Archive for the 'Banking' Category
My wife recently applied for an EverBank Yield Pledge Money Market account for their introductory rate. Everbank also “pledges” to stay amongst the top 5% of competitive banks, and I have seen that rate has indeed stayed competitive to other online banks for the last couple of years. (WaMu is now down to 2.25% APY, ahem…)
Currently, the promo rate is 3.93% for 3 months, and the standard rate after that is 3.21% APY. (3.93% guaranteed for 3 months is still better than any 3-month CD out there.) The application process is a lot different now than when I applied for myself a year or so ago, so I’ll start with reviewing that.
Background and Promotion Rules
Everbank always offers a 3-month introductory promo rate to both their FreeNet Checking and Yield Pledge Money Market accounts. The rule for these promotions is that you can only get one 3-month bonus period per person (Social Security number), and that you can get them at the same time, but not one after the other. As you might have guessed, one way around this is for couples to open separate accounts at least 3 months apart.
So if you opened both the FreeNet Checking and Yield Pledge Savings account on November 1st, you can get the promo rate for both ($100,000 total balance) for 3 months. If you open up the Yield Pledge a month later, you’ll only get the promo rate on that account for 2 months.
Step 1: Personal Information
The standard info is requested on the first part of the application - address, SSN, and also employer info.
Step 2: Identity Verification - No Hard Pull
In the past, Everbank has done a hard credit check when taking applications. However, it appears that they no longer do this. For one, my wife did it and she has a credit monitoring service which alerts her of such activity - no alerts from Everbank.
The website itself is a bit confusing on the subject, stating the following:
What kind of inquiry does EverBank obtain and how will it affect my credit score?
EverBank obtains a credit inquiry for the purposes of opening an account. While such an inquiry will show on your credit report, it’s coded differently than an inquiry for a loan and would have less of an impact on your credit score.
I personally interpreted this as a soft pull, but I also called to confirm. The customer service rep stated that they no longer do a “full credit check” but only confirm ID.
This is finally supported by the fact that they now ask the real-time Equifax ID Check questions during your application, which are based on data from your credit report. Things like names of streets you’ve lived at, where you hold mortgages, and previous employers. Noneof the banks that I’ve had do this have done a hard pull.
Step 3: Funding
Finally, we arrive at the funding ($1,500 minimum). In the past, you had to wait for a welcome package and send in a physical check along with a physical signature and other paperwork. Now, as long as your initial deposit is under $25,000 you can fund online using routing and account numbers. From the website:
ACH funding is available for personal Checking, Money Market, and Asset Manager Service cash management accounts. You can fund just the minimum opening deposit or any amount up to a total of $25,000 per day. For funding more than $25,000, you’ll want to open now with $25,000 and send a check or wire for the additional amount.
For the ACH funding source account, you can use any account that supports check writing. You can verify ownership of your source account in 3 days through a small deposit and withdrawal.
You can also choose to activate the Checkwriting option here (3 per month).
After you enter these details you can go ahead an log into the Everbank website and poke around, although it takes a few days for the initial deposit to arrive. All in all, the application process is much improved by being completely online with no paperwork, with apparently no hard pull.
Posted in Banking | 12 Comments »
I went ahead and opened an account at DollarSavingsDirect and their attractive 4.0% APY. WaMu had dropped their savings rate to 2.5% APY, and DollarSavingsDirect still seems to be in their “new bank customer accumulation” stage, which means keep the rates high as long as possible. Might as well take advantage of loss leaders…
People have called EmigrantDirect and DollarSavingsDirect clones of each other. I mean, your money is at the same bank - Emigrant Bank, FDIC Certificate #12054 and the home pages look very similar. But man, they truly did a cut-n-paste job. Check out the identical internal interfaces, down to the color scheme:
The application was straightforward and efficient - completely online, no paperwork to sign or print out, and your deposit is done using only routing and account numbers. Took less than a week to get up and running. I would pick your funding account carefully, because adding additional bank relationships does require paperwork.
As noted, the major difference is that with DollarSavings you need to maintain a $1,000 minimum balance to get the 4.0% APY, unlike Emgirant with no minimum. Good news is that there are no fees at DSD if you drop below $1,000 though, just a lower 1.0% APY.
