Ally Bank Interest Checking Account Review

allyreview_logoUpdated. If you are looking for a flexible alternative to a megabank account with tiny interest but convenient ATM network, here is my review of the Ally Interest Checking Account which I use in conjunction with the Ally Online Savings Account and also Ally CDs. I think they represent a reasonable compromise from your neighborhood credit union with only a few ATMs sprinkled across town. I’ve used this combo for years, and here are my experiences:

User Interface. Below is a screenshot of the main page after logging in (click to enlarge). I can see all of my accounts and their balances at a glance. The overall design is clean and minimalist, and it was recently updated to be more mobile-friendly.

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Customer Service. Ally Bank differentiates itself with their customer service. First of all, they are available 24/7 at 1-877-247-ALLY (2559). When you use their smartphone app or log into their website, you can see the wait time beforehand. Even better, if you don’t want to call them you can just use their Live Chat feature.

Security. Ally Bank supports two-factor authentication with security codes sent via either e-mail or text message. They ask for a security code when you log in from a computer they don’t recognize. However, if you’ve logged into that computer before with a security code, they may not ask you again and you can’t choose to have two-factor authentication to always be in effect.

Awards. Ally Bank has won “Best Online Bank” from Kiplinger’s Personal Finance magazine in 2014 and “Best Online Bank” from Money Magazine from 2011-2014.

FDIC Insurance. Ally Bank is a member of the Federal Deposit Insurance Corporation, FDIC Certificate #57803. As with other FDIC-insured banks, this means your Ally deposits are insured by the FDIC up to $250,000 per depositor, for each account ownership category.

Funds Transfers. With no physical branches, online savings accounts should have maximum flexibility as they are often secondary accounts (given most megabank checking accounts pay either no interest or a sad 0.01% APY). Ally Bank allows you to link any other external bank account using the standard routing number and account numbers. As long as you initiate the transfer before 7:30 pm Eastern Time, the transfer will take 2 business days. You can link up to 20 different accounts (it used to be unlimited; but other banks limit to 3; I have 7 myself).

So if I initiate a transfer on Monday afternoon by 7:30pm ET, the money will be debited first thing on Tuesday, and credited to the destination account first thing Wednesday. But know that if you initiate on a Saturday, you’ll get the same result. Even bank computers really don’t like working weekends, it seems. Overall, free transfers within 2 business days during the week is about as good as it gets for online banks.

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The transfer limits are also relatively high. On my accounts, I see that I have a $150,000 daily limit outbound and $250,000 daily limit inbound, with a total monthly limit of $600,000 outbound and $1,000,000 inbound. Keeping in mind that all savings accounts from any bank are limited to six withdrawals per month.

ATM Rebates. As of August 15, 2015, Ally Bank will no longer offer unlimited ATM rebates in the US. Here is the new structure:

  • Ally Bank continues to not charge ATM fees on their side of the transaction.
  • Ally Bank has added the Allpoint ATM network, with locations such as CVS and Walgreens pharmacies, Target stores, and 7-11 convenience stores. (Certain other online banks like Capital One 360 Checking also partner with Allpoint).
  • Ally Bank will now limit ATM fee reimbursements to $10 per statement cycle for fees charged by other institutions or ATM owners nationwide.

This is definitely a reduction in the benefit, but honestly I was surprised that it lasted so many years. Ally eliminated their international ATM rebates in August 2011. I used it a few times at a Las Vegas casino at $5 a pop; can you imagine their annual cost if someone did that every few days? For me, if I can find convenient ATMs that charge around $2.50 each, that means I can still go 4 times a month. Their online app also has an ATM locator that works pretty well (see below) .

I’ve made a few ATM withdrawals at random ATMs, and the surcharges have been credited at the end of the month as promised. (I wish they were credited immediately.) International ATMs are not eligible.

Free Overdraft Transfers from Savings. The checking account pays less interest than savings, so it is best to open both and keep as much money as you can in the savings. The Ally Online Savings account pays 0.99% APY as of 7/14/15, and is one of the places I keep my emergency cash reserves.

With their free Overdraft Transfer Service, Ally will automatically transfer the required funds from savings if your checking goes negative. I usually use this service whenever I write a relatively big check or make a large transfer:

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Ally transferred an amount equal to a round number near the overdraft amount plus $100. Alternatively, you can set it to auto-transfer a preset amount over if your checking balance dips to a certain threshold. Remember, you can only do 6 withdrawals from savings each money due to banking regulations.

