New inflation numbers for March 2013 were just announced, so it’s time for the usual semi-annual update and rate predictions.
New Inflation Rate
September 2012 CPI-U was 231.407. March 2013 CPI-U was 232.773, for a semi-annual increase of 0.590%. Using the official formula, the variable component of interest rate for the next 6 month cycle will be approximately 1.18%. The new fixed rate is nearly guaranteed to be zero, so the total rate will be 1.18% as well. If you have an older savings bond, your fixed rate may be different.
Purchase and Redemption Timing Reminder
You can’t redeem until 12 months have gone by, and any redemptions within 5 years incur an interest penalty of the last 3 months of interest. A known “trick” with I-Bonds is that if you buy at the end of the month, you’ll still get all the interest for the entire month as if you bought it in the beginning of the month. It’s best to give yourself a few business days of buffer time though, since if you wait too long your effective purchase date may be bumped into the next month.
Buying in April
If you buy before the end of April, the fixed rate portion of I-Bonds will be 0.0%. You will be guaranteed the current variable interest rate of 1.76% for the next 6 months, for a total rate of 0 + 1.76 = 1.76%. For the 6 months after that, the total rate will be 0.0 + 1.18 = 1.18%. Let’s say we hold for the minimum of one year and pay the 3-month interest penalty. If you buy on April 30th and sell on April 1, 2013, you’ll earn a 1.28% annualized return for an 11-month holding period, for which the interest is also exempt from state income taxes. This is better than any 1-year bank CD that I can find right now, keeping in mind the liquidity concerns and the purchase limits. If you hold for longer, you’ll be getting the full 1.47% over the first year.
Given the combination of current low rates and the fact that you lose the last 3 months of interest (again, for holding less than 5 years), it might be better to wait long enough to grab 12 full months of interest by holding for 15 months (14 buying late). If you buy on April 30th and hold until July 1st, 2014, you’d achieve a annualized return of ~1.26% over 14 months. After that, you can see what the new rates are and decide whether to keep holding them.
Our family keeps a full year of expenses put aside in cash reserves; it provides us with financial stability with the additional side benefits of lower stress and less concern about stock market gyrations. Emergency funds can actually have a better return on investment than what you see on your bank statement.
I’ve been slacking in terms of updates on this topic. While I still like to maximize my interest, there just hasn’t been many new developments that make me want to jump from one bank from another. However, if you haven’t optimized your cash recently, you may be stuck in a money market fund or megabank saving account paying 0.05% or less. You can definitely still do better than that! Here are what I consider the highlights of the best currently available interest rates.
Certificates of Deposit
If you have a large cushion, it’s quite likely to just sit there for years or more. Therefore, you may wish to put some of it in longer-term investments where you can take the money out in a true emergency and paid an early withdrawal penalty.
Everbank’s Yield Pledge Money Market and Interest Checking account both offer 1.25% APY guaranteed for the first 6 months for new accounts. Since it is fixed, this is essentially a 6-month CD with a higher rate than any other 6-month CD rate out there and with no early withdrawal penalty to worry about.
Ally Bank Raise Your Rate CDs have a rate bump feature; the 2-year term pays 1.09% APY and the 4-year term pays 1.30% APY (as of 4/8/13). You can change your rate after your account is opened — if their rate on this CD goes up, yours can bump up to match it (one interest rate increase with the 2 year term, two interest rate increases with the 4 year term).They also offer traditional Ally Bank High-Yield CDs with 3-year CDs at 1.20% APY and 5-year CDs at 1.54% APY (as of 4/8/13) currently. Early withdrawal penalty is only 60 days.
Discover Bank CDs are currently offering 3-year CDs at 1.25% APY, 5-year CDs at 1.60% APY, 7-year CDs at 1.90% APY, and a 10-year CD at 2.00% APY. Early withdrawal penalty varies from 6 months for the 3-year to 15 months on the 7 and 10-year CD.
PenFed Credit Union CDs are currently offering 3-year CDs at 1.60% APY, 5-Year CDs at 1.65% APY, and a 7-Year CD at 1.75% APY. Early withdrawal penalty varies from 6 months for the 3-year CD to 12 months on the 5 and 7-year CD.
