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Banking

Everyone hates bank maintenance fees. (If you don’t, email me – I have a few you’re welcome to take.) So, what would you think if you discovered that your bank had been charging you fees for an account you never opened? In fact, THEY secretly submitted an application and opened that account on your behalf. I’d imagine, you’d be furious.

So, you might be surprised to learn that Wells Fargo has fired over 5,300 employees over the past few years for this exact practice. A practice which, we’re learning, has affected a surprising number of customers. In fact, a consulting firm was hired by Wells Fargo to conduct an external investigation, and found that bank employees may have opened as many as 1.5 million deposit accounts without their customers’ permission or knowledge.

They also submitted 565,443 applications for credit card accounts without consent of the customers. These accounts racked up annual fees, interest charges, and even fees for overdraft protection. The resulting damage equates to almost half a million dollars in erroneous fees – over $400,000 from 14,000 credit card accounts alone, in fact.

Apparently, this practice has been going on since 2011, with employees fraudulently opening both these bank and credit card accounts. But why? Richard Cordray, director of the Consumer Financial Protection Bureau, says that,”Wells Fargo employees secretly opened unauthorized accounts to hit sales targets and receive bonuses.” Ah, it’s starting to make sense now.

‘How could they possibly get away with something like this, though?’ you may be asking. Well, for fake bank accounts, employees were moving customers’ existing funds from authorized accounts into the new, fraudulent ones. Because of this, many customers were hit with insufficient funds or overdraft fees, as they didn’t have as much money in their bank accounts as they had deposited. Many employees were even going as far as creating fake email addresses and PIN numbers, in order to enroll the victimized customers in online banking services without their knowledge.

As expected, people are fuming. Many are asking how such a large bank, with an extensive network of internal controls, could even allow this to happen on such a large scale. Between the discovered deposit accounts and credit card applications, that equates to over 2 million victimized customers. Keep in mind that 5,300 employees have been fired over the past few years for this practice. It has obviously been a well-documented problem within the company for a while. So, why wasn’t something done years ago to prevent it from continuing?

Regardless of how it got so out of hand, Wells Fargo is in quite a bit of hot water now. They have, of course, agreed to pay “full restitution to all victims,” as well as been slammed with $185 million in fines — which is the largest penalty imposed on a company since the CFPB’s founding in 2011. On top of that, Wells Fargo will also refund $5 million to its impacted customers.

While $185 million sounds like a lot of money, some are questioning whether it’s even enough. Wells Fargo, after all, is worth over $250 billion, with Warren Buffet as the leading stakeholder in the company. These fines equate to a mere 0.074% of their worth. That’s a drop in the financial bucket, after such a grievous breach of trust and ethics.

This betrayal will surely have impacts on the company for years to come, though. When picking the financial institution that will hold your money (and often, your credit) in their hands, it’s imperative that they been deemed trustworthy. Most people wouldn’t choose a bank with a history of fraudulent activity or unauthorized use of personal information and funds. Maybe they will be able to earn back their customers’ faith in the coming years. Personally, I’ll be keeping my money and information at my existing credit union, whom I trust.

Are you a Wells Fargo customer? What are your thoughts on this being brought to light? If you’re not a WF customer, would you consider opening an account with them in the future?

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The best high-yield online savings accounts offer strong interest rates and great customer service, making them a popular option for savers. Studies also show online savings accounts often come with lower fees.

“High-yield” is unfortunately a bit of a misnomer these days; a decade ago, interest rates were 4% and 5% among select savings accounts and money market accounts. Today, the best rates are around 1% while a fair amount are still hovering near 0%! This trend will continue until banks and credit unions need more cash from depositors.

Banking Deal: Earn 1.00% APY on an FDIC-insured savings account at Barclays Bank.

Interest rates

Interest rates are important because money shouldn’t lose too much purchasing power. In a perfect world, interest rates offered by banks should beat inflation while preserving the balance without risk. I am not aware of any bank offering a savings option with ongoing interest rates high enough to beat inflation, whether measured by the government-reported CPI-U or by any other meaningful measure of consumer prices. Nevertheless, if your savings is at a brick and mortar bank earning below 0.25% APY, choose one of the better options below.

