Archives for July 2018

2018 IRS Federal Income Tax Brackets Breakdown Example (Single)

Posted on July 17, 2018 // 9 Comments

The Tax Cuts and Jobs Act (TCJA) changed up the personal income tax brackets, exemptions, and deductions. Here is an updated graphical breakdown of a simple scenario for a single filer with no dependents in Tax Year 2018. I’ll try to illustrate the relationship between gross income, taxable income, marginal tax rate, and effective tax rates. See also my previous post 2018 Income Tax Breakdown (Married w/ 1 Child).

2018 federal income tax rates for single filers. Taken from the official IRS tax tables (source):

The following changes also apply for Tax Year 2018:

  • The personal exemption deduction is now gone ($0), from $4,050 in 2017.
  • The standard deduction for single taxpayers and married taxpayers filing separately rises to $12,000 from $6,350.
  • The standard deduction for married taxpayers filing joint returns rises to $24,000 from $12,700.
  • The standard deduction for heads of household rises to $18,000 from $9,350.
  • The Child Tax Credit was expanded with higher income phaseout limits and is now worth up to $2,000 per qualifying child.

Let’s say your individual gross income is $60,000 a year. You are single with no dependents, aged 64 and under. You are an employee that receives W-2 income only (i.e. you are not self-employed). You don’t have any additional income sources like interest, capital gains, rents, etc. You don’t have any extra deductions like IRA/401k contributions or mortgage interest. You live in a state with no state income tax. We will ignore any state or local income taxes.

Gross income. Let’s start with your annual $60,000 gross income. There are no personal exemptions anymore. You do get the larger standard deduction which is $12,000 for single filers in 2018. Since you don’t have a lot of itemized deductions, you fall back onto the standard deduction.

The first 12,000 of your gross income is not taxable. Without doing anything special at all, your $60,000 in gross income is now only $48,000 in taxable income after personal exemptions and the standard deductions.

The first $9,525 of taxable income is subject to a 10% tax rate. Shave off 10% of $9,525 and put that on your tax bill ($952.50). The remaining $38,475 of taxable income is moved onto the next tax bracket.

The next $29,175 in taxable income is subject to a 12% tax rate. So we take 12% of $29,175 ($3,501) and add that to the existing $952.50. The tax bill is now $4,453.50. The remaining $9,300 of taxable is moved onto the next tax bracket.

The next $43,800 in taxable income is subject to a 22% tax rate. However, we only have $9,300 left. So we take 22% of $9,300 ($2,046) and add that to the existing $4,454 (let’s round up that dollar). The total tax bill is now $6500.

In this example, this 22% is your marginal tax bracket. If you earned another $1, it would be taxed at this marginal rate of 22%.

Payroll taxes. These aren’t technically federal income taxes, but you must pay a Social Security tax (OASDI) of 6.2% and Medicare payroll tax (HI) of 1.45% of your gross income. That’s $3,720 a year for Social Security and $870 a year for Medicare. (Your employer pays the same amount.)

Overall effective tax rate. You paid $6,500 in federal income taxes on $60,000 of gross income, for an overall effective tax rate of 10.8%. You also paid 7.65% in payroll taxes.

The same single filer in 2017 would have paid $8,139 in federal income taxes on $60,000 of income, for an average or overall effective tax rate of 13.6%.

Filed Under: Taxes //

Target $20 off $50+ Coupon, 15% Off Coupon Via Text

Posted on July 15, 2018 // 9 Comments

Expired: This offer is no longer available.

Target is offering a mobile coupon for $20 off a $50+ purchase. Simply text LKWKGK to TARGET (827438) and a special link and promo code will be texted back to you. Coupon will expire 10/31/18. Valid both in-stores and online. Found via Slickdeals. Exclusions apply:

Coupon offer excludes alcohol, Apple products, Bose, CVS clinic & pharmacy, dairy milk, DSLR cameras & lenses, Elf on the Shelf, gift cards, Google products, GoPro, LEGO, mobile contracts, prepaid cards, Sonos, Target Optical, Tylenol pain relief, and Weber.

You can also try texting the following codes to TARGET (827438) and get a 15% off coupon code. They might even stack…

  • ptwyy3
  • ptwxx3
  • Lkwgkg

Text STOP to 827438 to end.