Ally Bank’s Flexible Certificates of Deposit
Let’s focus on the Ally Bank certificates of deposit, where you can still access your money as long as you pay a early withdrawal penalty of 60 days interest – significantly less than at other banks. Why is this good?
If you have a Citi credit card or a Citibank account with the ThankYou points rewards system, you have a wide array of options to redeem your points at ThankYou.com. But while that fancy coffeemaker may look nice, chances are the cash equivalent value for your points is quite poor. I’ve covered this in bits and pieces before, but here’s a complete guide to getting the most value out of your points.
Eligible ThankYou accounts (* are the ones I have linked to my account):
CitiBusiness ThankYou® Card* – 15,000 bonus ThankYou® Points after $3,000 in purchases within 3 months of account opening. 3X points in rotating categories. No annual fee.
Best Value Option #1: Limited Time Offers
If you have either patience or luck, Citi does offer “sales” on gift card redemptions which can reduce the cost of a reward by up to 25%. For example, right now until 3/31 you can get a $50 Home Depot gift card for 4,500 points. Normally, you’d need 5,000-6,000 points. That equates 1.11 cents in gift card value per point. If you wanted cash, you could sell a Home Depot gift card at PlasticJungle.com for 87% of face value in cash, 91.35% in Amazon.com gift certificates. That equates to 0.967 cents per point in cash.
Previously ThankYou point sales have involved gift card to other popular retailers like Wal-mart, Lowe’s, Kohl’s, Best Buy, Gap, and Macy’s. The regular price is usually 1 cent in gift card value per point.
Best Value Option #2: Student Loan & Mortgage Rebate Checks
Capital One bought ING Direct USA back in early 2012, and has finally completed their transition and re-branding. Their new savings account product is called Capital One 360 Savings. Since I’ve had an account with them for over a decade (September 2001, as they remind me every time I log in), here’s an updated review of my 2nd oldest bank account meant for both new and existing customers.
At first glance, the only thing that really changed was that the primary colors went from orange and blue to Capital One’s red and blue. However, there are a few other tweaks that I noticed were different from the ole’ ING Direct days.
Login. This is still a little unique amongst online savings accounts. You login with either a username/account number and a PIN number (not an alphanumeric pA$sW0rd). If you have an old 4-digit PIN, they’ll ask you to change the PIN to a 6-digit number for better security. In addition, while the default entry method is via mouse clicks to avoid keystroke loggers stealing your password, you can also use a keyboard to enter the PIN with a creative key-to-number conversion that changes each time. See screenshot below:
Main account screen. The home screen is simple and straightforward, as always. There is better integration with their brokerage arm, Sharebuilder, with your balance automatically showing and the ability to perform same-day transfers between accounts. So if you have a Sharebuilder account, you essentially have a high-interest sweep option instead of a money market fund paying zero interest. Screenshot: Read the rest of this entry…
State Farm is again offering their bank customers TurboTax tax-prep software at a great discount. TurboTax Deluxe Online is free, Premier is $20, Home & Business is $30, and State is also included free with e-File for all versions. You can see the offer mentioned here, but with very limited details. Keep reading for how it only takes a one-time $25 deposit and a week’s time for anyone to open an eligible checking account and get this valuable perk.
According to my blog archives, from 2006-2009 State Farm offered TurboTax Deluxe for free to all customers including insurance policyholders. Starting in 2010 or 2011, they started offering it only to bank customers. However, it has been relative easy to maintain a checking account there with a small balance of $100 with no monthly fees. Even at 5% interest, that’s just $5 a year in exchange for what is worth over $40. Plus, it looks like now you only need to commit $25.
My experiment this year was to test if you could simply open up a new account and immediately get free access to TurboTax. I thought that perhaps you had to be a deposit customer for a certain period or there was a cut-off date. Well, it appears that from application to free access takes about a week. Here are my findings.
Annual reminder for 2013. The most well known part of the Fair and Accurate Credit Transactions Act (FACT Act) is that you can get a free copy of your credit reports from all three major credit bureaus once every 12 months. However, there are also several other consumer databases that you should check as well which are also available absolutely free once every 12 months, and they can also have a significant financial impact. If you got one last year, you can now get another one and reset the 12 month clock.