Posted in Banking | 25 Comments »
Given the recent drop in Fed interest rates, here is a quick update on the rates being paid on online savings accounts:
HSBC Direct lowered its rate to 3.00% APY.
ING Direct also recently lowered its rate to 2.75% APY. ($25 bonus) However, they do have a new 12-month CD at 4.25% APY.
FNBO Direct holds steady at 3.50% APY dropped today to 3.25% APY. (FNBO Direct review)
Emigrant Direct is still at 3.00% APY, but if you have more than $1,000 there, you should move your money to DollarSavingsDirect at 4.00% APY instead. They are both under the same parent Emigrant Bank, and so your deposits are insured together for FDIC purposes. The only real difference is that DollarSavings requires a $1,000 balance to earn the 4%.
I was really annoyed at this until I figured out that there is actually no minimum balance requirement at DollarSavingsDirect, your interest rate just drops to 1.0% APY if you go below. No fees or penalties. Thus, I can still open an account and move my money there while the rate is good, and still be able to move it out if the rate drops. Okay, so I’m still kind of annoyed. They are saying “we think you’re too lazy to move your money, but new customers get 4% APY”.
Everbank’s Yield Pledge savings account has an intro rate of 4.65% APY for the first 3 months, and then 3.51% APY afterwards. Not bad, considering even the non-special rate is very competitive, as it “pledges” to stay amongst the top 5% of competitive banks. There is a minimum balance requirement of $1,500 to avoid fees.
Corus Bank has what looks like the top 12-month CD rate at at 4.60% APY if you open with $10,000+.
Posted in Banking, Deals & Offers | 29 Comments »
Well, the big boys are getting their rescue/bailout plan, but I guess ours got lost in the mail… So what should we do? I think that everyone should take a second look at their cash reserves. Do you have enough?
What Job Security?
These days, I don’t see any job as safe. My company went from interviewing people to hiring… nobody. Even local and state governments are facing major budget deficits. At a minimum, I would want a few months of living expenses to tide me over until I find another job. I still remember the dot-com bust days when former tech workers ended up living in their cars.
A Reason Not To Invest In Stocks
Hey, if you’re looking for an excuse not to buy any more stocks for a while, beefing up your emergency fund is not a bad one. Any money you may need within 5 years should be in cash or short-term investments anyway.
A Reason *To* Invest In Stocks
Ironically, after you build up a nice cushion, it may actually make you feel better about investing in the stock market. I definitely helps me to keep short-term money separate from long-term money. As such, I’m still applying my upcoming income towards maxing out my 401(k) for 2008. But after that, I will probably start to save another three months of living expenses, for a total of 9 months in cash.
Less Credit Available
A lot of people used to simply assume that their home equity line of credit (HELoC) could serve as their emergency fund. But these days, it just takes one letter in the mail that says your HELOC is frozen or greatly reduced. You don’t want to be forced into taking an early withdrawal from your 401(k) or IRA, or paying exorbitant credit card interest.
If anything, apply for a credit card with a low fixed interest rate now while it is still offered. The Discover More card has 0% APR on balance transfers for 12 months ($75 max fee), and the American Express Clear card has 0% on purchases for 12 months. Just buy goods as you regularly would, and pay the minimum while saving the difference in an interest-bearing account. (Don’t go buying more stuff, obviously!)
Looking Ahead
For me, an alternative reason for increasing my cash reserves is that I can also use it later for investing in real estate. I still don’t see many opportunities with good cashflow right now, and may not see them for another couple of years. But I want to be ready, as the no-money-down days may never come back.
Where do you keep it?
As long as it is safe and liquid, I just go by rate. Use the new FDIC insurance estimator if you have lots of money. Both Vanguard and Fidelity are participating the money market fund insurance program, so they are super-duper safe now. . Well, your old money is safe. Still, I consider money market funds with Fidelity and Vanguard as safe as FDIC-insured, although this is only my opinion. However, my cash is currently split between:
- Series I US Savings Bonds - Bought in April with 1.2% fixed rate, now only 0% fixed rate available. Note that they are illiquid for the first 12 months. Rates adjust semi-annually. I earn 4.38% for 1st six months, 6.06% for 2nd six months. With recent inflation, my 3rd six months should also be pretty good. Exempt from state income tax as well.