Mobile check deposit. You can use the Ally smartphone app to deposit checks using your smartphone camera. (This is in addition to using your computer scanner and/or free postage-paid deposit envelopes.) I’m not sure if this is the same for everyone, but my deposit limit is $50,000 which is higher than many other electronic deposit programs. I’ve used the app to deposit multiple checks without issue. Screenshot below.

allyreview_echeck1  allyreview_echeck2

Mobile app. Available for iOS and Android… you can do all the important stuff – see transactions, transfer funds, deposit checks, pay bills. It can remember your username, but you must type in your password every time. I usually just use my Mint app for checking balances, as that only requires a 4-digit PIN. The overall design is acceptable, and the ATM locator is helpful to find those free AllPoint ATMs or stores that allow cash back with purchase with no fees.

Paper checks. Even though they are an online-only bank, Ally still provides free paper checks. You get a set of 50 to start, but you can always order more online for free. Cashier’s checks are free as well.

Paper statements. If you prefer physical statements via snail mail, you’ll be happy to know that Ally still offers those free of charge. Of course, you have the option of paperless statements as well.

Ally Perks. Ally discontinued their Ally Perks Debit Card Rewards program in 2013.

The Stats

  • Current interest rate: 0.60% APY for daily balance $15,000 or more, 0.10% APY for daily balances under $15,000 (last checked 7/14/2015)
  • Interest Compounding: accrued daily, compounded daily, credited monthly
  • Minimum to open: $0
  • Minimum requirements to avoid monthly service charge: None
  • Number of external bank account links allowed: 20
  • Routing Number: 124003116

Bottom line. The Ally Interest Checking Account is a solid offering with with no monthly fees, no minimum balance requirement, ATM fee rebates (up to $10 per statement cycle), free online billpay, and the ability to use the savings account as a free overdraft source. Additional features like a flexible funds transfer system and solid 24/7 customer service help differentiate themselves from the competition.

I would highly recommend pairing this account with the Ally Online Saving Account, as you can keep the majority of your fund in the savings account at a higher interest rate. You can then set up the savings account as a free overdraft source, allowing you access to all your funds with no fees to worry about. Ally also has certificates of deposit which offer competitive rates at times.

Chase Total Checking $150 + Chase Savings $100 Bonus

Here’s a Chase Bank Total Checking + Savings account promotion offering up to $250 total for new customers, broken up into the following two bonuses:

Chase Total Checking $150 Bonus details. Checking offer is not available to existing Chase checking customers, those with fiduciary accounts, or those whose accounts have been closed within 90 days or closed with a negative balance. To receive the $150 checking bonus (taken directly from their offer page):

  1. Open a new Chase Total Checking account, which is subject to approval;
  2. Deposit $25 or more at account opening;
  3. Have your direct deposit made to this account within 60 days of account opening. Your direct deposit needs to be an electronic deposit of your paycheck, pension or government benefits (such as Social Security) from your employer or the government.
  4. After you have completed all the above checking requirements, [Chase will] deposit the bonus in your new account within 10 business days.

Chase Total Checking® has no Monthly Service Fee when you do at least one of the following each statement period. Otherwise a $12 Monthly Service Fee will apply.

  • Have monthly direct deposits totaling $500 or more made to this account; OR
  • Keep a minimum daily balance of $1,500 or more in your checking account; OR,
  • Keep an average daily balance of $5,000 or more in any combination of qualifying Chase checking, savings and other balances.

Chase Savings $100 Bonus details. To receive the $100 savings bonus (taken directly from their offer page):

  1. Open a new Chase SavingsSM account, which is subject to approval.
  2. Deposit a total of $10,000 or more in new money into the new savings account within 10 business days of account opening;
  3. Maintain at least a $10,000 balance for 90 days from the date of deposit. The new money cannot be funds held by Chase or its affiliates.
  4. After you have completed all the above savings requirements, we’ll deposit the bonus in your new account within 10 business days.
  5. 0.01% effective APY as of 9/22/15. Interest rates are variable and subject to change

Chase SavingsSM has no Monthly Service Fee when you do at least one of the following each statement period. Otherwise a $5 Monthly Service Fee will apply.

