Banking

Ally Bank Review: Flexibility and Decent Yields

Miranda Marquit — Fri, 17 May 2013 10:36:37 +0000

Ally Bank is one of the most prominent banks in the online space. While it seems that Ally is a new player in the banking game, the reality is that the bank’s roots actually date back to 1919 when the company now known as Ally Financial was founded as the General Motors Acceptance Corporation.

Ally Bank is a subsidiary of Ally Financial, and is known for its competitive yields on cash products, as well as its customer-friendly attitude.

A Brief History of Ally Bank

Ally Financial was started in 1919 as the General Motors Acceptance Corporation (GMAC), and was originally meant to help finance auto purchases for those buying GM cars. The company’s headquarters is in Detroit, Michigan.

Over time, the financial services offered by GMAC expanded to include consumer banking, mortgages, and even insurance. However, after decades, GM began selling its stake in the company. In 2006, a 51% stake in GMAC was sold to a consortium of buyers led by the private equity firm Cerberus Capital Management.

GMAC was hit hard by the financial crisis, and in 2008 received TARP funds. In 2009, GMAC Bank was rebranded as Ally Bank. The overall company name was changed to Ally Financial in 2010. Ally is still about 74% owned by the U.S. government, and an exit plan is being developed. Ally claims that it has repaid about $6.1 billion to the U.S. Treasury as of May 15, 2013.

Along with the rebrand, Ally began focusing heavily on customer service, and offering no-nonsense accounts with competitive yields. The consumer banking side of Ally is fairly basic, offering a few products and services, and receiving recognition for its efforts.

Ally is FDIC insured, so your accounts are protected up to the maximum amount. Additionally, Ally Bank has a mobile banking app that allows you to keep track of your accounts no matter where you are.

Features and Benefits Ally Bank

For savers looking for reasonably high yields, Ally Bank offers a few options. While you won't find as many products and services with Ally as you might find with other institutions, the offerings at Ally Bank focus on boosting yields on cash products, making Ally a decent choice for emergency fund holdings. On top of that, Ally Bank compounds interest daily, boosting your total earnings from interest.

Certificates of Deposit

Ally is well-known for its certificates of deposit. In 2012, MONEY Magazine awarded Ally the recognition for "Best One-Year CD." CD rates change often, but as of this writing the High Yield CD with a one-year term has a yield of 0.94%.

Ally also offers a no-penalty CD. This CD is a little different, in that you can withdraw your money early with no penalty (as long as you wait at least six days). This is a somewhat unique situation, especially since there is no minimum deposit to open the no-penalty CD. The yield on a no-penalty CD is lower than what you will get for a more conventional CD, but if you want the freedom to withdraw your money when you want, it can make sense to use this option.

You can also choose the "Raise Your Rate" CD, which allows you to take advantage of higher CD rates. If the rate rises during the term of the CD, you have the option to raise your rate. However, you can only raise your rate once during a two-year term, and twice during a four-year term. This is still a nice feature, however, since it gives you the opportunity to improve your yield, even after you are "locked in" by a specific maturity.

Ally also offers a handy CD laddering tool that can show you how to maximize your CD earnings with the help of a ladder.

Online Savings

Ally's online savings account has been recognized as one of the best savings accounts available. There is no minimum deposit to open your account, and no monthly maintenance fees. As of this writing, the variable APY on the savings account is 0.84%.

You can set up automatic deposits to your online savings account, and you can transfer money out of the account up to six times a month.

Money Market

If you want a little more flexibility with your savings account, Ally offers a money market savings account. You receive free standard checks, as well as a Visa debit card. You don't have to pay ATM fees on the Ally end, and Ally will also reimburse your ATM fees from other banks. Because it is a savings account, you are limited to the six transactions per statement cycle if you want to avoid fees, pursuant to federal law.

Checking

You can earn interest on your checking account balance with Ally, and this can make the account a valuable addition to your emergency savings strategy, providing you with the ability to use your MasterCard debit card, as well as get free checks.

The checking account is compatible with Popmoney, allowing you to quickly and easily send and receive personal payments. You can make deposits remotely with eCheck Deposit, and you don't have to worry about ATM fees. On top of that, you can earn cash back with Ally Perks.

IRA Products

You can also find IRA-friendly products with Ally. The IRA CD options come with much higher yields, but you have to be willing to commit to a longer term. You can open a Traditional, Roth, or SEP IRA with Ally. However, carefully consider this option before you commit some of your contributions to cash products.

Ally Bank also offers links to other services that fall under the Ally Financial umbrella. One of these is auto financing and leasing. Even though this isn’t a service of Ally Bank, it’s possible to learn more about personal and business auto financing by following the link from Ally’s main web site.

Bottom Line

Ally Bank has managed to successfully rebrand itself into a competitive bank with high yields and products that consumers hold in high esteem. Ally is straightforward in its materials, offering upfront information. As a place to park your emergency fund cash, Ally is a good choice, offering flexibility and good rates.

Written by Miranda Marquit and published on Wise Bread. Read more articles from Wise Bread.

The Basics of CD Laddering

Miranda Marquit — Wed, 24 Apr 2013 09:48:40 +0000

Right now, many savers are disappointed with the low savings account yields offered by many banks. Many bear the situation because there isn't a safer option in terms of a place to keep your cash.

In order to boost yields, some savers turn to CDs to help find an edge. The downside to that approach, however, is that you might have to agree to lock your money away for five years if you want the best CD rates. (See also: The 5 Best High-Yield CDs.

One way to take advantage of better rates without locking away all your money is to use a technique known as CD laddering.

How a CD Ladder Works

A CD ladder is designed to give you predictable access to your money (just in case you need it), while allowing you to take some advantage of higher yields.

Putting together a CD ladder is fairly straightforward. You begin by dividing the desired deposit into five smaller deposits. Then, you open five different CDs, each with a different maturity. Once one matures, you can then roll it over into a five-year CD (or use the money, if you need it).

Say you have $15,000 in your savings account. Here's how your ladder would work:

$3,000 in a one-year CD, 0.90%
$3,000 in a two-year CD, 1.20% yield
$3,000 in a three-year CD, 1.25% yield
$3,000 in a four-year CD, 1.51% yield
$3,000 in a five-year CD, 1.62% yield

In one year (year two of your CD ladder), the lowest-yielding CD will mature. Now you have the chance to roll it into a five-year CD. If rates have gone up in the intervening year, you'll be able to take advantage of that with your five-year CD. Even if rates have gone down, a five-year CD is still probably yielding more than what the one-year CD was anyway, so your money is still likely moving into a higher-yielding product.

For year three of your CD ladder, it will be your two-year CD that you roll into another five-year CD. As you can see, setting up your CD ladder in this manner allows you to keep putting money into a longer-term CD that usually has a higher yield.

CD Features to Look For

Choose a CD that compounds interest daily and deposits your earnings automatically into your CD account. That way, your interest earns interest more often, and you can build on the money that you have in your account a little faster.

In our example, the first CD will have a balance of $3,027.12 after one year. After you roll it into a five-year CD with a 1.65% yield at the end of that one year, the next time you access the money it will have grown to $3,286.44. In the meantime, all your other CDs have matured with their interest added to the total, and you are rolling over the principal plus all the accrued interest into new five-year CDs. It's slow going, but anytime you invest in safe, FDIC-protected products, you can't expect to see dramatic returns.

Annual Rollovers Provide Flexibility

Interest rates are expected to rise at some point, and when they do, you'll be in a position to take advantage of the higher rates once a year. In the meantime, you receive some measure of protection from the possibility of falling rates by having your higher yield locked in on your four other CDs. Over time, a CD ladder can provide you with a decent cash cushion, even if it won't provide you with the means to retire (unless you start with jumbo-CD cash).

Does This Work With an Emergency Fund?

A CD ladder can also work as part of an emergency fund. If you want to be able to access your money more regularly, just in case, create a short-term ladder. You can do this by dividing your cash reserve into four sections instead of five:

$3,750: three-month CD
$3,750: six-month CD
$3,750: nine-month CD
$3,750: one-year CD

When your three-month CD matures, roll it into a one-year CD, and it will mature at month 15, three months after your original one-year CD expires. Each time a CD expires, renew for a year, and it will mature at the same time annually. If you need the money, you know you'll have it in three months.

The downside to using a CD ladder for an emergency fund is that, as of this writing, a one-year CD is only slightly higher than the rates offered by high-yield savings accounts, and the three-, six-, and nine-month CDs might not have as high rates. This strategy works best if you think that high-yield savings account rates are going to fall, and you want to lock in something right now — just in case.

Using a CD ladder for your emergency fund also presents another conundrum. In the event that you need to access the money before a CD matures you might face early withdrawal penalties. CD laddering can work well as part of a wider emergency fund strategy. Make sure you have more liquid funds in an account that you can access immediately if need be. Those funds should be able to help you stave off financial disaster while you wait for one of your short-term CDs to mature.