ChexSystems Banking History
ChexSystems is a consumer information database used by an estimated 80-90% of all banks to help determine the risk of opening new accounts. Think of it as the bank’s version of a credit bureau. If a person commits check fraud or overdraws their account, it will be listed here. In addition, the simple act of opening or closing a bank account may be recorded in their database. Getting a negative ChexSystems record can leave you blacklisted from opening bank accounts at most major banks.
Medical History Used For Insurance Underwriting
MIB (previously known as Medical Information Bureau) is run by 470 insurance companies and has a “primary mission of detecting and deterring fraud that may occur in the course of obtaining life, health, disability income, critical illness, and long-term care insurance.” They record information of “underwriting significance” for those who have applied for life and health insurance with MIB member companies. If you have not applied for individually underwritten life, health, or disability income insurance during the preceding seven year period, then you probably don’t have a record.
Insurance Claims History
CLUE stands for Comprehensive Loss Underwriting Exchange, and they collect information that is used to calculate your potential risk of loss and thus your insurance premiums. You can also find out about previous claims on the house you are currently renting or recently bought, even if they weren’t made by you.
The C.L.U.E. ®Personal Property report provides a seven year history of losses associated with an individual and his/her personal property. The following data will be identified for each loss: date of loss, loss type, and amount paid along with general information such as policy number, claim number and insurance company name.
The C.L.U.E. ®Auto report provides a seven year history of automobile insurance losses associated with an individual. The following data will be identified for each loss: date of loss, loss type, and amount paid along with general information such as policy number, claim number and insurance company name.
In addition, you should also request your free A-PLUS report (Automated Property Loss Underwriting System), which is a smaller database that also contains information about property loss claims.
When a potential employer runs a background check through LexisNexis (formerly known as ChoicePoint), this is the information they see. It doesn’t seem to claim be comprehensive, and they may have only limited or even no data about you, but I would still check for potentially negative data.
LexisNexis Screening Solutions Inc. provides Employment History Reports to employers only with a job applicant’s or employee’s consent. Employers utilize a variety of companies to obtain employment history information. Our files would only contain information on you if LexisNexis provided your Employment History Report to an employer.
This report can be important if you are a renter and someone runs a background check on you at LexisNexis (ChoicePoint).
LexisNexis Screening Solutions provides Resident History Reports to housing providers that have the subject’s consent. Housing Providers utilize a variety of companies to obtain tenant history information. Our files would only contain information on you if LexisNexis provided your Resident History Report to a housing provider.
LexisNexis Full Disclosure File
You may notice that LexisNexis is involved in many different areas above. As one of the largest personal information databases in the US and a for-profit company (part of Reed Elsevier), they should just rename themselves Big Brother, Inc. You can request a “Full File Disclosure” that supposedly includes all of the information that they have on you – including public records, real estate transaction and ownership data, lien, judgment, and bankruptcy records, professional license information, and historical addresses on file.
Capital One 360 has a few Black Friday weekend deals for their 360 checking account and their Kids Savings Account, some easy bonus money that you can use to pay for those gifts. The checking account is designed to complement the savings account, and actually pays higher interest for large balances. Good for 3 days only, from now until Sunday at midnight Eastern.
$125 360 Checking account opening bonus
Open a 360 Checking account November 23rd – 25th and make a total of 10 purchases (either signature or PIN-based) using your 360 Checking Card or 10 CheckMate deposits (or any combination of the two) within 45 days. Your $125 bonus will be automatically deposited into your account on day 50. Bonus only available for new 360 checking accounts.
Open a Kids Savings Account and get a $10 bonus.
Open a Kids Savings Account November 23rd – 25th and we’ll put a $10 bonus into your new account. Only available when you open a new account with at least one new Customer (either you or the kiddo must be a new Customer to Capital One 360). $10 bonus starts earning interest upon account opening, and is available for withdrawal after 30 days. A kid-friendly 0.75% variable APY (effective 11/21/2012)
Ally Bank has updated their new mobile banking apps to add mobile check deposit and more. You can now do the following:
Mobile eCheck Deposit – Deposit a check just by snapping a picture of it with your camera phone.
Bill Pay – Pay your bills from your phone or tablet. Payees need to be set up on the website first.
