Many Consumerism Commentary readers have written in to let me know that they recently received a check for about $98 from Bank of America. This check is not a result of the Bank of America overdraft fee class action lawsuit, but it is the result of a similar lawsuit. First of all, the overdraft lawsuit has only recently entered an appeal process. It could be another year or more before customers see any benefits from this latest class action.

The check is the benefit that customers are receiving due to an earlier class action lawsuit, Closson v. Bank of America. Customers who are eligible had a Bank of America, Fleet Bank, LaSalle Bank or U.S. Trust Company debit card and paid an insufficient funds fee, overdraft fee or similar fee before December 31, 2007. In order to receive a benefit, customers would have needed to file a claim form before May 1, 2009. The deadline to receive any benefits has long since passed, so even if you fit this description, it is too late to become a member of this lawsuit.

This is one of many class action lawsuits against Bank of America, some of which pertain to companies that were purchased by the bank, like Countrywide Financial.

• Ross, et al. v. Bank of America, et al. This lawsuit pertains to the bank’s forcing of customers into mandatory binding arbitration, much like Wells Fargo is doing today. This is a new class action lawsuit.
• Closson v. Bank of America. This is the class action lawsuit I described above. Bank of America encouraged its customers to use debit cards that were designed to increase the number of fees. If you received a check in December 2011, it is likely a result of this lawsuit.
• Bank of America overdraft lawsuit. Nearly 1,000 Consumerism Commentary readers have offered their thoughts about Bank of America’s processing of customers’ debits in a certain order that ensured that they could maximize fee revenue from overdrafts. Read more here.
• Homeowner lawsuits. Class action lawsuits in several states, including California and Washington, allege that Bank of America or its related companies withheld taxpayer money designed to help homeowners facing foreclosure.
• Foreign currency conversions. Bank of America was one of many defendants (also including Visa, MasterCard, Chase, Citibank, and more) in a class action lawsuit regarding a conspiracy to set fees for foreign currency conversions, eliminating competition in this particular aspect of business.

Class action lawsuits are usually settled by the defendants, often without admitting any wrongdoing. As a result of settlement, affected customers often only receive a small award while the lawyers representing the class receive significant payments for their work and time. For example, in the overdraft fee settlement, lawyers will receive $123 million, or 30% of the settlement fund, unless the verdict is successfully appealed. At the same time, each affected customer will only receive a portion of the overdraft fees paid. That could be $35 or less per individual.

Are you included in a Bank of America class action lawsuit? Have you received a check in the mail from Bank of America and you don’t know why?

The original version of this article, Bank of America Class Action Lawsuits – Did You Receive a Check?, is copyrighted by Consumerism Commentary.

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If you enter into an agreement with a company, and that company does something to wrong you, most of the time you can avail yourself of the American judicial system to correct the problem. This happens frequently, with both individual lawsuits and class action lawsuits. For example, Bank of America is dealing with several lawsuits stemming from shady fee practices and other policies enacted by Countrywide Financial, a company Bank of America acquired.

In order for bank to protect themselves from problems and major expenses like these is to take away their customers’ rights to a trial with a jury or a judge. This is legal, and you don’t even need to sign these rights away. Companies can change these terms of your banking agreement, and your continued patronage implies that you agree and are willing to waive your rights for the benefit of remaining a customer.

I make it a point to thumb through the mailed statements because banks will occasionally update terms and change fees, and it’s easy to miss this information if I were to only check my account online or in my Quicken software. A few days ago, I received my statement from Wells Fargo in the mail, and discovered a notice informing me that by remaining a customer at Wells Fargo beyond February 15, 2012, I would never be able to be included in a class action lawsuit or sue the bank myself. Any disputes would go through a binding arbitration process.

Binding arbitration has its benefits. It is often less costly, and businesses can generally get a sense for the result before moving forward. The benefits, plainly one-sided, end there.

Binding arbitration is usually detrimental to consumers. The costs for an individual often outweigh the potential reward, and potential rewards are low because binding arbitration often favors the large company over the individual, unlike juries and most judges. It’s easy to see why arbitrators favor big businesses; arbitration is a business, and if they favor a large corporation, that corporation will likely bring more business to the arbitrator.

A consumer initiating arbitration through the American Arbitration Association, the administer Wells Fargo identifies in its new terms, would be subject to fees, such as:

• $250 for telephone consultation if the claim is less than $75,000, higher otherwise
• $750 for in-person consultation of the claim is less than $75,000, higher otherwise
• Up to $125 in additional fees if the claim is less than $10,000, up to $375 if the claim is less than $75,000, higher otherwise

The business would be subject to fees higher than those listed above for the consumer, but the total expense for a corporation could still be considerably less than dealing with a lawsuit. Not every arbitration organization follows the same pattern for fees, though. In some cases, the consumer could spend more money initiating arbitration than filing his or her own suit.

Also a detriment to the consumer, arbitrators are not required to follow an established process. This uncertainty can limit the consumer’s ability to argue. For example, arbitration does not include a discovery process, making it difficult for consumers to present evidence to support their cases. Also, the consumer does not have the ability to choose the arbitrator. The business selects the arbitrator, so it’s clear that this could easily be a biased approach to settling a disagreement.

Binding arbitration is reviled so much that Congress has been inspired to take action to determine whether binding arbitration clauses can be considered legal — in cellular phone contracts, only. So far, this effort has failed to produce any results beneficial for the consumer.

Bank of America and other banks have been the subject of a class action lawsuit alleging they have forced customers into mandatory binding arbitration agreements. The Supreme Court has ruled 5 to 4 in favor of companies’ options to put binding arbitration into customer agreements.

What a consumer can do about binding arbitration clauses

I’ve been a customer of Wells Fargo or its predecessors for most of my life. I’ve had my primary checking and savings accounts at this bank. But with this change, I am not wasting any more time in moving my money out of this bank. It’s not that I anticipate having any problems that require a lawsuit or arbitration, and if I am included in any class action lawsuit, I don’t expect to gain much.

Businesses and employers force binding arbitration on customers when the customers or employees are in a weaker position than the larger entity. For example, with unemployment high, many Americans feel lucky to have jobs. They’re willing to waive rights in order to be employed, and most do. Most customers will be unaware that by continuing to hold their accounts they waive their rights. Others will be aware and not consider this to be an issue worthy of going through the process of closing their accounts. Very few will use this as an incentive to move money elsewhere.

Banking institutions are everywhere, however, and customers have choices. For example, I could move all of my money held at Wells Fargo to Chase Bank. At one point, Chase included binding arbitration in its customer contracts for credit cards but has recently abandoned this approach. There is always a danger that the terms will change, particularly as more big banks want to protect the revenue they earn from fees. With a Chase branch within walking distance to me, this move makes sense, but it still isn’t a perfect solution.

I would prefer to switch to a credit union, but I’ve researched my options many times, and there are no credit unions convenient for me. Additionally, one of the largest and most popular credit unions, USAA, is as bad as Wells Fargo when it comes to members’ rights: USAA requires customers to waive their rights to a trial by judge or jury, just like the bank I intend to leave.

I’ll be moving my money out of this bank as soon as possible.

If you decide to move your business to a company that does not limit your rights, be sure to let the company know exactly why it is lowing your business. Unfair fee practices and binding arbitration could be only two of many reasons you’d be better off being a customer elsewhere.

Read the entire Wells Fargo notice below.

Photo: Neubie

The original version of this article, Binding Arbitration: Wells Fargo Taking Away Customers’ Rights, is copyrighted by Consumerism Commentary.

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Many Wal-Mart locations around the country now have Money Center departments. These developments create an incredibly convenient way to take your paycheck into the store, have it cashed at the Money Center, and use your cash for your shopping trip. With Wal-Mart’s trend to become a one-stop shop for all household needs, including groceries, each Wal-Mart location is becoming its own small mall — or even village.

The Wal-Mart Money Centers are not full banks. They offer check cashing services, bill payments, outgoing wires, and reloadable debit cards. There are no checking accounts or savings accounts. Wal-Mart abandoned its plans to become a bank, and in doing so, is able to offer certain financial services while not being held to the same regulations as Chase, Bank of America, or your local bank branch. On the spectrum of financial institutions, Wal-Mart Money Centers are closer to establishments like payday loan companies and check cashing storefronts, who charge high fees and cater to lower-income communities and the unbanked population, than the centers are to banks.

Check cashing fee. The good news is that the fees for cashing your paycheck or government check are generally much lower than the fees at shadier establishments. At the Wal-Mart Money Center, you can cash your check for a 1 percent fee with a maximum fee of $3. Of course, you can cash your checks for free at a bank.

Prepaid debit card fee. The fee to reload and maintain your prepaid debit card is lower than fees for prepaid debit cards elsewhere. Wal-Mart uses GreenDot prepaid debit cards, but at reduced rates of $3 to load and $3 per month to maintain. This is a system designed to charge people with low credit scores or a poor history with banks fees to use their own money. These are fees that middle-income banking customers doesn’t need to pay, particularly now that big banks have backed away from charging monthly debit card fees.

According to Wal-Mart’s own survey, 60 percent of the customers using the Money Center have bank accounts. These customers are most likely more interested in the convenience, and willing to accept the fees in exchange for getting access to their money at the same location they shop. The remaining 40 percent must be the reason Wal-Mart chose to offer its own check cashing service rather than extending a potentially lucrative contract to a bank that could theoretically operate a branch in every Wal-Mart location.

Are these new services good for the people of Wal-Mart? I’m having trouble finding a significant drawback. I believe it would be better if Wal-Mart were to offer more traditional banking services, but this system is more profitable. The temptation to spend more money when you receive cash from your employer’s paycheck in the store where you’ll be spending money could be an invitation to spend more than necessary, but if you’re spending with cash, at least you’ll be limited to spending only what you have on hand. At the same time, Wal-Mart’s Money Centers offer a better choice than payday loans and check cashing storefronts for lower-income families or the 40 percent of customers who do not have bank accounts, and could possibly help these households transition to a bank in the future.

I do not see Wal-Mart centers as an alternative to banks for most existing banking customers. There is anger towards Wall Street and the banking system, and initiatives like Bank Transfer Day encourage people to move away from the big banks towards credit unions and community banks. The Wal-Mart Money Center is not a replacement for a big bank, and moving a family from managing finances through a bank to managing finances on an all-cash basis through an outfit like these could be detrimental to long-term financial stability.

Photo: aforero
New York Times

The original version of this article, Wal-Mart Offering Check Cashing Services, is copyrighted by Consumerism Commentary.

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The best online savings accounts offer high interest rates and great customer service. Savings accounts, particularly so-called “high-yield” savings accounts, are best for money you might need within a year. Any money that you don’t want to subject to the short-term risk and volatility in the stock market should be held safe in a savings account, earning as much interest as possible. Your emergency fund should primarily consist of money held in a high-yield savings account. “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 all below 2% while a fair amount are still hovering around 1%, many rates are now dipping below the 1% mark. This trend will continue until banks need more cash from depositors.

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. Many banks are not now offering a savings option with interest rates high enough to meaningfully beat inflation, so 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 are current as of February 2012, 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.

American Express offers an online personal savings account from the company’s banking division that rivals the best banks. The account offers an interest rate of 0.90% APY.

Ally Bank was selected by Kiplinger Magazine as the best savings account for 2009. Formerly known as GMAC Bank, Ally Bank sports an interest rate of 0.84% APY as of February 10, 2012.

ING Direct offers no fees and no minimum balance requirement. ING Direct has a great website and I’ve never had any customer service problems. My favorite feature is the ability to split your account into several labeled sub-accounts. ING Direct offers a current interest rate of 0.80% APY.

Worth noting is that Capital One purchased ING Direct earlier this year, but even with an acquisition in progress, the bank recently won the Second Annual Plutus Award for Best Bank.

FNBO Direct offers no fees and no minimum balance requirement. Rated best online savings account for 2008 by Kiplinger Magazine, FNBO Direct is the online arm of First National Bank of Omaha. FNBO has an interest rate of 0.65% APY.

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, Everbank’s money market account yields an interest rate of 0.76% APY and their Yield Pledge Checking Account for balances between $25,000 and $49,999 has an interest rate of 0.61% APY.

SmartyPig currently sports one of the better interest rates you can find online at 0.70% 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.

Sallie Mae is now offering a high-yield savings account boasting no fees and no minimum balance. The process to open a savings account takes less than ten minutes and the current interest rate is 0.85% APY.

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. Since then, HSBC Advance has continued to be towards the top of any list of online bank accounts. HSBC Advance has an interest rate of 0.80% APY.

What is your favorite online savings account? Share your thoughts in the comments below. Here are a few more banks to round out the selection.

• Capital One Bank is offering 0.65% APY no fees, APY for balances of $1,000 and above.
• Emigrant Direct is offering up to 0.60% APY no fees no minimums.
• DollarSavingsDirect is offering 0.70% APY no fees, minimum account balance $1,000.

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

The original version of this article, The Best Online Savings Accounts, February 2012, is copyrighted by Consumerism Commentary.

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Bank of America has given into the pressure of losing more than just a few unprofitable customers, canceling its planned $5 monthly debit card fee. The damage, not just to Bank of America but to retail banking overall, has already been done. The Credit Union National Association has counted, state by state, a total of 650,000 new customers since September 29, the day Bank of America announced its plan to begin this fee in 2012.

While other banks had tested the debit card fee waters before Bank of America, this bank, the largest in the United States, was at the tipping point of an anti-Wall Street campaign. Reaction was vast, with thousands of dissatisfied customers — some with Bank of America, some with other mainstream banks — rallying around the creation of Bank Transfer Day, on the calendar for this past Saturday.

Listen to the Consumerism Commentary Podcast interview with Kristen Christian, the founder of Bank Transfer Day.

This was good news for credit unions. Not including any new customers since last Wednesday, credit union membership increased at a record pace in the short time period of just over one month. With the 650,000 new customers, credit unions experienced an influx of $4.5 billion. The survey data come from a wide sample of 5,000 credit unions, 80 percent of which have seen a membership increase during this period. If Bank Transfer Day has been successful, the numbers should be even more impressive when NCUA includes the rest of the week’s figures.

I did not yet move my accounts from my primary brick-and-mortar bank, Wells Fargo. I did, however, research credit unions for myself and discovered one that is somewhat convenient. It isn’t nearly as convenient as the Wells Fargo branch down the street, the TD Bank branch in the other direction, or the Chase Bank within a short walking distance. With most of my banking online, a need for a convenient branch is less of an issue.

Did you move your money to a credit union in the last month? What was your experience?

The original version of this article, Credit Unions Successfully Woo 650,000 New Customers, is copyrighted by Consumerism Commentary.

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Reports are coming in with many HSBC customers around the world experiencing declined card transactions, no website access, and no phone system. HSBC’s network in the UK is apparently unavailable at the moment, and other areas may be affected throughout the world. HSBC is the largest bank in the United Kingdom, and all HSBC card transactions are being declined. ATMs are inoperative. The institution’s online banking system is unresponsive. I had no problem accessing the HSBC Advance website in the United States, but I’m no longer a customer so I have no account to view.

The news is getting out through Twitter. Here are some recent comments:

• “As an #hsbc customer, I’m glad I got my money out yesterday. Check out the hashtag for tales of woe. A new kind of bank crash. Ouch.”
• “Their Secure Key was not enough – HSBC have obviously decided to move online banking to ultra-secure mode. #hsbc #fail”
• “The end of Capitalism has begun, HSBC network down! Get into your bunkers people, this is not a drill! #Bankpocalypse”
• “HSBC, I think you should know; you made me look a right fool in that Café when my card was declined.”

According to the BBC, the bank is aware of the issues and is investigating the problem. Are you affected by the HSBC networking downtime?

Update: The problem affecting HSBC’s systems, including ATMs, transactions, and phone access, has been resolved. “We are very sorry for any inconvenience this may have caused our customers, and will ensure that no customers are impacted financially. We have now cleared and processed all payments.”

The original version of this article, HSBC Banking Network Down, is copyrighted by Consumerism Commentary.

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After Wells Fargo, Chase Bank, SunTrust Bank, and Regions Bank dropped their plans for debit card fees yesterday, the largest bank in the United States, the only bank holding onto its policy of eliminating unprofitable customers by annoying them with inconvenient fees, dropped their own plans to enact a $5 monthly debit card fee in 2012.

The Wall Street Journal is reporting that thanks to customer backlash and likely due to a public relations nightmare, the bank is reversing its policy. It’s a smart move, but is it too late? Bank of America has done a great job burning an imagine in customers’ minds of a bank that is willing to sacrifice its customers — not to recover from a potential loss, but to recover from a lower profit due to regulators’ new rules against excessive interchange fees. Corporations are expected to look for profit under every rock, but this particular type of fee hurts low-income customers much more than high-income customers. You would have been able to avoid the potential fee by having a significant balance of deposits held at the bank, much more than the typical customer might hold.