  • Keep a minimum daily balance of $300 or more in your savings account; OR,
  • Have at least one repeating automatic transfer from your Chase checking account of $25 or more. One-time transfers do not qualify; OR,
  • Have a linked Chase Premier Plus CheckingSM, Chase Premier Platinum CheckingSM, or Chase Private Client CheckingSM account.

Earning $100 on $10,000 for 90 days is the equivalent of 4% annualized return. The bonuses are considered interest and will be reported on IRS Form 1099-INT. You will need to provide your e-mail address and bring the unique coupon code they send you into a physical branch.

“Disclaimer: This content is not provided or commissioned by the issuer. Opinions expressed here are author’s alone, not those of the issuer, and have not been reviewed, approved or otherwise endorsed by the issuer. This site may be compensated through the issuer’s Affiliate Program.  “The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered.”

Navy Federal Credit Union Youth Week $100 Bonus

navyfedlogoNavy Federal Credit Union has solid bank and loan products, including checking accounts with ATM rebates, competitive mortgage rates, and limited-time 0% balance transfer promotions. Membership eligibility for NavyFed is primarily restricted to Marine Corps, Navy, Air Force, and Coast Guard regular Active Duty and reservists, and Army and Air National Guard personnel, but also includes family and household members of existing NavyFed members and some civilian employees in the Department of Defense.

If you’re a member, the exclusive perks mean that you should sign up your kids sometime… and right now you can get $100 for doing so! As part of their Youth Week 2015 promotions, you can get:

  • $25 for signing up your child (under 18) for membership.
  • $25 for opening a Campus Checking Account for your child (age 14-17), which has no minimum balance requirements and up to $10 in ATM fee rebates per statement period.
  • $25 for opening a SaveFirst Account for your child (under 18) with as little as $5.
  • $25 for opening a reloadable prepaid Visa® Buxx Card for your child (age 10-17).

Expires soon on April 18th, 2015. Thanks to reader Charles for the tip.

American Express Personal Savings Account Review (Updated)

AMEX LOGO

Updated 2015. American Express has a banking division called Personal Savings through their FDIC-Insured bank American Express Bank, FSB. There are currently just two products – a high yield savings account and certificates of deposit. This is a review from my own experiences with the American Express Personal Savings Account. You don’t need to have an American Express credit or charge card to open a bank account with them.

The Basics
The savings account has no minimum balance requirement, no inactivity fees, and no monthly fees. Their current interest rate is 0.90% APY (as of 4/13/15).

As with all savings accounts, the rate is subject to change. Their rate history for the last few years has been that they consistently pay a competitive interest rate but usually not the very highest. They are usually in the mix with their competitors like Capital One Consumer Bank (0.75% APY) and Ally Savings (0.99% APY as of 4/13/15).

Like those other online savings banks, this one is designed to piggyback onto your existing checking account through online transfers. There are no checks, no ATM cards, and no online bill-pay with this account. If you really want, you can withdraw your money by having them send a check payable to you. Interest is compounded daily, and credited monthly. Interest begins to accrue on the business day the deposit is received, as long as it is by 5pm Eastern.

Application Process
The application process can be done completely online. You provide the usual personal information, as well as the routing number and account number of the checking account you wish to link and fund your account with. There is no minimum opening amount. AMEX Bank will then send two small verification deposits of under $1 to your checking account (and then withdraw them as). They’ll also send a verification code to your e-mail address. With this information, you can activate your account and initiate the funding transfer. They’ll send you a welcome packet in the mail, but there is no paper to sign or send in.

Website User Interface
In the beginning, AmEx used a 3rd-party backend service but now the entire bank website is hosted at personalsavings.americanexpress.com. Here are some screenshots of my bank account after logging in with some captions (click to enlarge).

The overall interface is pretty minimalist and straightforward. Here is the main page:

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Here is the Transfer tab:

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Here is the Alerts tab:

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Funds Transfers, Customer Service, E-mail Alerts, and Statements
You can link up to 3 external bank accounts, and you can remove and add accounts online as needed. Online transfers to/from your external accounts take the usual couple of business days to complete. However, I wasn’t thrilled about this note on the transfer page: “Funds from electronic deposits to your account that you have initiated through us will generally be available for withdrawal on the sixth business day after the deposit is initiated.” This is likely for protection against fraud, but could be inconvenient and discourages me from using this account as a central transfer hub.

