For the first time in what feels like over a year, banks are actually raising some of their rates. Very slightly, but still up. Ally Bank just raised their rates on their online savings account to 1.80% APY, up from 1.75%. Their 12-month CD is also up to 2.05% APY, while ING Direct has a 12-month CD rate of 2.10% APY. Not exactly exciting, but if rates are rising I’d be keeping my maturities short.
I haven’t done an interest rate update in a while, as sadly there just hasn’t been that much to write about.
Reward Checking Accounts
These are checking accounts, usually through local credit unions, that pay a very high interest rate if you jump through some hoops each month. However, if you make a mistake you’ll forfeit virtually all your interest for that month, so it can be tricky. But for the very diligent, their rates are still averaging around 4-5% APY on balances up to $50,000. Here’s a recent example at 4.01% APY on up to $25k, which requires 10 check card purchases each month, a direct deposit/auto-withdrawal, and online statements.
For more, see my review of rewards checking accounts and also this list of accounts by state. I’d stick with small local credit unions with limited membership eligibility if possible, as the rates tend to be more stable. I myself got burned with nationally-advertised Evantage Bank that dropped its rates shortly after opening.
Online Savings Accounts Rate Updates
Certificates of Deposit
As stated above, for 3-months or less go with Everbank. In general, CD rates have been very low, and given how fast rates can rise as compared to how much further they might fall, I don’t see the benefit in locking up for money for a long period of time. Even a top 3-Year CD might get you 2.76% APY, according to MoneyAisle.
Remember, the new $250,000 FDIC & NCUA insurance limits per titled accounts are currently extended through 2013.
Someone e-mailed me about high-yield savings accounts for businesses. These can be a helpful tool to maximize interest income for all kinds of businesses with idle cash, including sole proprietorships, partnerships, LLC’s, and corporations. Here’s a quick rundown of some favorites.
The ING Direct Orange for Business Savings Account pays 1.15% APY and has no minimum balance requirements or monthly fees. The benefit of this savings account is that you get the “it just works” factor of ING Direct. There are no bells and whistles, it simply pays you a good interest rate, and provides easy and fast transfers to/from your existing business checking account.
Capital One / Costco
If you can open with at least $1000 and will keep at least $100 in your savings account, you can get a slightly higher interest rate of 1.40% APY with the Business Money Market Account from Capital One Bank. The perks of this account include checkwriting ability (you are limited to 6 withdrawals per month, 3 of which can be checks) and the sign-up bonuses for Costco users. Executive members can get $60 and Gold/Business members can get $20 after you open your first account and deposit $5,000 within 30 days.
(Considering upgrading to Executive? Buy a Costco membership certificate and get over $50 in coupons.)
Fidelity Investments
For maximum flexibility, you can open a Fidelity Account for Businesses and invest in anything from a money market fund to bond mutual funds to individual stocks. (Online stock commissions range from $8 to $19.95.) You’ll need $2,500 to open, but there are no minimum balance requirements or annual account fees. Currently, money market yields in general are very low. The Fidelity Cash Reserves fund currently has a yield of 0.28%. But if you were so inclined, you could invest in Treasuries, municipal bonds, inflation-protected bonds, or even dividend stocks.
I still love getting my bills via snail mail. I avoid online statements because I get over a hundred e-mails a day and it is very easy for me to put it off temporarily and never remember to read the e-mail again. A paper bill will stay on my desk until pay it and I file it away.
However, I essentially got paid $50 to sign up for paperless statements when signing up for the Citi Forward card (see my review), so of course I did it. This month, I barely got my payment in on time, and was only 2 days away from being dinged a $30 late fee.
As a result, I’ve been gradually visiting all my financial provider websites and signing up for online alerts, which e-mail or text you when certain criteria are met. For example, with Citibank I can get alerts for:
Credit Cards
Banking
For the credit cards, the option is under the “Account Profile” menu as opposed to under “Tools” where I thought it would be. See screenshot.