Non-Ally Bank-to-Bank Transfers – Transfer money to and from your other banks for free. Very handy if you’re like me with many bank accounts.
Instant phone access. Tap a button on the app and it’ll call an Ally human by phone 24/7. The estimated wait time is even shown beforehand.
Built-in ATM locator with GPS. Not really needed much as I can use any ATM with their fee reimbursements. I did notice that the locator includes drugstores and grocery stores that offer cash back with purchase.
I tested out the mobile check deposit today, and overall it worked the same as other apps I’ve used. You can deposit into either a Ally checking or savings account. My eCheck deposit limit was $10,000 per day or $25,000 every 30 days, which is pretty high as these things go. Anything higher and you can still use the free postage-paid envelopes from Ally. After you take a picture of the front and back, they will send you an e-mail about your deposit status. My deposit was approved later the same day, and my $100 deposit was available the next business day for withdrawal (varies with size of deposit). They ask you to save your check for 60 days and then destroy it.
ING Direct announced to customers last week that they would soon change their name to Capital One 360, effective February 2013. Goodbye big orange ball, you were the first no-frills savings account that paid high interest by piggybacking on regular checking accounts (no branches, no ATM access, no checks) and it worked brilliantly, creating an entire new banking niche. But the financial crisis happened, ING Group got a big Euro-bailout, and as part of the restructuring terms they agreed to sell their ING Direct unit for $9 billion dollars.
It was a fun ride, ING Direct. For a while, you paid me nearly 5% APY interest as I borrowed money for free using 0% APR balance transfers. Your website was unapologetically simple, but everything worked as promised. You created handy sub-accounts for savers to stash their money for specific needs. Good times. Of course, I can’t forget that you also had a nervous brainfart and bullied my webhosting company into shutting down my entire website without any warning. In the end, your interest rates also started to fade a little from the top while staying somewhat competitive, and being a rate-chaser I moved my money elsewhere. No hard feelings?
As is always the case, the new company promises to keep everything you loved about the old company, while also making additional improvements. I still keep about $100 with ING Direct to keep them from closing my account, mostly out of nostalgia I suppose. I’ll continue to wait and see how they integrate the site with the other recently-improved Capital One products like their 1.5% cash back personal cards and 2% cash back business cards. CapOne wants to join the big boys Chase/Citi/AmEx as a broad financial services company.
What are you planning to do with your ING Direct account?
If you open a new regular checking account with their Basic Banking package by 10/31/12, and within 45 days of opening complete both a direct deposit and a qualifying bill payment for two consecutive months, you will get a bonus of 10,000 ThankYou points, redeemable for $100 in gift cards at various retailers including Home Depot, Macy’s, and Gap stores. New customers are those that have not received a bonus reward for opening a new Citibank consumer checking account within the past two years.
There are other bonuses for up to 30,000 ThankYou points, but those require large ongoing deposits to avoid high monthly fees. Citibank’s Basic Banking package is actually pretty reasonable if you’re looking to for a keeper checking account with access to Citibank’s branch/ATM network and free online billpay. As long as you make 1 direct deposit and 1 bill payment each monthly statement period, you’ll pay no monthly service fee. Or, just keeping $1,500 in the account by itself will waive the monthly service fee.
Ally Bank has an amusing new commercial using Nobel Prize-winning economist Thomas Sargent to promote their Raise Your Rate CD. Currently the 2-year CD pays 1.14% APY but has the uncommon feature that allows you to bump up the rate once during the term if rates rise. They also have a 4-year CD also at 1.14% APY that allow two bump-ups during the term. Via MR, it’s short and sweet:
I actually prefer their 5-year CD with short early withdrawal penalty, which offers a higher rate but no rising rate protection.
Chase Bank is offering a $150 bonus for new customers when you open a Chase Total Checking account plus deposit $100 and set up direct deposit within 60 days of account opening. You can avoid monthly service fees if you make a $500+ direct deposit each month or maintain a $1,500 minimum daily balance. Must keep account open for 6 months to keep the bonus. Expires 8/15/12.
At least in the past, you could simulate direct deposit using an ACH transfer from an online savings bank. Fine print quoted below. Read the rest of this entry…
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