- 12-Month 5% APY CD at WaMu/Chase - Sadly, no longer available.
- Low or no-minimum banks with high liquidity - A big chunk currently in transit to Everbank at 4.65% for first 3 months.
Posted in Banking, Career, Frugal Living | 21 Comments »
Some eagle-eyed readers let me know late last night that WaMu/Chase quietly made a change to their offered interest rates. Their online savings account is now at 3% APY when attached to their free checking, down from 4%. Not too bad, but no longer the highest yield for a no-minimum-balance savings account.
They also lowered the rates on their online CDs, with the 8-month, 12-month, and 13-month CDs all at 3% APY. It looks like those that opened up one of their 5% APY CDs late last week just got in under the gun. My 12-month CD was successfully funded yesterday, and today I see my 5% APY rate shown online. All signs seem to suggest that Chase will honor these CD contracts. Hurray for small victories 
, I hope everyone who wanted in on these got their application in on time.
Options?
Given these actions, it might be time to move banks soon… now to investigate other attractive all-in-one Checking/Savings combos. Here are some possibilities:
Everbank has their FreeNet checking account with a 4.65% bonus rate for the first 3 months, and then 2.87%-3.59% APY afterwards depending on balance. No minimum balance, but you need $1,500 for free billpay. $6 in free ATM fee rebates each month.
Combine this with Everbank’s Yield Pledge money market account, which also has a 4.65% bonus rate for the first 3 months, and then 3.51% APY afterwards. This account “pledges” to stay amongst the top 5% of competitive banks, and there is a minimum balance requirement of $1,500 to avoid fees.
Fidelity has their mySmart Cash account. It is kind of a checking account/brokerage account hybrid where you can basically use their money market funds (non-FDIC-insured) as the main holding place on your cash for higher yields. You can choose from taxable to tax-exempt money market funds with competitive yields. Their main checking account is FDIC-insured, and is currently earning 1.50% APY. No minimum balance, and you get unlimited ATM fee reimbursements.
Posted in Banking | 48 Comments »
I went ahead today and bought some more of the 12-month CD at 5% APY from Washington Mutual/Chase. Here’s why:
Reason #1: Chase agreed to honor WaMu CD rates
From the official FDIC WaMu takeover page:
6. Will I continue to earn interest at the same rate?
JPMorgan Chase accepted Washington Mutual’s interest bearing accounts including CD’s at the contract rate; therefore, they are not waiving early withdrawal penalties.
Even though there was speculation that Chase would only pay interest up to the failure date as was the minimum requirement, Chase went as far as to not even allow early withdrawals without penalty. They have committed to honoring these rates, which also worked out great for those that jumped on it last month.
Reason #2: They are still offering the 5% APY 12-month CD
A week later, the same high rate is still on their website:
This can’t have been an accident. 13-month CD is available too.
Reason #3: It’s FDIC-insured, now with a more stable bank
For those that worried about WaMu service interruption or lost liquidity (which never happened) , now it should be even more stable with Chase Bank.
Reason #4: It’s still a top rate, and it might change at any time.
Maybe there is some sort of behind-the-scenes rate freeze agreement that we don’t know about. Their popular Online Savings + Free Checking combo is still paying 4.00% APY on savings and the checking perks haven’t changed (WaMu review). Savings accounts at any bank are always subject to change, so there is nothing I can do about that. But I can sure lock in this rate now and keep my system going as long as possible:
Reason #5: Fed may drop interest rates soon
Bailout plan or not, this economy ain’t doing so well. Although I don’t make big bets on such forecasts, there is a good possibility that Fed will lower interest rates by the end of the year (see USA Today, WSJ).
If your funding source is not WaMu, they let you fund electronically with another bank’s routing and account number. You have to remember to verify the test deposits, though.
Posted in Banking, Deals & Offers | 27 Comments »
Washington Mutual was taken over by the FDIC today (Thursday). But for most account holders, there is no reason to panic.
All deposits, even those over $100,000 FDIC limits, will be taken over by JPM Chase, and are still safe. From the WSJ:
While the exact structure of the transaction wasn’t immediately known, J.P. Morgan is expected to acquire Washington Mutual’s deposits and branches, as well as other operations. The deal isn’t expected to result in any hit to the Federal Deposit Insurance Corp.’s bank-insurance fund, according to a person familiar with the arrangement. […]
Under the deal, New York-based J.P. Morgan, which has long coveted WaMu as a way to secure a footprint on the West Coast, will assume most of the thrift’s deposits and branches, as well as some other operations.