Some sites like American Express also have an alert that triggers when it is X days before the bill is due, but they still haven’t received payment, which find most useful. Another alternative would be to just set up auto-pay on the card while it was on e-statements. But if you’re like me, I just switched my Forward card back to paper statements after I got my 5,000 ThankYou points. Sorry, trees!
U.S. banks will collect a record $38.5 billion in overdraft fees this year, according to a recent CNN Money article. These overdraft fees accounted for more than 75 percent of service fees charged on customer deposits. Take Bank of America for instance:
The fee is $35 for each overdraft or returned item. However, you will be charged for no more than 10 items per day.
Wow, how considerate of them, only 10 items per day! In my post about the Bank of America overdraft fee class action settlement, people are still commenting about being charged over $400 for what is usually a small mix-up about your account balances. Is it any wonder I avoid using check cards like the plague…
With such high fees, it can be worthwhile to request a “courtesy” fee refund since they were so nice to allow all those overdrafts (and charge the accompanying fees) out of “courtesy”. 
I had an overdraft fee from Bank of America last year when I was trying to close out an account. Luckily, I was able to get it refunded to me. You never know if you don’t ask, so don’t give up the opportunity to save hundreds of dollars with a 10-minute phone call! Here are some things that I think helped:
“Hi, I was recently charged an overdraft fee when an old check got cashed. I totally forgot about it and it was my fault. However, I’ve been with BofA for X years, and this is my first overdraft fee. I am calling to see if I am able to get this waived.”
If you’re not satisfied with your response, it has paid off for many customers to escalate your request to the “Executive Customer Relations” division of Bank of America. The Consumerist shares some helpful contact information:
Call Executive Customer Relations:
Executive Customer Relations general line: 704-386-5687
Martha Dominguez, Executive Customer Relations Specialist: 714-792-4264
E-mail the BofA Customer Advocate:
Nancy M. Condos
VP/ Customer Advocate
Executive Customer Relations
Office of the Chairman
nancy.m.condos@bankofamerica.com
…or try the CEO!
Kenneth Lewis, CEO: Ken.d.lewis@bankofamerica.com
A sample success story:
Emailed the office of the chairman 2 weeks ago and received a call today from that office. They credited back $440 in overdraft fees. Issue was my fault since i made the purchases but the merchant submitted all transactions for 3 months on one day. Pretty happy with the result.
Write a snail-mail letter to the CEO:
Mr. Kenneth D. Lewis
100 N. Tryon Street.
Mail Code NC-1-007-18-01
Charlotte, NC 28255
Another success story:
Thank you, thank you, thank you. After reading the post about the BoA customer who got $280 in NSF fees refunded, I wrote BoA myself. They had charged me 7 NSF fees in succession (which sucked ass) and was my fault. [...] So I wrote a formal letter of complaint to Kenneth Lewis. This past Saturday, they refunded all of the fees - even though it was my fault. I can’t believe it. That rocks. People do have the power.
If you have cash sitting in a money market mutual fund right now, chances are the yield is quite pitiful. Have you checked recently? The average yield on a money market fund is only 0.09%! Even the usually competitive Vanguard Prime money market fund (VMMXX) is only paying a 0.23% yield, and the highest paying retail Fidelity fund is eeking out a 0.44% yield. (Numbers as of 8/3/09.) There’s little if any benefit to switching to a Treasury or Municipal money market fund, either.
Such low yields may tempt you to start looking at corporate bonds or funds with longer maturities. However, by chasing any of these you start risking your principal. Definitely avoid anything with “high-yield” in the name for your cash needs. Why not explore the world of FDIC and NCUA-insured deposits? The new $250,000 insurance limits per titled accounts are now extended through 2013.
High-Yield Reward Checking Accounts
These are checking accounts, usually through local credit unions, that pay a very high interest rate if you jump through some hoops each month. However, if you make a mistake you’ll forfeit virtually all your interest for that month, so it can be tricky. In addition, these accounts also only pay the higher interest on a limited balance, usually $10,000 or $25,000. But for the very diligent, their rates are still averaging around 4-5% APY on balances up to $25,000. Here’s one recent example at 4.01% APY that requires 10 check card purchases each month, a direct deposit/auto-withdrawal, and online statements.