On Twitter, Michael Kitces from kitces.com said in response to my comment about the fee cancellation, “I think people that BoA didn’t want as customers still got the message loud & clear, even if BoA drops the fee now.” Kyle from Amateur Asset Allocator responded, “Doesn’t affect my attitude one way or another. If I were affected, I’d probably just go to cash-only instead of using the debit card.”

This doesn’t affect plans for Bank Transfer Day. This fee could have been the wake-up call consumers needed to gain the extra motivation to move to a credit union. As we’ve seen with the interchange fee regulation, a window of potential profit closed in one area leads to another window opening somewhere else. Bank of America and the other banks who dropped plans for a debit card fee will find a way to earn their profits, and the next fee may not be nearly as transparent and well-marketed as the debit card fee.

Keep an eye on those bank statements.

Wall Street Journal

The original version of this article, We Did It: Bank of America Dropping $5 Debit Card Fee Proposal, is copyrighted by Consumerism Commentary.

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Consumer outrage and backlash does work, apparently. Wells Fargo Bank and Chase Bank have been testing debit card fees in a small number of locations within the United States, but due to the anger unleashed after the largest bank, Bank of America, announced it would add a $5 debit card fee in 2012, the two smaller (but still very large) banks backpedaled. Wells Fargo and Chase are unwinding their test plans, and the bank executives have decided not to continue charging more customers for the benefit of accessing their own funds on deposit.

A customer who deposits cash in a checking or savings account has been traditionally doing the banks a favor by allowing them to initiate loans based on the funds held in deposit. In return of this favor, banks paid depositors interest. With banks not lending as much as they have in the past, banks are in no rush to acquire depositors. Thus, they can pay much less interest and increase fees. They’re happy to drive customers away.

Bank spokespeople also cite new regulations as rationalization for new fees. Particularly, the interchange fees banks charge retailers for accepting debit cards at the point of sale are now limited. In effect, banks are switching revenue-generation from retailers to depositors. With this new swipe fee regulation, retailers are now more protected than consumers.

Bank of America’s new debit card fee policy stirred public unrest, and from a public relations standpoint, Chase and Wells Fargo would do well to avoid more public outrage. That won’t be the end of this story for Wells Fargo and Chase. Corporations need to answer to their shareholders, and investors will not want to see a bank willingly part with revenue potential. While the banks are still making great profits in a “post-bailout” environment, expect the executives to tap another source. Be on the look-out for new fees now that certain banks are avoiding debit card fees.

Related: See my article, “The Bank-Fee Wake-Up Call,” on US News & World Report’s “My Money” blog.

Update: In response to the announcements from Wells Fargo and Chase, Bank of America offers a response. The bank will revamp its debit card fees, presumably by lowering the $20,000 minimum to avoid the monthly debit card fee. The bank has not made a decision, though, and unless the bank sees a mass exodus, expect the $5 debit card fee in 2012.

Second update: The finance industry, minus Bank of America, is continuing to listen to customers. SunTrust and Regions Bank have announced that their customers will no longer be subject to the new debit card fees. This leaves Bank of America on its own. Will the largest bank buckle?

Photo: neoliminal
Reuters

The original version of this article, More Banks Drop Debit Card Fees, is copyrighted by Consumerism Commentary.

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As I’ve pointed out recently, banking customers have grown accustomed to the concept of free checking. Thanks to profits in the banking industry from a variety of sources, banks could justify offering checking account services, including debit cards, without charging any fees. The industry has changed over the past year, and many banks, particularly large financial institutions, are finding ways to earn more money from depositors.

Only a few banks remain that offer competitive interest rates — and in today’s environment these rates are nothing exciting — without charging oversized fees. For a limited time, EverBank is attracting new customers with a $60 cash bonus after opening a Yield Pledge Checking Account.

The amount of $60 has become a special number recently. Bank of America’s new debit card fee is $5 per month, or $60 annually. EverBank has devised the clever idea that turning the $60 from a fee to a benefit might be a good way to attract customers. Whether you consider it a gimmick or not, free money can help anyone.

EverBank has some requirements for new customers wishing to earn the $60 cash bonus. The bank doesn’t give $60 to every new customer. Those seeking the bonus will need to be aware of the bank’s conditions for qualification.

• The Yield Pledge Checking Account must be opened by November 30, 2011 with an initial deposit of at least $1,500.
• New customers must establish a repeating direct deposit of at least $500 before January 31, 2012.
• Accounts must have an average daily balance of $1,500 for statement periods ending December 31, 2011 and January 31, 2012.
• The account must remain open until February 29, 2012.

For any new customer who meets the above conditions, EverBank will deposit the $60 cash bonus into the account on or before February 29, 2012. Furthermore, if you use your Yield Pledge Checking Account and are not satisfied after three months and one successful bill payment, EverBank will give you $50.

As an added bonus unrelated to the special promotional offer, EverBank will reimburse users for all ATM fees, regardless of whether the ATM is included within the EverBank network. There is no maximum to this reimbursement as long as EverBank believes the reimbursement requests are legitimate.

EverBank Yield Pledge Checking Account Rates

Account Balance	Interest Rate (APY)
$100,000 - $10,000,000	0.76%
$50,000 - $99,999	0.71%
$25,000 - $49,999	0.61%
$10,000 - $24,999	0.56%
$9,999 or less	0.46%

EverBank is not as well-known as many other banks because they don’t advertise often. The bank has over $12 billion in assets, so even if the bank is not popular, it is sizable. There is no monthly account maintenance fee for the Yield Pledge Checking Account. If the latest offer interests you, sign up for an EverBank checking account and earn the $60 cash bonus before the offer expires on November 30, 2011.

The original version of this article, EverBank Checking Account Offering $60 Cash Limited Time Bonus, is copyrighted by Consumerism Commentary.

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Almost ten years ago, the government passed a law that made electronic images of paper checks just as legitimate as the paper checks themselves. As banks implemented the law, it saved time and money by allowing banks of first deposit to scan checks after a customers deposit them for verification with the originating bank. With an image of a check being accepted in place of a paper check, more banks have begun implementing a convenience to customers as well.

Businesses were the first customers to receive these benefits. For a business that receives thousands of checks every day, bringing the physical paper checks to a branch for deposit can be an expensive and time-consuming process, fraught with the possibility of security problems with the checks in transit. Banks have offered business the option of remote deposit. With this service, the customer can scan checks using a specialized imagine device (check scanner) and transmit the images securely over the Internet or a private network connection. The funds are then available immediately rather than overnight.

With this success, banks are in the process of extended similar features to non-business customers. With the proliferation of cell phones with built-in, high-megapixel camera, banks can now offer deposits using snapshots of checks sent via text message or custom smartphone apps. For these customers, no bulky desktop scanner is necessary, and there’s no need to be home to make the deposit. You can effectively deposit checks from your mailbox down the street or from your grandmother’s house on your birthday.

Business customers still have the advantages, with very few banks actively offering this service to non-business customers. The number of banks offering this service to consumers is increasing, however.

Remote deposit is most useful for banks that don’t have local branches, like these online banks. ING Direct, still bloggers’ most favorite bank, is working to implement remote check deposit soon, but with the bank’s planned acquisition by Capital One it’s unclear when new features will be added. ING Direct recently began offering paper checks to customers, so remote deposit capture may not be too far behind.

Chase Bank offers apps for iOS and Android devices. The application allows customers to log into their bank accounts. To deposit a check, take a picture of the front and back, and send the images securely to Chase using the application. The deposit will be recorded as pending immediately, though availability will depend on the bank’s typical schedule, usually next business day availability for local checks. The availability schedule has several variables, though, so always check with the bank to determine when the funds you deposit will be available.

Ally Bank has offered remote deposit for customers since April 2011, but the bank has just recently opened the program to all customers. Ally’s eCheck Deposit service requires a scanner and some manual work, such as inputting the check amount (shouldn’t this be automatically read when scanned?) and aligning the images. Ally plans to offer a mobile application soon.

The USAA Bank mobile application for iOS, Android, and Windows Phone 7 includes a feature allowing remote deposit. Deposit@Mobile requires the customer to enter the check amount, take one photo of the front of the check and one photo of the back, and submit the images to the bank through the application. The bank will confirm the deposit amount.

Have you used your bank’s remote deposit service? If so, what did you think of the experience?

The original version of this article, Banks Offering Remote Deposit, is copyrighted by Consumerism Commentary.

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The fourth largest bank in the United States by assets, Wells Fargo, admitted last week that many of its customers received statements with other customers’ banking information included. In this security breach, those affected might have received a statement with a stranger’s account number, transaction detail, and in some cases, Social Security number. Other affected customers might have had their information compromised, with their details included on other customers’ statements, without their knowledge.

Wells Fargo through its spokesman Josh Dunn blamed the error on a “malfunctioning printer.”

The biggest threat is that with an account name and number, and a bank’s routing number which is public information, anyone can easily print a check. When presented, if the signature isn’t checked, could result in a withdrawal from the compromised customer’s account. For those whose Social Security numbers have been shared, the potential fraud could be worse.

My first reaction is to encourage customers to turn off paper statements opting instead for online statements only, but that won’t prevent every potential bank error. Online statements are much more secure than mailed statements.

If you’ve been affected, I would suggest changing your account number at Wells Fargo. This may be a significant process, particularly if you have direct deposit enabled or automated debits scheduled with outside vendors. It will be worth the effort, however, to ensure the compromised account number is no longer linked to you. If you Social Security number has been shared with a stranger, you should contact one of the credit reporting bureaus to freeze your credit. Your Social Security number can be used to open accounts in your name, using your credit history, so by working with the credit agencies you can opt to be notified if anyone tries to open a new line of credit.

Considering Wells Fargo’s error, the bank should offer to pay for credit monitoring services for affected customers.

Is this extra motivation for moving your money out of a big bank? There are many reasons to switch to a credit union, but this may not be a reason on its own. Mistakes like this one can happen at any institution, regardless of the company’s size.

I’ve used Wells Fargo for my primary banking services, ever since Wells Fargo acquired Wachovia, since Wachovia acquired First Union, since First Union acquired CoreStates, since Philadelphia National Bank merged with New Jersey National Bank forming CoreStates Financial Corporation.

If you’re a Wells Fargo customer, do you plan to close your account after this incident?

Photo: MoneyBlogNewz
BusinessWeek (AP)

The original version of this article, Wells Fargo Sent Statements to Wrong Customers, is copyrighted by Consumerism Commentary.

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Kristen Christian has declared November 5, 2011 to be Bank Transfer Day. Fed up with the big banks’ claims that regulation would make the institutions unprofitable, and with research to back that up, Kristen started a movement on Facebook to encourage more people to withdraw money from large banks and use these funds to open accounts at non-profit, member-owned credit unions. The movement, not related to Occupy Wall Street or Anonymous, has been gaining momentum in the media and among the public.

Here are the actions that Kristen is suggesting, and if you plan to do the same, you can respond to this Facebook event.

• Research your local credit union options. In the United States, search here. Here are links for Canada and the United Kingdom.
• Open an account with the one that best suits your needs. You will likely find a credit union that is convenient for you.
• Cancel all automatic withdrawals and deposits. It’s important to change any direct deposits or automated withdrawals and bill payments. Missing these details could be costly.
• Transfer your funds to the new account. Thanks to the convenience of ACH transfers, this will be the easiest step.
• Follow your bank’s procedures to close your account before November 5. Some banks allow their customers’ accounts to be closed online, more allow closing over the phone, some require a letter, and some require an in-person appearance at a branch. Here’s how to close your Bank of America account.

As of the moment I’m writing this article, more than 55,000 Facebook users have pledged to participate, but my impression is that only a small percentage of those who replied positively to the event invitation will take these steps.

Kristen is not encouraging vocal or physical protests. This is an effort to calmly close accounts without causing a scene. For those planning to visit a bank branch in person, she has this advice:

Bank Transfer Day encourages supporters to close their accounts just as they opened them — independently, with respect and without signage. When asked why you’re closing your account, feel free to be frank. Calmly communicating your reasons for closing your account are vastly different from causing a public disturbance. While we understand that many of you feel very strongly about this, please remember that the employees at your local bank branch have no control over the structure of their company. As banks are private property, signage or a group demonstration will likely result in your being asked to leave. If you refuse, you can be arrested for trespassing. Let’s keep this peaceful & legal!

Will you join the Bank Transfer Day movement?

The original version of this article, Bank Transfer Day: November 5, 2011, is copyrighted by Consumerism Commentary.

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As consumers grow increasingly frustrated by the checking account options offered by traditional banks, more are seeking out the best online checking accounts for better interest rates and service. Large banks like Wells Fargo and Bank of America are continuing to add fees, such as debit card fees, and are not concerned with scaring the less profitable customers away. This is part of a larger plan to increase profitability, which includes firing the customers who don’t have large balances and sending them to online banks, small banks, and credit unions. If these customers remain unprofitable at their new institutions, those organizations may be forced to enact fees, as well.

Regardless of the larger situation, including industry-directed changes and regulations, the best thing a customer can do is find the best checking account that meets his or her needs at that particular time, with the information that is currently available. Here are my picks for stable, convenient online checking accounts.

Ally Bank. Ally Bank (formerly GMAC Bank) offers a checking account with no monthly fees and no minimum balance. The no-fee, no-minimum accounts are becoming increasingly rare, and even those banks that have held out with these accounts, very few offer interest on the accounts, as Ally Bank does.

PerkStreet. PerkStreet takes a unique approach to checking, offering cash back for using an associated debit card. Cash back in a world where other banks are charging to use their debit card is a novel idea. For now, customers with a PerkStreet account earn 2% cash back on all debit purchases and an additional 3% cash back, for a total of 5% cash back, on rotating categories throughout the year.

There are some limitations to this cash back; the 2% cash back is effective for the first 90 days or for accounts with at least a $5,000 balance. Otherwise, the cash back rate is 1%. The 5% offered on rotating categories expires after a customer ha earned $250 in cash back from that tier.

Perkstreet’s checking account is a finalist in its category for the 2nd Annual Plutus Awards.

ING Direct. The ING Direct “Electric Orange” online checking account has been my primary online checking account for almost as long as the account has been offered by the bank. To catch up with other online offerings, ING Direct recently began offering paper checks. Like Ally, this account charges no fees, requires no minimum balance, and offers interest to account holders. Rather than overdraft coverage from a linked savings account, the Electric Orange account takes advantage of a line of credit offered to approved customers.

FNBO Direct. FNBO Direct offers a savings account with a competitive interest rate, and the Online BillPay Account is a competitive offer as well. FNBO offers a high interest rate on their BillPay Account and integrates PopMoney, a system that allows you to easily transfer money to and from your friends (or anyone else who uses PopMoney).

I’ve had an FNBO Direct savings account for a long time, and it has consistently offered high rates.

USAA. USAA is taking advantage of banks charging $5 debit card fees, heavily advertising that their debit card is free to use. The USAA checking account is certainly a favorite among experts, earning its place as a finalist at the 2nd Annual Plutus Awards. USAA was also named one of CNN Money’s least evil banks.

The bank serves primarily members of the military, but membership is open to the public. The checking account has no fees and does not charge for up to the first 10 AM withdrawals each month. USAA also reimburses customers for up to $15 in ATM transactions each month, making any convenient location an “in-network” ATM. USAA also offers remote deposit, a convenient way to deposit checks into the account by scanning or taking a photograph of both sides of the check.

With the largest banks finding ways to eliminate the least profitable customers through the addition of fees, as of today, there are still plenty of options available for people who are interested in sticking with an institution that generates revenue in another manner. If the above options don’t work for you, there are credit unions that would be happy for an influx of customers. Every financial institution is a business, however, and if new customers end up being unprofitable in the future, free checking will become extinct.

The original version of this article, The Best Online Checking Accounts, February 2012, is copyrighted by Consumerism Commentary.

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For the last few years, savers have been punished by banks offering low interest rates. If that weren’t enough, banks now want depositors to pay for the privilege of putting money in a bank. In the world until recently, banks sought depositors because they used the public’s money to increase lending to borrowers who were willing to pay for the privilege of using someone else’s money. The tables have been turned. Rather than borrowers paying for the bank’s services, depositors are paying through an increasing barrage of fees.

A number of banks have been testing debit card fees. Bank of America is moving beyond the testing phase and will begin charging all debit card users a $5 monthly fee soon. Citi found another path towards customer-generated revenue. Until now, the Citi checking account (called the “Citibank Account”) has featured a $20 fee for customers who haven’t maintained a $6,000 balance. With the introduction of the new fee structure, the new minimum balance to avoid the $20 fee will be $15,000, combined across savings and checking.