Customer service

When evaluating customer service, there are two important factors to consider. The best banks offer all account maintenance and transfers through a professional, reliable, and easy-to-navigate website. Secondly, live customer service representatives should be knowledgeable, helpful, and available, although customers should have to deal with a representative infrequently if at all.

Based on my own experiences and reviews from other Consumerism Commentary readers, here are the most-recommended accounts for short-term savings. All of the listed interest rates directly below from our partners and in the table that follows are current but they are subject to change by the banks. Although I have nine accounts listed below the table of rates, you don’t need to have accounts with that many different banks. Choose one that fits you the best.

First, here is a list of the latest interest rates. Following this table, I offer a few of my own observations and opinions about savings accounts from nine popular online banks.


Ally Bank was selected by Kiplinger Magazine as the best savings account for 2009. Formerly known as GMAC Bank, Ally Bank provides an interest rate for their online savings account of 1.00% APY. Click here to apply.


EverBank has a variety of products including a high yield checking account, a money market account, and world currency CDs, all with top-tier interest rates. Currently, for first time account holders, Everbank’s Yield Pledge Money Market account offers a new account bonus rate of 1.11% for the first year, with an ongoing APY after that of 0.61% for account balances up to $150K. And their Yield Pledge Checking Account for first time account holders for balances up to $100,000 offers a new account bonus rate of 1.11% for the first year and the ongoing APY is tiered 0.25%-0.61% APY. Click here to apply.


FNBO Direct offers no fees and no minimum balance requirement. FNBO Direct is the online arm of First National Bank of Omaha. FNBO has an interest rate of 0.95% APY. Click here to apply.


Discover Bank offers a solid online savings account with a fast opening process; my account was opened within twenty-four hours. The current interest rate for the Discover Bank Online Savings Account is 0.95% APY.


Barclays is a large, international bank that has been around for 300 years, and operates in over 50 different countries. Barclays offers a 1.00% APY on all deposits, with no minimum balance and no monthly fees.


Click here to start saving with Capital One 360!Capital One 360 offers no fees and no minimum balance requirement. Like ING DIRECT before it, Capital One 360 also has a great website and excellent customer service. So far, managing your money with Capital One 360 is just as easy as it was with ING DIRECT. Capital One 360 offers a current interest rate of 0.75% APY .


CIT Bank was founded in 1908 in St. Louis by Henry Ittleson. Throughout the 20th century, CIT continued to grow, in all sectors. CIT Bank, an FDIC-insured institution, serves consumers and small businesses with certificates of deposit, savings accounts and custodial accounts. CIT Savings account offers 0.95% APY on all deposits between $100-$24,999 and 0.95% APY on all deposits of $25,000 and above. Click here to apply.


SmartyPig currently sports one of the better interest rates you can find online at 0.75% APY. In addition to the high interest rate, you can also convert your savings goals into gift cards and earn an additional bonus for each gift card conversion. SmartyPig is not a bank by itself, but it is a goal-oriented savings vehicle, a layer, that can be compared with other savings accounts.


HSBC Advance offers no fees and no minimum balance requirement. HSBC Advance (formerly HSBC Direct) entered the race with one of the highest interest rates ever available at 6% APY. HSBC Advance Online Savings Account has an interest rate of 0.05% APY for $15,000.


Lending Club Investing offers a significantly higher return than most banks. LendingClub is a social lending site where you can invest in loans issued to individuals and businesses. The most recent average net annualized return for notes by grade A to C is between 5.20% and 8.19%. While these investments are not FDIC insured, given the low interest rates paid by banks, LendingClub may be an alternative worth considering.


What is your favorite online savings account? Share your thoughts in the comments below.

For more banks to round out the selection, see this list of savings accounts interest rates. I have been tracking the rate changes for many years now, and this list gives you an idea of which banks have been consistently offering the highest interest rates.

Credit: iStock photo by psphotograph

Tell us: What online savings account works best for you?