There will be no interruption in services. Bill payments will go through, checks will clear, direct deposits will arrive, your account number stays the same, the website still works, branches will still open on Friday. From CNN:
“For bank customers, it will be a seamless transition,” said FDIC Chairman Sheila Bair. “There will be no interruption in services and bank customers should expect business as usual come Friday morning,”
Shareholders get nothing. Well, not like they had much hope anyways with the stock at less than $2 per share. I hope this is another wake up call for those that still think it’s a good idea to keep a large portion of their portfolio in their company’s stock. I don’t care if you work for GM, IBM, or Microsoft. Shares of any single company always have some risk of becoming worthless.
More details to come…
They haven’t released the official press release yet. It will be interesting to see how the interest rates will change, and if they will choose to honor outstanding CDs. Chase Bank doesn’t have the same products as WaMu did, but IndyMac still honored their existing CDs. Maybe it’s time to apply for one now? WaMu is still advertising everything like their 4% APY savings as before on their website.
Anyways, don’t panic, okay? My local branch is crowded enough as it is. I don’t need a line around the block of nervous people clamoring for their money in small bills. 
Update: Here is a preliminary welcome page from Chase. Nothing too much new there, no mention of interest rates changing. Still offering the same 4% APY savings and 5% CDs on the website.
Update 2: Here is the official page from FDIC.
Will I continue to earn interest at the same rate?
All interest on deposits accrued through September 25, 2008, will be paid at your same rate. JPMorgan Chase Bank will be reviewing rates and will provide further information soon.
Update 3: They updated and changed the FDIC page!. It now states:
Will I continue to earn interest at the same rate?
JPMorgan Chase accepted Washington Mutual’s interest bearing accounts including CD’s at the contract rate; therefore, they are not waiving early withdrawal penalties.
Accordingly, the 5% APY CDs should stay valid.
Posted in Banking | 68 Comments »
Washington Mutual has raised the rate on their Online Savings + Free Checking combo to 4.0% APY. This is now the highest of the no-minimum no-fee savings accounts. Curiously, HSBC Direct actually dropped their rate to 3.25% APY earlier this week.
You can learn more about this account at my WaMu review post. They also again have 12-month CDs yielding 5% APY.
I’ve already laid out why I am sticking with Washington Mutual. In short, why would I mess with this nice setup as long as my money is still insured?
[Some pages still say 3.75%, but my account details confirm the 4.0% APY. Existing account holders can log in and click on “About this account”. Or just click here and hit Apply Today, and you should see the new rate.]
Posted in Banking, Deals & Offers | 58 Comments »
I wouldn’t say my wife and I are well-traveled, but we do try and experience other cultures whenever we can. Given work constraints and Corporate America’s hatred of vacations (2 weeks a year??), we are lucky if we can manage one trip per year. However, I think we’ve worked out a pretty good system of managing money needs while abroad.
Travelers Checks?
I never buy travelers checks. You often have to pay a fee when you buy them, and then you might have to pay a fee for exchanging them to local currency. Or you’re searching all day for the American Express office. Less and less stores accept them for purchases, due to fraud and theft. If your signatures don’t exactly match, they give you grief. If you get them wet, they are useless and you have to replace them.
Most importantly: Any place that does take them will most likely accept credit cards, which are a better alternative (see below).
Best Credit Card For International Travel
Whenever possible, I use a credit card for making purchases while abroad. Hotels, transportation, sightseeing tickets, and so on. However, most credit cards are pretty expensive when it comes to foreign currency purchases. Visa and Mastercard charge a standard 1% “conversion” fee on top of the wholesale “interbank” exchange rate. Many major credit card issuers like Citi, Chase, and American Express charge you another 2%-3% on top of that. You’re losing up to 4% off the bat.
So what do I use? My favorite card, hands down, is the Capital One NoHassle Cash Rewards card. I have used this card from China to France with no issues at all. Capital One charges you only the interbank currency exchange rate. They pay the Visa/Mastercard 1% fee for you, and they don’t have any self-imposed surcharge. Finally, this specific card gives you 1% cash back on all purchases (2% for groceries/gas) and has no annual fee.