Another Citi option, the “EZ Checking” account currently has no fee, but the bank will now be charging a $15 fee to all customers who have this account with a balance lower than $6,000. The “Basic Checking” account will receive a fee increase from $8 to $10 for accounts with less than $1,500.

In order to make the $20 fee for the Citibank Account easier to swallow — and the fee may not be significant to customers who do keep that $15,000 minimum balance — Citi is offering a few perks for new customers. At the same time Citi is changing the fee structure, they are introducing a promotion to acquire new customers. I’ll write about the promotion in a separate article. For most customers, the $20 monthly fee outweighs any possible rewards.

This is the new state of the banking industry. It’s easy to blame increased fees on new regulations that limit the industry’s ability to generate revenue from merchants, as banks turn to customers to become the next cash cows. Other reasons for the industry’s desire to find new fees include Basel III compliance which requires banks to increase their financial strength and new SEC regulations for money market funds which require banks to make safer (and less lucrative) investments with their own money. Banks are eager to jump at the chance to punish customers and blame the government. No one is forcing banks to turn to customers to keep profiting, but without banks profiting from offering loans either, it’s the only untapped source.

As public companies that answer to shareholders, banks are obligated to find as many methods as possible to profit — even to earn outsized profits while taking advantages of customers who feel they have no option other than sitting back and taking it and customers who aren’t paying enough attention to know they’ll be paying more fees.

The more I see the banking industry’s path, the stronger I believe in the importance of credit unions. Find a credit union and move your money before banks find more ways to part customers from their money. If you can’t find a convenient credit union for which you qualify, take a look at PerkStreet’s checking account with a 5% cash back debit card.

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The original version of this article, Citibank to Charge $20 a Month for Checking Account, is copyrighted by Consumerism Commentary.

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If you’re upset about Bank of America charging a monthly debit card fee or any other fee, if the bank has a policy you don’t like, or if you just have no need for this company’s particular set of services, consider closing your Bank of America account. There’s an initiative called Bank Transfer Day encouraging customers to remove money from large banks before November 5, 2011.

In a perfect world, every bank would make it very easy to close accounts. For the most part, they want to keep their customers, and will often request that anyone wishing to close their account talk to a retention specialist. These specialists are often empowered to offer a few incentives to remain a customer of the company, including waiving fees for a period of time. It’s a tactic that sometimes stops people from leaving, particularly those who do really want to stay. It’s a negotiation technique used with employees in the corporate world; if your company wants to keep you, when you threaten to quit they might make it more attractive for you to stay.

In most situations, if you want to quit, it’s better to quit than accept a peace offering without solving the problem of not wanting to be there. So it’s best to avoid or ignore the retention specialists who want you to stay with a bank.

Note: Some readers have had success by entering an online chat with a Bank of America customer service representative and asking to have their accounts closed. Some readers have said that they were unable to do so.

Before you begin the process described below, log into your account and initiate a chat. You may find the closing process is as easy as sending an instant message. The Bank of America website has been non-responsive or slow over the past several days, so accessing online chat may be impossible or difficult.

If you are unable to access your account online, or if you are and a representative who answers your request live is unable to close your account, you might need to proceed through the longer process, and this process varies depending on the state in which you reside.

To close your account at Bank of America, you should just be able to walk into a branch, withdraw your funds, instruct the teller to close the account, and walk out a free man or woman with a cashier’s check or cash in hand. It’s not always quite this simple, however.

California, Idaho, and Washington are the only states that officially let you close your account just by walking into a bank branch, according to Bank of America’s official procedure. Residents of all other states must follow a different process, but I find it hard to believe that any American can’t walk into their local branch and get this done. Bank of America insists that most customers throughout the country — those living in the 47 states not mentioned above — send a letter stating your desire for the bank to close your account and describing how the remaining funds should be distributed to you.

For example, your letter might state that you want to receive your funds via check to an address you provide, or you might request that your funds be transferred via ACH to the external account you specify (including the destination’s routing/ABA number and bank account number). The letter, including a signature from each account holder, must be sent to this address:

Account Closure, FL1-300-02-07
4109 Gandy Blvd
Tampa, FL 33611-3401

You can verify the process for closing your Bank of America savings or checking account by visiting the bank’s website and finding the answer in the frequently asked questions list after providing the state in which you reside. Once you close your account, consider depositing some cash in a high-yield savings account or a credit union.

Do you plan to cancel your Bank of America account? If so, why? If you have closed your account, what did you think of the process?

The original version of this article, How to Close Your Bank of America Savings or Checking Account, is copyrighted by Consumerism Commentary.

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Last month, I noted that Wells Fargo was to begin testing a $3 debit card monthly fee in some areas of the country. Since the recession, banks are looking for more ways to generate profits from depositors. Historically, banks turned deposits around and approved loans for borrowers at higher interest rates than what was paid on deposits, but with loan interest rates remaining low, the financial industry is not satisfied with current profits.

More recently, banks have benefited from swipe fees or interchange fees, where card issuers receive a small payment for every transaction. These fees have been a significant source of revenue for banks; in fact, the cost for banks to provide merchant services is significantly less than the revenue from fees. As a result, new regulations, intended to help small business owners who absorb the cost or pass it onto customers in the form of higher prices, enact limits to interchange fees. The most obvious solution to a squeeze on revenue from one source is to find another willing source.

In this case, banks are beginning to charge depositors directly.

Bank of America is initiating a new monthly fee of $5 for debit card use. Regardless of whether a Bank of America customer uses a debit card in “credit mode” (usually a signature-based transaction, though in some situations signatures aren’t necessary) or in “debit mode” (a PIN is required), as long as he or she has one transaction in a month, the bank will deduct $5 from the account at the end of the period.

While there is something to be said for customers paying a service provider — a bank — for the services it provides — immediate access to their money stored safely in checking and savings accounts, this isn’t the model for savings and checking account access the country has come to accept over the past century.

The good news is customers still have choices.

Unfortunately, many Bank of America customers will continue blissfully unaware that there have been any changes. Some will notice the new $5 fee after receiving the first statement after the debit card fee has gone into affect, and some will notice months later — or perhaps never. Perhaps this is justified punishment for not managing finances closely. Some will know about the fee but not care enough to make any changes. $60 a year on a $30,000 annual income is not a significant expense at 0.2% of income.

If, however, you keep an average of $1,000 in your checking account, a fee of $60 a year is 6% of your balance. That is an insane fee considering the benefit the bank provides. You’re better off — much better off — with any alternative.

• Carry around cash. While this will save money from a few different perspectives, it is not an ideal situation for everyone. If you regularly make a lot of transactions and need to carry a significant amount of cash on your body at all times, you’re putting your cash at risk, whether the risk comes from a capacity for misplacing your wallet or getting mugged. Another benefit is that on average people spend less with cash than they would with plastic due to the psychological effect of taking bills from your wallet and giving them to someone else.

  One potential drawback, especially for spenders who are aware of the psychological disadvantage and work to control their spending with plastic, is they lose the benefit of receiving statements outlining their spending. For someone who tracks her finances, that might mean keeping a collection of receipts and making notes in a pad whenever she doesn’t receive a receipt. Cash is an accounting nightmare.

• Switch banks! This is an approach I highly recommend. It would take a significant amount of customers to send a message to a bank by closing accounts and taking their business elsewhere. I don’t expect banks who have chosen to implement these debit card fees to ever go back to the free model. Many banks, particularly smaller regional and local banks, have not begun nickel-and-diming their best customers. Credit unions, as well, pride themselves on being customer friendly; after all, the shareholders of credit unions are their customers, so there is no friction between the institutions pitting the needs of the owners against the needs of the customers.

Go and do it today. It will only take a few minutes; move your money out of any bank that plans to charge a monthly fee for using your debit card, which as of today includes these major banks:

• Bank of America
• JP Morgan Chase
• Wells Fargo

There’s a new initiative called Bank Transfer Day, encouraging consumers to pull money out of big banks and into credit unions by November 5, 2011.

The original version of this article, Bank of America Charging $5 Debit Card Monthly Fee, is copyrighted by Consumerism Commentary.

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Since many banks are constantly updating their interest rates offered on savings, money market and checking accounts, this chart should come in handy. On the 1st and 15th of every month, this page is updated to show the most accurate rate information available.

This list is organized in two sections. The first section includes FDIC-insured savings or money market accounts and the second includes FDIC-insured checking accounts. Each list is sorted alphabetically and unless there is a notation listed, the APY rate applies to all amounts.

Current rates

Use the table below to search for current interest rates available on money market accounts, savings accounts, and certificates of deposit. For historical rates, scroll down.

Historical interest rates

The table below demonstrates the trend of interest rate changes over time, which has proven to be on a consistent down slope for the past few years. Contact me if you have any updates and I will gladly add the information below.

If you would like to include this information on another website, please use this code:

<iframe target="_blank" width=’620′ height=’990′ frameborder=’0′ style=’width:620px; overflow: auto;’ src=’http://spreadsheets.google.com/pub?key=p8S_s76majVluBtKLV6PYfA&output=html&gid=0&single=true&widget=true’></iframe>

Note: By default, the links below will open within this page. To view the full website, you should open the links in a new tab or window.

The original version of this article, Current and Historical Checking and Savings Account Rates, is copyrighted by Consumerism Commentary.

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In early October, I will announce the winners of the Second Annual Plutus Awards, which will include the best bank, best credit card, best brokerage, and a number of other categories. Later today, the Plutus Awards website will list the finalists. Money Magazine has already completed its survey and announced the publication’s editor’s picks for best bank this year.

For an alternative to these selections, I’ve reviewed what I believe to be the best online savings accounts, looking past the antiquated notion that a physical branch is necessary for a good banking experience.

For the best national checking account, Money Magazine recommends U.S. Bank, citing the bank’s high customer satisfaction ranking in J.D. Power & Associates. With no branches in my region and one ATM within 100 miles, U.S. Bank is not an option for me. For checking accounts, I appreciate having not only nearby ATMs but convenient branches. Wells Fargo is not my favorite bank, and like other national banks they rely on increasing fees to maintain their profits, but I have a checking account there because the branches are ubiquitous. I prefer TD Bank, but a less professional website prevents me from keeping my primary checking accounts there.

Money Magazine picked the Discover Bank Online Savings Account for best savings account. It’s difficult to argue with this selection. Although I closed my Discover account to consolidate my savings, I had a positive experience with that bank, and the interest rates they have been offering have been solid. The rates have been higher than the online banking mainstay, ING Direct.

Ally Bank wins Money Magazine’s selection for best online package, thanks to great rates, unlimited ATM fee reimbursements, and remote check deposit. The magazine also mentions that Ally introduced a debit rewards program at the same time other banks are eliminating them. I expect this benefit to be short-lived, though. Ally Bank is a result of General Motors and its subsidiaries distancing themselves from the negative public image of the company. The rebranding worked so well that more GMAC departments eventually changed their names to Ally. Here’s my review of the Ally Bank Savings Account.

Money Magazine chose Alliant Credit Union for the best credit union category. Credit unions often have regional or local associations, making it hard to determine a best credit union relevant to all Americans. I’m a fan of moving away from large banks towards credit unions, but not everyone can qualify. I’ve searched, and it doesn’t appear that I can become a member of any credit union near me.

The survey also recognizes the best regional banks: Bank of the West in the west, Huntington in the mid-west and TD Bank in the east.

Overall, the above selections are good choices for best bank. I think it’s good that the formerly innovative ING Direct receives some serious competition in the online space. With ING’s large customer base, the company has little incentive to staying competitive. Executives know that most customers will not switch to other banks just to chase higher interest rates. The more other online banks can improve their services and offer compelling products, the more ING Direct will need to worry about staying competitive.

National banks, with their overzealous fees and impersonal customer service, should be concerned about losing business to regional and local banks, credit unions, and online banks that offer more convenient services like remote check deposit and ATM reimbursements.

Money Magazine

The original version of this article, Money Magazine’s Best Banks 2011, is copyrighted by Consumerism Commentary.

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Bank of America is settling the overdraft fee class-action lawsuit that alleges the bank knowingly manipulated customers’ deposits and withdrawals in order to maximize the fees they would receive. Although the banks aren’t completely to blame for the proliferation of overdraft fees, policies were so much of a problem that the government and regulators needed to step in. As a result of new regulations brought on by the Credit CARD Act of 2009, banks now require customers to opt in for overdraft protection, which about 90 percent of customers do. Those who do not would suffer the embarrassment of a declined debit card or, perhaps worse, the expense of a bounced check.

While limited by new regulations, banks are constantly looking for ways to increase profits, and when they can’t earn money by lending out deposits as much as they have in the past, they turn to increasing fees. According to recent research, banks project earning $38.5 billion from overdraft fees alone in 2009, up from $24 billion in 2008. In 2010, profit from overdraft fees set a new record, but due to a variety of fiscal accounting years in the industry, I don’t have the number on hand yet. 90 percent of these fees come from only ten percent of customers, so it would be fair to say that it’s more common to see a serial offender than a one-time offender.

You may find that it has been more difficult for those one-time offenders to talk their way to a reversal of a fee through customer service. In times like these, when the banks want to protect their money as much as possible, it makes sense for consumers to avoid overdraft fees in the first place.

If you follow these suggestions, there should be no reason for you to be charged an overdraft fee unless you make a mistake.

1. Balance your checkbook. There is a disconnect between the checking account balance according to the bank and how much money you have to work with. If you have a traditional personal checking account, the bank doesn’t know when you write a check. It’s your responsibility to know how much money you have available at any one time. The best way to do this is to keep a register. Start with your opening balance, and subtract from it every time you write a check and add to it every time you make a deposit.

2. Don’t forget about your debit card. It gets difficult to balance your checkbook if you also use a debit card to get cash or to pay for purchases. When you sit down at your desk to write checks to pay your bills, all of your financial information is in front of you and you can easily enter the check amount in your register. But when you use a linked debit or ATM card, you need to hold onto your receipts so you can enter the transaction into your checkbook at a later time. If you remember.

3. Access your checking account online. Online banking is one of the greatest benefits of the internet. Rather than waiting for your monthly statement in the mail, you can log onto your bank’s website and check your recent transactions at any time. If nothing else, checking the bank’s records for your account more than once a month helps you become familiar with the transactions that flow through your account and how low you like to keep your balance.

4. Keep your balance well above the minimum. Some checking accounts charge a fee if your balance dips below a certain minimum, but almost all will charge a fee if that minimum is $0. Give yourself a buffer. If you withdraw an average of $2,000 each month for your mortgage and other bills, don’t let your bank account float below $2,000. This way, you always have a month’s worth of expenses ready to protect you from $0. Since checking accounts often offer lower interest rates than savings accounts, particularly high-yield savings accounts, you will be giving up a small amount of interest income, but the protection might be worthwhile.

5. Link your checking account to a savings account. Many banks offer the option of linking a checking account to a savings account. In the even that your checking account dips below $0 due to a cashed check for which you have insufficient funds or a charge on your debit card, the bank automatically transfers money from your savings account to cover the withdrawal. Some banks will charge a fee for this service, but the fee is often lower than an overdraft fee.

6. Link your checking account to a line of credit. If you have good credit, this is a legitimate option. Rather than withdrawing funds to cover your overdraft from a savings account, the bank taps your line of credit. You will owe interest on the amount you borrow from your credit line, and you may owe an annual fee for use of the credit line, but the total fees could be substantially lower than a typical overdraft fee.

7. Ask to remove overdraft protection. Banks believe overdraft protection, even for a fee, is a service customers want. In many cases, that is true. If you send your mortgage or rent payment, you might prefer the large check not to bounce. Bounced checks cause problems for the recipient and the sender; overdraft protection eliminates this hassle. If it is not likely that you will bounce a major payment, it might make sense to ask your bank to remove the overdraft protection feature for your account. Keep in mind that you will still be charged a “returned check” fee if you bounce a check.

8. Track your finances electronically. There are many tools now that let you connect directly to your bank’s databases to download and list your transactions automatically. My current favorite is the desktop version of Quicken, but even with its robustness, this type of software may be more than what is necessary for avoiding overdraft fees in a checking account. I suggest signing up for a free service like Mint to monitor all your financial accounts in one place.

9. Create reminders and notifications. Many banks continue to improve their technological offerings for checking accounts. I know of at least one bank that will, if you enable this feature, send you a text message if your bank account decreases to a balance you define. For example, you might receive a notice when a cashed check reduces your balance to $95, five dollars below your established warning minimum of $100. If your bank doesn’t offer this feature, one of your linked services will. Although I don’t use this service often, I receive an email from Mint when my Wachovia personal checking account balance dips below $2,000.

