As featured in The Wall Street Journal, Money Magazine, and more!

avatar You are viewing an archive of articles by Richard Barrington.

Richard Barrington

Banks not very popular institutions. Fairly or unfairly, the prevailing impression many folks have is that bankers are fat cats who make their fortunes at the expense of ordinary people. So here is how to choose a bank while avoiding being ripped off.

how to choose a bank

However, instead of being mad at bankers, perhaps consumers should be mad at themselves. Time and time again, people let banks get the better of them through careless banking habits.

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

1. Savings account rates

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

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

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

Unfortunately, too many bank customers fail to take an active approach to shopping for rates. Which means they settle for less than a tenth of the interest they could be getting.

2. CD rollovers

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

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

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

3. Mortgage refinancing

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

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

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

An easy way to compare mortgage rates is to use LendingTree.

4. Checking account fees

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

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

5. Overdraft protection

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

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

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

6. Credit card rates

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

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

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

{ 1 comment }

J.D. Power recently issued its annual study of the best credit cards. Not surprisingly, cash back cards are still the most popular.

American Express, Discover, and Capital One topped the charts for customer satisfaction. Yet J.D. Power also found that customer satisfaction varied based on the cardholder’s age.

While these surveys are helpful, nothing beats a detailed analysis of the best credit card offers available today. So we’ve conducted our own research, the results of which are below. We’ve included a brief explanation as to why each credit card made the list.

Cash Back Credit Cards

Discover it® Card-Cashback MatchTM

Discover It® CardThe Discover it® Card-Cashback MatchTM credit card offers up to 5% cash back on categories that change every three months. In addition, Discover will double your cash back the first year, making this card one of the most rewarding available today.

In addition to the cash back rewards, Discover provides its members with free access to their FICO score and the new New Freeze It® on/off switch. With Freeze It, you can effectively turn off your card should you have misplaced it or suspect that it was stolen.

  • Cash Back: 5% on categories that change each quarter, up to $1,500 in purchases. All other purchases earn 1% cash back.
  • Sign up bonus: Discover will double your cash back rewards at the end of your first year.
  • Annual Fee: None.
  • Introductory APR: 0% on purchases and balance transfers for 14 months.
  • Other Benefits: Discover gives you free access to your FICO score.

Find out how to apply for the card here.

learn_more


Blue Cash Preferred® Card from American Express

The Blue Cash Preferred® Card from American Express is best known for its 6% cash back at U.S. supermarkets. What many don’t know is that it also pays 3% on gas and department stores. Add to that a $150 cash bonus when you spend $1,000 on the card in the first three months, and this card tops our list. Here are the cash back details:

  • 6% cash back at U.S. supermarkets, on up to $6,000 per year in purchases
  • 3% cash back at U.S. gas stations
  • 3% cash back at select U.S. department stores
  • 1% cash back on other purchases

Find out how to apply for this card here.

learn_more


Capital One® Quicksilver® Cash Rewards Credit Card

As a final cash back card to make the list, the Capital One® Quicksilver® Cash Rewards Credit Card pays 1.5% on all purchases. There are no rotating categories or sign ups required. Capital One also pays a $150 cash bonus if you spend $500 on purchases in the first three months. There is no annual fee.

  • Cash Back: 1.5% cash back on all purchases.
  • Sign up bonus: Get a $150 bonus when you spend $500 on the card in the first three months.
  • Annual Fee: None.
  • Introductory APR: 0% on purchases and balance transfers for 9 months.
  • Other Benefits: Every 10th Uber ride is free up to $15 when you pay with your Quicksilver card through March 31, 2017

Find out how to apply for this card here.

learn_more


Travel Rewards Credit Cards

Discover it® Miles

Discover it Miles

The Discover it® Miles card takes the famous Discover cash back features and turns it into a travel card. You’ll earn 1.5 miles for every dollar spent. On top of that, Discover will double your miles the first year. And there is no annual fee.

  • Travel Rewards: 1.5x Miles on every dollar spent on purchases
  • Sign up Bonus: Discover automatically matches all Miles earned at the end of your first year. You could turn 50,000 miles into 100,000
  • Annual Fee: None

Find out how to apply for this card here.

learn_more


Capital One® Venture® Rewards Credit Card

Capital One Venture Rewards Credit CardThe Capital One Venture card is effectively a 2% card. You’ll earn 2 miles on every purchase. When you use those miles to pay for travel, they are worth 1 cent each. Thus, $50,000 in purchases will earn 100,000 miles. These miles are worth $1,000 when used to pay for travel expenses. On top of that, you can earn a 40,000 mile bonus when you spend $3,000 on the card in the first three months.

