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Barclays Online Savings Review

This article was written by in Banking, Reviews. 5 comments.


Barclays has enjoyed a long and storied history as a financial industry leader in the United Kingdom. While those of us in the United States often consider a financial company to be historied once it passes its centennial, Barclays was founded in 1690. As an organization, the bank is older than our country.

The brand made its entrance in the United States recently. During the collapse of the financial industry, Barclays acquired the remnants of the failed Lehman Brothers. The bank also primarily backed store-branded credit cards, like the Best Western Credit Card, until last year. The BarclayCard division of the company developed its own credit card products, such as the Barclaycard Ring MasterCard, which featured crowdsourced rewards. By using questionnaires and online voting, the cardholders can determine the card’s features.

Barclays, like many financial services companies, has been under scrutiny. Last year, the company was fined $450 million for its involvement in the Libor scandal, allegedly manipulating how intrabank lending rates were determined, either to make a profit or to appear more financially secure than the company might have been.

Increasing its presence in the United States, Barclays is now focusing on its retail banking division, offering online savings and certificates of deposit. I opened a Barclays Online Savings account to see if the bank would be competitive with some of the best online savings accounts, like Capital One 360 (formerly ING Direct) and Ally Bank.

Applying for the account

The Barclays Online Savings account application requires the same type of information all banks in the United States require. The application conveniently asks up front whether you would like to create the account as a Payable on Death account, where you can designate a beneficiary. This will come in handy as it the option might be difficult to change later or you might forget.

The bank requires a Social Security Number and a street address in the United States. You will need to choose one security question from among three standard choices. If you ever need to call the bank for customer service, the representative will challenge you, asking you to answer your chosen security question with the answer you provide on the application.

As with all online banks, creating a new account requires an electronic link with an existing checking or savings account. Barclays ask for your external bank’s routing number and your account number. Within a few days, Barclays will initiate a test deposit. New customers must verify the amount of the test deposit in order to successfully use the external bank for depositing and withdrawing money to and from the Barclay’s account. The application notes that the bank will hold new customers’ initial deposits up to five business days.

The next step in the application is to agree to Barclay’s terms and conditions. The terms make it clear that for the first thirty days, Barclays will hold all deposits will be held for five business days before making the funds available for withdrawal. After that, ACH transfers will be available immediately (but keep in mind ACH transfers are usually processed overnight) while all other deposits are subject to a hold for five days.

In the terms, Barclays makes it clear that it is under no obligation to reduce fees for insufficient funds:

If we receive a withdrawal, transfer, electronic transaction, or other item drawn on your Account, and there are insufficient funds in your Account to pay the item, we will return the item unpaid and you may be charged an Non-Sufficient Funds (NSF) fee. We will process withdrawals, transfers or related requests received on the same day in the order we choose. You understand that we have no obligation to minimize the NSF fees charged as a result of having insufficient funds in the Account, and that the processing order we select may result in your incurring more fees than you would if we were to process the withdrawals, transfers or related requests in a different order.

This has been a significant problem with banks; Bank of America and several other banks recently settled a lawsuit that alleged they ordered withdrawals in such a way that the bank could maximize insufficient funds fees. The bank expects that including this clause in the terms would prevent customers from being able to successfully take action against the bank for the same shady practice. The good news is that the NSF fee is only $5 per item.

I discovered that actually taking the time to read the terms and conditions creates an online delay long enough for the application to time out, requiring the applicant to start from the beginning.

The final step is to verify your identity using questions taken from information on your credit report. This is a common method of identity verification used by the financial industry at large. If everything is as the bank expects, you’ll immediately be granted an account number and Barclays will begin processing your initial deposit from your funding bank.

Using the Barclays Online Savings account

Logging in to your account for the first time, the website will ask you to create a SafeKeys phrase. The bank will display this phrase and a selected image each time you access your account online. Also, you will need to provide answers to five security questions. These are different from the security question and answer created during the application process. Normally, you would need to answer one of these five questions every time you access your account online, but you can register your computer (or other device) to skip this part of the log-in process. That’s not recommended for security reasons.

The website interface won’t win any awards for innovation, but it gets the job done. All the necessary features are present. You can view a list of recent transactions in your account, transfer funds to and from your linked accounts, and sign up for remote deposit. You can read your statements online; Barclays does not send any statements via the mail.

Once my account is fully funded, I intend to test the speed of withdrawals. All other things being relatively equal, this is what I frequently see as the most annoying aspect of online bank accounts. For savings, you expect the money to be accessible when you need it; if it takes an unexpected long time for your linked bank to receive a withdrawal from the online bank, the funds held there are useless for small emergencies. (This is a good reason to consider a tiered emergency fund.