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The Occupy Wall Street movement seems to have faded away, but it is fair to say that banks are still not very popular institutions. Fairly or unfairly, the prevailing impression many folks have is that bankers are fat cats who make their fortunes at the expense of ordinary people. However, instead of being mad at bankers, perhaps consumers should be mad at themselves. Time and time again, people let banks get the better of them through careless banking habits.

Here are six ways people willingly give up money to their banks when they don’t have to:

1. Savings account rates

Whether you use an online savings account or traditional brick-and-mortar one, savings account rates have dropped to nearly nothing. According to the FDIC, the average U.S. savings account pays a rate of 0.06 percent. That means a $10,000 savings account would earn just $6 a year in interest — hardly worth the trouble it takes to open an account.

Why are deposit rates so low? Part of it has to do with the Federal Reserve’s monetary policy of lowering interest rates to stimulate growth, but some of the blame has to go to consumer behavior. Banks generally have more deposits than they know what to do with these days, so most do not feel compelled to offer a higher interest rate to attract deposits. What exacerbates that problem is that consumers are all too willing to settle for mediocre rates.

Review up-to-date savings rates

While the average savings account pays just 0.06 percent in interest, some of the top savings accounts pay over ten times that. If consumer behavior were a little more rational, deposits would flow toward the top-paying banks and away from the low-paying ones. This would force those low-paying banks to raise their interest rates or risk a severe drop in deposits.

Unfortunately, too many bank customers fail to take an active approach to shopping for rates, and thus settle for less than a tenth of the interest they could be getting should they go for a high-yield savings account.

2. CD rollovers

Let’s give consumers the benefit of the doubt and say that they actually compare rates for certificates of deposit when they first open a CD. After that, though, too many people just let their CDs roll over automatically at the same bank, without even comparing to see if they could get a better rate somewhere else.

Face it — if the bank knows a CD is going to roll over passively, do you think they will go out of their way to give it their best rate? Different banks have specials on CD rates that come and go, so there is always a good chance of finding a better offer when your CD is due to mature. The nice thing about a CD is that, if you make the effort to shop for the best rate, you can then lock that rate in for the term of the CD.

Besides missing out on the best CD rates, people who let their CDs roll over passively are also missing an opportunity to reevaluate the length of their CD terms. The right term depends partly on interest rate conditions and partly on your financial situation, both of which are likely to have changed since the last time you chose a CD.

3. Mortgage refinancing

This is another situation where banks are more than happy to benefit from a home-court advantage. If they already have your business, they may feel less compelled to offer a better rate when you do additional business with them.

Certainly, it is worth including your current bank in any refinancing comparison you make. If they still own your loan (which is far from a sure thing), they have already approved of you as a credit risk and so may be more likely to approve you for refinancing.

At the same time, though, understand that mortgage rates can vary significantly from one lender to another. Also, risk assessment is a subjective thing, so some banks will feel more comfortable with you than others and thus offer you a lower mortgage rate. Don’t let the convenience of refinancing with the same bank cause you to be locked into paying more mortgage interest than you need to for years to come.

4. Checking account fees

Free checking used to be quite commonplace, but now it is the exception rather than the rule. Still, free checking is there for those who are willing to look for it, even with interest-bearing checking accounts or high yield checking accounts.

Monthly maintenance fees on bank accounts run to over $150 a year on average, so avoiding them can be a big win. Your best bet is to try online checking, since online accounts are more likely to offer free checking than traditional, branch-based accounts.

5. Overdraft protection

Protection sounds nice, doesn’t it? Who wouldn’t want to be protected? Well, when you look at the cost of overdraft protection, it may make you feel a little less safe and warm.

Overdraft fees typically exceed $30 per occurrence, and stories abound of people who bought a $3 cup of coffee and ended up paying a $30 fee. What’s worse is that you might make several transactions before realizing that you’ve overdrafted your account and so pay a multiple of that $30 charge.