Net result: Not only do I get the best exchange rate possible, but I actually gain 1% cash back on my foreign purchases. It’s better than cash!
(I only use this card internationally. While in the US, I prefer these cash back credit cards.)
ATM Cards / Getting Cash
I used to worry about bringing some local currency with me, but it is usually expensive to get this done in the US. (Always compare their rates with the interbank rates at Oanda.com.) Nowadays, if you are arriving in a large international airport, there is hardly any chance they won’t have ATMs available. I do bring $100 in US $20 bills in my money belt as an added backup.
When it comes to getting cash in local currency from ATMs, there are also fees to be aware of. The local ATM may charge a fee, although bigger banks are less likely to. Your bank may also charge a fee for using a non-network foreign ATM. Finally, they may charge a surcharge for the currency exchange itself.
Because I use a credit card for most large purchases, I usually only need cash for restaurants and other small things. Therefore, I usually take out all the cash I expect to spend during my stay all at once, as it is no more than a few hundred dollars. Since I only have to pay these fees once, I don’t worry about them as much.
For example, on a $300 withdrawal using my normal WaMu Free Checking account, I will be charged a 3% exchange fee + no ATM fees. I am okay with paying a one-time fee of $9 for this convenience. My backup card is with Bank of America, where it would have cost $8 total (1% + $5), though they do have some partner banks with no fees. I like sticking with big banks here.
A good comparison of all these card fees is located here.
Money Belt and Wallet
After experiencing firsthand how slick a professional pickpocket can be in an Italian train, I don’t go anywhere without my trusty money belt keeping everything hidden safely underneath my clothes. I usually put in my week’s worth of cash, my backup credit card, two ATM cards, emergency numbers, and my passport.
My wallet only holds a day’s worth of cash (~$40) and my primary credit card. I usually also have travel pants with zippered pockets. This way, if it gets stolen I am only out a small amount of money and one credit card.
Lost Your Credit Card While Traveling?
You can easily report your lost card to the major issuers while traveling internationally by calling these US numbers collect. Write them down and keep in your money belt, along with any credit card numbers.
- Visa: 410-581-9994
- Mastercard: 636-722-7111
- American Express: 336-393-1111
Posted in Banking, Credit Cards, Travel | 38 Comments »
WaMu has rolled out a new 5% APY 12-month CD, which is a very high yield for that term length. Yes, WaMu has had some issues like other banks, but I’ve already explained why I am sticking with them as long as I’m under the FDIC insurance limits.
Convenience Factor
If you already bank at WaMu, you can fund it easily online with a minimum of $1,000. With their existing Free Checking and 3.75% APY Online Savings combo, it makes a convenient package:
Early withdrawal penalty is 90 days interest. You can fund directly from your existing accounts. I might move some money around for this one.
Combine with 0% APR Balance Transfers
For those that are interested in making some profit using 0% balance transfers, but have been holding off due to the narrowing interest rate spreads, this might be an opportunity to jump back in. You can get 0% APR for 12 months with a $75 fee from the Discover More card.
There is also 0% APR for 12 months + $100 Bonus from the Discover Business Card if you want to go that route. Details here.
Borrowing the money at 0% and putting it in 5% CD for 12 months gives the following rough math: Gain of 5% interest on $12,000 = $600. Minus $75 fee and taxes to get your final profit. You can do better if you get a larger credit limit. If you can handle the minimum payments of 2% of balance per month ($200 initially each $10,000) with your regular cashflow, then you could stick the entire amount in the CD. The actual terms say that the introductory period lasts “until the last day of the billing period ending during September 2009″.
Posted in Banking, Deals & Offers | 47 Comments »
After pointing out that the FNBO Direct video contest (since ended) was giving out $500 to the Top 20 semi-finalists and there were only 14 entries at the time, many more people decided to give it try. Well, it turns out that my readers are much more talented at making videos than I am - at least two of them have won $500 (and still have a chance at $5,000). Here is one of the winning entries from reader Dave and his son Max:
Updated: More $500 videos from readers Dan, Danila, Alexa, ChristianPF, and William. Congrats everyone! I’m going to *sniff* sit in the corner and wait for the $10 consolation prize that everyone else gets.
