While most banks are still lowering their interest rates, Ally Bank increased its rate today, November 13, 2009, to 1.64% APY. Although the rate is up, it is only 0.09 percentage points higher than the rate of 1.55% last month, the lowest rate from Ally Bank or GMAC Bank since I started watching interest rates at the beginning of this decade.
It seems like savers are being punished with these low rates, but I don’t see it that way. Inflation is still low, for now, so savers aren’t quite losing ground. But savings accounts aren’t meant to be appreciating investments, anyway. The low rate is the price we pay for safety and quick access to the money.
To compare Ally’s rates with other banks, and to see how the rates have changed over the past two years, check out this list of historical savings interest rates.
With Congress threatening to create new consumer protection agencies to protect the public from customer-unfriendly banking practices, the Federal Reserve stepped in today to prove it is still relevant and involved with banking regulation. The Fed announced that as of July 1, 2010 for new bank accounts or August 15, 2010 for existing accounts, banks must have received permission from their customers before charging overdraft fees.
Overdraft protection will only be an opt-in service. There are some exemptions to this new rule, however. The only type of overdraft protection requiring customers’ consent is the type in which the bank covers the overdraft to cover the debit. If your overdrafts are covered by a linked savings account or credit card, you could still be charged a fee. Usually these fees are lower, such as $5 rather than $35.
Also, only overdrafts caused by transactions with debit cards or ATM cards qualify for opt-in only. If a customer writes a check that causes an overdraft when cashed, the bank is still free to charge an overdraft fee without the account holder’s permission. Banks still argue this overdraft coverage is a benefit that customers want and don’t mind paying the fee. Customers would rather have their rent or utility check go through if it costs $35 to cover the overdraft than to have their check bounce.
According to a recent survey by ING Direct, 24 percent of Americans are angry about overdraft fees. Are you angry? I can’t bring myself to get worked up about these fees, myself; avoiding them is pretty simple:
- Don’t let your bank account get anywhere close to a zero balance. Always keep a buffer in any account you use for making payments. If you get close to zero, you are much more likely to fall into a bank’s trap, including multiple overdraft fees on the same day.
- Don’t count on money you deposit into your account actually being there until you confirm that the cash is available. Sometimes check deposits take more than a week to clear, and banks can still pull back the funds for weeks after the deposit if there is a problem.
- Here are ten tips for avoiding overdraft fees.
Banks will earn almost $40 billion from overdraft fees this year, and you can be sure the industry doesn’t want to see that practically free revenue disappear. When one door closes, another opens. Banks will innovate and find news ways to collect fees. We already see Bank of America planning to charge annual fees to credit card users who pay their balance in full every month. I expect the news will be full of stories about new fees for the next year.
Photo credit: smith
Fed: banks need customer consent on overdraft fees, Associated Press, November 12, 2009
It’s not every day that I find a bank account offering more than 2% APY, but as of October 30, 2009, I’ve discovered one thanks to a reader. “Ski Naut” contacted me yesterday to ask about SFGI Direct’s offer of 2.25% APY. I had not heard of the bank, so I looked into it.
SFGI Direct is the online banking division of Summit Community Bank, based in Moorefield, West Virginia. Deposits at Summit and SFGI Direct are covered by the FDIC as you would expect for any legitimate bank in the United States. To open the online savings account at SFGI Direct, customers will need to provide the typical personal information including Social Security number and employment information. The account requires a $500 minimum balance and initial funding deposits are limited to a maximum of $25,000.
For some people, SFGI Direct may be one of the fastest bank account opening processes from application to use. Like a small number of other banks, SFGI Direct allows “Instant Verification.” Most banks still offer only “Micro-Deposit Verification,” or the even more antiquated “Check Verification.” This means that after your application for opening an account is approved, if you link your new SFGI Direct account to an outside bank that supports this feature, rather than waiting two to three days for Micro-Deposit Verification, you can provide your account access details for the linked account. SFGI Direct will securely and privately confirm your account details with the external bank and allow you to immediately initiate your initial funding deposit.