10. Look for free overdraft protection. Some credit unions offer checking accounts with free overdraft protection. You can start at the Credit Union National Association’s credit union finder.

Overdraft fees happen to the best of us because we are all human and make mistakes. The best thing we can do is reduce the occurrence of these fees to a point at which it will be much easier to talk with the bank when the mistakes do happen. Opening a line of communication can help, and if you maintain a good conversation with customer service representatives, you may be able to convince banks to make an occasional overdraft fee disappear.

This negotiation works best when you have a positive history with the bank. The more overdrafts you have on your record, the less likely the bank will be willing to forgive your fees. If you prove yourself to be a good customer, you have a better chance of being rewarded.

The original version of this article, 10 Tips for Avoiding Overdraft Fees, is copyrighted by Consumerism Commentary.

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The best 12 month CD rates may not be impressive overall today compared with historical rates. With the Federal Reserve keeping interest rates low for the near future, all types of deposits will not command the interest rates that were common before the recession. With nowhere to go but up, it may not make a lot of sense to lock in a rate for a long period of time. With most certificates of deposit, once you agree to a term like five years, you’ll be stuck with that rate even if new CDs have different rates.

This is a good approach in an environment where rates are high and possibly falling, but not a great idea when rates are low and possibly increasing. Nevertheless, you can often find better rates for CDs than for savings and money market accounts, so if you know you won’t need your savings for three months, six months, or a year, you might be able to achieve slightly higher interest payments from the bank. One drawback is there is often a penalty for accessing your cash before your term is up.

For the uninitiated, a certificate of deposit (CD) is considered a “time deposit.” CDs are generally considered cash or savings when it comes to asset allocation, but the “time” requirement presents a maturity date like a bond. This probably doesn’t matter for most individual savers and investors, but it does carry an important distinction for businesses whose investments are reported to regulatory authorities.

Like savings accounts, CD interest rates are compared using APY, annual percentage yield.

Here are some of today’s best 12 month CDs APY rates.

Discover Bank offers a hassle-free banking experience. I am a current, happy customer. Discover offers a rate of 1.00% APY as of February 2012.

Ally Bank offers two unique types of CDs in addition to a traditional CD. The Ally Bank Raise Your Rate CD has a feature that mitigates the risk of CD rates increasing while you’re locked in. You’ll have one opportunity during the term of the CD to lock in the market interest rate. The shortest term offered is 2 years, though, not 12 months. The rate for this product is 1.14% APY as of February 2012.

Ally Bank also offers a No-Penalty CD, where you can withdraw your money at any time without a penalty. This term is slightly less than a year at 11 months, and the current rate is 0.91% APY as of February 2012. Beyond these products, Ally Bank also offers a typical 12-month CD, subject to an early withdrawal penalty and no option to increase the interest rate mid-term, and the current rate for a 12-month high yield CD is 1.02% APY as of February 2012.

Aurora Bank offers a 12 month CD with a minimum balance of $1,000. The Aurora Bank 12 month CD offers a rate of 0.15% APY as of February 2012.

ING Direct is a mainstay of online banking and set the standard for all other online banks. While the bank has been recently sold to Capital One, ING Direct continues to offer state-of-the-art banking products and deliver excellent customer service. The interest rate for ING Direct’s 12 month CD is 0.50% APY as of February 2012.

American Express is a relative newcomer to online banking, but their products are compelling to offer here. I like my account with American Express. This bank offers a wide range of terms for CDs from six months to 60 months, with many intermediate terms. The interest rate American Express offers on their 12 month CD is 0.55% APY as of February 2012.

Sallie Mae Bank is also new to offering banking products, having been established in 2005. My account with Sallie Mae was the easiest to open, and my only criticism is the lack of integration with Quicken and online tracking tools. Sallie Mae offers a strong 0.90% APY on the 12 month certificate of deposit as of February 2012.

Do you have a favorite bank, offering a compelling CD product, you’d like to see added to this list? Let me know by leaving a comment below.

If time deposits aren’t right for you and you’d like the ability to withdraw your money as needed, consider a high yield savings account from one of the best online banks. If you do like the idea of saving with CDs, consider creating a CD ladder to make the most of the highest CD rates.

The original version of this article, Best 12 Month CD Rates, February 2012, is copyrighted by Consumerism Commentary.

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Wells Fargo Bank, the primary brick-and-mortar bank I’ve been holding onto for my branch-based banking, ATM deposits, and immediate check-writing, is jumping on the debit card fee bandwagon.

Chase was one of the first banks to start playing around with fees and debit card changes. Chase increased its ATM fee to $5, eliminated the short-lived debit card rewards, tested a limit of $50 for debit card transactions, and is still currently testing a $3 monthly fee for debit card users.

That same fee will grace Wells Fargo account holders’ bills in the states of Georgia, New Mexico, Nevada and Oregon. If the pilot program is successful, you can be sure Wells Fargo will roll the new few out to customers throughout the rest of the country.

Monthly fees and other nuisances are increasing as banks find it more difficult to maintain the profits they’ve grown accustomed to seeing. If interchange fees are limited through regulation, despite the abundant profit banks generate from spending customers, they will continue to grow the business’s profits through other means.

As I’ve grown older and perhaps more financially secure, I don’t automatically dismiss any product with a fee. But if there are better, free choices for the same service, you can be sure I’ll send a message by ending my relationship as a customer — and by sharing my experiences with whomever is interested in reading them.

The monthly fee will begin in the states mentioned above on October 14.

CNN Money

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The internet is a-twitter with the news that ING Direct is now offering paper checks to accompany its Electric Orange “paperless checking” account. Apparently, customers have received emails from the bank confirming this long-needed enhancement, but I have not received an email yet. A box of 50 checks costs $5 through the ING Direct website.

Paper checks, while vestiges of the all-but-obsolete era of twentieth-century banking, are still convenient for making purchases when cash would be inconvenient and credit inappropriate or unaccepted. You generally don’t carry cash to put a down payment on a house, for example. The lack of paper checks meant that ING Direct customers needed to maintain a separate, external checking account, and in many cases, the Electric Orange account could never be a customer’s sole transaction account.

ING Direct has provided the option to send a paper check from the bank, but for the times that a check is required, it usually means you need to write one on the spot rather than wait for days to weeks for the check to arrive. While checks are declining in relevance — most of the time, they are processed electronically, anyway — this has been the missing piece.

With this announcement, ING Direct is outlining some extra security features. When you receive the checks from the bank — and you can only order one box of 50 checks at a time — they will have more numbers at the bottom than checks from other banks. This is a security feature that ensures that only valid checks will be processed.

Checks are interesting. Technically, any piece of paper that includes your signature and an amount qualifies as a check. If the bank of first deposit can determine the bank that holds the account and that bank can determine the correct bank account of the individual who owns the check, the check can be processed. You can print checks at home or write them on a bar napkin. You might get the evil eye from a bank teller, but if there’s enough identifying information, the check can be processed. You don’t even need to know the bank’s routing number.

That won’t be the case with ING Direct‘s checks, because this bank will only process transactions that have the right extra digits in the check number, which I would guess is a checksum that verifies the check number with the account number using some sort of algorithm, like the thee or four digit verification code now popular on credit cards.

To order your first box of checks, log onto your account at ingdirect.com and view your checking account, click on “Account Maintenance,” then click on “Order New Checks.” You’ll need to activate your checkbook when it arrives, and ING Direct will provide instructions for this process.

It’s a little late, but thanks to ING Direct for providing this basic feature. Thanks also to PT Money where I first learned of this development, as I haven’t received the email other customers are reporting. I didn’t receive the message because I still had an old email address on file at ING Direct, and I’ve corrected that oversight.

Be aware of the fees. As I mentioned, each checkbook costs $5 to order, and checks printed by third parties like ChecksUnlimited or your home printer will not be accepted. If you do not have enough money in your account and your overdraft line of credit to cover a transaction, ING Direct will charge you $9. Keep track of the checks you write, as they won’t be reflected in your online balance until they are cashed.

For brand new ING Direct customers, those who do not have a savings or a checking account with this bank, the box of checks is effectively free because there is currently a $50 bonus available.

Photo: pasa47

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In my neverending quest to find more options for banking in today’s environment of low-yield high-yield savings and money market accounts, I’ve come across Aurora Bank. I don’t move money around from one account to another to chase high rates, but until I get around to simplifying my banking options, I tend to open accounts at a variety of banks. I do this mainly for the benefit of Consumerism Commentary, so I can share my thoughts on the latest banks, but if I happen to stumble across a great institution, I’ll be ready to be a full-time customer.

Savings and money market accounts are not necessarily investments. You don’t deposit money expecting your savings to grow. In fact, you’ll be lucky if the interest on savings matching the official rate of inflation. The likelihood of that interest matching your personal rate of inflation is even lower. The purpose of savings is to have cash ready at an instant, either for an emergency or for impending spending, like purchasing a house within the next year.

I recently opened an account at Aurora Bank to see if this little-known institution has what it takes to pull me away from my mainstays.

About Aurora Bank

Aurora Bank, like all legitimate banks in the United States, is a member of FDIC. All deposits are insured by the government up to the legal limit. Aurora Bank has been in operation since 1921, when it was formed as the Delaware Savings And Loan Association. From 1999 through 2009, the bank was known as Lehman Brothers Bank. The bank is currently still owned by the bankrupt Lehman Brothers Holdings Inc., but it must sell the unit by May 2012.

Does this make the bank riskier? I don’t think the issue that the bank will be sold should prevent a customer from opening account. In fact, in the short term it could be good news. Lehman Brothers wants to increase the value of the bank before it is sold, and that means the bank is in search of depositors. When banks are competing for customers, savers tend to win with higher interest rates. That’s what I’m seeing with Aurora Bank right now. As already mentioned, deposits are insured by FDIC, so in the unlikely event FDIC closes the bank, its receivor will be capable of maintaining your account or returning your deposit.

Aurora Bank is offer comparatively high interest rates for savings accounts, money market accounts, checking accounts, and certificates of deposit. I opened a money market account. It offers a higher interest rate than the savings account, but a higher minimum deposit of $1,000.

Bankrate has given Aurora Bank a four-star rating, but it may be worthwhile to note that when broken down into categories, Aurora received five stars in every category except asset quality. In this category, the bank received only one star due to a substantially below normal loss reserve coverage (if the bank’s lending customers default, the bank might have trouble) and a below normal asset growth rate. Despite this negative analysis, the overall rating of four stars qualifies Aurora Bank as being in “sound fnancial condition.”

Opening a new Aurora Bank Money Market Account

All banks require a detailed profile of each customer, and Aurora Bank is no exception. I began my application with my Social Security number and Driver’s License at the ready. The application required my employment information, and I listed myself as Self Employed.

Aurora presented me with several options for funding. I could fund the account with a personal check by mail or through an electronic transfer. I chose the electronic transfer, making sure I had enough in my primary checking account to cover the deposit. As my account would be a money market account, I had the option of ordering checks and a debit card for the account. I decided to order both. I don’t forsee using either unless Aurora Bank is shown to be a significantly better choice than the institutions I currently call my primary banks, but I thought it would be helpful to take advantage of every service offered.

After selecting these choices and confirming my personal information, I was presented with the law-related part of the account opening process. The terms and conditions included a link to the bank’s fee schedule. For the most part, the account is free to operate, but by aware of a few fees and some notes.

• There is a $5 monthly fee if the account balance is below the minimum.
• There is a $5 dormant account fee if an account is inactive for three years.
• THe account balance most be above the minimum to receive interest.

After agreeing to the legal documents, the application presented me with the familiar identity-confirming questions, drawn from information on my credit report. I successfully passed this stage by answering the questions correctly. The final step in this process was providing the routing number and account number for the bank account that would provide the initial deposit of $1,000. After doing so, I immediately received a verification code and an email that explained the next process.

Within four business days, Aurora would make two test deposits nd two test withdrawals in my linked account. This is a familiar procedure, as many banks verify linked external accounts with this method. Once I see the test transactions in my external account, I will visit the link provided in the email from Aurora Bank. If the amounts match, Aurora Bank will withdraw my initial deposit and my external bank will be available for transfers.

After receiving the two test deposits, I confirmed the amounts as instructed in the email I received. Although I entered the correct information, when finalizing my account set-up, I received the following message:

The Account Opening Process Has Not Finished. We’re sorry, but we’re unable to retrieve your customer information. We apologize for this inconvenience and ask that you select one of the options below.

The suggestions available to me were signing up for online banking, signing on if I already had an account, or returning to the Aurora Bank home page. I still did not receive any credentials for accessing my new account online, so there was nothing for me to do. At the same time, I received an email to let me know that my banking information for my initial deposit was confirmed, and I’d receive another email soon with more instructions.

Bank data

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I chuckled when I received my replacement business debit card in the mail yesterday. Although I never had any problems with my account, and I’ve always received mail from Wells Fargo addressed properly, at some point, someone in the bank decided the name of the owner of my business accounts is “Business Customer.” As Wells Fargo is continuing to update their branding following their purchase of Wachovia, the bank wants to get new cards and documents in the hands of its customers. I know that large banks sometimes see their customers as nothing but numbers, but not much can be considered less personal than the bank referring to one of its patrons as “Business Customer.”

My Wachovia Visa Business Check Card would have been replaced with a Wells Fargo Visa Business Platinum Debit Card if it weren’t for this strange error. The “Platinum” moniker sounds fancy, but as far as I can tell, there are no features on this card beyond what I had previously, including a debit card form of a “zero liability” policy.

Rather than activating the card listing me as “Business Customer,” I called Wells Fargo’s customer service to have a new card with the correct name shipped to me. Besides waiting on hold for a business representative while my cell phone battery approached its daily little death — I could really use a new phone — the resolution was easy and I should have a new card in about a week. My old Wachovia debit card, which displayed only my business name, not my own name, on its face, will continue to work.

I am a customer of Wells Fargo for almost all of my business banking. Almost all business checks I send are initiated through Wells Fargo’s bill payment website, so I hardly use paper checks. I have not yet found a good Wells Fargo product that offers competitive interest rates for business savings. Most of my business cash is deposited at ING Direct, in a business savings account. I am looking for other options, though; if Vanguard were to offer a free cash management account for businesses with less than a total of $1,000,000 deposited or invested, I’d most likely move everything there to consolidate all business accounts at one location.

Photo: Tony Webster

The original version of this article, According to Wells Fargo, My Name is Business Customer, is copyrighted by Consumerism Commentary.

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If you qualify for the Bank of America overdraft lawsuit settlement, you may have already received a postcard in the mail from the bank. Here is information on the overdraft lawsuit, only one of many class action lawsuits against Bank of America. If you recently received a check from Bank of America for about $98, you have received a benefit from an earlier class action lawsuit pertaining to the bank’s debit cards. This article pertains to a later lawsuit regarding overdraft fees.

December 2011 update: While the judge has approved Bank of America’s settlement related to the overdraft class action lawsuit and has ordered Bank of America to pay $410 million, a member of the settlement class who objected to the settlement has filed a notice to appeal the ruling. With an appeal filed, it could take at least a year for the issue to be resolved. If the appeal is denied, customers may still be disappointed. With 13.2 million affected customers in the class and fees to be paid from the settlement fund to the lawyers and class representatives, the benefits each customer will receive are sure to be less than the value of a refund of even one overdraft fee.

Any compensation to affected customers is on hold until the judge enters the settlement and any appeals are filed.

Like many banking institutions, Bank of America processes debit transactions not at the time they occur, but in a batch, from largest to smallest. If they don’t still take this approach currently, they did in 2009 when a class-action lawsuit combined several other legal actions. 24 other banks in the United States and Canada were named in the class-action lawsuit, including Citigroup, Chase, and Wells Fargo.

The banks say that by ordering debits from largest to smallest benefits customers. For example, mortgage or rent payments are generally the largest debits, so they should receive priority and should be the first to be paid. This is not how it works in practice, however. The system is designed to make more money in fees, particularly from the paycheck-to-paycheck class of customers.

For example, five debits may be scheduled to post on a Monday:

• $800 mortgage payment (check)
• $200 purchase at the grocery store (debit card)
• $100 withdrawal at a different bank’s ATM
• $25 purchase at the book store
• $4 coffee

That’s the order the funds will be taken from this person’s account. If there is $900 in the bank account, the mortgage payment will be processed, but the four other transactions will generate overdraft fees, one for each, likely totaling more than $100. If the debits were processed from smallest to largest, only the mortgage payment would cause a problem, and the check will bounce. This could cost the account owner less money, but a bounced mortgage payment could be troublesome.