  • Travel Rewards: 2 miles for every $1 in purchases
  • Sign up Bonus: Enjoy a one-time bonus of 40,000 miles once you spend $3,000 on purchases within 3 months of approval, equal to $400 in travel
  • Annual Fee: $0 intro annual fee for the first year; $59 after that

Find out how you can apply for this card here.

learn_more


Starwood Preferred Guest® Credit Card from American Express

Starwood Preferred Guest American ExpressArguably the best hotel rewards card, the Starwood offers 25,000 bonus Starpoints® after you use your new Card to make $3,000 in purchases within the first 3 months. Starpoints can not only be used for hotel stays at Starwood properties, but they can also be transferred to many airlines and other travel partners.

  • Travel Rewards: Get up to 5 Starpoints® for each dollar of eligible purchases at participating SPG® hotels – that’s 2 Starpoints for which you may be eligible as a Card Member in addition to the 2 or 3 Starpoints for which you may be eligible as an SPG member. Get 1 Starpoint for all other purchases.
  • Sign up Bonus: Get 25,000 bonus Starpoints® after you use your new Card to make $3,000 in purchases within the first 3 months.
  • Annual Fee: $0 introductory annual fee for the first year, then $95.

Find out how you can apply for this card here.

learn_more


Balance Transfers Cards

Discover it® – 18 Month Balance Transfer

Discover it 18 MonthDiscover offers a version of its Discover it®- 18 Month Balance Transfer card that comes with a 0% balance transfer feature for 18 months. The card also comes with all of the same cash back rewards of the standard Discover it card, charges no annual fee and still offers free access to your FICO score.

  • 0% on Balance Transfers: 18 months
  • Balance Transfer Fee: 3% of amount transferred
  • 0% on Purchases: 6 months
  • Annual Fee: None.

Find out how you can apply for this card here.

learn_more

It’s always important to read the issuer’s terms, but the 0% introductory APR that applies to purchases and balance transfers would be a good option for buying a larger item. If you’ve saved up to purchase some furniture, for example, you can use an introductory purchase APR of 0% to use the credit card issuer’s money to improve your cash flow — however, this leverage technique is risky. If you end up using the credit card for an emergency, you can make it more difficult to repay your balance before the introductory period is complete. On the other hand, it could leave you with more cash in your bank account.

Comparing and Using the Best Credit Cards

Even the best credit cards won’t fulfill their potential if used incorrectly. With that in mind, consider the following tips when comparing and using a credit card:

Pay off the balance in full each month: If you use credit cards as a tool for convenience, pay your bills in full every month, and are otherwise financially self-aware, consider some of these credit cards. If you use credit cards to pay for things you can’t afford, paying interest every month, then start thinking about paying off debt.

Consider your spending habits: Many of the above cards pay increased rewards for certain categories of spending. Therefore, consider how you’ll use the card before selecting the best option for your spending patterns.

Consider how you’ll redeem your rewards: Earning credit card rewards is just half the battle. Once earned, you should consider how you will use them. Many cards offer increased rewards when you use points or miles for travel. If you don’t travel frequently, a cash back card is probably best.

Enjoy the signup bonus: Signup bonuses are a great way to increase miles or points quickly. In some cases, they put cold hard cash in your pocket. But make sure you will meet the spending requirements to earn the bonus. And keep in mind that bonuses are just one feature to consider.

The information in this article is believed to be accurate as of the date it was written. Please keep in mind that credit card offers change frequently. Therefore, we can not guarantee the accuracy of the information in this article. Please verify all terms and conditions of any credit card prior to applying. This content is not provided by any company mentioned in this article. Any opinions, analyses, reviews or recommendations expressed here are those of the author’s alone and have not been reviewed, approved or otherwise endorsed by any such company. This site may be compensated through American Express Affiliate Program.

 

{ 54 comments }

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

Best Online Savings Accounts

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

Banking Deal: Earn 1.30% APY on an FDIC-insured savings account at Synchrony Bank.

Interest rates

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

Best Online Savings Accounts

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, even if customers should not have to deal with a representative frequently.

