Cash Is Still King, But Most People Prefer Debit Cards Over Credit Cards

The Federal Reserve recently released a report about about consumer payments [pdf], and it had some interesting results (at least to me). Via Business Insider. Here are the distilled highlights.

Cash is still the most frequently used form of payment, as measured by number of transactions. This is partly due to the fact that cash totally dominates for payments less than $10. In terms of value, electronic payments (online billpay and ACH payments using bank account numbers) have the largest share.


This next chart shows that debit card use is actually growing faster than any other form of payment:


Overall, debit cards are also the most preferred form of payment… but it does vary with income. 55% of consumers with household incomes less than $25,000 per year prefer cash over anything else, while 66% of households making more than $200,000 per year prefer credit cards over anything else.


People seem to have an either/or relationship with debit cards and credit cards. You either use one or the other predominantly.


Initially, I was surprised by the popularity of debit cards. (I prefer credit cards and am one of those people who haven’t used a debit card in years.) My hunch is that people think of debit cards as the closest thing to electronic cash. The money gets zapped out of your checking account and your balance decreases instantly. As long as you decline overdraft “protection”, if you hit zero your purchase will be declined. I admit it does have the appeal of simplicity.

Although I treat my credit card purchases the same as cash and always pay in full each month, credit cards do come with more complexity and the knowledge that the credit card company is lying in wait in case you feel like taking on a little debt. But in return I earn cash back rewards, get better consumer protection against fraud, and enough sign-up bonuses to fly me around the world once in a while.

Everbank 5 Year MarketSafe Treasury CD Review – FDIC Insured Principal, Rising Rate Participation

marketsafe2Interest rates remain very low, but at the same time we are constantly being warned that they could spike up soon. What is a conservative investor to do?

Everbank’s lineup of MarketSafe CDs are a new wrinkle on FDIC-insured bank CDs that try to take advantage of these current low interest rates. They are basically a hedged bet on something like currencies, precious metals, or commodities. If things don’t work out, the principal you put in is protected with FDIC insurance so you’ll always get that back, just with no interest in the worst case. If your selected market bet does pan out, you’ll get an interest payment based on that upside.

Their newest product is the 5-yr MarketSafe Treasury CD which bets on rising interest rates. I don’t pay much attention to gold or currency prices, but interest rates are easier to understand. Here’s the pitch:

With this latest MarketSafe CD, seek 3.3 times any upside growth in the 10-year Treasury yield during the CD term.3 Full protection of your deposited principal comes standard.1 Act by June 11, 2014 to take advantage.

Sound intriguing, but as usual let’s dig into the details.

The CD has a term of 5 years. You must fund it by 6/11/2014 and the maturity date is 6/21/2019 where you’ll get your principal plus any interest accrued (“market upside payment”). You can’t make any early withdrawals (well, technically you can but you lose the principal protection and are subject to penalties). The minimum opening deposit is $1,500. No monthly or account fees. Available for IRAs.

The market upside payment is based on the following formula using the 10-Year US Treasury yield:

(yield at maturity - initial yield) x 3.3 x deposited principal


  • While the formula multiplies the rate difference by 3.3, this includes all the interest you’ll get for 5 years. As an example, if you had a 5-year CD paying 2% annually, that’s a 10.4% total return at the end of 5 years. (You can find a 5-year CD at 2.25% APY at GE Capital Retail Bank).
  • The current 10-year Treasury yield is roughly 2.6% (this could change by issue date). If you want a 10% return after 5 years from this MarketSafe CD, 10-year yields would have to rise by 3% to 5.6% in June 2019.
  • If the 10-year Treasury yield stays constant or drops between the initial date and maturity date, you will only get back your original principal.

I won’t make a rate prediction because I have no idea where rates are headed. Here’s a historical chart of the 10-year Treasury yield over the last 20 years (FRED):


The last time the 10-year yield was near 5.5% was around 2002. Rates would have to go higher than that to beat a top 5-year traditional CD. However, keep in mind that with this product you are getting both upside potential and principal protection. In exchange for such risk reduction, it can’t be a slam dunk. If rates do rise up to say 5.5%, then the people who actually bought 10-year bonds today would be looking at a significant loss of principal.

Manilla Shutting Down. Online Bill Management Alternatives?

checkappA few readers e-mailed me to let me know that bill management website announced that they will be shutting down. Surprising, as they were just mentioned in Money magazine last month!

Manilla will be closing on July 1, 2014. This was a hard decision given that, over the past three years, Manilla has won many awards […] but was unable to achieve the scale necessary to make the economics of the business viable.