Bottom Line

A CD ladder can be a safe way to squeeze a little more yield out of your cash. With rates as low as they are right now, you might not even beat inflation, but your money will be in an account protected by the FDIC in the event of bank failure. You can use your CD ladder to build up a tidy amount of cash over a period of years, or you can use it as part of your emergency fund strategy.

No matter how you use your CD ladder, though, you need to make sure you understand the terms of the CD, including early withdrawal penalties and the rollover policy practiced by the bank.

Written by Miranda Marquit and published on Wise Bread. Read more articles from Wise Bread.

Why Savings Account Interest Rates Are So Low

Miranda Marquit — Wed, 17 Apr 2013 10:24:31 +0000

In 2006, I started writing about personal finance. One of the first topics I wrote about was the online high-yield savings account. (See also: The Best 5 Online Savings Accounts)

Back then, these accounts were all the rage. I opened an account offering 5% APY and wrote about how great online accounts were for emergency fund purposes. A deposit of $1,000 meant a little more than $4 in interest the first month.

Now, you'd be hard-pressed to find a high-yield account offering much more than 1% APY, providing you with right around 83 cents in interest the first month. That's a big difference.

But why are interest rates so low on savings accounts? Shouldn't we want to encourage savers in our current economy?

Depositors vs. Borrowers

In reality, banks can pay whatever yield they want on a savings account. If a bank wanted to start paying 5%, it could. There's nothing stopping it, except the desire to turn a profit.

Banks set yields on deposits based on the rate they can get for lending money. The difference between what a bank receives on mortgages and auto loans and other credit, and what the bank pays out in yields to depositors, represents one of the bank's revenue streams.

In 2007, when I bought my home, the best interest rate available to me was 6.02%. By then, the yield on my savings account had dropped to 4%. Now, you can get a mortgage for right around 3.50%. As long as a bank is able to lend at a rate higher than what it pays to depositors, there's a better chance of profit.

So why even pay depositors at all? The reason is that banks are required to keep some capital in their reserves. They are required to keep money in — for lack of a better word — the vault in order to lend. For the most part, credits and debits appear on paper and digitally. But those records have to show that the bank has money in reserve.

Hence the need for depositors.

Banks need to attract depositors to put money in the bank, so they have something to lend (or something to leverage). A bank pays a yield in order to encourage you to park your money in an account; the bank then lends the money at a higher rate than it pays you.

The Federal Reserve and Savings Account Rates

So why are mortgage (and other loan) rates so low? What sets those rates?

The Federal Reserve plays a large role in determining what the rates look like. There are two main rates that come into play:

Federal Discount Rate: This is the rate at which the Federal Reserve lends money to the banks.
Federal Funds Rate: This is the rate we're all familiar with when the news talks about the Fed "setting rates." This is the rate at which banks can lend money to each other.

The Federal Reserve prefers banks to lend to each other, rather than borrow from the Fed, so the Federal Funds Rate is often a little lower than the Discount Rate.

Since consumer spending drives about 70% of economic activity in our country, the ability of banks to lend to each other, and to consumers, to keep the money going 'round the economy is a big part of what the Federal Reserve does.

Lower Fed Rates Encourage Borrowing

In times of economic turmoil and difficulty, the Fed lowers the two rates in order to encourage borrowing. Right now, the Fed Discount Rate is at 0.75%, and the Fed Funds Rate is operating in a target range of between 0% and 0.25%.

In a down economy, with so much of the activity dependent on consumer spending, the goal is to attract consumers to loans. These low Fed rates bring loan rates down. Since banks can borrow from the Fed, and from each other, at such low rates, it means they can lend to consumers at lower rates, encouraging them to borrow.

Fed Purchases of Treasuries Reduce Mortgage Rates

Another twist is the fact that the Federal Reserve is still buying long-term Treasury securities. The rates on long-term Treasury securities often influence mortgage rates. As long as the Fed maintains its monthly bond purchase program, long-term Treasury rates are expected to remain somewhat low, keeping mortgage rates down with them.

Of course, once the banks are no longer enjoying higher rates of return on the money they lend, it means they no longer pay their depositors a truly high yield.

When Will Savings Account Rates Go Up?

Following the last policy meeting for the Federal Open Market Committee (FOMC), the body that sets interest rate policy, Federal Reserve Chair Ben Bernanke announced that interest rates will remain ultra-low until 2015. The bond purchases will continue for now, but they are likely to be reduced as a prelude to an interest rate hike from the Fed.

No one knows for sure when the Fed will decide to hike rates. The FOMC makes its decisions based on how members feel the economy is faring. If the economy is heating up, the Fed raises interest rates in order to slow inflation and keep growth in check.

As the economy improves, interest rates are more likely to rise. There isn't the need to encourage banks and consumers to borrow, so rates are allowed to rise. Once the interest rates on loans begin rising, the yields on savings accounts are likely to begin rising as well.

Until then, consumers are stuck looking for yield in places other than savings accounts. Many are turning to the stock market, since all of these efforts at economic stimulus are aimed at helping businesses borrow at lower rates (and boost their profits). However, there are larger risks with stocks than with cash held in a bank insured by the FDIC.

If you have debt, though, now is a good time to aggressively tackle it. With interest rates lower, more of your payment goes to principal. And paying off high-interest debt will offer you a better return on your money than watching it languish in a savings account.

Written by Miranda Marquit and published on Wise Bread. Read more articles from Wise Bread.

Get Ready to Manage Your Bank (and Other Cash) Accounts

Philip Brewer — Fri, 22 Mar 2013 09:48:38 +0000

For most of the last five years, there's been no reason to pay much attention to how you stored your cash — it doesn't earn enough interest to worry about. That's about to change. (See also: Managing Your Short-Term Money)

Back in the 1980s, it made a big difference where you held your money. Bank interest rates were capped at below the rate of inflation. The money market fund was invented to get around that, meaning that finally, ordinary people (not just the wealthy) could get a market rate of interest on their short-term cash.

Interest rates were high enough that it made a real difference. For much of the first half of the 1980s, it was possible to get 11% on your cash — about double what you could get in a savings account, and infinitely more than you could get on a checking account (because banks weren't allowed to pay interest on checking).

With rates that high, people found it worth their while to do quite a bit of micromanaging of their money. They'd rush to get any new cash earning interest at the earliest opportunity. They'd shift any spare cash into their money market fund even if they knew they'd move it to their checking account in just a few days. They'd delay paying their bills until the last possible moment.

At 11%, a $1,000 deposit is going to earn $2.12 every week. Multiply that (and compound it!) over the course of a year, and pretty soon you're talking real money.

Before, people kept liquidity balances mostly for convenience. If you had some money sitting in your checking account, it meant you could pay bills when they came, rather than having to wait until you got your paycheck.

After, liquidity balances were a profit center.

That's good in a sense. (Profit!) But it was also yet another thing that had to be managed. It could be very unhandy if you were caught suddenly needing your money while it was in the midst of being moved.

With interest rates so low, we've been able to just ignore this.

That's what I've been doing. I mentioned a couple years ago about how the sneaky bank almost got me when they increased minimum balances. Without really giving it much thought, I just boosted the amount I kept in my account. That's been fine so far. The extra interest I could have earned by making sure that money earned a top rate is just a few dollars a year. But once rates start to go up, it's going to be a different story.

Enjoy the luxury of just keeping cash anywhere that's handy — checking account, savings account, money market account, and money market fund — without monitoring rates. Pretty soon you'll have another thing you'll need to manage.

Written by Philip Brewer and published on Wise Bread. Read more articles from Wise Bread.

What You Need to Know About the FDIC

Miranda Marquit — Thu, 21 Mar 2013 09:48:34 +0000

With all of the bank failures since the 2008 financial crisis, more consumers are asking questions about the FDIC and what it does. Many consumers have a vague idea that the FDIC protects their money if a bank goes down, but the other details might be fuzzy.

If you want to make sure that all of your money is protected adequately, it helps to know how the FDIC works and what kinds of deposits are covered. (See also: Why I Like Big Banks)

Brief History of the FDIC

Between 1929 and 1933, thousands of banks in the United States failed. At that time, when banks failed, all the money customers had deposited was lost. Estimates put the losses to depositors during this period at about $1.3 billion.

In response to the banking crisis, and in order to help build confidence in the U.S. financial system, the Banking Act of 1933 was passed. As part of this legislation, the Federal Deposit Insurance Corporation (FDIC) was created.

At first, the FDIC was a temporary government corporation. However, in 1935, another Banking Act made the FDIC permanent and set the protection level at $5,000. Through the years, the limits have been increased. Following the events of 2008, the insured limit has been raised to $250,000.