By law, all banks, including FDIC insured banks, are supposed to leave people out of overdraft protection unless they actively sign up for it, but banks actively encourage people to opt into overdraft protection when starting an account. It may sound like a benefit, but the inconvenience of having a transaction denied is less damaging than racking up multiple $30 overdraft fees.

6. Credit card rates

You know how interest rates generally have come way down in recent years? Well, apparently credit card companies didn’t get the memo. The average rate paid on a credit card is about the same today as it was seven years ago. This means that, relative to other interest rates, credit cards have become a more expensive form of debt.

Rates can be especially high if your credit history is less than perfect. Remember that when you shop for a credit card, they are probably going to advertise their very best rate. That is not the rate you are going to get unless you have excellent credit, so before signing up for a card, find out what rate they would offer someone with your credit history.

Overall, it is a mistake to think of banks as if they were all pretty much the same. There are over 6,000 FDIC-insured banks in the US, which means you have plenty of choices. How you exercise those choices makes the difference between enriching yourself or enriching your bank.

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If you have any questions for me, I encourage you to go ahead an ask. It’s great to hear from readers, whether it’s to ask a question or challenge me on my opinions. The link to contact me is unfortunately now buried at the very bottom of this website, or you can just click here to send me a message. For financial questions where anonymity might be important, particularly if you have a question about your personal situation and would like me to ask the readers, there is an option to send me a message without providing your personal information. This has come in handy with readers many times.

A question I received recently pertained to my savings accounts. Here it is, from reader Mike:

Do you still have an account with Capital One 360 and their 0.75% APY?

I ask this in a sarcastic manner. Having recently found your article from November 13, 2012 talking about how Capital One was at the time taking over ING Direct and that you did not see enough reason to close your account. Even though a savings account is for protection and not an investment I still find it hard to swallow that all Capital One and the other online savings account sites can only offer a pitiful 0.9% at most.

When I first opened an account at ING Direct, the interest rate was more than 4% APY. Those were good times, at least compared to the world of deposit accounts since the recession. I was earning those higher rates on a much smaller balance than I had at the bank later on, when rates all across the board tanked to below 1%.

Banks offer higher rates on savings accounts to attract customers. But with a facility to borrow money from the Federal Reserve at insanely low rates, close to zero, there’s no incentive to offer higher rates to average depositors like you and me. Experts who watch the Federal Reserve Board believe they may start raising rates, or at least hint at the possibility of raising rates sometime in the future, after the next meeting this month. It could be a long time before banks decide to offer rates on savings accounts that exceed the historical rate of inflation.

Savings is an important part of a household’s financial picture, regardless of the interest rate. Low rates make savings more painful.

Let’s get to my savings accounts, which were the real focus of the question. My last public financial statement was from December 2011 and didn’t include anything in my business accounts. The statement indicated I had $66,531 in savings, and almost all of this was in ING Direct (now Capital One 360) savings accounts. This was technically after the sale of my business (Consumerism Commentary), but I didn’t include any proceeds from the sale in my public balance sheets. But that ING Direct/Capital One 360 account remained roughly the same after the sale.

Since the time of that final balance sheet, I’ve occasionally withdrawn from the savings account, but it is still open. And, in fact, the $17,000 in my Capital One 360 account reflects nearly the totality of my cash savings; everything else is invested. I’ve left my investments alone for the most part, and have been living mostly on the income from the company that purchased Consumerism Commentary. But in order to make that work, I have to occasionally dip into my savings to assist. It’s a better choice than selling investments. Had I planned my taxes a little more carefully, and had I better anticipated what my tax bill would be with the change in investment income rates, I could have kept more cash ready to go, but it didn’t work out that way.

Capital One’s purchase of ING Direct and the resulting Capital One 360 brand have had no impact on the quality of the account. I am certain the interest rate would be the same regardless of the name of the company or the corporate owner.

My account at Capital One 360 has survived the Great Consolidation.

