day. Furthermore, on Friday, they consider it to be Monday, The one-business-day rule then stipulates that cash deposits on Friday won’t be available in your account for use until Tuesday!

Wachovia

Like Steve mentioned, the customer service representative at Wachovia explained the policy quite clearly. Wachovia will post your credits first, from highest to lowest amount, and will then post your debits, also from highest to lowest.

According to each bank’s representatives, the respective policies have been in existence as long as they could remember. I would like to contact more banks, like Bank of America, Bank of New York, Capital One, and PNC Bank to determine their policy as well. If I do, I will update this article.

It’s interesting that each bank has its own method of posting items to customers’ accounts. I think this is a practice that should be standardized across financial institutions, and it should be done in such a way that it benefits the banking customer: all overnight credits (ACH deposits, Direct Deposits, checks coming off hold, late ATM deposits) first followed all overnight debits (ACH withdrawals, electronic checks) from lowest to highest amount at the start of the day, then all real-time credits (cash deposits, ATM deposits during business hours) followed by all real-time debits (ATM withdrawals, bank teller withdrawals, debit card purchases) from lowest to highest amount at the end of the day.

Having never worked in a bank, I’m not sure if this policy is feasible, but it would be fair to the customer and reasonable to the bank.

Note: As of October 28, this deal is no longer available.

This is just a quick reminder that the promotion for the $25 bonus offered by E*TRADE Bank ends today. In order to qualify for the $25, you must open your account by today and fund the account with at least $5,000 by Monday, November 10.

A number of people reported that referral bonuses offered by E*TRADE Bank pay $25 and have no minimum balance requirement. If you can find someone to refer you, that is definitely a better deal. However, if you plan on keeping $5,000 at E*TRADE anyway, these two promotions offer the same benefit. Here are further details and here is the application.