How the FDIC Works Today

Banks that wish to have their deposits insured by the FDIC pay an insurance premium. The FDIC provides the insurance. Since 1991, banks have had their premiums based on risk — much like other insurance policies. If a bank looks like a higher risk of failure, it is assessed a higher premium.

If an insured bank fails, the FDIC either finds another bank to take over the failed institution and run it (preserving the consumers' accounts), or the FDIC sends money to the depositors who are entitled to their cash. Usually, these transitions happen fairly smoothly, and the FDIC is generally prompt about issuing replacement funds when necessary.

When a failed bank is taken over by another bank, it's important that you pay attention to the new account terms. Interest yields may not be the same with the new bank, or there might be a fee attached to the account. If you aren't happy with the new bank, you can withdraw your money and open an account at a bank you like better.

The current structure of the FDIC includes seven divisions, with the agency overseen by a five-member Board of Directors. The Chair of the Board is a presidential appointee, subject to approval from the Senate.

What Types of Accounts Are Insured by the FDIC?

It's important to note that the FDIC doesn't insure all accounts that you hold at a bank. The types of accounts that are covered by FDIC insurance include:

Savings
Checking
Money market deposit (but not money market mutual funds)
Certificates of deposit
Individual Retirement Accounts
Revocable and irrevocable trusts
Negotiable Order of Withdrawal (interest bearing accounts with check-writing privileges)

Some types of accounts, like Coverdell ESAs, are insured as trust accounts. A Coverdell account is considered an irrevocable trust account. A Health Savings Account might be classified as a single savings account or as a revocable trust account, depending on whether or not you include beneficiaries.

Not every type of account is covered by the FDIC — even if you open the account at an insured bank. Stock market investments, municipal securities, bonds, mutual funds, life insurance policies, and annuities are not covered by FDIC insurance. If you lose money because of these accounts, you can't get help from the FDIC (although there may be other insurance to protect you).

Understand that FDIC protection only applies to bank failures. If your money is stolen, or if something you kept in a safety deposit box is destroyed, you won't receive protection from the FDIC. Instead, you should check with your bank to see what kind of protection it has purchased against theft and natural disaster.

How to Protect More Than $250,000

When you open an account, you should check to see how your account will be qualified, and make sure that you understand the rules. There are five categories that the FDIC classifies accounts into:

Single Accounts
Joint Accounts
Qualifying Retirement Accounts
Revocable and Irrevocable Trusts
Government Accounts

Knowing these five categories can help you get around the $250,000 protection limit.

FDIC protection applies to all of the accounts you have at the same bank. If you have $150,000 in a single savings account, and another $150,000 in an HSA classified as a single savings account at the same bank, only $250,000 of the $300,000 is covered, leaving the remaining $50,000 vulnerable.

One way to get around this is to spread your accounts around various banks. That way, you don't have a large concentration at just one bank. This can become difficult to manage, however.

If you want to keep more money at one bank for simplicity, realize that the FDIC will cover up to $250,000 in each category. If you have a trust account, a single savings account, and an IRA at the same bank, you can receive up to $750,000 in FDIC coverage. As long as you pay attention to categories, you can increase the amount of money you keep at a single bank.

It's also worth noting that joint accounts receive increased protection, since each person is eligible for the coverage. So, if you have a joint checking account with your spouse, it is covered for $500,000. This can dramatically increase the amount of money covered by the FDIC.

What About Credit Unions?

Credit unions aren't covered by the FDIC. Instead, there is a different organization, the NCUA, that insures credit unions against failure. The coverage limit of $250,000 is the same, and many of the rules are similar. If you keep your money at a credit union, you should check for NCUA insurance.

Written by Miranda Marquit and published on Wise Bread. Read more articles from Wise Bread.

Best Money Tips: How to Save on Banking Fees

Ashley Jacobs — Thu, 14 Mar 2013 11:00:30 +0000

Welcome to Wise Bread's Best Money Tips Roundup! Today we found some great articles on saving on banking fees, decluttering your kitchen, and time management rules you are breaking.

6 Ways to Get Paid for Saving Money

Julie Rains — Wed, 06 Mar 2013 11:36:33 +0000

You can make money by saving money, apart from interest, dividends, and investment earnings. These methods deliver bonuses in ways you may not have recognized as getting paid to save. (See also: The 5 Best Online Savings Accounts)

1. Claim the Saver's Credit

This money comes from the federal government via the IRS. Through the Retirement Savings Contributions Credit (aka Saver's Credit), you can get up to $1,000 (or $2,000 if married filing jointly) if you contribute to a qualified retirement account and meet certain requirements, which most notably include income limits.

You can't make more than $28,750 in modified adjusted gross income ($43,125 if head of household or $57,500 if married filing jointly) to be eligible. At those income levels, you may not have a lot of extra cash to sock away for retirement, but if you do save, you'll get a nice bonus. Use Form 8880 to calculate and claim your credit.

2. Win Prizes and Rewards for Saving Money

You can earn rewards and may be able to win prizes by tracking your savings with a couple of online services.

SaveUp helps you to monitor savings and debt payoff, and gives you the opportunity to play for prizes that range from a $100 gift card to a $2 million jackpot. The site also dispenses rewards in the form of promotional offers.
SmartyPig gives you a place to save money for specific purposes such as a summer trip to the beach or new flooring for your house. When you have accumulated the dollars, you can redeem your savings by 1) transferring money to your checking account, 2) loading money to a prepaid debit card, or 3) receiving a gift card from certain retailers. While option #1 doesn't give you extra cash, you'll get 1% more if you take your savings on the debit card and a bonus of up to 11% if you choose a gift card.

3. Earn Bonuses for Setting Aside Money in Savings Accounts

Many banks and credit unions have cash incentives for customers who commit to saving. For example, BBVA Compass matches a percentage of transfers from a checking account to a savings account; you can earn up to $250 per year through the Build My Savings program. Bank of America also contributes up to $250 through its Keep the Change program.

And, I learned via Money Crashers that Citizens Bank has a CollegeSaver savings account that gives a one-time $1,000 bonus when your child reaches 18 if you make minimum monthly deposits.

4. Get Cash for Opening and Funding an Investment Account

Brokerage firms offer incentives for opening and funding an investment account. To get rewards, you typically have to make a hefty deposit. For example, to earn $200, you'll need to put $50,000 in a new account with Charles Schwab (but you can earn $100 on a deposit of just $10,000 if you are an AARP member).

However, your bank, credit union, or other financial institution may offer more accessible deals. For example, ShareBuilder is offering a $50 bonus to open and fund an IRA with $5,000.

5. Snag Your Company's Match

You can make extra money courtesy of your employer if you contribute to a qualified retirement plan and your employer matches contributions. Review plan documents to verify that a match is available. Set aside the percentage of your pay that harvests the maximum payout from your employer.

6. Take Tax Deductions

The federal government and most state governments give you a bonus (in the form or lower taxes) for your contributions to traditional retirement accounts (such as traditional 401ks or IRAs) and Health Savings Accounts (HSAs).

There are restrictions for tax deductions, generally based on earnings and the amount of deductible for the high-deductible health plan linked to the HSA. But if you qualify for tax deductions and put money in these accounts, you can lower your tax liability and increase your cash inflow, either from a larger refund or smaller tax payment.

Even though interest rates are low and rewards for saving are often small (even in a high-yield CD) or uncertain in investment accounts, there are ways to get cash bonuses that boost your bottom line.

How have you made money by saving money?

Written by Julie Rains and published on Wise Bread. Read more articles from Wise Bread.

The 5 Best High Yield CDs

Miranda Marquit — Thu, 21 Feb 2013 11:36:31 +0000

Savers are having a tough time. Interest rates are low, and that means yields on cash are low, too. The term "high yield" doesn't have the same meaning that it had before the financial crisis of 2008, but that shouldn't stop you from trying to get the best possible deal when it comes to your time deposit accounts.

What Should You Look for in a CD?

It's not just about yield (although that is a major concern). Here are some of the items you should consider as you look for a CD.

Length of Term

How long will your money be locked up? While you can get a higher yield if you choose a longer term, it's important to remember that if you try to get your money before the CD matures, you will pay a penalty. On top of that, if yields rise while your money is locked up, you can't take advantage of the increase.

Minimum Deposit

Some CDs require a minimum deposit for you to take advantage of the yields. While some minimums are as low as $500, others require as much as $10,000 or even $25,000 to get the best return. If you don't have a large amount of money, or if you are looking to create a CD ladder, it might make sense to look for a CD that offers a relatively high yield with a minimum deposit of $1,500 or less.

How Interest Is Compounded

Look for a CD that compounds your interest. This means that you earn interest on your interest. Each time your interest is compounded, it is added to your CD total, and begins earning interest along with the principal. Some CDs compound your interest daily, which provides you the best earning potential. Others compound interest monthly, quarterly, and annually.