I attempted to use the Instant Verification option to fund a new SFGI Direct account from ING Direct. Unfortunately, ING Direct’s verification process requires the customer to choose ten identifying questions. I don’t believe I set up ten questions and answers at ING Direct initially, so I was relegated to the slower Micro-Deposit Verification. After the weekend, I will be able to confirm my ownership of my linked account and initiate my funding transfer.
With this generous interest rate in comparison to other savings accounts, I have added SFGI Direct to the list of high-yield savings and checking account interest rates. You can SFGI Direct here.
Update: New customers are not currently welcome at SFGI Direct. As of Friday, November 6, the bank has closed its online application and presented this message on their website:
On Friday, November 6th SFGI Direct will again remove the “Apply Now” button from our website. As many of you noticed in July we removed the “Apply Now” button for approximately 2 months. It is our philosophy to deliver a competitive product to our clients.
SFGI Direct has chosen a strategy to slow down account growth by limiting the application process for new clients instead of dramatically cutting the rates on loyal customers.
Here in the Untied States, ING Direct, a banking arm of the large financial company ING Group from the Netherlands, offers more than just high-yield online savings accounts. The bank also offers investments and mortgages, and some of the latter may have been too risky, like those sold and packaged into securities by domestic banks.
ING Group received a taxpayer bailout of €10 billion ($14.9 billion) and the European Commission is forcing the financial company to restructure in order to repay this loan. Part of this deal involves taking ING’s insurance companies public and selling the United States’ ING Direct by 2013.
The effect of this sale remains to be seen. Some time between today and the end of 2013, ING Direct will be owned by another company. This bank was one of the first to operate without any brick-and-mortar branches and the first to be an unmitigated success. When I first started paying attention to my finances at the start of this decade, the recommendations for ING Direct flowed from every information channel. With the highest interest rates in the savings account business, unusually capable customer service, and a slick and functional website, the bank was a favorite among the die-hard personal finance fans at the Motley Fool discussion boards.
More recently, ING Direct has moved from excellent to very good. I still recommend this bank to people who want a hassle-free experience, but their rates are no longer as competitive and their electronic checking account is not the best in class. For those with more money to put in savings, those who would benefit from a higher interest rate, I usually offer additional options.
ING Direct’s corporate message in response to those customers concerned about recent news of the impending sale is that your money is safe. I don’t think safety is the real concern. Accounts at the bank are insured by the FDIC, so even if the bank fails safety isn’t a problem. These are the questions you should have right now:
- Who will purchase the bank and will ING Direct’s core values change?
- If the core values change, will they be for the better (more competitive interest rates, for example) or for the worse (scaled back operations and customer service, for example)?
- What new account fees will be introduced?
- ING Direct employs about 1,200 in Delaware and another thousand more across the country. Will they have jobs and for how long?
These questions will not be answered for some time.
I do not see the announcement of this sale as a reason to move money out of ING Direct now. I will be watching developments closely, however. With the bulk of my savings in ING Direct, I am very sensitive to the fact that they do not offer the highest interest rate available. For years, the bank has counted on customers like me: those who first deposited when the interest rates were high and competitive and who have stayed around as other banks consistently offer higher rates. But I do not owe my loyalty to a company and will be quick to shop around if I am no longer getting a good deal considering cost, return, and service.
Photo credit: diaper
ING to sell Delaware-based bank in [sic] 2013, Eric Ruth, The News Journal, October 27, 2009
Post-Bailout Blues as Europe Orders ING Group to Sell 2 Units, Eric Dash, New York Times, October 26, 2009
As of October 26, 2009, over 100 banks have failed this year. Most of these are smaller regional banks who, in order to compete with larger banks, offered risky loans and are now facing customer defaults. Larger banks were offered government bailouts to prevent failure, but these smaller banks whose failures are not seen as major risks to the economy are left without taxpayer assistance.
The FDIC covers savings accounts, checking accounts, and certificates of deposit to ensure that customers hardly notice when one of these smaller banks fail. As long as a bank is a member of FDIC, and most are, customers should be confident that even if a bank fails, they will be able to withdraw their deposits within the coverage limit. Predicting the increase of bank failures this year, the FDIC decided over a year ago to increase its insurance limits. In 2008, only 26 banks failed compared to 106 so far this year.