Customer service is available by phone only – no secure online message or live chat. Call 1-800-446-6307, available 24/7. Although you have to navigate the usual phone tree, once you do reach a human they are as courteous as the reps from AmEx credit cards, which is to say very courteous.

You can set up free, automated e-mail alerts in case of your balance reaching a certain threshold or the arrival new deposits and/or withdrawals. Text messages are not directly supported but you can usually find an e-mail version of your cell number (ex. 5551234567@txt.att.net).

Finally, one unique thing about American Express Personal Savings is that they give you free paper, snail-mail, monthly statements. Many online savings accounts only include you electronic statements and will charge you for paper statements. Of course, you can opt out and just stick to e-statements, but I can see paper statements as being attractive for some folks. A commenter below noted that if you elect paper statements, then AmEx limits the amount of transactions you can view online to the last 30 days.

Other Handy Stuff
American Express Bank, FSB Routing Number: 124085066
Customer Service: 1-800-446-6307, available 24 hours a day. I haven’t had to call in yet, but American Express does have good customer service on their credit cards in my experience.

Best Interest Rates for Cash Reserves – Updated April 2015

percentage2Our family keeps a year’s worth of expenses (not income) put aside in cash reserves; it provides financial insurance with the side benefits of lower stress and less concern about stock market gyrations. In my opinion, emergency funds can actually have a better return on investment than what you see on your bank statement.

I don’t rate-chase nearly as much as I used to, but it still pays to shop around. Too many places are basically paying ZERO – the Megabanks, short-term US Treasuries, and money market sweep funds. Do you know what Chase offers on a 1-year CD? 0.02% APY. Bank of America on their 5-year CD? 0.15% APY. The highest money market mutual fund in the country yields 0.06%. My Vanguard Prime is at 0.01%.

Best Currently Available Interest Rates
Here is a brief summary of the best interest rates available on deposits backed by the full faith and credit of the US government. I will try to sort them from the shortest to longest maturities.

  • High-yield savings accounts. There are a variety of online savings accounts out there nowadays, with the highest ones earning around 1% APY. GE Capital Bank has an FDIC-insured Online Savings account paying 1.05% APY with no maintenance fees, no minimum balance, and no minimum to open.
  • Short-term guaranteed rates. Everbank Yield Pledge Money Market and Interest Checking account both offer 1.40% APY guaranteed (up to $50k each) 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. Salem Five Direct has an eSavings account that pays 1.10% guaranteed until 1/1/16 (~8.5 months left) but the rate is only available to new customers.
  • “Series I” US Savings Bonds offer rates that are linked to inflation. “I Bonds” bought right now will earn 1.48% total for the first six months, and then a variable rate based on ongoing inflation after that. You must hold them for a year, and if you redeem them within 5 years you lose the last 3 months of interest. While future rates are unknown, the net rate after a year is likely to be competitive with top 1-year CD rates at a minimum, while offering upside if inflation spikes. More info here.
  • Rewards checking accounts pay above-average interest rates, but with some risk. You have to jump through certain hoops, and if you make a mistake you won’t earn any interest all that month. Rates can also drop quickly, leaving a “bait-and-switch” feeling. But the rates can be high while they last. Consumers Credit Union offers up to 5.09% APY on up to a $20k balance, although 3.09% APY is easier to achieve unless you satisfy a long list of requirements. I list this one because the rate is guaranteed until December 31, 2015.
  • Certificates of deposit. If you have a large cushion, it’s quite likely to just sit there for years. Why not put some money in longer-term investments where you can still take it out in a true emergency and pay an early withdrawal penalty. Synchrony Bank (formerly GE Capital Retail Bank) is offering a 5-year CD paying 2.25% APY for $25k+ balances (2.20% APY for $2k+) with an early withdrawal penalty of 180 days interest. For example, if you withdraw from this CD after 2 years and pay the penalty, your effective rate earned will still be 1.69%.
  • Willing to lock up your money for 10+ years? Did you know that you can buy certificates of deposit via Vanguard’s bond desk? These “brokered CDs” offer the same FDIC-insurance and are often through commercial banks like Goldman Sachs. As of this writing, you can get a 10-year CD maturing 4/22/2025 that pays 2.95% APY. Prices will vary regularly.
  • How about two decades!? “Series EE” US Savings Bonds are not indexed to inflation, but they have a guarantee that the value will double in value in 20 years, which equals a guaranteed return of 3.5% a year. However, if you don’t hold for that long, you’ll be stuck with the normal rate which is quite low (currently a sad 0.50% APY). Think of it as a huge early withdrawal penalty. You really want to be sure you’ll keep it for 20 years.
  • Finally, how about something out-of-the-box? You can earn up to 2.25% APY within a 529 college savings plan (which can be opened with you as the beneficiary for now). FDIC-insured, and the rate is still pretty good even after a 10% penalty for non-qualified withdrawals.