Other Features and Perks

You should also look at other features and perks offered by high yield CDs. Some offer you the opportunity to "bump up" your rate one time during the course of the maturity, allowing you to benefit if yields rise. Others are "no penalty" CDs that allow you to withdraw money before the maturity without incurring a penalty. You have to read the fine print, though, since many of these types of CDs come with lower yields to make up for the flexibility.

Consider your situation and what works best for your finances as you consider what CD might work for you. Choose a term and double-check the minimum deposit amount. Also, be aware of other issues that might impact your eligibility for the advertised yield. Sometimes the rate you see advertised is not the yield you end up getting.

Below are five great high yield CDs to consider. All of the CDs listed below are at properly insured financial institutions, and you can check with the financial institution for different maturities and other high yield products. As always, though, read the fine print before you commit to a CD account.

1. Ally Bank

In October 2012, MONEY Magazine named Ally the "Best Online Bank," and there's a reason for that. Ally's one-year CD has an APY of 0.94%, compounded daily. You don't need a minimum to open this CD, and you can arrange an automatic renewal when the CD matures. You can also get an APY of 1.59% (also compounded daily) if you choose a five-year maturity.

Sorry, this offer is currently unavailable

2. Nationwide Bank

When most of us think of Nationwide, we think of an insurance company. However, there is a bank, and it offers reasonable customer service and features competitive CD products. The 12-month CD offers a yield of 1.00%, and there is no minimum deposit. The five-year CD offers an average-beating 1.80% yield on deposits of between $0 and $9,999.99. Rates are even more attractive if you have a jumbo CD with $100,000 or more. Rates at Nationwide Bank are compounded on a daily basis.

Click here to open an account now

3. OneWest Bank, FSB

OneWest Bank has a five-star rating on Bankrate, which means that it's probably a solid choice. The rates are competitive. There is a $1,000 minimum on the CDs. A one-year maturity has a yield of 1.00%, while a five-year maturity comes with a 1.60% APY. Rates are compounded daily on the OneWest CDs.

Click here to open an account now

4. Bank of Internet USA

This is a lesser-known bank that provides competitive rates, thanks to its low overhead. The one-year CD currently has an APY of 0.80% with a $1,000 minimum deposit. If you can afford to have your money locked up for five years, there is a very attractive yield of 1.60%. All of the interest is compounded daily, so you receive maximum earnings on your money.

Click here to open an account now

5. EverBank

EverBank is an increasingly popular choice for serious savers. The CD account comes with no maintenance fees, but you do need a minimum deposit of $1,500. There is a yield of 0.81% on EverBank's one-year CD, and a 1.65% yield on EverBank's 60-month CD. Both of these rates are fairly competitive. EverBank often receives high marks for customer service. Like many of the other banks on this list, EverBank compounds its interest daily. Unlike the other accounts (check, savings, and money market) at EverBank, which come with maintenance fees and other fine print issues, the CDs offered are straightforward and hassle-free.

Click here to open an account now

Honorable Mention: USAA

Another popular financial institution is USAA. You do need a minimum deposit of $1,000 in order to open a CD at USAA. The one-year CD offers an APY of 0.81%, and the five-year CD provides a yield of 1.46%. One of the hallmarks of USAA is the customer service and the ease of banking. Interest is compounded monthly, though, rather than daily.

Click here to open an account now

Bottom Line

Right now, you are unlikely to find a cash account that pays a truly high yield. You are probably going to have a hard time finding an account that will keep pace with inflation. But if you want to make the best of a difficult savings situation, these six institutions offer decent CD options.

Written by Miranda Marquit and published on Wise Bread. Read more articles from Wise Bread.

5 Best Online Checking Accounts

Miranda Marquit — Mon, 11 Feb 2013 11:24:30 +0000

The Internet provides us almost limitless choices, especially when it comes to finances. These days, you can choose to keep your money at almost any bank in the nation rather than limit yourself to the brick-and-mortar choices in your local area.

If you aren’t happy with your local offerings, turn to the Internet. There are plenty of online checking accounts with no fees, and some that even pay yields on your account balance. With low overheads, online checking account providers can afford to be more generous in their terms, and that benefits consumers.

How to Choose an Online Checking Account

The first thing you should look for is FDIC or NCUA protection — you want to make sure that your money is safe. You should also check into the reputation of the bank or credit union, since you don’t want to end up with a fly-by-night operation.

Consider your individual needs. Think about whether or not you can handle maintaining a large account balance. Will you use the checking account as your primary account, or is it more of an emergency fund? Paper checks, remote deposit of checks you receive, ATM access, and other perks are also things to consider.

You can also compare yields, but it’s important to recognize that yield isn’t everything. If you have to maintain a high balance to get a high yield, it might not be worth the trouble — especially if you can get a great account with a little lower yield, but fewer restrictions.

Here are five great options for online checking accounts, plus an honorable mention.

1. PerkStreet Financial

If you are wary of using credit cards to earn rewards, PerkStreet Financial might offer you an alternative. PerkStreet features a cash back rewards program, paying you up to 1% on every transaction, as long as you make a signature purchase rather than a PIN purchase. The checking account also offers up to 2% back on online purchases at major partner retailers and up to 25% back on personalized "PowerPerks" that come to your email inbox.

PerkStreet gets high marks for customer service and access to 42,000 surcharge-free ATMs. PerkStreet will send you paper checks and allows unlimited check writing and bill pay. You can connect to customer service through social media, as well as call anytime day or night.

This checking account is ideal for those who want to use it as a primary checking account, and who want to earn rewards without using a credit card.

Click here to open an account now

2. Ally Interest Checking Account

Instead of rewards, Ally offers a checking account yield that is very competitive. You receive unlimited checks for check writing if you want, and there is free online bill pay. You don’t have to pay any monthly fees, and you can open an account without a deposit.

One of the great things about Ally, though, is that the overdraft fee is only $9. In a world where $25 to $45 is normal for overdraft charges, Ally doesn't penalize as much for slip-ups. Ally also reimburses you for ATM fees, offers great customer service, as well as eCheck Deposit to remotely add funds to your account.

The Ally account works well whether you want to use it as a very accessible emergency fund or as a primary checking account.

Sorry, this offer is currently unavailable

3. Capital One 360 Checking (Formerly Electric Orange)

Capital One has taken over ING Direct, and so far has kept things business as usual. Even though yields have fallen since the merger, they are still there, and the checking account yield is about average.

You can access more than 35,000 free ATMs, and you pay no monthly fees. If you want checks written, the account will do it for you, printing out the check and mailing it on your behalf. Remote deposit of checks is possible, and you can use P2P payments to send money to others for free. Rather than paying an overdraft fee, this checking account charges you interest until the overdraft is paid.

Click here to open an account now

4. USAA

Even though you won’t earn a yield on this account, it is still one of the best in the business. USAA is generally lauded for its outstanding customer service. You no longer have to be a member of the military to join. You also don’t have to worry about fees, and you are reimbursed for up to $15 in ATM transactions.

You can pay bills for free, as well as enjoy free unlimited funds transfers to any bank in the United States. USAA was one of the first financial institutions to offer remote check deposit. You can also send money to anyone using your iPhone or Android phone.

Click here to open an account now

5. Mutual of Omaha Bank Online Advantage Checking

This is a great checking account, but it’s only available to residents of Connecticut, Illinois, Maryland, Massachusetts, New Jersey, New York, North Carolina, Ohio, Pennsylvania, South Carolina, and Virginia. The interest begins accruing on a relatively low balance of $1,500, and you have access to thousands of free ATMs and bill pay.

You do need to be aware of the fees that come if you are inactive with your account. Make sure that you swipe your debit card at least once a month to avoid dormant account and inactive card fees. This account is a great choice for a primary checking account.

Click here to open an account now

Honorable Mention: EverBank Yield Pledge Money Market Account

EverBank generally gets points for high yields and solid customer service, but you need to have a high balance in order to make the most of any of EverBank’s accounts, including the Yield Pledge MMA. There are five tiers of rates, and you won’t get the best rate unless you have more than $100,000 in your account.

If you have less than $5,000 in your account, you will be charged for bill pay. There are a number of other fees that you might end up paying as well if you don’t maintain a relatively high balance.

This account is good as an emergency fund and for the occasional bill, but if you can’t keep at least $5,000 in your account, it’s probably not the best choice for you.

Click here to open an account now

Written by Miranda Marquit and published on Wise Bread. Read more articles from Wise Bread.

Are You Happy With Your Bank?

Beverly Harzog — Mon, 04 Feb 2013 11:36:33 +0000

Since my focus is on credit cards, I keep an eye on the banking industry. This helps me predict trends.

Sometimes the trends look positive for consumers. Sometimes they don't, especially if I sense there's a new fee on the horizon. But for a nice change of pace, I decided to look at another side of the banking business — customer satisfaction.