Based on my own experiences and reviews from other Consumerism Commentary readers, here are the most-recommended accounts for short-term savings. All of the listed interest rates directly below from our partners and in the table above are current, although interest rates 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.


Synchrony Bank Savings AccountAt 1.30% APY, Synchrony Bank offers one of the highest rates available today on an FDIC-insured savings account. With no minimum balance required and no monthly service fees, it’s one of the most popular options. Click here for more details.


ally_120x60-002Ally Bank was selected by Kiplinger Magazine as the best savings account for 2009. Formerly known as GMAC Bank, Ally Bank provides an interest rate for their online savings account of 1.20% APY. Click here for more details.


EverBank has a variety of products including a high yield checking account, a money market account, and world currency CDs. All of these accounts offer top-tier interest rates. For example, first time account holders of Everbank’s Yield Pledge Money Market account earn a new account bonus rate of 1.31% for the first year. After the first year, the ongoing APY is 0.86% for account balances up to $250K. And their Yield Pledge Checking Account for first time account holders for balances up to $100,000 offers a new account bonus rate of 1.31% for the first year and the ongoing APY is a standard 0.86% APY. Click here for more details.


FNBO Direct offers no fees and no minimum balance requirement. It is the online arm of First National Bank of Omaha. FNBO has an interest rate of 1.10% APY. Click here for more details.


Discover Bank offers a solid online savings account with a fast opening process. For example, I opened my account within twenty-four hours. The current interest rate for the Discover Bank Online Savings Account is 1.20% APY. Click here for more details.


CIT Bank was founded in 1908 in St. Louis by Henry Ittleson. Throughout the 20th century CIT continued to grow in all sectors. An FDIC-insured institution, it serves consumers and small businesses with certificates of deposit, savings accounts, and custodial accounts. CIT Savings account offers 1.35% APY on all deposits.


SmartyPig currently sports one of the better interest rates you can find online at 1.15% APY. You can also convert your savings goals into gift cards and earn an additional bonus for each gift card conversion. SmartyPig is not a bank by itself. It is a goal-oriented savings vehicle, a layer, that can be compared with other savings accounts.


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


Barclays is a large, international bank that has been around for 300 years, and operates in over 50 different countries. Barclays offers a 1.30% APY on all deposits, with no minimum balance and no monthly fees.


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


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


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

{ 280 comments }

It’s late May, and a new crop of students is preparing to go on to college. One of my less pleasant memories was the agonizing process of securing financing so I could pursue my degree. Though it’s many years later, I’d like to share what I learned that can make paying student loans more manageable and less onerous.

Of course, it was much easier when I went to college than it is now. Even adjusted for inflation, college education was much less expensive then and student loans were a better deal.

The interest rates were actually fairly similar to today’s; but I attended college back when mortgage rates were around 15 percent, so low, single-digit student loan rates represented much more of a discount.

Because student loan debt was less burdensome when I graduated, despite the fact that I took on the debt in a desperate and disorganized way, I was able to pay my loans off early, within five years. These days, the financial stakes are higher, and it takes more planning to make student loan debt manageable.

How to reduce student loan debt

Here are some things students and their parents should consider to reduce student loan debt in the first place:

  1. Consider value for your education dollar. Education is a wildly inefficient market. By that, I don’t mean that the schools themselves are disorganized. What I mean is that if you think of education as a consumer market with heavy competition for student dollars, it is amazing how wide the cost differences are. Even if you excuse the cost of elite colleges as the price you have to pay for a premium product, looking at more run-of-the-mill colleges one finds huge cost differences — sometimes representing tens of thousands of dollars a year — which do not seem generally to correlate with differences in quality. The nice thing about inefficient markets is that they make bargains available, but only to discerning consumers who take the time to shop around. Cheap should not be your primary criterion for choosing a school, but value for money should be high up on your list.
  2. Understand the qualifications needed for what you plan to do. One reason it is not out of place to think of education as a consumer market is that there is so much hard selling of degree programs these days. Often times, colleges heavily advertise degree programs that relate to a trendy career choice, but those degrees do not represent the full qualifications necessary to compete in that field. Don’t just choose a degree program because it sounds like something you’d like to study; think ahead to what you would like to do for a living, and then work backward to identify the degrees necessary to get hired in that field.
  3. Know what the market is for your planned career. Speaking of thinking ahead, research what demand there is for your planned career. The Bureau of Labor Statistics is a good source for information on hiring trends by occupation. I’m not saying you can’t choose more of a niche field because it is something you love, but you should know what your odds of making a living in that field are before you spend time and money preparing for it.
  4. Explore all your financial aid options. The federal government has a program called Free Application for Federal Student Aid, or FAFSA. This is a good clearing house for information and application materials for several types of student financial aid, so you can find the resources you need and choose the best ones for your situation.
  5. Prioritize your financial aid types. If there are grants or scholarships available — sources of aid that don’t require repayment — make the most of those before you borrow money. Then, choose federally-backed student loans first, because these offer good loan terms and some repayment flexibility. Private student loans should be your last priority.
  6. Use savings resources wisely. If you have saved money for college, put it in vehicles that will make it available when you need it and yet earn you the most interest in the meantime. You’ll find that if you are able to plan six months or more ahead, you can find CD rates that will do better for you than what you could earn in a savings account.
  7. Check how your repayment schedules add up before you borrow. Every loan you sign up for will probably provide a repayment schedule, but the reality check is to see how those repayment schedules add up as you take on multiple loans. Graduating students are often shocked by the burden they are facing, but there is no excuse for taking on obligations you won’t be able to meet.
  8. This time is too expensive to waste. Don’t be intimidated by the financial responsibility facing you, but respect it and use it for motivation. Blowing off classes and prolonging your time in school is an awfully expensive luxury. Getting your degree on time can save you a great deal of money.
  9. Remember the bigger picture cost of failing to pay. There is a lot of resentment among recent graduates about the financial burden they’ve taken on with student loans, and this is often expressed as talk about not paying back those loans — either by taking advantage of government forgiveness programs, lobbying for student loan relief, or simply defaulting. Just remember that every student who fails to pay back a loan makes it harder for subsequent students to get those loans. If you approach taking on and paying back loans responsibly, you can make the system work for you and future generations of students.

When you think about it, financing college represents a sort of hand-off of responsibility from the parent’s generation to the student’s. The parent often helps pay for college and guides the student in finding and organizing financing. In the long run though, it is the student left making the student loan payments for years to come — often until he or she has kids and has to start thinking for their college education.

That passing down of financial responsibilities between generations makes this an ideal time to work together to find and plan educational financing, so the older generation can share what they’ve learned and the younger generation can step up and make informed decisions about the process rather than just going along for the ride. Given the nature of the challenge involved, both an older person’s knowledge and a younger person’s eye to the future can bring valuable perspective to the process.

{ 2 comments }

Best Time to Buy a House

by Richard Barrington

In chemistry, a catalyst is something that triggers a reaction — but the nature of the reaction itself depends on having the right elements in place to respond to the catalyst. What brought to mind that tattered remnant of high school chemistry was thinking back on buying my first house. I’ll explain how I got […]

2 comments Read the full article →

Why Lending Rates Can’t Stay Low Forever

by Richard Barrington

The Federal Reserve sure gets a lot of media attention. And yes, the discussion of when and if the Fed is going to raise interest rates can get a little tedious, but it still probably deserves some of your attention because interest rates are woven so deeply into the fabric of household finances. The Fed […]

2 comments Read the full article →

Balance Transfer Cards for Fair, Average or Excellent Credit

by Richard Barrington

[Editorial note: This offer was last updated on July 13, 2016.] Are you still wrestling down holiday debt? Zero-interest balance transfer credit card offers can help you meet this challenge, but only if you know what to look for. Otherwise, you will end up paying interest anyway, which is exactly what the credit card companies […]

2 comments Read the full article →

Retirement Planning and Advice

by Richard Barrington

Retirement does not always go the way people expect. While no two experiences are exactly the same, over time it seems that people’s financial situations in retirement tend to fall into one of a few distinct categories. As you think ahead to how you want your retirement to go, keep the following categories in mind. […]

2 comments Read the full article →

Metrics for your household finances

by Richard Barrington

It’s the heart of the baseball season and, whereas 20 years ago talk about the sport would have centered on the All-Star Game, the trade deadline, and how the pennant races were shaping up, now the chatter is filled with terms like “Wins Above Replacement” and “Defense-Independent ERA.” For better or worse, advanced metrics have […]

1 comment Read the full article →