In the more likely event that there is only $500 in this checking account, ordering debits from largest to smallest ensures nothing will go through without generating a fee. However, ordering the debits from smallest to largest, only the mortgage payment would bounce, and there would be no overdraft.

Bank of America will be paying $410 million to settle the class-action lawsuit, which also notes that the banks did not tell customers they could waive overdraft protection, allowing certain transactions to fail rather than paying a fee. Not every bank handles activity posting the same way.

The deadline to opt out of or object to the settlement was October 3. The official website for the settlement is bofaoverdraftsettlement.com.

Photo: Wonderlane
Reuters

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Online bank ING Direct is offering some goodies in July in time for Independence Day. July 4 is a bank holiday in the United States, so this sale starts early. July 1 and July 2 are the only days this sale will be available, so this offer is only around for a very limited time. The promotions have been expanded from what ING Direct offered in previous years. Here is what the sale entails:

Electric Orange. Electric Orange is ING Direct’s paperless checking account. During this two-day promotion, new Electric Orange customers will receive a bonus up to $126. ING Direct is offering $50 just to try the account, after making three purchases or person-to-person payments within 45 days and an additional $76 for setting up direct deposit and making deposits of at least $250 by August 31.

Orange Savings Account. ING Direct’s Orange Savings Account is the flagship online savings account. Normally, ING Direct offers $10 bonus for each customer referral, up to 25 referrals. During today and tomorrow, any referral emails current and new customers send out will generate a total of $76 to you, as well as $25 to each of your friends who open an account. Two successful referrals are required in order to receive the $76 bonus (the $20 standard fee for two referrals plus $56 additional).

ShareBuilder. ING Direct’s discount brokerage arm offers low transaction fees, and for today and tomorrow, all new customers receive a $76 bonus just for opening the account and making one transaction.

Savings IRA. ING Direct offers savings IRAs to save for retirement. If a low-risk investment choice is part of what you need for retirement, having cash in a savings account in your IRA could be a good way to balance your portfolio. Current ING Direct customers who open a savings IRA with at least $1,000 will receive an additional $76 bonus. The bonus counts as a 2011 contribution, so if you’ve already maxed out your IRA, you wouldn’t qualify.

Easy Orange. ING Direct offers mortgage loans, and their rates are often lower than what you might find at a local branch-based bank. During this limited time sale, ING Direct is offering $1,776 off closing costs.

Finally, if you visit the ING Direct store, you’ll receive 17.76% off everything you could buy. Just use coupon code 1776. The ING Direct store has a variety of items included branded messenger bags, bicycles, children’s books, and boxer shorts.

I’ve been a happy customer of ING Direct since July 29, 2002, and I usually recommend the bank’s savings account to friends looking for a good place to keep their money. Although their interest rates are no longer in the upper echelon, it’s a solid choice for most customers. I’ve also been happy with ShareBuilder for the past several years. Thanks to bonuses I’ve earned there over time, most of my (infrequent) ETF and stock purchases have been free to me.

Photo: David Hepworth

The original version of this article, ING Direct Financial Independence Days Sale, is copyrighted by Consumerism Commentary.

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ING Direct has been on sale for the past few years, and I’ve speculated on the rumors of possible buyers like Ally Bank and GE Capital. The winning bidder has been announced. Capital One has purchased ING Direct for $9 billion.

Capital One is a financial institution that is historically known as a credit card company, but in the past few years, a series of banking acquisitions, like that of North Fork Bank, has allowed Capital One to expand its horizons a bit. With ING’s deposits, the bank will be the sixth largest bank in the United States by deposits.

Traditionally, ING Direct has been a hit with a new generation of savers. It was one of the most popular banks offering high-yield savings accounts, with interest rates that far exceeded what brick-and-mortar banks offer. In recent years, however, ING Direct had gained momentum and market position that allowed them to relax competitively against other online-only banks. While their rates are still far better than one can earn in branch-based savings accounts, many online banks offer better terms with little else for differentiation.

Nevertheless, many customers have stayed with ING Direct due to inertia as well as a genuine affinity for the bank. There is an impression that ING Direct treats its customers well for the most part, and the bank has a capable and friendly support system.

Customers are rightly concerned about this acquisition. Capital One has not always been an organization that offers the friendliest terms. The company is not as universally loved as ING Direct, but any negative publicity is usually geared towards credit cards. Now that Capital One is aggressively moving into banking, their reputation might shift for the better.

ING Direct customers will likely gain access to Capital One branches and ATMs, and that could be a benefit for those living in an area where Capital One is present. The big question is whether Capital One will maintain the customer-friendly approach to banking — no fees, no minimums, high interest rates, an easy website to navigate — that has made ING Direct a favorite among younger customers.

The biggest portion of my cash is held at ING Direct. I will be watching closely to see whether Capital One implements any changes. For those eager to leave ING Direct, consider these reviews of other high-yield savings accounts or find a local credit union that offers the service you need.

Updated. As the story continues, it gets more intriguing. My efforts to reach out to Capital One for some comments have been unsuccessful, but the New York Times was able to reprint some of Capital One’s prepared remarks about the acquisition. Here’s how the bank answered the question, “Are you planning any new fees or minimum balance requirements?”

ING Direct has built a large and valuable franchise of engaged customers by focusing on a few simple proconsumer products. We deeply understand the value of the loyalty and advocacy ING Direct has been able to build with its customers. Everything we do as we integrate our businesses will be thoughtful and surefooted with a focus on sustaining and building that customer loyalty. We will focus on the customers, channels, products, and pricing strategies that build the best long-term customer relationships and deliver the best cost of funds.

Meanwhile, on the other side of corporate marketingspeak, ING Direct’s Twitter representative broadcast: “We hear you, Savers. The plan is ING DIRECT + the best of Capital One = more ways to help you save.”

I’ll continue working on getting some answers from Capital One.

New York Times

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Update: Capital One has purchased ING Direct.

A few weeks ago I mentioned that Ally Bank was considering buying ING Direct, the United States deposit bank arm of the Dutch ING Group. In exchange for a European bailout, ING was forced to agree to sell ING Direct by 2013. As the date nears, more rumors are circulating about the nature of interested buyers.

I’d like to see the bank purchased by a company that would recognize ING Direct’s overall philosophy when it comes to dealing with consumers and mix the philosophy with a higher interest rate product for savers. Consolidation could prove to be bad for consumers who end up with fewer banking choices, but there are enough banks around to keep strong competition among the best online savings accounts.

The latest company to neither confirm nor deny their intent to acquire ING Direct’s deposits is GE Capital. GE Capital deals mainly with business clients, not retail banking customers, so this would be a move into uncharted territory. Compare this with Ally Bank, where a consolidation would probably prove to be smoother from a business perspective, which, down the line, is usually better for the consumer.

According to the CNN video, other interest parties include Capital One and CIT Group. You may remember CIT Group from the recent financial meltdown when the company’s stock was frozen on the New York Stock Exchange and the company soon after filed for Chapter 11 bankruptcy.

Who do you think would be the best buyer for ING Direct?

Photo: yonathansantana
CNN

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Born in the 1970s, I didn’t get to experience the days when anyone with a bank account could earn 18% APY in their savings. When I started being aware of interest rates — something that didn’t happen for me until I was out of college, struggling to earn a living, and thinking of a savings account as something I might never afford to have — the concept of online banking had already taken off. Brick and mortar banks were offering paltry interest while NetBank and ING Direct were offering higher interest rates and sign-on bonuses. This is the reality for every generation from Generation Y on down; superior products are often available to those who wish to look past the traditional teller-based banking system.

What is the point of saving? The financial media place the strongest emphasis on interest rate — the fee banks pay depositors for the privilege of using the customers’ money. The interest rate is important, of course, but this singular focus leads to the idea that a savings account is a type of investment. Customers often chase the highest interest rates blindly and get upset when their savings, even at the highest interest rates offered today, lose purchasing power thanks to inflation.

Savings accounts were never meant to be investments. They do play a role in investing by being a super-safe (no-risk) option for investors looking to balance the riskier (and potentially more rewarding) selections in the portfolios. This safety feature drives people to savings. Besides being a foil to riskier investments, everyday savings is best for any money you think you’ll need to use in the next year, including or in addition to a good portion of your emergency fund.

How do you know which savings account is best? Since my first introduction to online saving, the number of options for banking with savings accounts, online and offline, has grown. To muddle through the myriad banks and accounts, focus on specific criteria for making your selection. There are four basic criteria for a bank account. In order of importance:

1. Stability
2. Accessibility
3. Interest income
4. Service

Stability. When it comes to savings, stability comes first. While it’s good to be a customer of a solid bank, any bank can fail. When yours does, FDIC protection will ensure your money is never lost. While you may believe that some banks are more stable than others, unless you’ve personally reviewed their balance sheets and cash flow statements, you’re relying on marketing for your judgment. Big banks are perceived as the safest, but they often have trouble in major financial crises. Small banks fail, too, and there are many more of them than large banks.

Big or well-known banks in the United States always have FDIC insurance. If you are unsure, look for the FDIC logo or use FDIC’s search engine to review the bank before you deposit. Credit unions have insurance coverage from the National Credit Union Administration (NCUA), and this coverage is similar and as effective as FDIC insurance.

Accessibility. If your money is in a bank that has no branches near your living or working location, you might have a delay getting your money when you need it. This is the one drawback to online-only accounts; if I want to see that money, I need to first initiate a transfer to a local brick-and-mortar bank and withdraw the funds from there. That process could result in a delay of at least two business days. That’s one reason I suggest a tiered emergency fund.

Interest income. Most savers might not profit enough from a 0.1 percentage point difference between banks, so chasing the highest interest does not always pay off. Chances are good that the interest rate you receive, especially after taxes are paid, will not exceed the rate of inflation. Over time, the purchasing power of your money in savings decreases, but it decreases much less than it would if you were leaving your savings outside of the banking system. Earning interest in your cash isn’t really investing, but compound interest will benefit your balance over time.

Service. Having good customer service, including good tools for customers like websites and mobile access, is the number one reason a saver is likely to stay with a bank. As ING Direct fell from its reigning position at the top of the interest charts, many customers stayed with the bank thanks to their easy-to-use website and friendly customer service, though inertia likely played a role as well.

ING Direct, Ally Bank, and Discover Bank have been cited recently for offering the best all-around savings accounts. I’ve been a customer of these three banks and many others, and I offer my reviews and suggestions here.

Photo: Bytemarks

The original version of this article, How to Choose the Best Savings Account, is copyrighted by Consumerism Commentary.

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As we head into summer, thousands of young adults will be heading to college for the first time. It’s important to get started on the right financial foot, and a free student checking account is an essential tool, particularly when combined with a savings account. Obtaining a student checking account that’s convenient for both students and their parents should be one of the first steps after deciding which school to attend and before moving in. For those students living at home, finding a convenient student checking account may be even easier.

The best student checking accounts often have desirable features, like no monthly fees, free checks, and low or no minimum balances. Completely free student checking accounts are a little difficult to come by, but many can be made free with a little effort. I often wish I could still qualify for free student accounts — and many adults can qualify if they are enrolled in courses at a college or university. After graduation or otherwise leaving the world of academics behind, you often find that you’ll need to pay fees or maintain a balance to maintain the same level of service from your bank.

Here are some of the features of common student checking accounts. There may be differences depending on where you live. Why focus on the big banks first? Consumerism Commentary readers check in from all over the country — well, all over the world, really — and at least one of these banks will be in everyone’s backyard. Big banks aren’t the only games in town, though, so continue reading for more options, some of which might be more attractive. If you’re more interested in free online checking accounts, read these reviews.

PerkStreet Checking Account. Although PerkStreet’s checking account isn’t specifically titled for students, it is directed towards young adults. Unlike most large-bank checking accounts, PerkStreet offers no fees and great rewards. Account holders with an average balance of $5,000 will receive 2% cash back rewards for every non-PIN purchase using a PerkStreet debit card. The bank also provides 5% cash back for purchases from select merchants every month, but checking account holders can only earn a maximum of $250 each year using these merchants.

PerkStreet customers can opt to receive student-focused rewards like free music from iTunes and free coffee from Starbucks, but it’s usually a better deal to choose to the cash back option. This checking account has no fees as long as customers make at least one transaction each month. PerkStreet is operated by Bancorp Bank, a publicly-traded company listed on NASDAQ (TBBK).

Open online or walk into a branch.

Wells Fargo Checking Package with Checking & Savings for College Students. The “College Combo” includes a checking account and a savings account, linked together. Wells Fargo is one of the largest banks in the country, thanks in part to its purchase of Wachovia. With the package, students will receive a Visa Platinum Debit Card, free online bill payment services, free account alerts, and the ability to access accounts online and with mobile devices. There is a $3 monthly fee for the checking account, but it is waived if you maintain a $500 average daily balance, set up a direct deposit, or sign up for a Campus ATM or Debit Card. The savings account for college students has a $5 monthly fee, but the fee is zero as long as the savings account is linked to the checking account in this package.

If you use a non-Wachovia ATM to access your account, Wachovia will charge you $2.50 per ATM transaction.

The minimum deposits required to open the “College Combo” at Wells Fargo is $100 for the College Checking account and $25 for the savings account if you set up a recurring transfer from checking to savings. You should set up a recurring transfer if you have regular income to ensure you’re saving automatically. If you don’t set up a recurring transfer, the minimum deposit required to open the savings account is $100.

Open online or walk into a branch.

Chase Student Checking. Chase Bank is also a large nationwide financial institution with many branches throughout the United States. Chase Total Checking is the basic checking product offered, and the student version of the checking account adds to these features and reduces the fees. The Chase checking account for college students comes with a free debit card, online bill payment, mobile banking, and account alerts. You need only $25 to open a checking account at Chase. The monthly service fee is $6, but it will be waived for the first five years you own the account or if you create an automatic deposit at least monthly.

Chase offers a version of this account for high school students, too. For high school students, there is no monthly fee when the account is linked to a parent’s account. It’s easy to convert the account from high school checking to college checking once the student is enrolled in an institute of higher learning.

Open online or walk into a branch.

Bank of America Student Banking. Despite another large network of bank locations, Bank of America wants to direct its student-customers towards “eBanking.” These accounts are designed to encourage staying out of bank branches and banking completely with ATMs, online, and mobile. With the account, students will receive a free debit card, online and mobile banking, a savings account with “Keep the Change,” a feature that automatically rounds your spending up to the nearest dollar and places the remainder into a savings account for you.

There is no ongoing minimum balance, but there is a monthly fee of $8.95 and a minimum deposit of $25 to open. Customers can avoid that fee by choosing paperless statements and by avoiding stepping into a branch to bank with a teller. You’ll need to use ATMs or electronic transfers for withdrawals and deposits.

Open online or walk into a branch.

Citibank Student Account. Citibank has one of the largest networks of ATMs thanks to their partnership with 7-Eleven convenience stores, a popular college destination to satisfy those cravings for Big-Gulps and Slurpees. For students, Citibank provides a checking account with no maintenance fees, unlimited check-writing, a debit card, free online banking and bill payment, and account alerts. Citi also provides ThankYou rewards if you’re interested in linking Citi’s other products to your checking account. As long as you are enrolled in college, you can visit any non-Citibank ATM without Citi charging a transaction fee, but the bank or ATM owner might still charge a fee.

You’ll need a minimum deposit of $100 to open the account.

Open online or walk into a branch.

Your local community bank, regional bank, or credit union. These four banks are the largest banks in the United States in terms of assets. It’s likely one or more of the four banks above will be convenient to both students and their parents or guardians. These aren’t the only choices, however. Banks will continue to add fees, and as long as each major national banks feels they only need to compete with the other three major national banks, there won’t be much incentive for the big companies to offer the best products. Smaller banks don’t have the resources to mount strong marketing campaigns that can compete for your attention, and credit unions hardly advertise at all.

Find a local bank or credit union using Move Your Money Project’s search tool. It may take a phone call, but you might find that smaller banks offer better deals for students than what the large banks offer. As long as your checking account is protected by FDIC or NCUA insurance, you shouldn’t feel that smaller banks are riskier than larger banks.

Here is a list of more student checking accounts offered by national and regional banks. If you have a major national or regional bank to add to the table, leave a comment below.

Photo: Npetten

The original version of this article, Student Checking Accounts Comparison, February 2012, is copyrighted by Consumerism Commentary.

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Savings accounts and money market accounts are different from each other practically in name only. From a saver’s perspective, there is no difference between these types of accounts. There are many misconceptions about the supposed differences between savings accounts and money market accounts, and if you’ve ever tried to learn about these differences online, even from reading major banking industry websites, you may have received a great deal of misinformation.