So I looked at the December 2012 American Customer Satisfaction Index. Here are a few interesting tidbits from the Index:

Chase scored the highest in customer satisfaction among big banks, followed by Wells Fargo.
Smaller banks, in general, score higher than big banks.
Credit unions have the highest satisfaction ratings of all.

When I started digging into the details, it got even more interesting. For instance, Chase is the only big bank that experienced an increase in customer satisfaction in 2012. Let's take a closer look at what's going on. (See also: Why I Like Big Banks)

How the Big Banks Fared

Really, most big banks have an image problem. In many cases, it's their own fault because they make some pretty lame PR blunders.

Bank of America had the lowest score at 66. This bank has been upfront about adding fees over the past few years. For this, they get high marks for transparency, but low marks for underestimating public reaction.

Remember the $5 per month debit card fee they tried to charge? They got flamed on social media and they were pummeled on the airwaves. To Bank of America's credit, they pulled the fee in question. But the damage to their image was already done.

And this isn't well known, but Bank of America is one of the few banks that doesn't apply retroactive rate increases to credit card balances even when they can legally do so. But this kind of positive news doesn't get much play in the media. So part of the problem is the bad PR when they mess up; and then, there's no good PR when they do something nice.

But Chase doesn't seem to have this issue and the bank scored pretty well at 74. I will say that I rarely hear complaints about Chase credit cards. Now that I've said that, if any of you have issues, I'm sure you'll let me know!

I've often said that I think consumers are much smarter now about their finances than they were before the recession. It occurs to me that banks might be smarter now, too. Sure, they're adding fees here and there, but many banks now seem more sensitive to how public opinion impacts the bottom line.

Local Banks Offer the Personal Touch

I use one of the big banks for my checking and savings accounts and I have no complaints. Maybe it's because I use the same branch for all my needs. I even go into the branch now and then, so the people who work there know me and my family. I even got a free tomato plant one day. Maybe I just have a unique situation going on here, but it works for me.

I think this is similar to what you get when you bank with a smaller, local bank. People like to go to a place where everyone knows their name. It's not only pleasant, but it makes you feel special and like your money is in good hands. This welcoming feeling is why people go to the same bars, the same restaurants, and even the same grocery stores.

Besides the warm feeling of being known, another plus with a local bank is that they might negotiate with you on account fees or offer you a credit card even if another issuer would turn you down. Big banks aren't as likely to work with you if you don't meet their requirements upfront.

Survey Says: We Really Like Credit Unions!

Credit unions scored a healthy 82. And this was even down from the previous month, which was at 87.

Remember Bank Transfer Day? It was on November 5, 2011 and it was a reaction to a sudden rash of higher bank fees. Customers were asked to move their money from big banks and put them in credit unions. It was somewhat successful because there was a big increase in credit union members in the past year.

It's certainly not a surprise that credit unions score high in customer satisfaction compared to banks. Banks have a fiduciary duty to make a profit for their shareholders. They're operating in a different environment and with different income goals.

In contrast, a credit union is a nonprofit, financial cooperative that lives to serve its members. Every customer is a member as well as an owner. So credit unions and banks operate in a very different environment.

This is why you'll see many credit union checking accounts without monthly fees. You also get better interest rates at credit unions. The National Credit Union Administration mandates that interest rates on most loans, including credit cards, be capped at 18%.

For many reasons, I'm a fan of credit union credit cards, especially the cards offered by the Pentagon Federal Credit Union (PenFed). But be aware that you'll need excellent credit to qualify for the top credit union cards.

If you're interested in finding a credit union for your banking or to apply for a card, check out aSmarterChoice.org.

Burning Questions…

I didn't move my money to a credit union on Bank Transfer Day because, like I said, I was happy with my bank. After all, I got a free tomato plant. But I do have my eye on a credit union credit card that I want to apply for this year.

Did any of you move your money to a credit union last year? I'm just curious!

OK, I'd also like to know if you love or hate your bank. And if you don't love your bank, why do you stay?

And here's a really big burning question — do you have a checking account that doesn't charge a monthly fee? I'm wondering if checking accounts fees have sent you packing to a new bank.

Written by Beverly Harzog and published on Wise Bread. Read more articles from Wise Bread.

Capital One 360 (Was ING DIRECT) Review

Miranda Marquit — Fri, 18 Jan 2013 11:36:35 +0000

In 2012, Capital One bought ING DIRECT, the popular bank that conducted most of its operations online. The transaction took place in February of 2012, but the name change didn’t happen until November, when Capital One, N.A. and ING DIRECT legally became a single bank.

The bank remained ING DIRECT until February 1, 2013, when it became Capital One 360. The colors changed from orange to a red and blue motif to match Capital One, but for the most part, ING DIRECT customers should notice very few changes. Sign-in information, routing numbers, payments (on loans), and other items are all the same. In fact, I just logged in, and there really aren’t any discernible differences with accessing my accounts, even though it is now “officially” part of the Capital One banking family.

The main difference that will affect consumers is that now the FDIC coverage treats your ING DIRECT/CapOne 360 balance as part of Capital One. So, while you used to have a limit of $250,000 in coverage for balances at each bank, now that is combined, so you have a limit of $250,000 coverage total for all the money you have in Capital One accounts and ING DIRECT accounts. (See also: 7 Banks Still Offering Free Interest-Bearing Checking Accounts)

Brief History of ING DIRECT

ING Group is based in the Netherlands and provides a number of financial products and services. ING DIRECT USA was established to provide services to consumers in the United States. Over time, ING DIRECT went from just offering a savings account with a very attractive and competitive yield to offering a range of financial products, including CDs, kids savings, interest checking, mortgages, investing, retirement, and business banking.

However, as ING Group grew, and its subsidiary companies grew, it drew the ire of regulators in the European Union. In February 2012, ING DIRECT was sold to Capital One as part of an effort to appease regulators.

Even before the sale, though, ING DIRECT had been losing the edge in high yield savings accounts. Finance geeks loved the high yield accounts, as well as the fact that there were no minimums and no fees on opening accounts. The Sharebuilder investment account was also favored for some time, since it made it easy to start investing with dollar cost averaging. However, other competitors have stolen ING’s thunder, with higher yields on deposit accounts and discount brokerages offering lower-cost trades.

Now, with the switch to CapOne 360 coming up, there are questions about how much of ING DIRECT will remain, and whether Capital One will make changes. So far, Capital One appears to be planning to keep everything business as usual, but there are still questions about what’s coming in the future.

Features and Benefits of ING DIRECT/Capital One 360

For most people looking to centralize their banking and find competitive rates, it’s possible to use ING DIRECT/Capital One 360 as a viable option. Having everything in one place can also make it easier to instantly transfer your money, and ING DIRECT/Capital One 360 makes it easy to access all of your accounts, including your investment account, from your account summary.

Here are the products and services offered by ING DIRECT/Capital One 360:

360 Savings

This is the classic account that started it all. There are no fees, no minimum requirements, and no catches. Right now, the yield is 0.75%, which is reasonably competitive, especially when you consider that there are no minimums and no fees. It’s easy to link your account to other banks and set up automatic transfers to make saving easy.

Kids Savings Account

My son’s savings account at ING DIRECT/Capital One 360 offers the 0.75% yield that kicks the crap out of the 0.20% he was getting at the local credit union. It’s easy to monitor the account from your own dashboard and to teach your child the value of saving early on.

360 Checking

You can open a checking account with ING DIRECT/Capital One 360 and earn a yield on the balance. Current yields range from 0.19% to 0.84%, depending on how much money is in the account. You can get an ATM card that is now accepted at Capital One ATMs in addition to the free in-network ATMs previously available. (Note that ING DIRECT network ATMs are not on the same network as Capital One, so your Capital One debit card used at an ING DIRECT ATM will still incur fees.)

This account has no fees and no minimums, and you can use P2P Payments to send money to family and friends for free.
Bill pay is free, even when you have paper checks sent.
You can use CheckMate to deposit checks remotely, and the account comes with overdraft protection.
If you overdraw your account, you won’t end up paying a fee. Instead, you are just charged an interest fee (currently 11.25%) on the overdraft until it’s paid off.

Click here to apply now

CDs

The yields on the CDs from ING DIRECT/Capital One 360 are not as competitive as they could be, ranging from 0.40% to 0.90%. You can choose your term, and you can also choose when you want to receive your interest payments.

Mortgages

The Capital One 360 mortgage allows you to choose a 5/1 or a 7/1 ARM on a new purchase or a refinance. The closing costs are very straightforward, and right now the rates are quite low. You can also get a home equity loan with a variable rate starting at 4.0%, or lock in a slightly higher rate for 15 years.