Over the last eleven years, I’ve opened savings accounts at dozens of banks to review the process and the experience of being a customer for readers. I don’t know of many other reviewers who have gone so far to review savings accounts; most reviewers take a look at the terms or the advertising copy and base their reviews on that. Since selling the site, I’ve had no need to continue opening savings accounts across the country and the internet. And I wouldn’t advise most people to have savings accounts at dozens of different banks. So I took some of my own advice and began closing accounts, moving cash to either Capital One 360 or Wells Fargo, the latter of which is where I still having my primary personal and business checking accounts.

That was the Great Consolidation. It took a few years, with the last account (American Express Personal Savings, currently offering 0.8% APY) closed a few weeks ago. Why close American Express when it’s five basis points higher than Capital One 360? It really doesn’t make a difference. Well, it makes a difference of $8.50 a year. Although, I wouldn’t like paying an $8.50 yearly fee for a savings account, the difference in interest earned isn’t that much of a big deal. I’m not chasing rates now — in fact, I never chased rates.

Considering it would take as much effort to close the Capital One 360 account as it would take to close the American Express Personal Savings account, there’s no reason I can give other than habit. I’ve had the Capital One 360 account longer (as ING Direct), and even though it’s no longer the hub for electronic transfers from dozens of other savings accounts, it has made its impression. And despite all the bad customer service stories from Capital One’s credit card division in previous years, none of the bad behavior seems to have leaked to Capital One 360.

I would prefer, however, to keep most of my cash where my investments are. My investments are almost all housed at Vanguard. The investment company offers a money market fund, but over the last few years, the returns haven’t been much better than online savings accounts. In fact, it’s been worse.

The point of the reader’s question seems to be about interest rates. Why stick with Capital One 360 when the rate has been lowered so much? Well, rates everywhere are down. The better options are not better by enough so that it makes too much of a difference. And if the other option is to invest in stocks or real estate rather than keep money in cash, you’re trading liquidity for the chance of income or appreciation, and adding risk on top of that. Savings and investing serve different purposes.

In short, the cash I have currently is almost all in a Capital One 360 account, the continuation of the ING Direct account I’ve had since July 29, 2002. (The Wells Fargo account is a continuation of the one I’ve had since 1993 or so.)

Where do you keep your savings? What’s your favorite savings account today?

If you have more questions for me, contact me now.

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Why Most Millennials Don’t Have Credit Cards

by Luke Landes
Credit Card Statement

According to a new survey, 63 percent of Millennials own no credit cards. For this poll, the Millennial generation is defined as those in the United States aged 18 to 29. The survey, put together by BankRate, attempts to get to the root cause for the lack of penetration of credit cards among this younger demographic, […]

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Wells Fargo Improving Transaction Posting Order

by Luke Landes
Wells Fargo

Banks typically look for every possible instance to charge customers to fees. That’s why it’s particularly important to stay aware of your bank account balances. With the increasing popularity of automatic payments (outgoing) or automatic withdrawals (pulls), a poorly timed deposit can result in overdraft fees or insufficient funds (NSF) fees. A few years ago, […]

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How to Close Your Wells Fargo Savings or Checking Account

by Luke Landes
Wells Fargo

Two years ago, Wells Fargo changed its customer agreement, taking away the rights of customers to resolve disputes with the bank through the typical legal process afforded citizens of the United States. Current Wells Fargo customers tacitly or knowingly agreed to sign away these rights in favor of an arbitration system that favors wealthy corporations. […]

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Should the US Postal Service Offer Basic Financial Services?

by Luke Landes
Post Office basic financial services

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MONEY’s Best Banks in America 2013

by Luke Landes
MONEY's Best Banks in America 2013

The MONEY magazine published its annual analysis of the best banks in America, and I count at least one surprise among the list of 15 categories. Just last month, personal finance bloggers voted on their favorite banks in the Fourth Annual Plutus Awards, and came up with a list with some notable differences, although the […]

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Money Systems That Lead to Success: Automatic Savings

by Luke Landes
Make Savings Automatic

Last month, I wrote about the opinions of Scott Adams on his eventual success as the creator of the comic strip Dilbert. I focused on the failure aspect of the article he wrote for the Wall Street Journal, and I only touched lightly on the success factors. A system, a methodical way of approaching any […]

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