For more, see my review of rewards checking accounts and also a list of participating banks by state here. I’d stick with small local banks with limited membership eligibility if possible, the rates tend to be more stable.
Online Savings Accounts
With most online brokers these days, you can easily link your accounts to online banks and make direct funds transfers. Online savings accounts like FNBO Direct or Ally Savings offer $250,000 of FDIC-insurance and easy liquidity. You’ll likely get a yield that is at least 100 basis points (1%) higher than any money market fund. However, you are limited to a maximum of 6 withdrawals per month.
Bank CDs & Short-Term Promotions
If you have a large amount of money to invest, and you don’t need immediate access to the funds, you can still get around 3% APY for short periods of time. For example, Everbank is offering 3.01% APY for the first 3 months for new accounts. WT Direct has a promotion that can earn you 3.2% APY for a 2.5 month commitment. To me, a short-term promotion is the same thing as a bank certificate of deposit, since many banks offer nice rates and then drop them when up for renewal.
When you’re done with the term, perhaps money market mutual fund rates will be tolerable again!
Online bank WT Direct has extended the terms of their $150 bonus promotion such that you only need to have your account funded by August 15th (previously July 31st).
You can read about the details in this previous WT Direct $150 bonus post. Keep in mind that this change actually makes the numbers for the promotion a bit better, since now you only have to keep your money there for 2 1/2 months instead of 3 months. Depending on your opening balance, you’ll get somewhere between 2.95% to 3.2% APY during your 2.5 month commitment. This is a higher yield than any bank CD that I’ve seen of similar maturity length.
It’s hard to believe that back in August 2008, I was able to get a 5% APY 12-month CD from Washington Mutual (now Chase). Since it’s almost time, I called today to see if I could designate how I wanted the funds to be disbursed upon maturity. However, I was told that I actually had to wait until the actual maturity date, and then call them within a 7 day grace period. If missed that short window, then it would automatically renew into another CD of the same term, and I’d be subject to early withdrawal penalties. (Up to 6-months of interest, which can mean you get back less than your initial principal.)
After a bit of research, it seems that many of the big banks do this. For example, with Bank of America, for CD account terms that are 7-27 days, there is a 1 calendar day grace period. For CD account terms that are 28 or more days, there is a 7 calendar day grace period. Yes, one calendar day, not business day, so if it’s a Sunday or holiday you still have to contact them? I’ve also read that some banks require you to physically enter a branch or send a snail-mail letter.
On the other hand, other places that I’ve dealt with, like Pentagon Federal Credit Union, allow you to choose how the CD should be treated right when you open it. I can have the CD renew, have the funds transferred to a PenFed checking account, or have it sent to me by check. I can even choose to either reinvest the dividends or have them sent to me monthly. I guess this is another example of credit unions often being more consumer-friendly.
Meanwhile, I guess I’ll just have to set up some Google Calendar alerts to text me repeatedly when this thing matures. The current traditional CD is paying only 0.25% APY, and the online CD is 1.25%.
If you’re looking for a short-term CD, Everbank is offering 3.01% APY for the first 3 months for new accounts. It’s a money market account, so there are no early withdrawal penalties to worry about.
The online division of Wilmington Trust Bank, WT Direct, is running another promotion for new customers. You can get up to $150 cash bonus on top of the standard interest rate (currently 1.76% APY) if you open a new account and maintain a certain balance from 7/31 to 10/31. Here are the balances and corresponding bonuses:
The fine print:
This offer is available to new WTDirect clients only. Primary account holder must not have held a WTDirect account in the past 12 months. To receive the bonus, a valid promotion code starting with the letters “WFIT” must be present on the application at the time of account opening. WTDirect account must be funded via electronic (ACH) transfer received by 7/31/09. Account must remain open and in good standing through 10/31/09, the end of the promotion period. There is no minimum balance to open the account but the bonus is determined by the account balance at the time of initial funding, which must be a minimum of $10,000 and must remain on deposit through the end of the promotional period. Bonus will be credited to client’s WTDirect account on or about 11/20/09. WTDirect reserves the right to cancel or modify this promotion at any time without notice.