ShareBuilder

The ING discount brokerage is part of Capital One now, too. You can invest in stocks, mutual funds, and ETFs, as well as trade options. There is no account minimum, and you can choose between paying a $12 monthly fee and getting a lower price on trades, or just opening the account with the Basic version. I have this version, in which regular purchases are $9.95 a transaction. However, since I have an automatic investment plan set up, I only pay $4 a transaction. It’s easy, straightforward, and the pricing is competitive with the automatic investing.

Note: ShareBuilder is currently offering a $100 bonus for new account. Click here to learn more.

IRAs

You can choose to open a savings IRA, or you can use ShareBuilder to open an investment IRA. With the savings IRA, you have all the money in CDs and savings accounts; you need to go the ShareBuilder route if you want to invest in stocks, mutual funds, or ETFs. You can also rollover your 401(k) into an IRA from ING DIRECT/Capital One 360.

Business Account

Capital One 360 also offers business banking products. You can open a business savings account, or a business CD. The current yield on the business savings account is lower than what you get with personal savings, though.

You can also use the ShareBuilder 401(k) to set up a retirement plan for your small business. It’s fairly easy to set up, and you can offer this benefit to your employees.

Bottom Line

Overall, ING DIRECT/Capital One 360 promises to remain a viable competitor. The products offered remain fairly competitive. Additionally, the low-fee, low-hassle structure of the bank makes it easy to open accounts, and avoid watching your wealth erode due to hidden fees and complicated requirements.

Click here to apply now

Written by Miranda Marquit and published on Wise Bread. Read more articles from Wise Bread.

Beware Celebrities Bearing Prepaid Cards

Beverly Harzog — Mon, 14 Jan 2013 11:36:33 +0000

Celebrities used to get attention by buying a small island or starting a clothing line. But nowadays, they know that one of the surest ways to get into the spotlight (and make a ton of money) is to align yourself with a prepaid card.

Remember the Kardashian Kard? That card had many horrible fees — almost $100 just to use the card for the first year — and it was destroyed by the media. The public fallout was so bad, even the Kardashian sisters couldn’t stomach the bad publicity, and they took it off the market.

Scores of other celebs — from Russell Simmons to Suze Orman to Lil Wayne — have gotten involved with prepaid cards. So I wasn’t surprised when I heard that Justin Bieber, the latest celeb to become an overnight personal finance expert, was promoting a prepaid card offered by BillMyParents, a company that focuses on the teen market.

I was annoyed, but not surprised. Why annoyed? Because celebrities have an opportunity to do something great with their access to the media. We live in a celebrity-obsessed culture and like it or not, these people have a lot of influence.

People listen to what they say. So I’d love to see a celeb take the high road and promote a product that really does help others. For instance, start a foundation for financial literacy or offer a secured credit card with minimal fees. Really, they can do so much better than a prepaid card. (See also: The 5 Best Prepaid Debit Cards)

Why Prepaid Cards?

The Mercator Advisory Group projects that consumers loaded $82 billion onto prepaid cards in 2012. In 2013, $117 billion is projected to be loaded onto these cards. So from the bank’s standpoint, prepaid cards are a great source of revenue both now and in the future.

Prepaid cards aren’t subject to the regulations that capped the interchange fees on debit cards (and neither are credit cards). So this is why banks now push both prepaid cards and credit cards. That’s where the money is, folks.

And recruiting celebs to endorse prepaid cards is a stroke of genius. These are flawed products, but who will notice that if Justin Bieber endorses it? And once he starts tweeting it to his 32 million Twitter followers, these cards will fly off the shelves.

But what’s in it for the celebrities? Obviously, a big piece of the revenue pie. And with the recent recession, this gives celebs a chance to say they’re doing this to “help” people manage their money.

To be honest, I think these celebs have no idea how bad some of these products are. They see an opportunity that offers PR and profits. I doubt many of them have read the fine print and noticed all the fees.

The Problem With Prepaid Cards

When Suze Orman came out with The Approved Card, I wanted to like it. I will say it’s one of the better prepaid cards out there, but there’s no way to avoid the $3 per month maintenance fee. Most prepaid cards will offer a way to avoid those fees if you load a certain amount via direct deposit each month.

Bieber’s card will have a $3.95 per month maintenance fee. If your card is inactive for 90 days, you’ll get hit with a $3 inactivity charge. I’m sorry, but being charged a fee for not spending my own money is absurd.

Some of the other celeb-related cards have really high fees, such as a $14.95 fee just to activate a card. But they bring a cool factor to the product. If it’s a celeb you admire, you trust their opinion. So suddenly the prepaid card with the monthly fee (a fee you pay to use your own money, by the way) looks like a good product to you.

Why Prepaid Cards Are So Popular

There are a few myths out there about prepaid cards, and I think these beliefs help keep these cards popular. For instance, there’s a subtle message that prepaid cards can help your credit.

When Suze Orman released her prepaid card, The Approved Card, there was an implication that this card might eventually help your credit. The fine print actually says that TransUnion has agreed to look at the data in a year or two. There are no promises that anything will be done with the data.

If you think about it, it doesn’t even make sense for prepaid cards to boost your credit. You’re spending your own money. You’re not buying anything on credit.

Another issue is that the media (and even some major websites) refer to these cards as “prepaid credit cards.” I suspect they make this mistake because the Visa or MasterCard logo is on the card. But that just indicates the payment network that’s being used.

When consumers hear “prepaid debit cards,” it suggests the cards are similar to a checking account. In most cases, your funds on a prepaid card aren’t FDIC-insured like they are in a checking account. This means that if the institution that issues the card fails, you lose your money. This would be a disaster for those who live paycheck to paycheck.

But I think the reason I hear most often from consumers about why they use these cards is that they believe it helps them budget. It isn’t widely advertised, but you can opt out of overdraft protection on your checking account.

When you have overdraft protection on your checking account, you’re allowed to spend more than you have in your account. But then you get hit with a fee, which can range from $10 to $39.

But if you opt out of overdraft protection, you’ll have the same result that you’d have if you used a prepaid card to buy something and you didn’t have the funds to cover it. Your debit card will be denied. So it’s possible to maintain a budget by using your debit card and avoid all the fees associated with prepaid cards.

What If You Can’t Get — or Don’t Want — a Checking Account?

Now, for some of you, it isn’t possible to get a checking account. Perhaps your name is in ChexSystems and you can’t qualify for a bank account.

If you can’t get a checking account, then go ahead and use a prepaid card. But consider it a short-term solution. Stay away from the celebrity-endorsed cards and look for a prepaid card that offers a minimum of fees, such as the Bluebird Prepaid Card from American Express. But be aware that the funds you load onto the Bluebird card are not FDIC-insured.

Now, the issue of not wanting a checking account is different. Maybe you got hit with a checking account fee, and you’ve sworn off banks. Whatever the reason, it’s still possible to find fee-free checking accounts out there.

If you’re having problems finding a free checking account, check out your local bank and credit unions. Another good idea is to take a look at online banks. But if you still prefer prepaid cards, that’s fine. Just make sure you read all the fine print. Then read it again!

The Future of Prepaid

The Consumer Financial Protection Bureau (CFPB) has their eye on the prepaid card industry. I’m glad because I’d like to see more transparency when it comes to fees and more consumer protections. As I already mentioned, most prepaid cards aren’t FDIC-insured, and this is unacceptable.

Now, I think too much regulation would backfire and create even more fees. But clearly, we need to have some ground rules in place so consumers don’t get burned by prepaid cards.

Do you use prepaid cards? If so, how do you minimize the fees?

Written by Beverly Harzog and published on Wise Bread. Read more articles from Wise Bread.

5 Best Online Savings Accounts

Miranda Marquit — Fri, 11 Jan 2013 11:36:35 +0000

Having a savings account is pretty much taken as an article of faith among those in the personal finance world. You are supposed to have a savings account — and you are supposed to look for the highest yield or interest rate.

In many cases, the highest yield is likely to come from an online source because of their limited services and low overhead.

Pros and Cons of Online Savings Accounts

Before you decide to open an online savings account, it's important to research your options and understand the realities that come with online savings accounts.

Better Interest Rates

The main advantage to an online savings account is the higher yield. Traditional brick and mortar banks are paying yields of between 0.1% and 0.3% right now. But if you put your money in an online savings account, you could earn a yield of around 1%. While this is hardly “high yield” when compared with the 4% and 5% yields common prior to 2008, it is still better than what you will get at a brick and mortar bank.

Inconvenient Access to Funds

The biggest downside to an online savings account is your access to the funds.

While you can mail paper checks to some online banks for deposit, it’s more common to transfer money from your checking account into your online savings account. And, if you want to withdraw your money, chances are that you need to transfer it from your online savings account to your primary checking account. This can take three to four business days — which can problematic if you need your money immediately.

Some online savings accounts have ways around this, though. You might be able to link your online savings account with an online checking account with the same bank. You can then instantly transfer the money to the linked checking account and use the debit card to withdraw the money from the online checking account.