Included in my “sorry, your video was lame” e-mail was an offer for a $25 bonus if you open an FNBO Direct Online BillPay account and make one bill payment. To get the bonus, you will have an opened FNBO Direct savings account, currently paying 3.50% APY (my review).
Posted in Banking, Funny | 20 Comments »
While logging on to my WaMu account I noticed (as did reader Alvin) that the WaMu savings account* is now paying 3.75% APY as of 7/31. Some pages still say 3.30%, but my account details confirm the 3.75% APY. (Login and click on “About this account”.) Or, click here and hit Apply Today, and you should see this:
Of course, if you read the news, you’ll know that Washington Mutual stock is being battered right now. Is this move a sign of desperation? If so, is this rate increase good news or bad news?
It’s All About The FDIC Limits
Well, if you have money over the FDIC insurance limits of $100,000 per titled account, I strongly suggest you stop reading right now and spread it out immediately. Your money is at risk. Here are some good options.
If you are under the limits, then your money is safe. The main things left to worry about are (1) easy access to money, (2) crediting of current interest earned, and (3) future interest rates. But hey, we already have two examples of struggling banks that give us an idea of what we might be in store for.
IndyMac Bank CD Example (FDIC takeover)
I believe that IndyMac failed on a Friday, and branches were closed that day. Over the weekend, branches were closed and the website was down. ATMs and debit cards still worked. By Monday, all the branches were open and the website was back up. Direct deposits, electronic transfers, and written checks went through uninterrupted.
All interest earned in accounts (under the limits) was still credited. Before the failure, IndyMac Bank also had some high interest rates on certificates of deposit (CDs). Upon takeover by the FDIC, an ideal scenario actually happened. For one, you had the option to withdraw your money from a CD with no early withdrawal penalty. Or, if you liked the rate, your CDs could continue to earn the same interest until maturity. This is an even better deal than if IndyMac stayed intact.
Countrywide Example (Bought by Bank of America)
Another struggling bank, this time merged with another existing bank. Currently they are still separate websites, with their own interest rates and products. Nothing really changed from the customer’s point of view. There was no downtime, or lost liquidity. You use the same checks, same debit cards, same website. CD rates and other terms remained the same. A slight bonus was that Countrywide customers could now withdraw money from Bank of America ATMs with no fees. [Merger Info]
So, Will WaMu Fail?
I have no clue. My PTI-style Toss-Up Percentage: 25% Fail, 75% No Fail. But even if it does, given it’s size, I can’t see it disappearing overnight like a small local bank might. It would have to be taken over by another (probably large) bank. In addition, there are so many moving parts that it will probably keeping run as-is for several months even if it does get taken over.
Taking all this into account, I will be sticking with Washington Mutual and happily take the increased interest rate.
* Reminder: This 3.75% rate is only available if you apply online and open a Free Checking account at the same time. If you go into a physical branch, they will deny deny deny! However, after opening you can use it at a branch just like any other savings account. More details.
Posted in Banking | 58 Comments »
It seems that one small silver lining of these ongoing bank troubles is that well, banks need more money in order to keep afloat. This means they are more willing to pay us more $$$ for the privilege of holding onto ours. Even the big banks are starting to play along. Thanks to Brian and John for their respective updates.
Big Banks
If you have a decent balance and are willing to lock up your month for a while, below are some nice rates with terms of a year or less. Interest rates might be going back up soon to combat inflation, so locking in a CD longer than that might not be the best idea.
Online Banks
The online bank arena remains the place to be if you want high yields and minimal restrictions, including the ability to withdraw money at any time. All are still FDIC insured.
- HSBC Direct is offering 3.50% APY with no fees and no minimum balance requirements, guaranteed until 9/15.
- FNBO Direct is also offering 3.50% APY with no fees and no minimum balance requirements, and has maintained a decent track record of consistently high rates.
- Everbank also has a savings account that offers a nice 4.65% APY for the first 3 months, and then 3.51% APY afterwards. Not bad, considering even the non-special rate is very competitive. I guess that is why they call it the Yield Pledge Money Market account, since it “pledges” to stay amongst the top 5% of competitive banks. There is a minimum balance requirement of $1,500 to avoid fees.