Filed Under: Deals & Offers //

2018 IRS Federal Income Tax Brackets Breakdown Example (Married w/ 1 Child)

Posted on July 15, 2018 // 7 Comments

The Tax Cuts and Jobs Act (TCJA) changed up the personal income tax brackets, exemptions, and deductions. Here is an updated graphical breakdown of a simple scenario for a married filing joint couple with 1 dependent in Tax Year 2018. I’ll also try to illustrate the relationship between gross income, taxable income, marginal tax rate, and effective tax rates. In future posts, I will also run 2018 examples for single filers and married joint filers without kids.

2018 federal income tax rates for married joint filers. Taken from the official IRS tax tables (source):

The following changes also apply for Tax Year 2018:

  • The personal exemption deduction is now gone ($0), from $4,050 in 2017.
  • The standard deduction for single taxpayers and married taxpayers filing separately rises to $12,000 from $6,350.
  • The standard deduction for married taxpayers filing joint returns rises to $24,000 from $12,700.
  • The standard deduction for heads of household rises to $18,000 from $9,350.
  • The Child Tax Credit was expanded with higher income phaseout limits and is now worth up to $2,000 per qualifying child.

Let’s say your household combined gross income is $100,000 a year. You are a married couple with one child 16 or under, and both earn $50,000 gross income. You are both employees that receive W-2 income only (i.e. neither are self-employed). You don’t have any additional income sources like interest, capital gains, rents, etc. You don’t have any deductions like IRA/401k contributions or mortgage interest that will allow you to itemize deductions. We will ignore any state or local income taxes.

Gross income. Let’s start with your annual $100,000 gross household income. There are no personal exemptions for you and your dependents any more. You do get the larger standard deduction which is $24,000 for married filing joint in 2018. Since you don’t have a lot of itemized deductions, you fall back onto the standard deduction.

The first 24,000 of your gross income is not taxable. Without doing anything special at all, your $100,000 in gross income is now only $76,000 in taxable income after personal exemptions and the standard deductions.

The first $19,050 of taxable income is subject to a 10% tax rate. Shave off 10% of $19,050 and put that on your tax bill ($1,905). The remaining $56,950 of taxable income is moved onto the next tax bracket.

The next $58,350 in taxable income is subject to a 12% tax rate. However, we only have $56,950 left. So we shave off 12% of $56,950 ($6,834) and add that to the existing $1,905. The total tax bill is now $8,739.

In this example, this 12% is your marginal tax bracket. If you earned another $1, it would be taxed at this marginal rate of 12%. Even with a six-figure income, a married couple can still land in the 12% marginal tax bracket (pre-tax 401k or IRA contributions would reduce taxable income even more).

Federal Child Tax Credit. As this income doesn’t exceed the phaseout limits and your child is 16 or under, you also get the full $2,000 Child Tax Credit. A tax credit lowers your tax bill dollar-for-dollar as opposed to a deduction that only lowers your taxable income. Thus, your tax bill is reduced from $8,739 to $6,739. (If you had additional children, each one would reduce your tax bill by another $2,000. Note that there is a limit to the refund-ability of the credit if it makes your tax bill negative.)

Payroll taxes. These aren’t technically federal income taxes, but you must each pay a Social Security tax (OASDI) of 6.2% and Medicare payroll tax (HI) of 1.45% of your gross income. That’s $3,100 a year for Social Security and $725 a year for Medicare. You both earn $50,000 gross and don’t exceed the income caps. (Your respective employers pay the same amount.)

Overall effective tax rate. You paid $6,739 in federal income taxes on $100,000 of gross income, for an overall effective tax rate of 6.74%. Again, you also paid 7.65% in payroll taxes. Your average tax rate is lower than a couple without kids due to the child tax credit. In this case, having a kid reduced your tax bill by $2,000.

The same married couple with one child in 2017 would have paid $9,340 in federal income taxes on $100,000 of gross income, for an overall effective tax rate of 9.34%.