Finally, there are some banks that will send you an ATM card for use in withdrawing money from your account. You need to be careful in these cases, since you might end up paying ATM fees. Your bank might not charge you, but the bank that owns the ATM may. Some online banks reimburse consumers for all fees, though. This can be a way to access your money quickly and conveniently without worrying about ATM fees.

Which Online Savings Accounts Are the Best?

When deciding which online savings account is likely to work best for you, start out by looking at interest yields. You need to look beyond the Annual Percentage Yield (APY), though. Some of the items to consider include:

Minimum balances
Fees
Introductory periods
Customer service
FDIC insurance

With an online savings account, it is also important to consider how you will manage your funds. An easy-to-navigate website is essential if you plan to do the bulk of your banking via the Internet. Many online banks provide live chat so that customers can contact support quickly and easily.

Here are five of the best online savings accounts, all of which are FDIC-insured.

1. Ally

Ally Bank offers a savings account with a yield of 0.95% annually. There is no minimum account balance required to receive that rate of interest, and you don’t need to maintain a particular balance to avoid fees. Ally offers a number of savings products, including options for high-yield CDs and IRAs.

This bank generally receives high marks for customer service. The website is easy to navigate, and you can call customer service anytime of the day, as well as access live chat.

Sorry, this offer is currently unavailable

2. CIT

One of the banks gaining a little more exposure is CIT, which has been around for more than 100 years. CIT is a Small Business Administration Preferred Lender and offers a variety of online banking services, including an APY of 0.90% on balances of less than $25,000. If you have a balance of more than $25,000, your yield is 1.05%. CIT is known for its high yield Achiever CD, which offers a yield of 1.20% for a year term.

You do need $100 minimum to open a CIT savings account, but there is no monthly maintenance fee after that. You can call CIT Monday through Sunday, but there are set hours. You can also contact CIT via email.

Sorry, this offer is currently unavailable

3. American Express Personal Savings

When we think of American Express, most of us think of credit cards. However, you can also open a personal savings account through American Express Bank, FSB. The current APY is 0.90%. There are no fees and no minimums with this savings account. American Express Bank also offers competitive CDs.

The website is fairly easy to use, and you can contact a customer service number 24 hours a day, seven days a week.

Sorry, this offer is currently unavailable

4. Discover

This is yet another company better known for its credit offerings. However, Discover has a banking division, and you can open an online savings account with a yield of 0.80%. Discover also offers a money market account with a yield of 0.70%, and a five-year CD with competitive 1.70% APY.

In order to open an account, you do need $500. Other than that, there is no minimum balance to maintain, and no monthly maintenance fees. Finding the customer service information is a little more difficult on the Discover site, but you can call 24/7 or send an email.

Click here to open an account now

5. EverBank

One of the more interesting banks right now is EverBank. If you are a serious saver, this might be the right fit for you. The Yield Pledge Money Market account comes with a very attractive introductory rate: 1.25% for first-time account holders for the first six months on balances of $50,000 or less. The first-year APY is as high as 1.01%. After that, EverBank promises that the yield will be in the top five nationally.

You need $1,500 to open this account. The rate you actually receive for various accounts, from an interest-bearing checking account to a jumbo CD to a savings account, is based on your balance. Many customers like EverBank, especially those with high balances.

The website is fairly intuitive, and you can find the phone number to call the bank, but there isn’t information about hours when the phone lines are staffed.

Click here to open an account now

In the end, you have to decide what you want from your online savings account. Consider your options and whether or not you will need immediate access to your money. Additionally, pay attention to minimums. It doesn’t do you much good to open a high yield account if you don’t have the balance to qualify you for the best rates.

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Written by Miranda Marquit and published on Wise Bread. Read more articles from Wise Bread.

ChexSystems: What It Is, and How It Can Make It Difficult for You to Open a Bank Account

Lauren Treadwell — Wed, 19 Dec 2012 11:00:32 +0000

ChexSystems provides financial institutions with information about how responsible you are with your bank account, and derogatory entries on your report can cause denial of applications for bank accounts and other banking products and services. A 2003 amendment to the Fair Credit Reporting Act, called the Fair and Accurate Credit Transactions Act, provides a free copy of your ChexSystems report every year. This allows you to keep tabs on the information banks report to ChexSystems to ensure it’s accurate. If the information is erroneous, you can file a dispute to have the entry removed from your file. However, if it is correct, the item will remain on your report for five years. (See also: 10 Surprising Ways to Negatively Affect Your Credit Score)

Ordering Your Report

You can order your annual free report online, over the phone, or by mail.

To Order Online

Visit the ChexSystems consumer website, and select “FACTA Free Report" from the menu at the top of the page. You’ll need to include your name, any previous names or aliases, your Social Security number, date of birth, driver’s license number and state, phone number, and your current and previous addresses for the past five years.

To Order by Phone

Contact the ChexSystems consumer relations department at 1-800-428-9623. You’ll be leaving a voicemail message, so speak slowly and clearly so the worker who reviews your request can accurately dictate your information from the recording.

To Order by Mail

Download, print, and complete the ChexSystems report order form to mail or fax your request.

However you order your report, you will usually receive it within 10 to 14 days of ChexSystems receiving your request.

The ChexSystems Consumer Score

ChexSystems uses a scoring system similar to the other big three credit agencies’ that provides banks with a snapshot of your account riskiness. This figure is called the ChexSystems Consumer Score, and it ranges from 100 to 899.

Although the annual report is free, you will have to pay to receive your consumer score from ChexSystems. Download, print, and complete the score order form and mail it along with the $10.50 fee. You will receive your Consumer Score within 10 to 14 days.

Reviewing Your Report

Once your report arrives, examine it carefully for mistakes.

Your name and current address will appear at the top, along with the consumer ID number ChexSystems assigned you.
Next is the personal information ChexSystems has on file for you. It will include your date of birth, previous names and aliases, and your current and previous addresses.
Information about any identity theft is in the next section, followed by information about any security freezes that restrict access to your report.

If there is detrimental information in your Chex System file, it will appear in the “Reported Information” and “Retail Information” sections.

Reported Information provides information about bounced checks, overdrafts, insufficient fund activity, debts owed for fees, or account overdraws and the bank that reported the data.
Retail Information gives details about checks that were not honored at grocery stores and other retailers. If you do not have information in either of these sections, your name is free and clear on ChexSystems.

Disputing Incorrect Information

Initiate a dispute if you believe any of the information on your report is inaccurate.

Download, print, and fill out the Request for Reinvestigation form with the personal information you provided in your original request, and include the Consumer ID number you received.
Provide the name of the bank that furnished the information, the account number, and the date listed on the erroneous information. Include a description of the mistake and the correct information, as applicable.
Sign the bottom of the form.
If you have paperwork or other evidence, include copies in the envelope along with the dispute form.
Make a copy of the dispute form for your records and mail the original to ChexSystems Inc., Consumer Relations Department.

The Fair Credit Reporting Act requires reporting agencies to investigate and respond to disputes within 30 days of receiving them, so send the form by certified mail and request a return receipt to receive notification of the exact day ChexSystems receives it. If ChexSystems cannot verify the disputed information after 30 days, it must change the entry to reflect the information you provided or delete the entry.

To keep your good name and account history out of ChexSystems, make sure you always have enough money in the bank to cover outstanding checks, automatic withdrawals, and electric funds transfer payments. If you do run into trouble, make a deposit as soon as possible to cover the overdraft and any fees. Opting-in to your bank or credit union’s overdraft protection program will also help you avoid a ChexSystems hit.

Written by Lauren Treadwell and published on Wise Bread. Read more articles from Wise Bread.

How Traditional Banking Practices Can Make You Poor

Emily Guy Birken — Tue, 18 Dec 2012 11:00:32 +0000

There are certain specific connotations with the word bank: impressive marble-floored buildings with high counters, smiling tellers, and huge vaults. Not to mention cash, free coffee, and, if you’ve got a particularly friendly local bank branch, cookies for the kids.

But the banking industry is changing. We no longer count on our brick-and-mortar branches for all of our banking needs. According to a recent American Bankers Association survey, 39% of Americans use internet banking most often in order to manage their bank accounts — and this was the most popular banking method by far.

But one of the things that happens when technology changes is that people start looking at traditional practices with a critical eye. In fact, looking closely at traditional banking practices can really drive home the fact that those practices are skewed to benefit the banks, rather than the customer. If you’re not careful, banking with a more traditional institution can really make you poor.

Here are two traditional practices that banks have in place that negatively affect your finances — and what types of better policies you should look for in a more modern bank. (See also: 12 Annoying Bank Fees and How to Avoid Them)

Overdraft Protection

Earlier this month, a deposit had not yet cleared my account, which meant that a debit card purchase I made overdrew my checking account. The overdraft protection my bank offers is tied to my savings account. If I overdraw checking, then the amount necessary to cover the overdraft is automatically taken from my savings account.