As noted in my now-useless Manilla review, many people enjoyed having all of their bills located in a central place. It was also nice that they offered to store all your old bills forever… or in this case September 30, 2014 after which they will be destroyed.

What are good Manilla alternatives? Here are several services that offer similar features in no particular order, please feel free to add more in the comments. I haven’t gotten to try them all out yet, so share your experiences as well.

  • Finovera – “Our mission is to make the process of receiving, managing, paying and organizing household bills and documents simple, automatic and effortless.”
  • Enfold – “Enfold is a free-for-life virtual filing cabinet where you can safely store and organize all your important documents and account information.”
  • MoneyStream – “Not just an organizer or bill-payer, MoneyStream brings everything together in one secure place—and then shows you a future view of your money so you can see at a glance where you stand and where you’re going.”
  • Check (formerly PageOnce) – A free smartphone app that both organizes and tracks balances, with the added feature of letting you pay your bills through the app. I don’t think it stores past statements past a certain time period.
  • Mint – Owned by Intuit, Mint is more budget-centric and tracks all of your transactions. You can’t pay bills through the software (although it will send you bill reminders) and it doesn’t store actual monthly statements.
  • Mobilligy – “Mobilligy puts all of your bills in one app that lets you review, manage and pay your bills for free – anytime, anywhere.”
  • FileThis – “FileThis is like a personal assistant for your paperwork. It automatically collects, files, tags, and organizes your online documents in a digital filing cabinet. Never lose another bank statement, legal paper, tax form, insurance document, or other important piece of paperwork.”
  • Doxo – “All your provider accounts and information together at last. Back up all your critical documents automatically to your personal cloud storage. Receive and pay bills from connected providers with doxoPAY.”
  • Personal Capital – similar account aggregation focus as Mint, plus some investment portfolio analysis features.
  • Zumbox – “Your postal mail delivered online. Your documents stored securely, forever.”
  • Intuit Paytrust = “PayTrust’s all-in-one online bill pay allows you to easily receive, track, and pay all your bills online.”
  • MyCheckFree – “Receive and pay your e-bills at one easy, secure location.”
  • Yodlee Labs – “This is a site where Yodlee will launch (and test) all of its latest (account aggregation) products before they are launched anywhere else in market.” If you just want most recent, most-refined version, sign up at Yodlee Moneycenter.

With Manilla and Everpix, I am reminded that any offer to store your stuff “forever” really means “as long as we keep making enough money”. Personally, I’m still using my bank’s Online Billpay service along with AutoPay with credit card where possible. For archival purposes, I download any paperless bills in PDF format to a folder on my computer, which is automatically backed up daily to my external hard drive and also instantly synchronized with my free cloud account. However, if I can truly view and pay all my bills in one simple mobile app and a few taps, I’d be up for that.

Bank of America Overdraft Fee Refund

boansfUpdated 2014. Although I originally wrote this post in 2009, it (unfortunately) still gets regular traffic. Bank reforms instituted in 2010 made overdraft “protection” only applicable on an opt-in basis on ATM/debit card usage. Despite this fact, U.S. banks still collected over $30 billion dollars in overdraft fees in 2012.

The advice below on how to get a BofA overdraft fee refunded still works, as many positive e-mails and comments will attest. But you should also ask to turn OFF your overdraft protection as many people are confused on the actual meaning of the service. If you opt-out of overdraft protection and try to use your debit card with an insufficient balance, you will simply get denied with no fee. If you opt-in to overdraft protection and try to use your debit card with an insufficient balance, your purchase will go through but you will get charged a fee of roughly $35 on each instance. Now you know why I put quotation marks around “protection”.

Just Ask!

I was hit with an overdraft fee from Bank of America when I was trying to close out an account. Luckily, I was able to get it refunded to me. The answer is always no if you don’t ask, so don’t give up the opportunity to save hundreds of dollars with a 10-minute phone call! A few tips:

  • Be nice but firm. Customer service reps are people. This is not the time to outline all the reasons why their overdraft system is unfair. The employee is never going to be able to admit “Yes, they are unfair!”, and you’re only going to put them on the defensive.
  • Admit you made a mistake, and include your personal story. Perhaps you and your spouse had a miscommunication and lost track of the bank balance. Your contractor finally cashed a check from 8 months ago that you forgot about. A spokesperson from Bank of America said they “may waive unemployed consumers’ fees on a case-by-case basis.”
  • Help them find a reason to help you. Are you a first-time offender? Are you a long-time customer? Do you have other accounts with Bank of America? Credit card, loans, or business accounts? Show them you are a profitable customer worth keeping.
  • Try different communication avenues. I used to visit my local branch a lot, and have had some good success with going directly there. Your mileage my vary, but also try any combination of Live Chat, E-mail, and Telephone.