Posted in Banking, Deals & Offers | 30 Comments »
I am currently out of VirtualBank referrals to give out to people. (Both referrer and referrer get $20 if you open an account.) As such, I am looking for a loyal and participating reader of My Money Blog to give out their referrals and make some easy money. If you have (1) made at least 3 comments here before today with the same working e-mail address (I will run a search), (2) have a VirtualBank account with available referrals, and (3) can make a promise to deliver referrals promptly, please contact me or leave a comment using the e-mail. I think I have enough for a while, thanks! I do not want anything in return. First come, first served. Thanks!
You can also get an easy $25 bonus by opening an ING Direct account, if you haven’t already.
Posted in Banking | 10 Comments »
I’ve had a lot of questions about FDIC insurance recently (for obvious reasons), and have been getting a good share via e-mail as well. Took some research to find all the answers, but here they are:
Will multiple accounts at the same bank, like having both a checking and savings account, increase my coverage limits?
Depends. It’s how the account ownership is titled that matters. If it is an individual account, then you get $100,000 per individual at that bank, no matter how many different accounts you open up. To get more coverage, you could open up an account at another bank. However, if you open up a joint account with someone else that can increase your limits.
How much FDIC coverage can a couple get at one bank?
If structured properly, a couple such as a husband and wife can shield up to $400,000 at one single bank without involving legal trust vehicles. In addition to the $100,000 per individual account, if two people open a joint account then each will have up $100,000 in coverage ($200,000 total for the account) [Source]. If you throw in revocable trust accounts, a couple can theoretically shield up to $600,000 at one institution:
Are business bank accounts covered by FDIC insurance?
Yes, but you have to be careful. Since legally there is no difference between a sole proprietorship and an individual, one cannot gain more coverage at a single bank by opening a “business” account when you are a sole proprietorship. The business account would still fall under the $100,000 individual cap. However, in the case of partnerships, corporations, and LLCs, because these are separate legal entities, they do get a separate $100,000 per entity.
The deposit accounts of a corporation, partnership or unincorporated association are insured up to $100,000 provided the corporation, partnership or unincorporated association is engaged in an “independent activity.” The term independent activity means that the entity is operated primarily for some purpose other than to increase deposit insurance coverage. [Source]
Where would you put $1,000,000 in cash if you had to? Spread across 10 banks (or more to cover accrued interest)?
First of all, there are very few scenarios where I’d want $1,000,000 sitting around in cash. I’d probably choose to take more risk with it. But I really don’t think I’d bother with 10+ banks. Most likely, I would place it in a retail money market fund at a reputable firm, like the Vanguard Prime Money Market Fund. That way, even if Vanguard goes bankrupt, this will not affect the underlying conservative investments. A retail money market fund has never “broken the buck”. Alternatively, I would buy traditional US Treasury Bonds or TIPS either directly or through a Treasury money market fund.
What about the Certificate of Deposit Account Registry Service (CDARS)?
Another way to increase FDIC insurance are services like that of CDARS.com. Essentially, they spread your large deposits into $100k chunks across a network of banks, but without any effort on your part. From their website:
In general, the FDIC insures up to $100,000 per customer per financial institution. So, you could run around to many institutions to deposit your funds to receive the same coverage you get using CDARS. Or you can place your large-dollar deposit with a network member. The member bank breaks your funds into smaller amounts and places them with other banks that are members of a special network. Then, those member banks issue CDs in the amounts under $100,000, so that your entire deposit is eligible for FDIC insurance. By working with one member bank, you can receive insurance from many.
According to this Bankrate article, due to the added costs of this system CDARS rates are usually about 0.15% lower than the “normal” CDs from the network banks. Also, the network banks seem to be smaller local banks, which may not offer the most aggressive rates in the first place.
Am I worried about my money at Washington Mutual?
Not really. WaMu is much better financially than IndyMac was. But again, due to the realities of fractional-reserve banking, if people panic and start pulling out tons of money from WaMu, then they can still fail due to liquidity issues. I am not going to be one of those people. If it fails, it fails. Most banks on the FDIC “problem list” do not fail. I have faith in the FDIC process, and I still have much less than $100,000 in my accounts. Finally, I never keep all my funds in any one bank. I can still run my day-to-day cashflow needs from other banks.
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