Although there is often worry in the press that FDIC is underfunded and might run out of money, that situation is highly unlikely. The FDIC is requiring banks to start paying their FDIC premiums which have largely been ignored for decades to increase its available funds. The FDIC also has an extensive line of credit with the Treasury, and because Congress will always vote to make sure the FDIC will be able to cover necessary expenses, it is in effect a limitless credit line.
Here is a full list of banks that have failed since 2000. I will update this list as necessary.
| Bank |
Location |
Failed Date |
| Riverview Community Bank |
Otsego, MN |
October 23, 2009 |
| Partners Bank |
Naples, FL |
October 23, 2009 |
| Hillcrest Bank Florida |
Naples, FL |
October 23, 2009 |
| Flagship National Bank |
Bradenton, FL |
October 23, 2009 |
| First DuPage Bank |
Westmont, IL |
October 23, 2009 |
| Bank of Elmwood |
Racine, WI |
October 23, 2009 |
| American United Bank |
Lawrenceville, GA |
October 23, 2009 |
| San Joaquin Bank |
Bakersfield, CA |
October 16, 2009 |
| Warren Bank |
Warren, MI |
October 2, 2009 |
| Southern Colorado National Bank |
Pueblo, CO |
October 2, 2009 |
| Jennings State Bank |
Spring Grove, MN |
October 2, 2009 |
| Georgian Bank |
Atlanta, GA |
September 25, 2009 |
| Irwin Union Bank, F.S.B. |
Louisville, KY |
September 18, 2009 |
| Irwin Union Bank and Trust Company |
Columbus, IN |
September 18, 2009 |
| Venture Bank |
Lacey, WA |
September 11, 2009 |
| Corus Bank, N.A. |
Chicago, IL |
September 11, 2009 |
| Brickwell Community Bank |
Woodbury, MN |
September 11, 2009 |
| Vantus Bank |
Sioux City, IA |
September 4, 2009 |
| Platinum Community Bank |
Rolling Meadows, IL |
September 4, 2009 |
| InBank |
Oak Forest, IL |
September 4, 2009 |
| First State Bank |
Flagstaff, AZ |
September 4, 2009 |
| First Bank of Kansas City |
Kansas City, MO |
September 4, 2009 |
| Mainstreet Bank |
Forest Lake, MN |
August 28, 2009 |
| Bradford Bank |
Baltimore, MD |
August 28, 2009 |
| Affinity Bank |
Ventura, CA |
August 28, 2009 |
| First Coweta Bank |
Newnan, GA |
August 21, 2009 |
| CapitalSouth Bank |
Birmingham, AL |
August 21, 2009 |
| Guaranty Bank |
Austin, TX |
August 21, 2009 |
| ebank |
Atlanta, GA |
August 21, 2009 |
| Colonial Bank |
Montgomery, AL |
August 14, 2009 |
| Community Bank of Nevada |
Las Vegas, NV |
August 14, 2009 |
| Union Bank, National Association |
Gilbert, AZ |
August 14, 2009 |
| Dwelling House Savings and Loan Association |
Pittsburgh, PA |
August 14, 2009 |
| Community Bank of Arizona |
Phoenix, AZ |
August 14, 2009 |
| First State Bank |
Sarasota, FL |
August 7, 2009 |
| Community National Bank of Sarasota County |
Venice, FL |
August 7, 2009 |
| Community First Bank |
Prineville, OR |
August 7, 2009 |
| Integrity Bank |
Jupiter, FL |
July 31, 2009 |
| Peoples Community Bank |
West Chester, OH |
July 31, 2009 |
| Mutual Bank |
Harvey, IL |
July 31, 2009 |
| First State Bank of Altus |
Altus, OK |
July 31, 2009 |
| First BankAmericano |
Elizabeth, NJ |
July 31, 2009 |
| Waterford Village Bank |
Williamsville, NY |
July 24, 2009 |
| Security Bank of North Metro |
Woodstock, GA |
July 24, 2009 |
| Security Bank of North Fulton |
Alpharetta, GA |
July 24, 2009 |
| Security Bank of Jones County |
Gray, GA |
July 24, 2009 |
| Security Bank of Houston County |
Perry, GA |
July 24, 2009 |
| Security Bank of Gwinnett County |
Suwanee, GA |