“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.”

Denied? Escalate!

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. Read the many relieved comments below.

Call Executive Customer Relations:
Executive Customer Relations general line: 704-386-5687

E-mail a Bank of America Customer Advocate:
Melissa Russell
Customer Advocate
Office of the Chairman
800-669-2443 Ext 2809

Crystal R. Peterson
Customer Advocate
Office of the CEO and President

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:
Brian Thomas Moynihan
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.

Free TurboTax Deluxe Online with State Farm Bank Account

Works again for Tax Year 2013. State Farm is again offering their bank and credit card customers TurboTax tax-prep software at a significant discount. TurboTax Federal Deluxe Online is free, Premier is $20, Home & Business is $30, and State is also included free with e-File for all versions. Software downloads are also available (Deluxe $20, Premier $30, Home & Business $40). I ran an experiment last year and found it only took a one-time $25 deposit and a week’s time to obtain this valuable perk. Details below.

(Side note: TurboTax Deluxe 2013 no longer supports stock and mutual fund sales reported on Schedule D. You must now pay for the $20 Premier version in order to get this feature. Rather disappointing feature reduction, Intuit!)

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 and credit card customers. I recommend opening a “Free Checking” bank account instead of a new credit card account, as many other credit cards are offering $500+ value in sign-up bonuses while the State Farm one does not. I’d much rather get $500 for a credit check and just put $25 in a State Farm bank account indefinitely while earning the same perks. Think of it as earning 50% APY interest every year on that $25! I did not get hit with a credit check for opening the State Farm bank account.

New Bank Account Application Process Details

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Pentagon Federal 5-Year, 7-Years CD Rates at 3.04% APY

Pentagon Federal Credit Union officially announced some competitive new rates for their money market certificates (basically CDs, or certificates of deposit) starting December 1st, 2013. The minimum opening deposit is $1,000.

Term APY Early Withdrawal Penalty*
(days of interest)
2-Year CD 1.41% Last 180 days
3-Year CD 2.02% Last 180 days
4-Year CD 2.22% Last 180 days
5-Year CD 3.04% Last 365 days
7-Year CD 3.04% Last 365 days

Here is an interesting chart comparing the effective APY depending on holding period (taking into account the early withdrawal penalty) for the 4-year and 5-year CDs. We see that the 5-year CD (and 7-year CD) actually matches the 3-year CD held to maturity at the 3-year mark (both 2.02%) and is slightly better than the 4-year CD held to maturity at the 4-year mark (2.28% vs 2.22%). However, for some interim time periods (7 to 28 months) the shorter penalty will make the effective yield of the 4-year CD higher.

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Pentagon Federal Offering 3-Year CDs at 2.02% APY

Pentagon Federal Credit Union is now offering 2.02% APY rate on it’s 3, 4, 5, and 7-year CDs (they call it a Money Market Certificate). The minimum opening deposit is $1,000. Early withdrawal penalties are as follows:

  • For terms from 6 months to 4 years, you will lose the last 180 days of interest. If you haven’t earned 180 days of interest yet, you lose all the interest and get back only your opening amount.
  • For terms of 5 years or longer, you will lose the last 365 days of interest. If you haven’t earned 365 days of interest yet, you lose all the interest and get back only your opening amount.

As a credit union, you must meet their eligibility requirements to join. Basically all members of the military and their immediate families are welcome, as well as many other military-related groups. Otherwise, simply become a member of the organization Voices for America’s Troops. Membership costs $15/yr, and you don’t need to renew to remain a PenFed member. “Voices for America’s Troops advocates for a strong national defense, including sustaining and improving quality of life programs for America’s troops, their families and survivors.”

(I ran a search through the blog archives and found a post about PenFed offering 6.25% APY 3-year CDs back in late 2006. I wonder how long until we see rates like that again?)

Santander Bank extra20 Checking: Effective 16% APY?

Santander Bank (formerly Sovereign Bank) has a new banking package called the extra20 checking and savings account that pays you up to $20 each month:

  • You must open both an extra20 checking and extra20 savings account.
  • Get a $10 bonus each month that you have direct deposits totaling $1,500.
  • If you qualify for the first $10, get another $10 bonus each month that you pay two bills from your extra20 checking account through Online BillPay.