I am not infallible; if you believe any of the information included below to be incorrect, let me know.

Withdrawal limits

Whether you open a savings account or a money market account at a bank in the United States, the bank applies your cash to their books as an asset and records a liability in the form of your deposit. The government considers both savings accounts and money market accounts as deposit accounts, not transaction accounts. Savings and money market accounts are not meant for frequent transactions. They are both limited by Regulation D, a Federal Reserve Board regulation that indicates that customers may make only six pre-authorized withdrawals from deposit accounts. ATM and teller withdrawals do not count against this limit, but debit card transactions, checks, and online transfers do. You may have read in various places online that only money market accounts are limited to six withdrawals, or you may have read that only savings accounts have this limitation. The limitation applies to all deposit accounts.

Interest rates

Money market accounts may offer higher interest rates, but not necessarily. This list of high-yield savings interest rates includes money market accounts and savings accounts, and the rates across banks don’t prove the hypothesis that money market accounts have higher interest rates in general. When the same institution offers money market accounts and savings accounts as separate products, the money market account often has a higher interest rate. Even this isn’t consistent from bank to bank. For example, some banks offer a “high-yield savings account” as well as a traditional savings account, and this more impressive-sounding product might provide a higher interest rate at that institution than all other products.

Fees

Banks may assess higher fees and minimum deposit amounts for money market accounts. Because customers perceive money market accounts as more sophisticated than savings accounts, banks often limit customers to a select audience by requiring a higher initial deposit amount, particularly when the benefit of choosing this type of account includes a higher interest rate. Furthermore, the bank may charge a monthly or annual fee for the privilege of owning this type of account. While fees and high minimum deposits are common, many banks offer money market accounts for free. Shop around and read the fine print before you commit.

Checks

Banks often offer check-writing privileges for money market accounts. Some do and some don’t. Money market accounts are deposit accounts, which means customers may make only six withdrawals per month as described above even if the bank provides a checkbook. Banks differ in how they penalize customers who exceed six withdrawals per month. In most cases, there is a fee for each withdrawal over the limit. Some banks, like ING Direct, threaten to close your account if you exceed the limit. While banks offer checks for money market accounts, some could, in theory, offer checks for savings accounts if they desired. Most do not.

You don’t even need an official document from the bank (or a mail-order check designer) to draw a check on an account — any piece of paper with your account number, your bank’s name and routing number, the amount, the name of recipient, and your signature will do. You may not even need to include your account number and bank’s routing number in some cases. It might be difficult to find someone to accept a check written with a felt-tip pen on a cocktail napkin without a hassle, but courts have ruled in the past that a hand-written document intended to function as a check is considered a legal form of payment. Thanks to the Check 21 Act, paper checks are even less a part of the payment process than they were throughout the twentieth century.

FDIC insurance

Money market accounts and savings accounts are FDIC insured. FDIC insurance doesn’t come automatically, but it is available for all types of deposit accounts held at banks located within the United States. This includes savings accounts and money market accounts. More misinformation online states that money market accounts are riskier and could “break the buck” — drop in value. This is true for money market funds or money market mutual funds, not money market accounts or money market deposit accounts. Money market accounts can be insured by the FDIC just like savings accounts and certificates of deposit. Always check the bank’s website to confirm that the bank is covered by FDIC, and if you are unsure, search for the bank using FDIC’s own Bank Find tool.

If the institution offering savings accounts or money market accounts is a credit union rather than a bank, the insurance comes from the National Credit Union Administration (NCUA). This coverage is effectively the same as FDIC insurance.

Money market funds: not savings accounts and not money market accounts

Money market funds — some institutions go so far as to confusingly call these “money market fund accounts” — are not FDIC or NCUA insured. The money market fund product is often offered by both banks and brokerages. Banks use the customers’ money to invest in low-risk securities, like government or municipal bonds with short maturities. This differs from both savings accounts and money market accounts, with which banks use deposits garnered to lend to other customers. With money market funds, the bank hopes to earn more from the bonds than it pays out to investors. A money market fund is an investment vehicle, not a form of savings, though it is almost as safe as an insured deposit account. There was concern a few years ago during the economic crisis that money market funds would break the buck, but for the most part, investors were safe even during the worst financial crisis of the past few generations.

Investors in money market funds are subject to a management expense ratio and possibly fees that reduce the net return.

The differences between savings accounts and money market accounts are negligible, and most are due to differences created by banks, not inherent in the products overall. Regardless of the name a bank gives its savings products, read the terms of conditions to determine how you may use the account, understand any fees they may charge you, and be aware of the penalties for not abiding by the terms.

Photo: frankh
Federal Reserve, Straight Dope,

The original version of this article, The Difference Between Savings Accounts and Money Market Accounts, is copyrighted by Consumerism Commentary.

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Anyone who is accustomed to being able to walk into the local bank branch, access accounts through a teller, and discuss banking options with an account manager on-site might still have reservations about moving money to an online-only bank. The benefits are big. Usually, online-only banks offer higher interest rates on savings and certificate of deposit accounts, and that makes the change worthwhile for most customers.

It’s common to hesitate. A bank with no physical branches seems more ethereal, as if it’s not a thing, but an idea of a thing. Does a bank you can’t visit exist in the real world? Are the customers identified by hacker-like handles and does the bank operate in a fictional world like Second Life? Will the company just disappear one day, taking advantage of the fact that closing down wouldn’t entail shuttering storefronts? Many customers simply have serious doubts about the legitimacy of a company that can’t be found by driving any number of miles.

Today, Jesus T. wrote into Consumerism Commentary with his concern:

I would really like to transfer my savings from Chase Bank to Ally Bank. At Chase I am not earning any interest. I’m just very wary because Ally is an online bank only. I don’t want to lose the money I have worked so hard to save. I was thining of opening a CD account with Ally. Any suggestions to put my mind at ease about to Ally Bank?

Online banks, as long as you’re dealing with a reputable institution, are just as safe as traditional brick-and-mortar banks. Here are some points about Ally Bank and online banking in general that could help put your mind at ease.

• Ally is currently one of the strongest online banks right now. The announcement may have been more of a marketing move than anything else, but Ally is a potential buyer for ING Direct. For more on this bank, see my Ally Bank review.
• Your deposits at Ally Bank, just like deposits at any other legitimate bank in the United States, are protected by FDIC insurance. Even if the bank does have a problem in the future and is acquired or goes out of business, you will be able to access your money. The likelihood of this happening is low. If you’re ever unsure about whether a bank is covered by FDIC, search for them on Bank Find, the FDIC’s database interface.
• Online banks without local branches have lower overhead costs, so they are able to pass the savings onto the customer in the form of higher interest rates.
• Banks that sprung up operating online only were so successful with customers that brick-and-mortar banks copied the business plan. For example, Emigrant Bank, a tiny bank in New York, gathered a wider audience when the company created Emigrant Direct and was a head-to-head competitor with ING Direct for several years.
• Banking online with a legitimate institution is secure. Your information is encrypted when it is sent to and from a bank.

Every time you get in your car and drive to the bank, in some respect, you are putting your life at risk. When banking online, all you have to worry about is lightning.

The original version of this article, Are Online Banks Safe?, is copyrighted by Consumerism Commentary.

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Update: Capital One has purchased ING Direct.

A little less than eighteen months ago, I mentioned that ING Direct was scheduled to be sold off. The online bank’s parent company, ING Group, received taxpayer assistance. The plan is for ING Group to sell ING Direct USA to pay back the European Commission.

The New York Post reported today that Ally Bank is in talks to buy ING Direct USA, its major online savings account competitor, to expand its portfolio of deposits and offset Ally Financial’s portfolio of troubled assets. I’m a customer of both banks. Both are strong marketers; customers in the United States are familiar with ING’s orange ball and Ally’s amusing commercials.

What this sale might mean for customers

I’ve dealt with customer service with both banks and I have never felt frustrated or confused. I have never had a problem with my accounts at either bank, but I have used my accounts at ING Direct much more extensively than my accounts at Ally Bank. Both banks continue to offer very good interest rates for savings, though ING Direct is no longer at the top of this list. The loss of a major competitor means that we could see increased costs of doing business — possibly new fees — and less favorable interest rates for customers. I’d like to think that there is enough competition among high-yield savings accounts to keep these changes to a minimum, but whenever the market combines the top two competitors in an industry, customers need to consider their options.

Ally has worked hard with branding and marketing to disassociate itself with its troubled past parents, GMAC and General Motors. Ally Bank has, in the past, angered the American Banking Association by offering savings interest rates that were too high. The ABA sent a letter to Ally requesting the bank to lower rates so other banks could compete. Brick and mortar banks had to stop posting their interest rates online because their rates could not match what was being offered by low-overhead, online-only banks.

ING Direct has spent many years turning its customers into loyal fans. From the consumer’s perspective, being a fan of a company is dangerous because it can lead to ignoring flaws. Many customers who joined ING Direct years ago due to the bank’s high interest rates have stuck with the bank because they like the service and it would be inconvenient to switch. These are legitimate reasons to stay with a bank, but when it comes to financial decisions, customers can’t ignore the effect it has on a wallet. For someone who has enough money in the bank to earn $50 in interest a year, it might not make sense to switch to a new bank to earn $10 more dollars that year, but interest compounds over time, and the effect a higher interest rate has on a lifetime of savings can be substantial.

Rates are, of course, only one factor in choosing a savings account. Both Ally Bank and ING Direct have offered good to excellent interest rates and great customer service so far. At this point, with Ally Bank’s troubled heritage in the past, it’s safe to say that there is a possibility for good synergy as a result of this sale. But even the simplest acquisitions could end up hurting the consumer.

As of today, there is no definite declaration that Ally Bank will purchase ING Direct. The announcement is only that the two banks are in talks, and these types of announcements often exist only to gauge public (and particularly investor) reaction and sentiment. I think the new online bank formed with the deposits from Ally Bank and ING Direct would not qualify for “too big to fail” status, but the combined bank would be the leading online savings account in terms of volume of deposit accounts.

What do you think of this hypothetical merger? If you’re an ING Direct customer, would you change banks based on the purchase alone? Do you think Ally Bank will be able to handle the merger of the deposits? Do you think it’s weird that ING Direct, a bank with Dutch heritage, would be partly owned by General Motors, a domestic car manufacturer?

New York Post

The original version of this article, Ally Bank in Talks to Buy ING Direct, is copyrighted by Consumerism Commentary.

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Xenocid is having a frustrating experience with US Bank. A customer service representative moved his account into a new tier, offering a free account with cash back rewards when using his debit card. Xenocid promptly received a letter saying they would start charging $25 per month for this free account.

Here’s his side of the story.

However lately when I was depositing some checks the cashier asked me why I have the simplest checking account without any extra perks? After all I had some money there and got a sizable monthly direct deposit and had a credit card with them, so I definitely qualified for their premium offerings…

Few days later I spoke with a personal banker and he happily converted my account to their premium offering, citing a cash back as one of their benefits… He looked at his screen and said that in fact I only receive cash back on my credit card transactions… It doesn’t work with my debit card at all. I have to use credit card. I said that this is not what he told me previously when he explained perks and benefits of this premium checking account. I even pointed to the booklet that HE showed me, which clearly stated that they have cash back for debit cards. He said that the booklet is old and they canceled cash back program for debit cards two years ago. I took my debit card and pointed to the “Cash Rewards” phrase printed right on its plastic surface asking does it mean “false advertising?” He parried saying that my card is old. I told him that my card was just reissued 2 weeks ago…

Two weeks later, I’ve got a letter from US Bank notifying me that I’m in fact not eligible for the “free” premium checking account and they are going to start charging me something like $25 a month for the privilege of being their client. Boy, I was mad!

The bank offered Xenocid free premium checking which included cash back rewards for using a debit card, then told him the cash back only applies to credit card usage, then told him he doesn’t qualify for the “free” aspects of the free premium checking account. This is the point where I’d move my money to another institution.

Banks and morons, part 1: US Bank

The original version of this article, US Bank Offers Free Rewards Account, Then Cancels Offer, is copyrighted by Consumerism Commentary.

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I’m aware that many regular Consumerism Commentary readers already have ING Direct savings accounts. Those who have been reading this website since the beginning know that I’m a fan. Their interest rates may not be at the top of the chart these days, and there is some concern that ING Direct’s parent company plans to sell off the bank’s American operations by 2013. Nevertheless, ING Direct is a solid choice for savings.

ING Direct’s paperless checking account, called Electric Orange, is an integral part of the bank’s services. I’ve been a customer of this type of account for almost as long as it has been offered. Although many readers have savings accounts at ING Direct, fewer have the associated Electric Orange account.

This is my main account for personal electronic transactions, including bill payments. Savings accounts are limited by regulators to only six withdrawals per statement cycle, so having a transactional account at the same bank allows me to easily and immediately transfer money from the account that receives payments to savings, while also allowing me to pay my bills.

ING Direct doesn’t send you a book of checks. If you need to send a paper check, you can do so my viewing your account online and entering the payee and address. The bank will send a paper check directly, and for $20 you can choose to send the check overnight for faster delivery. Otherwise, the process of sending payments are free. Customers will receive a debit card that can be used for purchases and in many ATMs throughout the country for free.

Be aware that if you are interested in opening an Electric Orange account, ING Direct will subject you to a credit check. For overdraft protection, rather than using funds from a linked savings account, ING Direct extends a small line of credit. You can still open the account if you don’t qualify for a line of credit, but you won’t have the option of overdraft protection.

To encourage new customers, ING Direct is now offering a $50 bonus for signing up for an Electric Orange checking account. In order to qualify, open a new account and use the debit card for a combination of signature-based (not PIN-based) purchases and Person2Person payments three times within 45 days of opening the account. This $50 bonus is better than the commonly-offered ING Direct referrals, but it’s only available for a limited time.

The original version of this article, ING Direct Electric Orange Checking $50 Bonus, is copyrighted by Consumerism Commentary.

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At Consumerism Commentary, I’ve been writing about putting money into high-yield savings accounts for as long as this website has been around. Just as people started getting the message, banks pulled the rug out from under their customers. The Federal Reserve made cash easy and cheap from banks to access, and since the low federal rates were announced, there has been no incentive for banks to pay those high yields.

High yield savings and money market accounts, alternatives to the typical savings accounts offered by primarily brick-and-mortar banks, helped savers keep their money safe while beating the average rate of inflation. You could put your money in the bank and not have to worry about your cash losing value over time or losing your deposit when a bank closes, thanks to FDIC protection.

More people than ever may be saving money. The recession coincided with a “new era of thrift,” with reports in the media about the savings rate — the amount of income saved by Americans, not the interest rate — at long-time highs. This good news came at a time when the reward for doing so wasn’t much of a benefit. To spur the economy, the Federal Reserve cut the interest rate on the money it loaned to banks, and the banks in turn didn’t seek money from depositors like you and me. The low interest rates reflect the fact that banks don’t need to attract depositors when the Federal Reserve is a better source of low-cost cash.

While high-yield savings once helped savers maintain their purchasing power and liquidity at the same time, that’s not the case today. Even with a lower-than-average official rate of inflation, the real costs of living that people experience continues to rise. The money in high-yield savings accounts isn’t going to keep pace with increasing costs.

Once the public feels more confident in other investments — and it could be years before this occurs — people will take money out of savings. When money is invested in businesses, the economy will be seen as improving enough for the government to raise the federal funds rate. Banks will want to attract more depositors and savings interest rates will increase. This may be a simplified view of saving economics, but the result is what is expected: fewer people need to be saving in order for interest rates to make saving worthwhile.

It’s easy to say that keeping a portion of your wealth liquid in a saving account is a good idea even though there’s a bigger chance of losing purchasing power, and it is true. It’s becoming a more difficult argument, though, as people are tired of supposed high yields that for the most part have a maximum of 1.5% APY.

Any alternative to high-yield savings accounts are compromises, usually in the form of risk or liquidity.

• Certificates of deposit don’t offer rates much better than savings accounts today, and when they do, they require locking your money away.
• A common choice is investing in municipal bonds, generally considered safer, but even Vanguard is warning investors to be wary when investing in bonds. “… Yields aren’t likely to go significantly lower, and at some point when the economy does strengthen, they’re likely to push higher. When that happens, you’ll actually have principal depreciation that will at least partially, and perhaps entirely, offset some of your yield.”
• Peer-to-peer lending is touted online as an alternative to high-yield savings accounts but that is a bad comparison. There is a significant amount of risk when you lend money to an individual who may not be fully vetted, and you don’t have access to your money until it gets paid back.