July 24, 2009 |
| Security Bank of Bibb County |
Macon, GA |
July 24, 2009 |
| Vineyard Bank |
Rancho Cucamonga, CA |
July 17, 2009 |
| Temecula Valley Bank |
Temecula, CA |
July 17, 2009 |
| First Piedmont Bank |
Winder, GA |
July 17, 2009 |
| BankFirst |
Sioux Falls, SD |
July 17, 2009 |
| Bank of Wyoming |
Thermopolis, WY |
July 10, 2009 |
| Rock River Bank |
Oregon, IL |
July 2, 2009 |
| Millennium State Bank of Texas |
Dallas, TX |
July 2, 2009 |
| John Warner Bank |
Clinton, IL |
July 2, 2009 |
| Founders Bank |
Worth, IL |
July 2, 2009 |
| First State Bank of Winchester |
Winchester, IL |
July 2, 2009 |
| First National Bank of Danville |
Danville, IL |
July 2, 2009 |
| Elizabeth State Bank |
Elizabeth, IL |
July 2, 2009 |
| Mirae Bank |
Los Angeles, CA |
June 26, 2009 |
| Horizon Bank |
Pine City, MN |
June 26, 2009 |
| Neighborhood Community Bank |
Newnan, GA |
June 26, 2009 |
| MetroPacific Bank |
Irvine, CA |
June 26, 2009 |
| Community Bank of West Georgia |
Villa Rica, GA |
June 26, 2009 |
| Southern Community Bank |
Fayetteville, GA |
June 19, 2009 |
| First National Bank of Anthony |
Anthony, KS |
June 19, 2009 |
| Cooperative Bank |
Wilmington, NC |
June 19, 2009 |
| Bank of Lincolnwood |
Lincolnwood, IL |
June 5, 2009 |
| Strategic Capital Bank |
Champaign, IL |
May 22, 2009 |
| Citizens National Bank |
Macomb, IL |
May 22, 2009 |
| BankUnited, FSB |
Coral Gables, FL |
May 21, 2009 |
| Westsound Bank |
Bremerton, WA |
May 8, 2009 |
| America West Bank |
Layton, UT |
May 1, 2009 |
| Silverton Bank, NA |
Atlanta, GA |
May 1, 2009 |
| Citizens Community Bank |
Ridgewood, NJ |
May 1, 2009 |
| American Southern Bank |
Kennesaw, GA |
April 24, 2009 |
| Michigan Heritage Bank |
Farmington Hills, MI |
April 24, 2009 |
| First Bank of Idaho |
Ketchum, ID |
April 24, 2009 |
| First Bank of Beverly Hills |
Calabasas, CA |
April 24, 2009 |
| Great Basin Bank of Nevada |
Elko, NV |
April 17, 2009 |
| American Sterling Bank |
Sugar Creek, MO |
April 17, 2009 |
| New Frontier Bank |
Greeley, CO |
April 10, 2009 |
| Cape Fear Bank |
Wilmington, NC |
April 10, 2009 |
| Omni National Bank |
Atlanta, GA |
March 27, 2009 |
| FirstCity Bank |
Stockbridge, GA |
March 20, 2009 |
| TeamBank, NA |
Paola, KS |
March 20, 2009 |
| Colorado National Bank |
Colorado Springs, CO |
March 20, 2009 |
| Freedom Bank of Georgia |
Commerce, GA |
March 6, 2009 |
| Security Savings Bank |
Henderson, NV |
February 27, 2009 |
| Heritage Community Bank |
Glenwood, IL |
February 27, 2009 |
| Silver Falls Bank |
Silverton, OR |
February 20, 2009 |
| Corn Belt Bank & Trust Co. |
Pittsfield, IL |
February 13, 2009 |
| Sherman County Bank |
Loup City, NE |
February 13, 2009 |
| Riverside Bank of the Gulf Coast |
Cape Coral, FL |
February 13, 2009 |
| Pinnacle Bank of Oregon |
Beaverton, OR |
February 13, 2009 |
| FirstBank Financial Services |
McDonough, GA |
February 6, 2009 |
| County Bank |
Merced, CA |
February 6, 2009 |
| Alliance Bank |
Culver City, CA |
February 6, 2009 |
| Suburban FSB |
Crofton, MD |
January 30, 2009 |
| Ocala National Bank |
Ocala, FL |
January 30, 2009 |
| MagnetBank |
Salt Lake City, UT |
January 30, 2009 |
| 1st Centennial Bank |
Redlands, CA |
January 23, 2009 |
| Bank of Clark County |
Vancouver, WA |
January 16, 2009 |
| National Bank of Commerce |
Berkeley, IL |
January 16, 2009 |
| Sanderson State Bank |
Sanderson, TX |
December 12, 2008 |
| Haven Trust Bank |