If you click through the bonus link above, the promotion code of wfitc32_1760738 or similar should already be filled in for you.
The Numbers: 2.75 to 3% APY 3-month CD
How does the bonus work out when converted to an interest rate? To start, you are already getting 1.76% APY, or about 1.75% APR. On $10,000 for 3 months, that’s 10000 x 0.0175/12 x 3 = $43.75 in interest. Since the bonus is $25 for a $10,000 balance, this works out to about 2.75% APY. On a $50,000 balance, the bonus is $150 and works out to nearly 3% APY.
Therefore, you can treat this bonus as a 3-month CD paying 2.75 to 3% APY, which is more than 1% higher than any other available 3-month CD.
Application Process and Setup
I’ve already opened a WTDirect account for a previous bonus, so here a quick summary of what to expect when applying. First, they gather the personal info. Second, they use the now-popular Equifax ID check questions to verify your identity. Third, you can fund electronically with account and routing numbers, although you must come back and verify trial deposits later. Finally, you can electronically sign the application and disclosures. There were no physical forms to send in, although a welcome packet does arrive by mail. They state explicitly that there is no credit check.
As for practical matters, WT Direct’s online transfer system allows unlimited linked banks, and transfers to external accounts are free both in and out with a 2-3 day transfer time.
I saw that Vanguard has a new account called the VanguardAdvantage account. On the surface, it looks great. In addition to having full brokerage features (buy individual stocks, ETFs, options, and even brokered CDs), you also get full checkwriting abilities, ATM access, and online billpay. Since I have most of my retirement assets there, this would be good tool for added convenience and simplicity.
But then I found the catch. You need to have $500,000 invested at Vanguard to even be eligible for the account. Even at $500,000-$999,999 in assets, you have to pay a $30 annual fee for the privilege of getting what is basically a checking account, and you must pay $4.95 per month for Online Billpay service. No ATM refunds either (free at PNC banks only).
Vanguard seems to have an overall policy of grudgingly offering services that their customers ask for, but only if the less-wealthy are willing to pay a premium. I feel like they don’t want to stray from their basic roots of low-cost mutual funds, or maybe they just don’t want the hassle, but their competitors are leaving them behind.
Checking account features. For example, I can get the brokerage + checkwriting combo for free at Fidelity or Schwab, with no minimum balance requirements and ATM rebates. I don’t know about Chuck, but Fidelity has as-good if not better customer service reps than Vanguard.
Commission costs. The Vanguard Brokerage Services (VBS) account still charges $25 for an online trade + a $30 annual fee if you have less than $100,000 invested. Contrast that with 100+ free trades annually at only $25,000 in assets at both Zecco and Wellstrade.
I guess I’ll have to wait until I have a million dollars to get free checking at Vanguard. Doesn’t that just sound odd?
It’s Friday, which has become the day when Ally Bank announces new rates. I’m not sure why Ally Bank has become the poster boy for naughty banks giving us interest rates that are “too high”, but they are. From this CNN Money article:
Last month, the FDIC issued rules capping the rates troubled banks can pay on deposits — an edict that didn’t apply to Ally Bank because it is well capitalized.
The letter requires Ally to report to the agency on its deposit rates and how they compare with other banks whenever it seeks to tap funds under a federal debt guarantee program.
So they are confirmed to be well-capitalized, but they are still under scrutiny. It is better to be under-capitalized and offer horrible interest rates? Either way, another round of slight drops this week:
Ally Bank rate updates
The 12-month CD is now 1.95% APY as of 11/6/09. The Online Savings Account is now 1.55% APY. There are no monthly fees and no minimum balances for any of these products.
The best bet still seems to be their No-Penalty 9-month CD at 1.49% APY, which remains a top rate for 9-month CDs. Why not lock in a good yield for now, and you can still get out with no fees if rates rise.