Filed Under: Taxes //

Why ‘Find Your Passion’ Can Be Bad Advice

Posted on July 12, 2018 // 6 Comments

The power of mindset was popularized by psychology professor Carol Dweck in her book Mindset: The New Psychology of Success and others including the bestseller Grit: The Power of Passion and Perseverance. The fixed mindset believes that success is based on innate abilities like talent and intelligence. The growth mindset believes that success is based on effort, good teaching, and persistence. Importantly, a person with a growth mindset believes that they have more control over their own fate.

In an article in The Atlantic, Olga Khazan explores why “find your passion” is bad advice for similar reasons. O’Keefe, Dweck and Walton have a new paper in the journal Psychological Science about the ““fixed theory of interests” versus the “growth theory of interests”.

Are passions really “found”, as if they are a hidden gem in a pile of rocks? The fixed theory assumes that passions are pre-formed. The growth theory suggest that you must gradually develop a small interest into a burning passion through time and effort. This path won’t always come quickly or easily. I liked this quote:

“If passions are things found fully formed, and your job is to look around the world for your passion—it’s a crazy thought,” Walton told me. “It doesn’t reflect the way I or my students experience school, where you go to a class and have a lecture or a conversation, and you think, That’s interesting. It’s through a process of investment and development that you develop an abiding passion in a field.”

One danger of the fixed theory is that you’ll pick something up and if it doesn’t “click” right away, you’ll just give up on it and move on to the next thing. You might miss out on a lot of potential passions because you didn’t dig deeper. Alternatively, once a person with a fixed mindset believes that they have discovered their “true passion”, they are likely to stop developing your other interests.

How do you know when to give up and when to keep trying? This is always the difficult part with no simple answer. I still prefer this simple diagram as a general guidance mechanism:

caddell620

  • It’s easier to fail and still try again if you are really interested in something.
  • It’s easier (or faster) to get better at something if you are naturally talented at it.
  • You are more motivated to fail and still try again if you get paid a lot of money to do it.

I often feel like people believe that passions aren’t allowed to also pay well. In fact, financial rewards should be another incentive to help you develop an interest into a passion. You’re trying to find something that you don’t mind working at day after day.

If you asked me as a teenager, I would have told you that I wanted to be a professor or a scientist in a lab coat. I had little interest in money, and I had a mental image of becoming the stereotypical “absent-minded” professor. It may sound weird, but engineering ended up being the “easy” career path for me. Personal finance started out only as a small side interest, but eventually it developed into a passion where now reading investing books is my idea of a nice afternoon. Sometimes I wish I had pursued finance or computer science earlier.

Bottom line. Finding your passion is rarely something that just “clicks”. It takes time and effort to develop an interest into a passion, and the fact that it is practical should be seen as a positive, not a negative. Sometimes your side interest can turn into a successful career/business, and sometimes it ends up better left as a side interest. Keep developing your interests, but watch your downside risk.

Filed Under: Career //

Auto Parts Class Action Settlement ($1 Billion Covering Most New Cars Bought Since 1995)

Posted on July 12, 2018 // 7 Comments

Here’s a big Auto Parts Class Action lawsuit with over $1 billion in total settlements across many different suppliers. The lawsuit claims that multiple auto parts manufacturers conspired together to keep their prices high (“price-fixing”). This was serious, as some automotive executives were actually sentenced to prison terms. If you bought or leased a new vehicle, or bought replacement parts at any time between 1995 and 2018, you could be eligible for compensation. Thanks to reader Gary for the tip.

To get monetary compensation, you’ll have to live on one of the following states per Car and Driver (emphasis mine):

Consumers in the following 30 states and the District of Columbia are eligible for some kind of compensation: Arizona, Arkansas, California, Florida, Hawaii, Iowa, Kansas, Maine, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Mexico, New York, North Carolina, North Dakota, Oregon, Rhode Island, South Carolina, South Dakota, Tennessee, Utah, Vermont, West Virginia, and Wisconsin. States not on the list do not have laws permitting recovery of funds in antitrust cases for indirect purchasers, according to a plaintiff’s attorney.

An actual award amount is not given as it depends on how many people file a claim. I don’t see a deadline for filing a claim right now, but there is a deadline of July 13th, 2018 if you want to exclude yourself from the settlement class.