Duluth, GA |
December 12, 2008 |
| First Georgia Community Bank |
Jackson, GA |
December 5, 2008 |
| PFF Bank & Trust |
Pomona, CA |
November 21, 2008 |
| Downey Savings & Loan |
Newport Beach, CA |
November 21, 2008 |
| Community Bank |
Loganville, GA |
November 21, 2008 |
| Franklin Bank, SSB |
Houston, TX |
November 7, 2008 |
| Security Pacific Bank |
Los Angeles, CA |
November 7, 2008 |
| Freedom Bank |
Bradenton, FL |
October 31, 2008 |
| Alpha Bank & Trust |
Alpharetta, GA |
October 24, 2008 |
| Meridian Bank |
Eldred, IL |
October 10, 2008 |
| Main Street Bank |
Northville, MI |
October 10, 2008 |
| Washington Mutual Bank FSB |
Park City, UT |
September 25, 2008 |
| Washington Mutual Bank |
Henderson, NV |
September 25, 2008 |
| Ameribank |
Northfork, WV |
September 19, 2008 |
| Silver State Bank |
Henderson, NV |
September 5, 2008 |
| Integrity Bank |
Alpharetta, GA |
August 29, 2008 |
| Columbian Bank & Trust |
Topeka, KS |
August 22, 2008 |
| First Priority Bank |
Bradenton, FL |
August 1, 2008 |
| First National Bank of Nevada |
Reno, NV |
July 25, 2008 |
| First Heritage Bank, NA |
Newport Beach, CA |
July 25, 2008 |
| IndyMac Bank |
Pasadena, CA |
July 11, 2008 |
| First Integrity Bank, NA |
Staples, MN |
May 30, 2008 |
| ANB Financial, NA |
Bentonville, AR |
May 9, 2008 |
| Hume Bank |
Hume, MO |
March 7, 2008 |
| Douglass National Bank |
Kansas City, MO |
January 25, 2008 |
| Miami Valley Bank |
Lakeview, OH |
October 4, 2007 |
| NetBank |
Alpharetta, GA |
September 28, 2007 |
| Metropolitan Savings Bank |
Pittsburgh, PA |
February 2, 2007 |
| Bank of Ephraim |
Ephraim, UT |
June 25, 2004 |
| Reliance Bank |
White Plains, NY |
March 19, 2004 |
| Guaranty National Bank of Tallahassee |
Tallahassee, FL |
March 12, 2004 |
| Dollar Savings Bank |
Newark, NJ |
February 14, 2004 |
| Pulaski Savings Bank |
Philadelphia, PA |
November 14, 2003 |
| First National Bank of Blanchardville |
Blanchardville, WI |
May 9, 2003 |
| Southern Pacific Bank |
Torrance, CA |
February 7, 2003 |
| Farmers Bank of Cheneyville |
Cheneyville, LA |
December 17, 2002 |
| Bank of Alamo |
Alamo, TN |
November 8, 2002 |
| AmTrade International Bank |
Atlanta, GA |
September 30, 2002 |
| Universal Federal Savings Bank |
Chicago, IL |
June 27, 2002 |
| Connecticut Bank of Commerce |
Stamford, CT |
June 26, 2002 |
| New Century Bank |
Shelby Township, MI |
March 28, 2002 |
| Net 1st National Bank |
Boca Raton, FL |
March 1, 2002 |
| NextBank, NA |
Phoenix, AZ |
February 7, 2002 |
| Oakwood Deposit Bank Co. |
Oakwood, OH |
February 1, 2002 |
| Bank of Sierra Blanca |
Sierra Blanca, TX |
January 18, 2002 |
| Hamilton Bank, NA |
Miami, FL |
January 11, 2002 |
| Sinclair National Bank |
Gravette, AR |
September 7, 2001 |
| Superior Bank, FSB |
Hinsdale, IL |
July 27, 2001 |
| Malta National Bank |
Malta, OH |
May 3, 2001 |
| First Alliance Bank & Trust Co. |
Manchester, NH |
February 2, 2001 |
| National State Bank of Metropolis |
Metropolis, IL |
December 14, 2000 |
| Bank of Honolulu |
Honolulu, HI |
October 13, 2000 |
Yesterday, Bank of America and J.P. Morgan Chase Bank announced they were changing their policies to allow customers to opt out of overdraft protection. Wells Fargo decided to follow in their footsteps late yesterday, announcing a number of changes at this bank. The following changes also apply to Wachovia, the bank that was acquired by Wells Fargo several months ago.