Interest rates and fees

Initially, Barclays is offering one of the top interest rates among online banks. This is a normal tactic for a bank that’s currently in a stage where it wants to generate deposits and new customers. Some banks offer competitive rates for a short time, enticing new customers, only to later lower the rates to be more like brick and mortar banks, while others hold onto their position among their competitors. Barclays is currently advertising that its rate are ten times the national average, and it will be interesting to see if that continues to be an enforced marketing message.

Online banks tend to be a commodity. Prospective customers generally shop on price, not on customer experience. Brick and mortar banks usually attract customers through customer service and location, but without a face, online banks are generally similar enough that customers may not always care about the identity of the company behind the account. Since price is an important factor, interest rates and fees tend to be important points for comparison.

I’ve already mentioned that the Barclays Online Savings account has a low insufficient funds fee of $5. There are no minimum balance requirements, and no monthly account fees just for the benefit of owning an account. You may be charged a small fee if you make over six withdrawals during a calendar month, but this comes from a government regulation for all savings accounts. There are no other fees with Barclays to speak of.

If you choose to open an account, or if you have had previous experiences with Barclays, please share your thoughts here. Continuing a conversation about the bank will help other readers decide whether the Barclays Online Savings account could be a great choice for a primary high-yield savings account.

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Raising the Minimum Wage to $9

This article was written by in Economy. 19 comments.

In his State of the Union address to the United States Congress and the television-viewing audience around the world, President Obama called for an increase in the federal minimum wage as a way to reduce poverty. If you believe that business owners have a right to pay whatever the market will bear, minimum wages, whether endorsed by the federal government or the state, are unacceptable. If, however, you believe that left unchecked, businesses are in a position of power over employees who need jobs and can take advantage of that power, a minimum wage of some form is necessary to help balance that relationship.

The federal minimum wage and its law protects most, but not all, workers. In some cases, state minimum wage laws pick up where the federal law stops, in other cases, state laws supersede the federal law, and in yet others, the state depends on the federal law for its citizens.

Who qualifies for federal minimum wage

You’re covered by the federal minimum wage law and other provisions of the Fair Labor Standards Act if the following are true:

  • You work for a federal, state, or local government agency.
  • You work for a hospital or health organization.
  • You work for a school, public or private, for-profit or non-profit.
  • A company that sells more than $500,000 a year.

You could also be covered by the federal law if you work at a company whose business involves interstate commerce or domestic service. Domestic service includes a variety of jobs, such as cooks, janitors, housekeepers, nurses, gardeners, and regular babysitters.

State laws vary, but a state’s minimum wage could apply to a broader set of occupations.

If you have a position with a salary rather than an hourly wage, or you have a position in management, you might be exempt from minimum wage laws, like the overtime provision. Once my position at a former company in the financial industry surpassed a certain level, I was no longer eligible for overtime. A raise and a promotion resulted in an effective pay decrease because I had been working so many hours in addition to the normal workday.

Who earns minimum wage

The Bureau of Labor Statistics has organized statistics related to workers earning minimum wage throughout the country. Half of minimum wage workers are under 25 years old. This age group contains a wide variety of types of families, though. This includes teenagers working at their first job during high school, living with their two-income-earning parents within middle-class communities, but it also includes heads of young households in poorer communities for whom their minimum-wage work is the only form of income.

If you work part-time, 35 hours a week or less, you’re more likely to earn minimum wage than full-time workers. The biggest group of Federal minimum wage earners — and those earning less — work in the service industry, mostly in food preparation and service. It’s typical for servers to officially earn less than minimum wage, relying on tips from customers to reach the required minimum wage.

In total, 3.8 million Americans were earning wages at or below the federal minimum wage in 2011. The Bureau of Labor Statistics notes that this figure is a low estimate, because it does not include salaried workers, who can still be earning an income that is equivalent to an hourly wage at or below the federal minimum.

What we don’t see on these figures are workers earning just cents above the minimum wage. Large companies might pay workers slightly above the minimum wage, not much to make much of a difference in people’s lives, but in order for the company to avoid the appearance of paying its workforce wages that would keep its workers in poverty or near poverty. It’s a method of staying out of the statistics. Walmart, for example, pays its sales associates an average of $8.81 per hour according to independent research.