How about my money? In terms of the opportunities above, I have opened an account at Everbank in the past for the promo rate and I have usually try to buy the max in US Savings I Bonds each year (no EE bonds, too long of a commitment). I don’t currently juggle any rewards checking accounts nor do I have any deposits with any other banks mentioned above. It’s just not worth it me to switch right now.

Besides some older CDs at higher rates, I keep a good chunk of my money at Ally Bank because right now they are the all-around “good enough” bank for me. Sure I could eek out 1.05% in a savings account somewhere, but Ally Online Savings is paying a 0.99% APY (as of 4/12/15) which serves as a no-fee overdraft companion to my Ally Interest Checking with unlimited ATM fee rebates. Along the same lines, I could get 2.25% in an outside bank’s 5-year CD, but Ally has 2.00% APY on their 5-year CDs and a relatively short 150-day early withdrawal penalty. A rate difference of 0.25% on $10,000 over a year is $25, and I’m not sure that’s enough to open a CD at another bank when my current Ally CDs mature.

All rates were checked as of 4/12/15.

Best 529 with FDIC-Insured High Yield Savings: Interest Rates Up to 2.25% APY

529Many people want to take advantage of the tax benefits of 529 college savings accounts, but don’t want to deal with the volatility of stocks or bonds. Perhaps the beneficiary will need the funds soon, or you want the security of FDIC insurance. Many students are now adults saving for their own educations in a few years. In this case, consider the Virginia CollegeWealth 529 Savings Account and its following features:

  • FDIC-insured through partner banks
  • $25 minimum to open
  • No annual fee
  • No monthly maintenance fees
  • No state residency requirements
  • Up to a $4,000 state tax deduction for Virginia taxpayers
  • High interest rates of up to 2.25% APY

Deposit details. The FDIC insurance coverage is $250,000 per account owner, per bank. All Virginia College Savings Plan 529 Accounts have a maximum aggregate contribution limit per beneficiary of $350,000.

Will the interest rate stay high? It is important to note that this is a savings account and not a certificate of deposit (CD), so the interest rate is subject to change at any time. If you are willing to commit to a 5-year CD, the Ohio CollegeAdvantage 529 has 5- to 12-year CDs paying 2% APY right now.

However, looking through old documents indicates that the interest rates that you see today for BB&T Bank have been the same at least as far back as June 30, 2011 (source, also checked in 2012 and 2013). That means BB&T’s rates have been the same for nearly four years during a period of historically low interest rates. I think that should provide some measure of confidence that the rates won’t drop dramatically the day after you open the account.

For Union Bank, rates have been slightly higher in the past (2.5% APY in 2011, 2.3% APY in 2012). Not a huge drop over time but interesting that Union Bank used to be higher but now BB&T is higher. I’m assuming you can also switch internally between these two banks. You can also roll over your assets into another 529 plan in the future, if you wish.

Partner banks and current rates (as of March 4th, 2015)

Union Bank & Trust

  • Balances of $1 to $9,999: 1.75% APY
  • Balances of $10,000 or more: 2% APY

BB&T

  • Balances of $1 to $9,999: 2% APY
  • Balances of $10,000 to $24,999: 2% APY
  • Balances of $25,000 or more: 2.25% APY

Best high-yield savings account, period? In a weird twist, you can put money in a 529 and take an unqualified withdrawal where you’ll be subject to income taxes and an additional 10% penalty on any earnings . But you’d have to pay income tax on interest from a normal savings account anyway. That means you could treat this account like a regular taxable savings account and get an effective rate of 1.8%+ APY even after any penalties. That is nearly a full percentage point higher than my current Ally Bank high-yield savings. I don’t know how many people have actually taken advantage of this “loophole” option, but it is interesting. One possible drawback is that it can take longer (possible weeks) to withdraw money from a 529 than from a traditional bank account.