Wells Fargo is eliminating overdraft fees if the account is overdrawn by less than $5 and are limiting overdrafts to only four per day. Customers will be allowed to opt out of overdraft protection, so they don’t incur fees but transactions that would bring their accounts below zero will be declined.
All of these changes are improvements, although I see no reason for a bank to charge more than one fee per day. Regardless of what a bank charges, customers have the responsibility to monitor their own accounts. Accidents and emergencies happen, but in the end we should all be aware of what we have in the bank. The best defense against excessive bank fees is to pay attention and give the banks no reason to charge them. Here are some tips for avoiding overdraft fees.
Wells Fargo Announces Changes to Overdraft Practices, September 23, 2009
JP Morgan Chase Bank is offering a $100 bonus for new customers who sign up for the Chase Checking account. If you are not a current customer of Chase, you can qualify for this $100 bonus with an initial deposit of $100 and by initiating a direct deposit or five purchases using your new debit card within 60 days. You will receive your $100 bonus 10 days after your direct deposit or fifth debit card purchase.
Like most account opening bonuses, the $100 is considered interest, so it will be reported to the IRS as interest income. You might owe taxes on the bonus as you would owe taxes on other interest earned in bank accounts.
Keep in mind that in order for this account to remain free, you have to abide by Chase Bank’s rules. Keep your direct deposit or make five debit card purchases each month to avoid a $6 monthly fee.
Also, if you close your account within six months, Chase will take the bonus back.
You can either apply for the account online or at a branch. To generate and retrieve your coupon, click here. This coupon expires December 31, 2009, but if there are more coupons after that point I will post them here.
Overdraft fees are nothing to sneeze at. Having not always been a model bank customer, I know how it feels like an unfair punishment to have roughly $30 taken away when my account is already negative. I’ve also worked for Bank of America, and I can see why they use a dis-incentive to drive away bad customers.
I was a pretty generous Customer Service Rep., and would refund overdraft fees to as many customers as I could. But sometimes there’d be an awkward conversation when a customer would ask, “How can I stop getting these overdraft fees in the future?”
Naturally, I’d go into my speech about keeping a balanced checkbook (or something similar) with you, and how the “available balance” you’d get from an ATM or the phone service was often a lie. Some customers persisted (as well they should) and felt like there should be a way to not be allowed to go negative. It was tricky, and unlikely, but not always impossible to get your branch manager to agree to put that kind of hold on your account.
But now, any Bank of America customer can opt-out of overdrafting. If you’re down to $2.12 in your checking account, and you go to buy a Frappucino, you’ll have your card rejected at the register.
In addition, Bank of America also decided it won’t impose an overdraft fee if your account is above -$10, unless you don’t fix it within five days. And the limit of overdraft fees you can get in one day is now four, instead of ten.
JP Morgan Chase also announced that they’ll be changing their policies:
Starting in the first quarter of 2010, the bank will make overdraft protection opt-in for all customers, post transactions to accounts as they occur, and eliminate fees when accounts are overdrawn by $5 or less. It will also reduce the maximum number of fees per day to three from six.
Bank Of America Backpedals On Overdraft Fees, Huffington Post, Sep. 22, 2009
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