$20 a month = $240 a year. If you choose to simply use this account to pay your bills, it shouldn’t be hard to keep a $1,500 average balance. Earning $240 on a $1,500 balance works out to a 16% APY. If you aggressively emptied your account after each direct deposit, you could increase this effective APY even more.

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Ally Bank CD Early Withdrawal Penalty Change: Details & Analysis

Ally Bank LogoAlly Bank just announced that they will be changing the early withdrawal policy on their CDs starting on December 7, 2013. Found via Ken Tumin’s DepositAccounts post, the details are now officially outlined in the fees tab of their certificates of deposit page. A screenshot:

I have several 5-year Ally CDs earning between 1.8% APY and 3.1% APY, bought largely due to their uniquely short 60-day interest penalty as it meant that I could effectively have access to my funds if required and still earn an interest rate that was higher than anything any other bank CD.

For example, let’s look at their 5-year CD currently paying a 1.60% APY (as of 10/27/13) with no penalty, a penalty of the last 60 days of interest, and a penalty of the last 150 days of interest. Here’s how your actual annualized interest rates would look like based on time of withdrawal:

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Citibank Checking Account Promotion: 20,000 ThankYou Points

Update: Citibank has a new checking account promotion for new customers. You can get up 40,000 ThankYou points if you can maintain a $50,000 balance, but the more accessible option can still get you a nice 20,000 ThankYou points. I’ll only focus on how to get the 20k offer below. This would combine well with the 30,000 ThankYou point bonus from the Citi ThankYou Preferred card. Don’t forget to maximize the value of your Thank You points.

First, you must open a Basic Banking package either through the link above or by calling 1-866-583-6706 and using promo code CZC2. As long as you make 1 direct deposit and 1 bill payment each monthly statement period, you’ll pay no monthly service fee. Alternatively, keeping $1,500 in the account by itself will waive the $10 monthly service fee.

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Capital One 360 Financial Independence Day Promo 2013

Update – This promotion is now EXPIRED

Capital One Consumer Bank has their annual Financial Independence Day promotion which boosts the usual bonus for their Consumer Bank Savings and 360 Checking accounts. (Artist formerly known as ING Direct.) Offers good until Wednesday, July 3rd 11:59PM ET.

Consumer Bank Savings $76 Bonus

  • Open a no-fee 360 Savings account between July 1st and 3rd ($500 minimum deposit) and snag $76.
  • This has to be your first Consumer Bank Savings account (includes Orange Savings Account).
  • The bonus starts earning interest on day 1, but you can’t take it out for at least 30 days.
  • 0.75% variable Annual Percentage Yield (APY) effective 6/30/2013.
  • For more, check out my Capital One 360 Savings Account Review.

Consumer Bank Checking $100 Bonus

  • Open a fee-free 360 Checking account between July 1st and 3rd (with a deposit of $500 or more) and grab $100.
  • This has to be your first Consumer Bank Checking account.
  • Make a total of 5 purchases (either signature of PIN-based) using your 360 Checking Debit Card, make 5 CheckMate deposits or any combination of the two within 45 days. Your $100 bonus will be automatically deposited into your account on day 50.
  • Variable APYs effective 6/30/2013: 0.20% Balances under $50,000 / 0.80% Balances between $50,000 and $99,999 / 0.85% $100,000+.

Fixed Annuities: Maximize State Guaranty Coverage Limits

A recent article by Scott Burns talked about investing in deferred fixed annuities with CD-like qualities, an example offered a 3% yield guaranteed for 5 years plus no surrender charges (similar to early withdrawal penalty) after 5 years. This is a better rate than current bank CDs offer, and annuities can grow tax-deferred for those saving for retirement (withdraw as early as age 59.5)*. After the 5 years, you roll the annuity over to another company if the new rate is no longer good enough. The catch? The annuities that have the best rates often don’t have the highest credit ratings.

A possible solution? Make sure you stay under the coverage limits of your state’s Life & Health Guaranty Association. From

State life and health insurance guaranty associations are state entities (in all 50 states as well as Puerto Rico and the District of Columbia) created to protect policyholders of an insolvent insurance company. All insurance companies (with limited exceptions) licensed to sell life or health insurance in a state must be members of that state’s guaranty association.

These are not federally-backed like FDIC insurance. Instead, all the member insurance companies agree to cover each other in cases of insolvency up to the policy limits. In order to be a licensed insurer, you need to maintain a certain level of financial stability. But just like banks, some insurers are stronger than others. So if you’re going to go over the limits, the standard advice is to go with a top credit rating from AM Best, Moody’s, or S&P. However, credit ratings can go down over time, and you may be holding these annuities for many years. Therefore, it’s still safest to stay under the limits.

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