Back to Basics: Simplify and Automate Your Savings

automateLet’s take a step back and focus on some actionable tips to simplify and automate your savings. Think of it as knocking out your New Year’s Resolution in just 10 minutes or less.

New Year’s resolutions fail because willpower is like a muscle. If you keep having to choose the “right thing” that does not provide immediate gratification, your willpower muscle starts to fatigue. Eat the healthy kale thing instead of the nachos? Yes for a few times, but after a month no no no. Take 15% of your paycheck and set it aside? You’ll forget. The key is to take away the decision = no willpower fatigue.

First, consider your paycheck. Is it bi-weekly, semi-monthly, or monthly? Let’s say it is biweekly and you get paid this Friday, January 9th. That means you know you’ll get paid on January 23rd, February 6th, and so on. You just need to schedule a transfer for 15% of your paycheck for each of those days directly into an online savings account. Here are screenshots and tips for some specific providers:

Auto-save with your 401(k) plan.
This allows you to get any company match, grow your money faster with tax advantages, and also takes the money out before it even reaches your paycheck. Our provider is TransAmerica, which like many others now offer an option for annual auto-increases as well. The only frequency option is every pay period.

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Auto-save with Ally Bank Savings Account.
This is my go-to savings account, and it has the most flexible list of frequency options: weekly, bi-weekly, every 15 days, weekly, every 2 weeks, every 4 weeks, monthly, every 2 months, every 3 months, every 6 months, every year, the first business day of each money, or the last business day of each month. With a competitive interest rate, no minimum opening balance, and no monthly fees, and other features – see my Ally Bank Savings Account Review for details.

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Auto-save with Capital One 360 Savings Account.
Formerly ING Direct, this is the original no minimums, no monthly fee online savings account. The frequency options include weekly, bi-weekly, semi-monthly, monthly, or quarterly. You can even set up special sub-accounts and name them things like “Vacation” or “Next Car”. See my Capital One 360 Savings Account Review for more details.

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Auto-save with Vanguard IRA and mutual funds.
The best place for low-cost investing in an IRA. Under “Automatic Investments”, you can schedule investments for mutual funds in either IRA or taxable accounts. You’ll need to have the fund already established with the minimum initial investment. The frequency options include weekly, monthly, bi-weekly, or semi-monthly.

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What if I need the money? Well, if you put in an online savings account, if you really need the money, you can transfer it back. But even transferring back out of your savings account will take a conscious effort, so you’re less likely to do it. You can’t easily withdraw from a 401k or IRA, so you’ll just have to make the commitment.

The key here is to combat laziness. If you like this idea, take action today and you’ll be on autopilot the rest of the year!

Capital One Consumer Bank Black Friday $100 New Account Promo

Cap One 360 Checking Banner

UPDATEThis promotion is now EXPIRED.

Capital One Consumer Bank has a few Black Friday weekend deals including …

  • $100 bonus for their 360 Checking Account
  • $100 bonus for their 360 Savings Account

This has to be your (or your joint account holder‘s) first 360 Checking Account (including Electric Orange Checking). Additionally, this has to be your (or your joint account holder‘s) first 360 Savings Account (including Orange Savings Accounts).  Good from Black Friday, November 28th at 12am ET to the end of Cyber Monday, December 1st 11:59pm ET.   This is usually the biggest bonus they’ll offer all year.

Cash Reserves & Best Interest Rates Update – November 2014

percentage2Our 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.

Interest rates are still depressingly low, and I haven’t made any changes to how I hold my cash reserves since my last update in June. However, there are still better options out there for cash stuck in a too-big-to-fail megabank savings account paying 0.000001%.

Best Currently Available Interest Rates

If I wasn’t already invested as outlined at the bottom of this post, here are the FDIC-insured or government-backed opportunities that I would be looking into based on my needs.