PNC Bank has a new online banking product called Virtual Wallet which combines multiple bank accounts and online money management tools into one site.
Virtual Wallet is comprised of 3 accounts working together:
• Your SPEND account is a non-interest-bearing checking account.
• Your RESERVE account is an interest-bearing checking account used for short-term savings goals. [currently 0.10% APY]
• Your GROWTH account is a savings account which earns interest and can be used for longer-term savings goals. [currently 2% APY up to $25k]
The SPEND account has a $25 minimum to open, while the other two have no minimum opening requirement. None of them have minimum monthly balances or monthly fees. Online statements are required, and you only get 3 free checks per month. ATM fee reimbursements are available if you keep $2,000 combined in the SPEND and RESERVE accounts. Looks to be available online to any state.
I see the motivation, but couldn’t this just be done with two accounts? The SPEND and RESERVE are basically the same… 0.10% APY difference?
If you open an account by 7/4 and initiate a direct deposit of at least $400 by 8/31/09, you can get a $75 bonus. Early closure fee of $25 if you close within 180 days. $75 also available with other PNC checking account types, but you can only get one bonus.
Looks like Ally Bank dropped their rates over the weekend, about a week after my Ally Bank review. I don’t think this means they are an undercapitalized bank though, as the rates are still much higher than the upcoming FDIC rate caps. More likely, they simply got enough money at their previous rates, and felt they didn’t have to offer as much to attract deposits.
Ally Bank rates
The 12-month CD is now 1.95% APY as of 11/6/09. The Online Savings Account is now 1.55% APY. There are no monthly fees and no minimum balances for any of these products.
The best bet still seems to be their No-Penalty 9-month CD at 1.49% APY, which remains the top rate for 9-month CDs despite the slight drop. For some reason, it has an even higher rate than Ally’s non-penalty CD!? So why not lock in a good yield, and you can still get out with no fees if rates rise. Remember, CD rates are always subject to change, so get ‘em if you want ‘em.
WT Direct is running a new “Stay Financially Fit!” promotion for their savings account. Ostensibly it’s to help you build your emergency fund with regular savings deposits, but of course you have to do it with WT Direct. To participate, you must open a new account first or log into your existing account and look for this banner on the Account Summary page.
Now WTDirect can help you stick to your savings plan and bulk up your savings account. Simply take a few minutes to set up Direct Deposit from your earnings to your WTDirect account.
Act now and receive a $75 BONUS*. All you have to do is maintain a balance of at least $10,000 on July 31 and make direct deposits of at least $300 each month between 7/1/09 – 9/30/09.
Equivalent APY?
Finding out exactly how good this promotion is tricky, but I’ll make some simple assumptions. Let’s say you put $10,000 in on 7/31, the interest rate stays at the current 1.76% APY, and take everything out on 10/15. Then you take out everything including the three $300 direct deposits. This roughly equates to 4% APY during that 3.5 month period. Not bad if you can change or split your direct deposits. It seems questionable if other electronic transfers will count as direct deposit:
Bonus will be credited to your account on or about October 15, 2009. A direct deposit is defined as a recurring and automatic electronic deposit transaction of at least $300 per month initiated by a third party source of income, such as employment, pension or social security income. Direct deposit must be from a source not already being direct deposited into any existing account with Wilmington Trust or its affiliates.
The standard maximum insurance limits for both FDIC and NCUA-insured accounts will remain $250,000 for at least until December 31st, 2013. Previously, it was temporarily increased from $100,000 to $250,000 only until December 31st, 2009. The extension was included as part of the Helping Families Save Their Homes Act, which was signed into law on May 20th. I wish it was made permanent, but I suppose this is better than nothing.
Here is the media release from the NCUA. Here is the FDIC fact sheet outlining the new changes. FDIC is for participating banks, and NCUA is for participating credit unions.
You may actually have more than $250,000 of coverage, depending on how you have titled your accounts and where you hold multiple accounts. Here are the official online calculators:
NCUA Electronic Share Insurance Calculator (ESIC)
FDIC Electronic Deposit Insurance Estimator (EDIE)