This average is higher than the federal minimum wage; in fact it’s significantly higher. But it’s still not enough for a full-time Walmart worker (or part-time, like many are, for that matter) to earn enough to live above the federal poverty line for a family of four.

What President Obama is proposing

The State of the Union gives the sitting President a chance to express his ideals and provide some clues about his (or her) political agenda for the upcoming year. Not only does President Obama want to see the federal minimum wage increased to $9 per hour, he would like the wage to be indexed to the cost of living. Here is what he said:

We know our economy’s stronger when we reward an honest day’s work with honest wages. But today, a full-time worker making the minimum wage earns $14,500 a year. Even with the tax relief we’ve put in place, a family with two kids that earns the minimum wage still lives below the poverty line. That’s wrong.

That’s why, since the last time this Congress raised the minimum wage, 19 states have chosen to bump theirs even higher. Tonight, let’s declare that, in the wealthiest nation on Earth, no one who works full time should have to live in poverty — and raise the federal minimum wage to $9 an hour.

This single step would raise the incomes of millions of working families. It could mean the difference between groceries or the food bank, rent or eviction, scraping by or finally getting ahead.

For businesses across the country, it would mean customers with more money in their pockets. And a whole lot of folks out there would probably need less help from government. In fact, working folks shouldn’t have to wait year after year for the minimum wage to go up, while CEO pay has never been higher.

So here’s an idea that Governor Romney and I actually agreed on last year: Let’s tie the minimum wage to the cost of living, so that it finally becomes a wage you can live on.

The consequences of a higher minimum wage

The President points out that workers getting paid more means they have more money to spend, focusing on the economic side of the societal issue. For minimum wage families — not middle-class families with a teenager taking a part-time job to pay for his own car insurance — an increase in income will almost definitely be directed towards spending for necessities rather than saving.

With more money to spend among its customers, businesses catering to those with more money in their pockets will be able to justify price increases. And more than just minimum wage workers will have more spending money; an increase in the minimum wage tends to lead to pay increases for those earning somewhat more than the minimum wage, which in turn affects pay increases on a large scale.

Some businesses will have difficulty with this proposal. If a business relies on the availability of cheap labor, an automatic increase of wages, and we could be talking about an immediate raise of 24% from $7.25 to $9 if the new wage isn’t phased in over time (though it most likely would be phased in like the last minimum wage increase), certain business might need to cut back their workforce and increase productivity in order to meet the same level of profitability.

This comes at a time, after an economic recession, in a period where the employment market is still in the process of improving, when businesses are already trying to make the most out their employees without increasing human resources expenses through raises and additional hiring. Requiring the same or more productivity from a smaller workforce causes stress on employees and businesses, and stress results in lost work days and higher medical expenses, and the costs of both can affect a company’s bottom line as much as the wage increase.

Requiring businesses to pay a livable wage is a necessary part of having a society where citizens are able to thrive. Individual responsibility is important, though. I don’t want to have to rely on the government to dictate my wages. In addition to livable wages, as a society we need to encourage as many people as possible to get out of minimum wage situations. Family situations differ, and this isn’t always possible, and the minimum wage is important for those people.

Get an education or get the training you need to work in a career that will help you move towards financial freedom. Don’t have children until you’re financially viable for yourself, at least. These may be luxuries for families whose first and only concern is survival, but moving beyond the first level of Maslow’s hierarchy of needs.

Where do you stand on the issue of raising the minimum wage?

Photo: Flickr
IBIS, Bureau of Labor Statistics

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My Net Worth History

This article was written by in Monthly Update. 13 comments.

Part of the draw of Consumerism Commentary has been my monthly financial reports. Having worked in the financial reporting area of a company that happened to be in the financial industry, I recognize the importance of monthly public reporting to be accountable to stakeholders; I started publicly reporting my own finances to be accountable to myself.

Until now, there hasn’t been a page on Consumerism Commentary that compiles all the monthly reports into one page. Now, at a glance, readers can easily see my financial progression from July 2003 through December 2011, when I stopped publishing my reports.

Note that throughout the course of the life of Consumerism Commentary, I’ve adjusted my methods of calculating several times. As a result, the historical numbers you see in the chart published for December 2011 do not always match up with the numbers you see when you look at the historical reports. The first net worth column includes the numbers as reported at the time. The second column is the adjusted net worth which fixed some initial calculation errors and normalizes the method of getting to the bottom line.

Note also that as a result of several migrations over the past few years, some charts have been lost. I do have other copies, and I’ll work over the next few days to add in the missing figures.