Don’t forget the benefits of savings accounts, even if the interest rate isn’t high:

• You have almost immediate access to all of your money at any time.
• Your deposits are fully insured up to the FDIC limit. No one has ever lost any money in a savings account, even when their bank has failed.
• Savings accounts simplify better financial habits like automatic transfers from checking or paycheck accounts to an account not used for spending.

Saving is a dilemma because when the practice is adopted, particularly in an economic downturn when business lending and investment slows, the interest rates are lower. As the economy improves and more money is invested in businesses, interest rates are higher but fewer people are interested in leaving money in a savings account. Those who want to use a savings account regardless of the economy are subject to the interest rates defined by the whim of the economy. When interest rates are higher, people will save less money.

The original version of this article, The Saver’s Dilemma, is copyrighted by Consumerism Commentary.

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At the end of March, Fifth Third Bank changed its procedure for dealing with overdraft fees. When a customer has many debits (withdrawals) posting on the same day, and they are not real-time debits, banks often start with the largest amount. Ordering the debits from largest to smallest ensures that customers who do not have the funds to pay for the largest withdrawal are hit with multiple overdraft fees in the same day.

Banks often argue that they want to start with the largest debit because these often signify more important payments, like mortgages and rent checks. Starting with the largest debit gives the most important debits a chance of clearing first. Customers who are aware of this practice are also aware that the reason the banks have chosen this approach has little to do with customer service; this is the way to collect more fees from customers.

A class-action lawsuit is changing this. Fifth Third Bank changed their procedure a few months ago, and now Citi has announced that it will do the same beginning July 25. At that point, checks will be paid from the customers’ accounts ordered by size from smallest to largest.

The key to avoiding this altogether is maintaining a register of the checks you write. Sometimes your deposits take time to clear, and you could be hit with an overdraft fee even if you’ve deposited enough to cover your check. Don’t send checks out without verifying you have the funds available to cover it. Then, short of a bank error or someone using your bank account without your permission, overdraft fees will be in your past, regardless of the bank’s procedure for applying them. The old policy may be a good way to trap customers into paying a string of fees, but it’s easily avoided if you don’t write checks without money in the bank.

The original version of this article, Citibank Changes Overdraft Procedure: Fewer Fees, is copyrighted by Consumerism Commentary.

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On May 16, ING Direct will change the rate is uses to determine the cost of overdrawing the Electric Orange checking account.

ING Direct’s overdraft system is a little like Passover, where we ask how this bank is different than all other banks. Rather than charging an overdraft fee if you send an electronic check or other electronic payment that exceeds your balance like most other banks, ING Direct extends a small line of credit and charges you interest for its use. The amount of interest is based on what ING Direct calculates as a prime rate plus a margin.

That margin has been, and will continue to be until May 16, a rate of 4%. Added to the ING Direct Prime rate, the total interest charged for using the line of credit feature of Electric Orange has been 7.25%. That margin rate will increase to 8% on May 16, and when added to the updated ING Direct Prime rate, will result in a total interest rate of 11.25%. ING Direct’s terms allow for this rate to be variable. In fact, ING Direct can increase the margin up to 12% without changing the terms for all customers. I expect, since that condition is currently allowed, for ING Direct to follow through and increase that margin some time in the future. Meanwhile, current customers of the Electric Orange checking account who use the line of credit should be aware that they will be charged more beginning May 16. As of 10.21.11 the ING Direct savings rate is 0.90% APY and the checking rates are 0.20% – 1.10% APY.

Even with this increase, this line of credit is a better deal than most overdraft protection terms offered by other banks. Rather than a fee of $25 to $35 per overdraft, you could be paying less than a dollar if your use of ING Direct’s line of credit is temporary.

For those who would rather have their transactions rejected than dip into a line of credit, the bank allows customers to cancel their overdraft coverage by calling 1-888-464-0727.

Do you use ING Direct’s line of credit? I used it once, when a deposit I scheduled was unavailable before a scheduled payment hit my Electric Orange account. I owed the bank just pennies for the protection, but I try to be more careful when scheduling my deposits and withdrawals.

The original version of this article, ING Direct Electric Orange Raising Credit and Margin Rates, is copyrighted by Consumerism Commentary.

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Chase Bank can’t seem to stay out of the news. Last week, I mentioned that the bank was considering limiting debit card transactions to $50 or $100 as a protest against the industry’s regulation of interchange (swipe) fees. Today, there is news that the bank has increased the ATM fee for non-customers to $5 in Illinois and $4 in Texas.

This is a trial; while they likely won’t roll back these increases without major protest, this will serve as a test for increased ATM fees nationwide. Complaints about this increased fee will go nowhere. From the bank’s point of view, it’s easy to avoid this fee: become a Chase customer. The bank’s own customers can access ATMs for free.

As Chase’s fee increase is found to be successful, as it undoubtedly will be, other banks will follow suit. Some of the more customer-friendly banking institutions like online banks and credit unions are willing to reimburse their own customers for fees they pay to use other bank’s ATMs. But as fees increase, so does the cost to these smaller, friendlier banks. They may be less willing to reimburse these fees in the future.

Being a banking customer with just a basic checking and savings account, something that has been free or nearly so, is becoming increasingly expensive. Today, we already have a portion of the population that prefers to avoid banks, either because they don’t have money (that is, they live paycheck-to-paycheck), they can’t afford bank fees, or they won’t be approved for an account, according to The Impact of Banking and Fringe Banking Regulation on the Number of Unbanked Americans, a Yale University study. This “unbanked” population is served by check cashing facilities, where customers may not need to pay fees to have their checks cashed.

Increasing the cost of traditional banking, in addition to the recent trend of traditional bank branches abandoning poor communities, will continue to broaden the divide between low-income and moderate-income households.

Yale University [pdf], World Bank [pdf]

The original version of this article, Chase Increasing ATM Fee to $5, is copyrighted by Consumerism Commentary.

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The FDIC is progressing in its development of new rules that will apply to financial firms — not just banks — deemed “too big to fail.” The rules would establish procedures for unwinding companies whose failure would pose a threat to the economy, when that failure appears to be imminent. The government organization approved a set of proposed rules and is now looking for comments from the public. A 91-page PDF explains the current proposed rules. Although the comments have not been enabled yet, you will soon be able to send messages to the FDIC on this proposal here.

Congress has already given more authority to the FDIC to unwind large financial institutions as they have been doing for failing banks. According to the director of the FDIC, this will shift the responsibility of keeping the country’s economic system stable from taxpayers — all of us who bailed out the financial industry through our tax dollars — to shareholders of companies deemed “too big to fail.”

Just like banks pay fees to FDIC now, to ensure coverage if their institutions fail, companies covered in these new procedures will likely need to pay for the protection. We’ve seen bank products increasing cost to the consumer, as companies pass higher expenses down the line, and I expect the same will happen to a broader mix of financial companies. Years ago, regulation forced companies too large to break up into smaller companies, but the government is taking a different approach today. Through this plan, financial companies might find it less profitable to be considered in the “too big to fail” category.

Doing business with a “too big to fail” company most likely means paying more for services you can find elsewhere. The selection of available services may be broad and the services might be convenient, but just like the CoinStar issue, you’ll need to determine whether the convenience is worth the extra cost.

Large financial institutions have also been able to attract the best talent, thanks to stratospheric compensation packages. The proposed rules include a clawback provision; if a company fails and regulators determine that certain executives did not perform their job well enough or could have prevented the collapse, they might decide those responsible executives must return some of their compensation. If this rule survives the final implementation of the procedures, larger firms may have a more difficult time attracting talent. The FDIC is in the process of suing to recover compensation from bank executives responsible for the recent economic collapse, but according to the Washington Post, these suits are moving slower than they should, particularly when compared to the situation after the Savings and Loan crisis in the 1980s and early 1990s.

I don’t know whether it’s possible to fully avoid financial companies considered “too big to fail.” With the knowledge that these regulations are coming, we can guess how it may reshape the financial industry, from fees to company sizes.

The original version of this article, Moving Away From Banks and Other Companies “Too Big to Fail”, is copyrighted by Consumerism Commentary.

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CNN Money is breaking this story right now. According to a company insider, Chase Bank is considering limiting debit card transactions at either $50 or $100. Any purchase you plan to make with your debit card that exceeds the amount — for example, your weekly groceries at the super market — would be declined if this plan were to go into effect.

The bank claims the reason for this is the state of the industry after the regulations from the Credit CARD Act took effect, limiting the high cost of merchant transactions. Swipe fees or interchange fees, small but cumulative costs that retailers pay for every debit card transaction, have previously earned significant revenue for the banks. Chase claims it stands to “lose” $1 billion a year from these fees, which pay for the infrastructure that allows the transactions to be processed.

Of course, if this technique is implemented and successful, other large banks will follow suit.

This morning, I wrote an article about the benefits and drawbacks of credit unions, and as large national banks continue to develop policies and fees that are undesirable to customers and more desirable to shareholders whose only concern is the stock price, it makes more sense to switch.

I don’t use debit cards because I prefer the extra protection and rewards of using a credit card for my spending. Debit card is very popular, however, and a limit like this will only frustrate customers.

Is this a good decision for Chase Bank? Should debit card transactions be limited so a bank is less exposed to the chance to not earn an extra $1 billion in revenue?

CNN Money

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I’m a member of AAA, paying once a year for benefits like roadside service, travel assistance, and in some cases, discounts. AAA members can now earn a higher interest rate at Discover Bank than non-members. Currently, the rate for AAA members is 5 basis points (0.05 percentage points) higher than the standard Discover Bank online savings interest rate.

A difference of 0.05 in the annual percentage yield (APY) isn’t exactly what I would call significant. It is a benefit, though, and AAA members who are looking to open a high yield savings account should know about it before they shop around. For AAA members, like me, who already have a Discover Bank Online Savings Account without the higher rate, the benefit is not available. I cannot convert my Discover Bank account to the higher-rate account available to AAA members. This is only available for AAA members who open a new account.

If you find this AAA benefit worthwhile, you must open a new account using this AAA link and transfer funds from your old Discover Bank account to the new one. For me, this is not worth the effort. For a typical balance of $1,000, the additional 0.05 percentage points amount to $0.50 over the course of a year. The yearly cost of basic AAA membership in my area is $65.50. I would need a balance of $131,000 in my Discover Bank account to make this jump worthwhile, assuming I was not taking advantage of any other AAA benefits.

Potential Discover Bank customers should read this review before opening an account.

The original version of this article, AAA Members Earn More Interest at Discover Bank, is copyrighted by Consumerism Commentary.

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By far, the most requested review on Consumerism Commentary that I have yet to write is for the American Express Personal Savings Account. American Express offers one of the highest interest rates available with this savings account, making it very attractive from the surface. Once you own an account, how does it hold up against ING Direct, Discover Bank, Zions Bank, and the rest of the online savings account portfolio? I opened an account to find out.

First of all, if the bulk of your savings is earning less than 0.5% APY at the local branch of your national brick and mortar bank, it’s time to change. There is usually no excuse for settling for interest rates that low when it’s simple and easy to double or triple the interest you receive in your account every month. Granted, this might not add up to a lot of money, but high yield savings accounts help to ensure your cash will at least hold its value when up against inflation. Your money loses value over time when setting in a low-interest or no-interest account.

Application process

After visiting the American Express website to apply for a new savings account, I was immediately impressed with the way the company outlined and prepared me for the application process. You can zoom in on the overview screen by clicking on the image included here.

The first step of the application process, after gathering the materials you need such as your checkbook, driver’s license, and Social Security number, is entering your personal information. If you have an American Express savings account currently, you can easily link your current account to the application.

As I do not have a savings account with AmEx, I entered my personal information. Following this, I entered the amount I intend to deposit from my external bank account. There is no minimum deposit, and I decided to start with $500. While there is an option to send a check, I chose to pull the funds from an existing bank account via an electronic transfer (ACH). After confirming my personal information and deposit amount, I agreed to the standard terms of service and entered my external banking information (routing number and account number). I chose to link this account to my personal Wells Fargo brick and mortar checking account.

The strength of American Express, in this first impression, is the bank’s professional appearance. Each step through this process, the bank’s website was very helpful in letting me know what to expect and when to expect it. When I confirmed my external banking information, it was clear that I would need to verify two test deposits into my newly-linked Wells Fargo account. I immediately received an email with instructions for verifying the test deposits, and I received a welcome kit in the mail in [three] days. It took three days, from Friday to Monday, for the deposits to hit my Wells Fargo account.

Verifying deposits

After the weekend, I checked my Wells Fargo account and saw two small test deposits from American Express. Once again, AmEx outlined the process clearly, as you can see from the image here. To finalize the link between my new American Express account and my existing checking account at Wells Fargo, the bank required me to enter my email address, a verification code that was sent to me via email, and the amounts of the two test deposits.

After the confirmation, American Express allowed me to create an online user identity for viewing statements and otherwise operating my new bank account. User names for the American Express Personal Savings Account require at least two numerals, so I was unfortunately forced to use a non-standard user ID. For the first time, I chose to receive online statements in lieu of paper statements. This is a trend I want to continue; I receive too much paper in the mail, and electronic states — when chosen without paper statements — will help reduce my clutter, as well as on a small scale, help the environment.

Using the account

As of today, I am waiting for my initial deposit to reach my new American Express savings account. Although there is not much I can do, I am able to look at all features contained in the website and get a feel for its operation. My first order of business was customizing the account names. I also looked at the options for downloading activity into applications like Quicken. American Express supports Quicken through the “Web Connect” service as well as Microsoft Money. There are options for QIF and CSV downloads, too.

There are not many different things you can do with this savings account. Although the bank recently lowered the interest rate offered on these accounts, the rates are still comparatively high. The deposits at American Express Bank are fully insured by FDIC, which means there is no risk in depositing your money up to the FDIC maximum, currently $250,000 for an individual savings account. American Express does not currently offer a checking, bill-payment, or other “transactional” account, so this type of service is fine for letting the cash you need to sit and grow, losing as little value to inflation as possible in a savings account.

Bank data

Click here to open an American Express Personal Savings Account.

The original version of this article, American Express Personal Savings Review, is copyrighted by Consumerism Commentary.

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Some good news has come out of the class action lawsuits dealing with overdraft fees. The lawsuit against Fifth Third Bank still has one more hurdle to overcome, but most likely, customers who have paid overdraft fees for debit card transactions may see some or all of these fees refunded.

Also as a result of the law suit, Fifth Third Bank will be changing the way it processes customers’ debits and credits. Currently, debits or withdrawals are posted to the account from largest to smallest, like many other banks. The banks that do this often say that the reason is to allow the large, more important debits like mortgage payments and rent checks to process first, assuming smaller amounts are less important and could therefore bounce or draw an overdraft fee. The more likely scenario is that this large payment will cause the first overdraft and associated fee, and then every subsequent, smaller debit will cause additional fees.

Reader Tom S. wrote in to say that after inquiring, Fifth Third notified him that this process will change as of March 25, 2011.

First: All deposits (including funds available from pending deposits) made prior to the end-of-day cutoff.

Next: All pending and posted date/time stamped debits will be deducted from the customer’s balance. Date/time stamp debits include all:

• Debit card transactions (both PIN and POS)
• ATM withdrawals
• Transfer from the account initiated via Internet banking or an ACE transfer

Finally: All other batch debits will process next in highest to lowest dollar order. These are transactions the customer initiated that are processed once per business day such as:

• Checks
• ACH debits
• Bill Payments
• Account Fees

This is great news. This is a process that makes sense.

Keep in mind that this doesn’t mean you can deposit a check on Monday and expect the full amount to be available first thing on Tuesday. Local checks are often processed faster than non-local checks. There are a few differing definitions of local checks, but for the most part, it means that the bank branch that issued is located in the same processing region as the bank of first deposit. Either way, there may be a delay of a day, five days, or more than ten days until the bank makes those funds available for you.

The original version of this article, Fifth Third Bank Changes Debit Procedure, is copyrighted by Consumerism Commentary.

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Whether banks are still dealing with the effects of the 2008 financial crisis, merging with other institutions, or taking advantage of increased automation opportunities, brick and mortar bank branches are closing more frequently than new locations are opening. According to the FDIC, 2010 was the first year in fifteen years that the balance tipped in favor of branch closings.

Most of these closings are taking place in poor communities. With new regulations, it’s more difficult for banks to make money on overdraft fees, and it’s possible that banks in poor communities rely on this type of revenue more than others. Banks are being replaced by payday loan storefronts and check cashing businesses, services that cater to the needs of poor communities, but are more predatory, more expensive, and more financially damaging to consumers and the community in the long run.