  • Everbank Yield Pledge Money Market and Interest Checking account both offer 1.40% APY guaranteed (up to $50k each) 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.
  • “Series I” US Savings Bonds offer rates that are linked to inflation. “I Bonds” bought right now will earn 1.48% total for the first six months, and then a variable rate based on ongoing inflation after that. You must hold them for a year, and if you redeem them within 5 years you lose the last 3 months of interest. While future rates are unknown, the net rate after a year is still likely to be competitive with top 1-year CD rates. More info here.
  • Rewards checking accounts pay above-average interest rates, but only if you to jump through many hoops. Make a mistake and you’ll forfeit your interest for that month. Rates can also drop quickly, leaving a “bait-and-switch” feeling. If you’re up for it, a recent example is Consumers Credit Union where you can earn up to 5.09% APY on up to a $20k balance, although 3.09% APY is easier to achieve unless you satisfy a long list of requirements. Good news is the rate is guaranteed until August 2015.
  • Certificates of deposit. If you have a large cushion, it’s quite likely to just sit there for years. Why not put some money in longer-term investments where you can still take it out in a true emergency and pay an early withdrawal penalty. Synchrony Bank (formerly GE Capital Retail Bank) is offering a 5-year CD paying 2.30% APY for $25k+ balances (2.25% APY for $2k+) with an early withdrawal penalty of 180 days interest. For example, if you withdraw from this CD after 2 years and pay the penalty, your effective rate earned will still be 1.72%.
  • Willing to lock up your money for 7 years? Tobyhanna Federal Credit Union has a 7-year CD paying 3.04% APY, however the early withdrawal penalty is a full 2 years of interest. More info at DepositAccounts.com.
  • How about two decades!? “Series EE” US Savings Bonds are not indexed to inflation, but they have a guarantee that the value will double in value in 20 years, which equals a guaranteed return of 3.5% a year. However, if you don’t hold for that long, you’ll be stuck with the normal rate which is quite low (currently a sad 0.50% APY). You really want to be sure you’ll keep it for 20 years.

Where’s My Money At?

Here’a quick recap of how I have our cash reserves split up. Keep in mind that most of the rates that I locked in are no longer available, but I did blog about them at the time.

  • Ally Bank Online Savings paying 0.90% APY (as of 11/3/14) which also serves as a no-fee overdraft option to my Ally Interest Checking, that way I can keep a minimal balance in checking. Ally checking also has unlimited ATM fee rebates and no fees. I know there are some savings accounts paying a tiny bit more, but not worth the trouble for less than 0.1% difference on $10,000.
  • Ally Bank CDs earning between 1.84% and 3.09% APY. These are old 5-year CDs with a short 60-day interest penalty. Current Ally CD rate of 11/3/14 is 2.00% APY for 5-Year CD with 150-day early withdrawal penalty.
  • PenFed CDs earning 5% APY. Long gone, although earlier this year PenFed did offer 5-year CDs at 3% APY (no longer available). Current rates are only so-so.
  • I also bought several US savings bonds that I now consider part of my retirement portfolio as opposed to cash reserves, as I don’t think I’ll ever want to cash them in before full maturity. More info below.

All rates are believed current as of writing, 11/3/14.

Pentagon Federal Credit Union Free FICO Credit Score (NextGen)

Pentagon Federal Credit Union (PenFed) now offers a free credit score to select members. It may be offered only to members with a credit account with them (auto, checking overdraft, mortgage, etc.). I was offered the free FICO score and only have their Thrifty Credit Service which is just a $500 line of credit in case of an overdraft from my checking account. You can find access via a banner on the main page after logging in:

penfedfico1

The score formula is called the FICO NextGen, which has a range of 150-950 as opposed to the traditional FICO range of 300-850. FICO tried to roll out this new “improved” score several years ago but it never really took off. So while this is a “FICO score”, the number may not be as easy to understand. However, PenFed does state that this score is the actual score that they use when making credit decisions. Also included are the top two “key factors” affecting your score:

penfedfico2

As usual, some of the advice these services offer don’t make much sense. So what if I don’t have an outstanding auto or student loan? I pay cash for my cars and worked hard to paid off my student loans. Why would I voluntarily go into debt again just to bump up my credit score a few ticks? They should know that my credit is already good enough that I’ve never had a problem getting any sort of loan product.