Under the chart is a graph depicting the long-term growth of my net worth, December 2001 through December 2011, with personal and business accounts separated. This doesn’t include the book value of my business or any business sale proceeds.

Net worth (balance sheets)

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Invest in Girls Gives Private School Students Training for Wall Street

This article was written by in Financial Literacy. 4 comments.

Despite the Main Street vs. Wall Street conflicts post-recession, there is still a great desire among young people — particularly among privileged families — to be part of the finance industry. In three private schools, one for just girls, a non-profit organization is bringing Wall Street education to young women. Invest in Girls takes a new approach to a financial education for high school sophomores.

To its credit, the program sounds like it has found a great way to create a curriculum that engages young minds. The lessons will likely stick with many of the students, who will later choose to pursue a career in finance. A combination of having an instructor who is deeply involved with the industry, field trips to experience the finance industry in a hands-on environment, and metaphors designed to help the students relate to complex financial concepts make this an effective method of teaching and inspiring. If women are underrepresented in finance, courses like these can help to change the balance.

But the balance isn’t shifting much. The finance industry, particularly at the biggest firms, is overwhelmingly represented by young people with privileged backgrounds. A private high school, Ivy League college education, and wealthy parents with connections in the financial industry already lead to young graduates entering that industry. Invest in Girls admits as much when asked about targeting only private schools for this program. The founder of Invest in Girls replied to a New York Times reporter, “This is really about girls who are emerging as leaders and how to help those girls have the finance and investing knowledge they will need.” Implicit in her remarks is that girls attending private schools are more likely to be leaders than those who attend public schools. I’m not sure I agree with that statement.

I have to wonder whether Invest in Girls is not yet comfortable with the idea that their program is designed only for private school students. While the Invest in Girls website explains features of the curriculum, I could not find any mention of the fact that the organization reaches only a subset of the population already likely to be involved with the financial industry after college. If not for the New York Times article, I would have assumed from the Invest in Girls website that any young woman could receive the benefits of the well-considered curriculum. Perhaps the organization is attempting to avoid the questions about introducing a privileged career to a set of students who probably don’t need as much as help breaking into the industry as the general public.

I like that Invest in Girls is not just another boring financial literacy curriculum, but they certainly know their audience. While the curriculum starts with the basic knowledge that underpins a life with which money is a necessity — saving, budgeting and personal money management — the crux of the set of courses is exposure to the professional money management industry on Wall Street. Financial literacy programs are generally geared towards families who do not have the same financial advantages as these students, but every young person, regardless of economic status, needs this foundation. But most high school money management classes don’t help. Invest in Girls sets itself apart from the other types of education, so perhaps there is a chance of the program inspiring young students not just to love Wall Street, but to learn to manage their own money intelligently.

Boys in these private schools who want to take these classes cannot. I mentioned the course uses metaphors to help reach students, relating complex financial concepts to things with which girls may (stereortypically) might already be familiar: organizing wardrobes, for example.

Not every private school student comes from a privileged background. As the author of the article notes, some girls in the class required financial aid to attend the school, some attended the school from foreign countries (the point of mentioning this, I believe, would be to indicate there were exchange students who often do not pay full tuition), and some families paid the full tuition. Regardless of the mix, on average, the students attending these three private schools, are less culturally diverse and come from a wealthier background than typical public schools. Does society really need help pointing young adults from wealthy families in the direction of careers in which they’re already over-represented?

Update: After publishing this articles, Invest In Girls contacted me via Twitter to inform me that they plan to expand to public schools in 2013.

New York Times

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The Over-Marketization of Social Behavior

by Luke Landes

Do you reward your children with money for performing well in school? Do you use the promise of an allowance to ancourage appropriate behavior in the family? These are big issues, because they take appropriate behavior and can turn the incentive to financial gain. Children growing up believing that financial gain is the reward for ... Continue reading this article…

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The Best Online Savings Accounts, May 2013

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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 ... Continue reading this article…

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Debt Collections: Do You Have To Pay?

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Clock - time-barred debt

People who borrow money generally understand that they will eventually need to pay borrowed money back to the lender. This understanding, whether codified in a contract or not in any particular case, makes lending and borrowing money work as an economic mechanism. It’s interesting that regardless of what’s written in a contract, most debt can ... Continue reading this article…

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My Future Investing Strategy

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Last week I met with a Certified Financial Planner for the first time. This was a free service provided by Vanguard, so it was a good opportunity to speak to a professional about my specific situation. For many years, I’ve been relying on mostly generalized advice, whether from books, large communities like the Motley Fool ... Continue reading this article…

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