This seems like a great policy on the surface. As long as I keep money in my savings account, my checking account overdrafts are covered. The only problem is that I get charged $35 when this happens. I personally would be happier to have my debit card declined. It would be a much cheaper option.

Luckily, I happened to log onto my online account that day and saw the issue before it was “officially” posted and I still had time to correct it. I manually transferred money from my savings account to checking and managed to avoid the fee. But most people don’t check their checking account balances once or twice a day for fun. (Seriously, I do it in the same way some people play Angry Birds — as a welcome distraction from work.) For many individuals, the helpful overdraft protection service is an expensive headache.

Granted, as of July 2010, banks are no longer allowed to automatically sign customers up for overdraft protection services. (In fact, as of that year, the Federal Reserve ruled that banks must drop the service for customers who never requested it in the first place.) Banking customers must opt into the service — and banks have tried very hard to persuade them to do so.

Considering the fact that this service appears to be a courtesy, it’s no wonder that many banking customers still opt in. According to Suzanne Kapner of Financial Times, as of February 2011, “about 100 million of the 130 million US checking account holders are on track to pay overdraft fees on ATM withdrawals and debit cards [in 2011].”

That’s an expensive “service” that many banking customers are paying through the nose for.

The Better Way

Right now, anyone can tell their bank that they do not want the courtesy of overdraft protection. That means your debit card will be declined if you go over the amount you have in your checking account, which might be embarrassing, but is at least free.

However, there are some banks that are offering other options that will help you both save face and save money. For instance, the online retail bank startup Simple (previously BankSimple) helps customers remember more clearly what their “spendable” balance is:

To relieve people of the off-the-top-of-their-head calculations they might have to make when checking balances, the interface prominently displays a "safe to spend" balance, which deducts amounts set aside for goals, upcoming bills, and card debits that have not yet been processed.

This innovation will make overdraft protection much less necessary, as customers will no longer have to rely on mental calculations to determine whether they’ve got enough money in their accounts to cover groceries and beer. They’ll know to put the groceries back if funds are lacking.

While Simple’s straightforward information will not solve all the problems associated with overdrawing your account, it will certainly help those account holders who have better things to do than balance their checkbook to keep a tighter rein on their finances. And it’s an innovation that only requires a little computer programming on the bank’s part but makes a huge difference to the customer.

Bankers’ Hours

Anyone who has ever rushed to the bank at 4:58 with an important deposit only to bang ineffectually on the already-locked doors knows that bankers’ hours are for the birds.

While most national, regional, and local banks have been offering extended weekday and weekend hours for the greater part of the last decade, that does not necessarily change the problem with “bankers’ hours.” For instance, I deposited two checks to my account at our local branch around noon on a Saturday. My local bank is open until 2 p.m. on Saturdays, so I used a teller for my deposit, which I generally understand is the fastest method for getting a deposit into my account (at least compared to an ATM or drive-through teller deposit.) However, as of the following Tuesday at close of business, the checks still had not cleared.

As that ubiquitous and frustrating experience shows, bankers’ hours are about more than just what times of day you can talk to a teller. Checks generally take at least one business day to be posted to your account, and often they will need more than one business day to clear.

The length of time that it takes for a deposited check to clear was regulated in 1987 by the Expedited Funds Availability Act, which standardized the length of time that commercial banks could put a discretionary hold on checks of varying dollar amounts and sources. This law was put in place to both protect banking institutions from bad checks and to serve the needs of customers. However, banks can work within the law to use your deposited money to earn itself profit, while still keeping that money from entering your account until the end of the “hold” period. According to SelectCDRates.com:

Even when a bank is able to clear the funds for a check in a shorter time frame than outlined in the federal regulations, it is not obligated to release the funds to your account. The bank can still clear your deposit expeditiously, not credit it to your account until the maximum allotted time, and reap the profit by using your money during this time period. While all regulated banks are subject to the same maximum hold periods established by the law and the rules issued by the Fed, each bank may make deposits available sooner.

Basically, the traditional banking model asks customers to take time from their 9-to-5 day Monday through Friday (except for federal holidays) in order to get their deposits and other banking business taken care of at a branch, only to then hold onto the deposited funds for the maximum allowable time before putting it in the account.

This is a great way to get overdrawn.

(And boy does the bank have a service to help you out of that overdraft jam!)

The Better Way

We live in a much different world from the one where bankers’ hours were first invented. Not only do bankers no longer wear handlebar mustaches and sleep in three-piece suits, but the world also no longer shuts down after sunset. We need to be able to handle our banking needs whenever we’re awake, which includes the dinner hour, midnight, the wee hours of the morning, and weekends and holidays.

Banks have been trying, bless their little hearts, to accommodate the modern 24-hour lifestyle. Between extended branch hours, drive-up tellers, ATMs, online banking, and mobile banking, there is a great deal of banking we can now handle whenever we like. However, that does not fix the real problem with bankers’ hours — availability of deposited funds. It’s all well and good for me to be able to see a teller on Saturday morning, but if the hold on the check I deposit isn’t even instituted until the following Monday, I am just as stuck waiting for my money to clear as I would have been if I’d deposited the check on Monday.

However, banks are starting to offer some technological solutions to this problem. In particular, iPhone and smartphone check deposits seem to be a potential way for banks to make funds available more quickly. According to Ann Carrns of The New York Times, the Bank of America mobile funds app allows you to access the funds from your smartphone-deposited check within one day: “Funds deposited by the mobile app show up immediately on your account, but aren’t available for withdrawal until the next day.”

While Carrns does not specify if next day must be the next business day, this still does give hope for the future to banking customers. (Who would have imagined the words "Bank of America" and "hope for the future" could be written in the same sentence?) While banks certainly have the right to protect themselves from fraudulent and bad checks, we can hope that the advances in technology will allow them to provide us with access to our funds earlier. After all, we deposit the money in our accounts so we can use it, not so the banks can hold onto it.

The Bottom Line

Banks need to change with the times. When we were all writing paper checks to pay our bills and paying for all of our purchases in cash, it was easier for banking customers to keep careful track of their expenses, and less of an issue to wait for deposits to clear. It was a slower world.

These days, purchases and paid bills post almost immediately to our accounts. We need more reliable information from our banks and we need them to be lighter on their feet. Banks need to know that they cannot simultaneously profit from the sped-up pace of finances and pretend that life’s still slow as molasses with their customers. We demand more from them.

Written by Emily Guy Birken and published on Wise Bread. Read more articles from Wise Bread.

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A Brief History of Ally Bank

Features and Benefits Ally Bank

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The Basics of CD Laddering

How a CD Ladder Works

Does This Work With an Emergency Fund?

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Why Savings Account Interest Rates Are So Low

Depositors vs. Borrowers

The Federal Reserve and Savings Account Rates

When Will Savings Account Rates Go Up?

Get Ready to Manage Your Bank (and Other Cash) Accounts

What You Need to Know About the FDIC

Brief History of the FDIC

How the FDIC Works Today

What Types of Accounts Are Insured by the FDIC?

How to Protect More Than $250,000

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Best Money Tips: How to Save on Banking Fees

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1. Claim the Saver's Credit

2. Win Prizes and Rewards for Saving Money

3. Earn Bonuses for Setting Aside Money in Savings Accounts

4. Get Cash for Opening and Funding an Investment Account

5. Snag Your Company's Match

6. Take Tax Deductions

The 5 Best High Yield CDs

What Should You Look for in a CD?

1. Ally Bank

2. Nationwide Bank

3. OneWest Bank, FSB

4. Bank of Internet USA

5. EverBank

Honorable Mention: USAA

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5 Best Online Checking Accounts

How to Choose an Online Checking Account

1. PerkStreet Financial

2. Ally Interest Checking Account

3. Capital One 360 Checking (Formerly Electric Orange)

4. USAA

5. Mutual of Omaha Bank Online Advantage Checking

Honorable Mention: EverBank Yield Pledge Money Market Account

Are You Happy With Your Bank?

How the Big Banks Fared

Local Banks Offer the Personal Touch

Survey Says: We Really Like Credit Unions!

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Capital One 360 (Was ING DIRECT) Review

Brief History of ING DIRECT

Features and Benefits of ING DIRECT/Capital One 360

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CDs

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Why Prepaid Cards?

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Why Prepaid Cards Are So Popular

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The Future of Prepaid

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Pros and Cons of Online Savings Accounts

Which Online Savings Accounts Are the Best?

1. Ally

2. CIT

3. American Express Personal Savings

4. Discover

5. EverBank

ChexSystems: What It Is, and How It Can Make It Difficult for You to Open a Bank Account

Ordering Your Report