Capital One 360 Financial Independence Day Promo 2014

13045000Capital One 360 is running their annual Financial Independence Day promotion, with what is traditionally the best bonus of the year for their 360 Savings and 360 Checking accounts. (Formerly known as ING Direct.) These online bank accounts offer no monthly fees and no minimum balance requirements, all with a decent interest rate. As a result, the savings account makes a great “online piggy bank” where you can make free transfers from your existing checking accounts from any bank into the 360 Savings account on a regular basis. Promo details:

360 Savings $76 Bonus

  • Grab $76 when you open a 360 Savings® account.
  • This has to be the primary account holder’s first 360 Savings account and it needs a $500 minimum deposit.
  • The bonus starts earning interest on day 1, but you can’t take it out for at least 30 days.

360 Checking $100 Bonus

  • Earn $100 when you open a 360 Checking® account. Sign up for fee-free 360 Checking®, make 5 Debit Card purchases or 5 mobile deposits with CheckMateSM within 45 days and snag a cool $100 on day 50.
  • This has to be your and your joint account holder’s (if you have one) first 360 Checking account.
  • Open 360 Checking from June 30th – July 3rd and make a total of 5 Debit Card purchases or 5 CheckMateSM deposits or any combination of the two within 45 days.
  • Your $100 bonus will be automatically deposited into your account on day 50.

Applying for Multiple Bank Accounts: Can You Apply For Too Many?

multibanksUpdated. If you open multiple bank accounts in order to take advantage of higher interest rates or sign-up bonuses, you may be concerned about any potential consequences from all that activity. In my experience, there are two main factors to be aware of when you open a bank account:

Banks pulling your ChexSystems report. 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 leaves their account with a negative balance, it will be listed here. In addition, the simple act of opening or closing a bank account may be recorded in their database.

One thing that may raise a red flag is opening up several bank accounts in a very short period of time. This is because of the connection of multiple bank accounts to a form of fraud called ‘check kiting‘. Kiting usually involves sending several checks between different banks to create an temporary surplus of money from the bank’s funds availability policies, and then cashing that out before all the checks fully clear. In the end, one of the banks is left holding the bag.

But for the most part, as long as you haven’t left any accounts in bad standing you shouldn’t run into any problems with opening up new bank accounts. I’ve opened up accounts at over 30 different banks over the last several years, sometimes two or three in one week, and have never been rejected by any of them. However, having a negative ChexSystems record can leave you blacklisted from all the major banks (even if you make $100k a year). Information generally stays on your ChexSystems report for five (5) years.

As with credit reports, you can get a free copy of your ChexSystems report once every 12 months.

Banks pulling your credit report. Yes, it is legal for banks to pull your credit report. According to the consumer help site HelpWithMyBank.gov, per the Fair Credit Reporting Act, a bank can obtain a consumer report for any legitimate business need, including the following:

  • credit transactions
  • review or collection of an account
  • opening a deposit or savings account
  • underwriting of insurance

There are a couple reasons they do so. First, this is another way for them to identify you and measure the risk of giving you a new account. Second, they may use this information to market other financial products like credit cards or home equity loans to you.

I’ve talked about the difference between hard and soft credit pulls. Usually, bank will just perform a soft credit check, which doesn’t affect your credit score. (All those “pre-approved” credit card applications in the mail are from soft credit checks.) However, some banks also perform hard credit checks, which do hurt your credit score slightly. Some banks do offer a line of credit in lieu of overdraft protection, but in general there doesn’t appear to be a rhyme or reason as to which ones do hard pull and which ones don’t. I personally suspect that it may just be unintentional and they don’t know the difference. (More importantly, most people don’t know the difference so they don’t really get any pushback.)

You can get a free copy of each of your credit reports (which lists all your hard pulls and which financial instituation did the pull) once every 12 months at AnnualCreditReport.com.

To summarize, I usually try to find out first if the bank will perform a hard credit check based on the reported experiences of other consumers online. This isn’t an exact science, as the banks can often change their practices. If it is likely they will, then I want to make sure that I am getting enough value from the new account because I know I can already trade a hard pull for $200-$500 of value from a credit card application. Otherwise, I don’t really worry about the number of bank accounts I have, although I do close them as soon as I don’t foresee any future benefit.