Banks face a dilemma. How can they cater to low-income communities while remaining profitable? Most likely more relevant than overdraft fees, in tough financial times, banks that lend money for homes in poor communities may be more likely to need to resort to foreclosure, though a foreclosure heat map from May 2010 shows that foreclosures occur more frequently in areas that have seen bubble-like real estate growth, such as California, Nevada, and Florida.

I’m not sure what the solution should be. Poor communities need financial services. Low-income households need choices other than what payday lenders and check cashing establishments provide. While families can be happy regardless of financial condition, banks should be helping to find innovative ways to increase financial security among the poorest communities.

New York Times

The original version of this article, Bank Branches Abandon Poor Communities, is copyrighted by Consumerism Commentary.

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The economic environment is still not great for savers. Those who were smart or financially stable enough to have emergency funds and other savings accounts have been rewarded with low interest rates for the past few years. Take a look at these historical interest rates to see how low we’ve come. The good news is that inflation is low, as well, but that doesn’t stop expenses from going up every year, with our savings unable to keep up with the changes.

Recently, a friend of mine asked for my advice. I suppose he reads Consumerism Commentary occasionally and thought that my opinion might help, or I’d be able to uncover a magical savings account. He wrote:

Back in 2008, probably on your recommendation, I opened a Business Savings Account with ING Direct because, at the time, the interest rate was 4%. As of March of last year, it has dropped to a dismal 0.95% APY and now I’ve got $26,000 basically doing nothing. Any suggestions for what to do with it? I’d like to keep it somewhat liquid as it is, technically, emergency backup money. But it doesn’t need to be too liquid because I haven’t withdrawn any money from it in two years. First Choice Bank, who I just signed up with for my line of credit, has a 1.25% APY money market account. I haven’t asked him about anything else, yet.

The first question is whether a savings account or something equally as liquid is appropriate for his situation. Emergency funds should mostly consist of money in savings accounts, but the credit line could help in emergency situations as well. Even though he hasn’t withdrawn money from the emergency fund for his business in the past two years, there is still the possibility of an emergency in the future, particularly if his business is already having some financial difficulty. A good portion of business expenses should remain liquid to be able to cover those times when clients may not be spending as freely with his company as they used to.

Money market accounts are, from a regulatory standpoint, savings accounts with a fancier name. They may offer some more features, like check access, but non-ATM, non-teller withdrawals are limited to six a month, just like savings accounts. A business certificate of deposit might provide a slightly better rate in return for the slight decrease in liquidity; most of the time, you have to lose some of that interest when you withdraw your funds from a CD before its maturity date, but that makes this a good choice to squeeze a little more out of an emergency fund, money there’s a good chance you won’t withdraw anyway.

I looked into business accounts interest rates. Most of the big banks have a variety of business products, and they usually don’t list rates on their websites. I called around to the major national banks to ask about their business savings account rates, and they were all well below ING Direct’s rate. Even CD rates were lower. I walked into Wells Fargo (formerly Wachovia), where I hold some of my own business banking accounts, to hear what they had to offer. The representative mentioned that this is the reason they don’t have current interest rates on their website; the low rates would scare customers away.

My friend is on the right path. Small banks and credit unions will be able to offer much more favorable rates on savings products. His best bet is to call the brick and mortar banks local to his business and ask around for the best rates in business checking and savings accounts.

My banking set up includes the basic business checking and money market account at Wells Fargo, as I mentioned, plus a business savings account at ING Direct. The accounts at Wells Fargo are free as long as I maintain a minimum balance in the money market account, and the account at ING Direct is always free. When I opened the Wells Fargo business account a few years ago, they offered a promotional interest rate on par with ING’s standard rate, but that offer has long since vanished. I have nothing to complain about when it comes to either Wells Fargo or ING Direct, and I would recommend them, but in terms of interest rate, a small bank or credit union could offer better plans.

What are your suggestions for business banking products?

The original version of this article, My Business Bank Accounts: Checking and Savings, is copyrighted by Consumerism Commentary.

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Out of the eight “least-evil” banks, as ranked by a staff reporter for CNN Money, I am a customer of two. Everyone who makes financial transactions of a regular basis or handles money in any form should have a checking and savings account at a solid bank that doesn’t attempt to charge its customers exorbitant fees. Although free banking is slowly becoming extinct and there is a good chance that choices for free accounts will become more limited in the next few years, you can still find a good banking institution to work with now, even if that might be a credit union.

Here are CNN Money’s picks, with some of my thoughts.

1. Ally Bank. Last year, Kiplinger’s Personal Finance magazine declared Ally Bank as the the institution offering the best savings account. I’ve had accounts at this bank since May 2009, and I have not yet come across a problem. Ally was originally GMAC Bank, but the parent company, General Motors, undertook a major rebranding campaign that put Ally Bank in the spotlight. Open a High Yield Savings Account at Ally Bank.

2. ING Direct. There is nothing I can say about ING Direct that hasn’t been said. It is the gold standard of online savings banks. I’ve had accounts here for almost a decade, and my accounts include the Orange Savings Account, Electric Orange Checking with free bill-pay, and Business Savings. When I had a paycheck for direct deposit, the Electric Orange Checking served as the gateway to my savings. Now, most of my income is delivered directly to my business savings account at ING Direct.

I have limited experience with the remaining six accounts listed by CNN Money. If you have any thoughts on the evilness of these banks, let us know by writing about them in the comments below. For the rest of CNN Money’s picks, continue reading this article.

3. USAA. CNN likes USAA’s free checking account and notes that the account isn’t just for military families anymore. I’ve heard countless positive reviews from readers about USAA, I will likely join later this year to share a more in-depth review.

4. Capital One. I know Capital One mainly as a credit card issuer, but the parent company merged with North Fork Bank, taking over those branches in New Jersey and New York. Again, CNN Money points out the free checking account makes this bank worthwhile. The article warns that the bank charges a $2 fee for using other banks’ ATMs — when the bank that owns that ATM will also likely charge a fee. If you have a convenient branch, however, this might be a good option to consider.

5. Alliant Credit Union. In our upcoming podcast interview with Liz Weston, we discuss credit unions and their advantages over banks. Although this credit union is based in Illinois, anyone can join. There are plenty of fee-free ATMs that communicate with this account throughout the country. If you live in Illinois or are satisfied with the lack of a local branch, CNN recommends this credit union.

6. PNC. PNC has many branches in the area where I live, and many of my friends have accounts here. Like the others listed, PNC offers free checking. If you need to use another bank’s ATM with your PNC account, the bank will reimburse any fees you pay the ATM’s owner, as long as you maintain a minimum balance of $2,000 in your account. That might turn some customers away, but I wish this feature of ATM fee reimbursement were more popular.

7. The Incredible Bank. This is the first I’ve heard of this Internet-only bank. It offers a higher interest rate than most other online banks, but I am wary of banks that show up out of nowhere, offering a rate that other banks can’t touch, in order to attract a flood of customers. Every time I’ve seen this happen, the bank has, after a while, dropped its rates to a more reasonable level, and have usually become non-competitive with other, more established banks. Incredible Bank doesn’t really come out of nowhere; it is the online branch of River Valley Bank. It’s been common lately for traditional brick-and-mortar banks to develop online branches whose branding is significantly different than the parent company’s.

8. Charles Schwab Bank. If you open an investing account at Charles Schwab, you will also have access to a free checking account. This is an interest-bearing account linked to your brokerage account to make buying stocks and other investments easy. Like PNC, Schwab will reimburse the fees other banks charge you for using ATMs.

I have my favorite online banks. What are yours? Do you have any experiences with the above?

CNN Money
Evil photo: scragz

The original version of this article, CNN Money’s 8 Least-Evil Banks, is copyrighted by Consumerism Commentary.

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If you visit the Bank of China’s branches in New York or Los Angeles and bring two forms of identification and your cash, you have the opportunity to open a savings or money market account denominated in yuan (renminbi), the currency of China. The interest rate you’ll earn is low, but that would not be the main purpose of opening this account.

Holding an account in yuan will expose you to the booming Chinese economy without the risk of playing in the foreign exchange trading market. If China relaxes its hold on the value of its currency, chances are it will increase — perhaps gradually, perhaps quickly. Not only that, but the accounts at the New York branches of the Bank of China are FDIC insured, so you won’t lose your money if the bank fails. That doesn’t protect you from losing money if the value of the currency decreases.

Don’t look at this as a get-rich-quick scheme. It might make sense to hedge your net worth with foreign currency, particularly when the U.S. dollar is falling out of favor with the rest of the world. A reader emailed me earlier today to ask what I thought about this. At first it seemed risky, but the more I think about it, I think it may be a smart move to get started with holdings in yuan, without sacrificing too much of my liquid investments.

Here are some of the drawbacks.

• Opening the account is more work than what we’ve grown accustomed to. If you live in New York City or Los Angeles, you can get to the branch to open your account easily, but others will have to travel. Currently, there is no way to open an account online.
• A global war between nations, resulting from the shift of economic power, might put investors in a difficult situation. After World War I, many wealthy Americans invested in the rebuilding of the German economy. Following the money, this capital helped finance Germany’s leaders in World War II. As China becomes closer to being the nation with the most economic power globally, will the United States push back to maintain its position?
• China is accused of human rights violations and this leads many concerned Americans not to consider doing business or investing with the country. This is a difficult stance, since many of America’s favorite brands are entwined internationally, including relationships with Chinese businesses. Nevertheless, some may want to avoid doing more to actively help the Chinese economy.

Here is information on opening the savings account at the Bank of China. You can bring a minimum of $500 and exchange the cash for yuan at the bank. The bank will deposit the yuan. For a certificate of deposit, you’ll need at minimum the equivalent of $1,000. Would you consider opening a bank account based in yuan (RMB)?

The original version of this article, Open a Yuan Bank Account in New York or Los Angeles, is copyrighted by Consumerism Commentary.

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As of today, Zions Bank offers one of the highest interest rates among high-interest savings accounts. Is it worthwhile to move your money there to take advantage of this interest rate? Today’s interest rate environment is not the best for moving money from bank to bank in search of the highest rate, so the more appropriate question is whether Zions Bank is a good choice for someone who is not currently taking advantage of a high-yield savings account. If you do not have a high-yield savings account and the money you keep for short-term expenses like emergencies is earning only 0.25% APY or less, as many are, open a high-yield savings account anywhere and start giving your cash a fighting chance against inflation — if not at Zions Bank, anywhere.

I’ve gone through the process of opening a Zions Bank savings account. This article contains a review of my experiences.

About Zions Bank

Before opening an account with the bank, I performed cursory research to understand the company that would be holding my deposit. Deposits at Zions Bank are FDIC insured up to the federal maximum, and I wouldn’t even consider opening a savings account at a bank that did not offer this protection or the equivalent protection available at credit unions. Zions Bank is based in Utah and has been in business since 1873. The corporation was formed by Brigham Young as Zion’s Savings Bank and Trust Company and was the territory’s first banking institution. The Church of Latter-Day Saints was involved with the bank’s operations until 1960, following a merger with other Utah banking institutions. After a series of name changes, the bank’s parent corporation is now known as Zions Bancorporation.

Zions Bancorporation operates 130 Zions Bank branches in Utah and Idaho, though the investment company’s operations span the western United States. The parent company is traded on the NASDAQ stock exchange (ZION). Zions Bank has a two star rating in Bankrate’s “Safe & Sound” system.

Opening a new Zions Bank Online Savings Account

The first page of the savings account application asks for your personal information. As expected, Zions Bank asks for your Social Security number, as well as your mother’s maiden name which will be used for identity verification when communicating with the bank. For communications, Zions customer service is available from 7:00 am to 8:00 pm Mountain Time every day except Sunday.

After completing my personal application, Zions suggested I open the bank’s free checking account, but I declined. Several additional features were offered. I declined the ATM account access option as well as the Visa credit card. I live in New Jersey, so there are no bank-owned ATMs local to me. I have no need for another credit card at this time.

Click the image to the right to zoom in.

Funding the Zions Bank Online Savings Account

New customers have three options for funding the initial deposit, which carries a minimum of $100. The application offers electronic funds transfer (EFT), check, and wire. For selecting check, the opening process would take longer, requiring you to send a check through the mail and waiting for the bank to receive it. The EFT process is the quickest, but it requires finding your bank routing number and account numbers. If you’re funding the account from an existing checking account, you can easily find this information on your checks.

I will be funding my new Zions savings account with an electronic transfer from ING Direct, and although I have the bank’s routing number memorized from the many times I’ve used it to fund new bank accounts, I always verify the number by logging into my account at that bank.

USA PATRIOT Act and Government Regulations

You may have noticed that opening a bank account in the past few years has involved more scrutiny for the applicant. To fight against terrorism — or against the funding of terrorism — banks are required to ask more questions about your purposes for opening a bank account. You will need to let Zions Bank know if you are a foreign government official, whether you plan to make deposits of physical cash (not electronic transfers), whether you plan to send or receive more than three wire transfers, if you plan to keep more than $1 million on deposit at the bank, and whether you are a business owner. You will also need to provide your occupation or industry and the name of your employer.

Like all savings accounts, Zions Bank will limit your withdrawals by internet, ACH, or telephone to six per thirty-day cycle. This is a federal regulation for savings accounts, but each bank can choose how they want to handle violations of this rule. Zions will charge a customer $15 per withdrawal over the limit of six in each statement period. ATM withdrawals are unlimited, however. There are no other fees for the Zions Bank Online Savings Account.

Once you provide all the information requested and agree to electronic disclosures, terms, and fees, the application is complete. Zions Bank will process the application within two business days, but your confirmation includes your new account number. provides instructions for accessing your new account right away, but you won’t be able to access your account until you receive confirmation by email. Your login name is the same as the email address you provided during the application process, and your default password is the first two letters of your mother’s maiden name followed the month and year of your birth.

Accessing your new Zions Bank Savings Account

Twenty-six hours after completing my application, I received my second email from Zions Bank to notify me that I could now access my account online. Using my email address and the password described above, I logged into ZionsBank.com. Note that while the password is case sensitive, and though I entered my mother’s maiden name capitalized properly, my password worked only when entering the two letters in lowercase. After entering your default password, you will have the opportunity to select a security image and phrase, now a common practice when banking online, and three challenge questions that will be used to verify your identity and register your computer the first time you log in and any time you view your account from a new computer.

After assigning answers to your chosen questions, you will be brought back to the main Zions Bank home page, and you can log in again. Once you are logged in and choose to register the computer, you will have the option of turning off paper statements and will see your account listed. If you log in right away, you will probably be viewing your account before your initial deposit makes its way to the bank. Zions Bank will present you first with your balance screen, which shows you the balances across all the accounts you hold at Zions Bank. You can click on the name of any of your accounts to see that account’s activity. In my case, there was still nothing to see.

The process of opening my account at Zions Bank has been flawless.

Bank data

The original version of this article, Zions Bank Online Savings Account Review, is copyrighted by Consumerism Commentary.

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In addition to my bevvy of online savings accounts, I have standard, twentieth-century brick-and-mortar banking accounts, though only at two banks. I opened an account at TD Bank (formerly Commerce Bank) several years ago — because everyone loves being able to visit the branch on a Sunday. My primary branch accounts for personal and business are still at Wachovia, despite minor frustrations throughout the years.

My accounts at Wachovia resulted from a long line of mergers and acquisitions for almost two decades. Now, I’m in the process of yet another transition. Wachovia was purchased by Wells Fargo, interrupting a process in which Citigroup and the FDIC were on the cusp of taking over the institution. The bottom line is I will be a Wells Fargo customer as of next month. Wells Fargo — a name traditionally associated with Westward Expansion — recently sent a communication to customers in New Jersey, the state where I live, to guide us through the transition. I received two packages on the same day — one for my personal accounts and one for my business accounts.

The cover letters were almost identical; interestingly the personal account letter contained, “We apologize for any inconvenience this may cause,” regarding online downtime, but the business account lettered offered no such apology. The letter was followed by a description of my current accounts and how the terms and fees will change after the conversion on February 5.

There was more. Two packets were included in each mailing. The first was a thirty-one page guide to the transition with more details about the transition and marketing materials for the bank’s products, and the second was a sixty-page disclosure statement.

With the new Wells Fargo-branded accounts, I’ll be treated to legacy terms. My accounts that are currently free will remain free and those that require a minimum balance will require the same minimum balance. The accounts that I have will not be available to new Wells Fargo customers, though. If I want to expand my banking at Wells Fargo, I might not have many free options.

While I had a nice introductory interest rate on my business money market account for the first year, I now have a good portion of money at this bank earning next to nothing. It could be earning more at a high-yield savings account. Until all the clients that pay my business offer direct deposit, I’ll stick with a local branch for at minimum business banking.

The original version of this article, Wachovia to Wells Fargo Transition, is copyrighted by Consumerism Commentary.

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