The car list looks like it includes most new vehicle makes and models since 1995. I started filling out the claim form and they require VIN number and documentation of purchase. I looked through their FAQ and couldn’t find exactly what kind of documentation they were looking for. I’ll have to dig that up later. You can upload a PDF or snail mail them the proof.

Bottom line. If you’ve bought or leased a new vehicle, or bought replacement parts at any time between 1995 and 2018, you could be eligible for this auto parts class action. That covers a lot of people, but you’ll also need to provide documentation of purchase. Expect to file a claim now, forget about it after a few years, and then a check will show up one day. (Hope you don’t move soon!)

Filed Under: Deals & Offers //

Retirement: Start Saving Regularly, Even If You Start Small

Posted on July 10, 2018 // 10 Comments

T. Rowe Price has a brochure The Benefit of Saving Regularly For Retirement [pdf] which has the common advice that you target saving at least 15% of your gross income each year to prepare for retirement. Of course, the earlier you start, the better. The added wrinkle here is that they offer an alternative route if you find 15% a stretch when you are young.

In their simulation, if you start saving at age 25 at a 6% rate and increase it 1% each year until you reach 15% (and then stay at 15%), you’ll actually come out ahead of someone who starts saving at age 30 at a 15% rate. You’ll even do okay if you start at age 30 at a 6% savings rate and increase it 2% a year until your reach 15% (and then stay at 15%). The two big takeaways are (1} start, even if small and (2) bump up your savings even if just a little by banking some of your raises each year.

The assumptions made seemed largely reasonable:

Examples beginning at age 25 assume a beginning salary of $40,000 escalated 5% a year to age 45 then 3% a year to age 65. Examples beginning at age 30 assume a beginning salary of $50,000 escalated 5% a year to age 45 then 3% a year to age 65. Example beginning at age 40 assumes a beginning salary of $80,000 escalated 5% a year to age 45 then 3% a year to age 65. Annual rate of return is 7%. All savings are assumed tax-deferred. Multiple of ending salary saved divides final ending portfolio balance by ending salary at age 65.

Bottom line. Start saving regularly, no matter the amount. Even if you feel like you can’t save 10% or 20% or whatever you read somewhere, just should start as soon as possible with a smaller number. After a year, try to increase your savings rate by 1% or 2%. Repeat each year. This can help minimize how much you “feel” the savings, while still ending up with a healthy nest egg. Build the habit.

Filed Under: Investing, Retirement //

Save Money By Splitting Doses of Frontline Plus Flea Medication – Up to 90% Savings!

Posted on July 9, 2018 // 252 Comments

frontlineplus0

Updated. The NY Times The Secret Price of Pets was rather eye-opening. We definitely spent a lot of money near the end of our last dog’s life, but Neuticles? Cosmetic surgery? Meanwhile, the cost of flea medication has dropped for us from $10 a month to 67 cents a month over the last decade of dog ownership. That’s over $200 a year in savings for two dogs as compared to buying it retail. We have dogs so that is what I’m using for my numbers, but the same strategy would work for cats.

There are many options for flea prevention today, but Frontline Plus is still quite popular. It used to be that you would buy it from your vet and it would cost close to $15 per monthly dose. These days, I’m guessing most people use Amazon or Costco since you don’t need a prescription. In addition, the patent for the main active ingredient in Frontline (fipronil) has been expired since 2011. Generic brands now include Sentry FiproGuard Plus and PetArmor Plus.

Price comparisons. Here’s an example of the cost comparison for their “Orange box” meant for small dogs (22 lbs and under). Prices taken January 2019.

Store Cost (w/ shipping) Cost per 0.67 ml dose
Frontline Plus Orange at Chewy.com $63.99 for 6-pack $10.66
Frontline Plus Orange at Amazon.com $63.99 for 6-pack $10.66
Frontline Plus Orange at eBay $49 for 6-pack $8.17
PetArmor Plus 22 lb at Amazon.com $39.95 for 6-pack $6.65

 

Buying a larger dose and splitting it yourself. I got this idea originally from eBay sellers that were selling the biggest size (Red box) made for dogs up to 132 lb. dogs with with glass vials and syringes for splitting. I’m not sure what happened, but I believe that the manufacturer Merial pressured eBay and/or their authorized sellers to stop the sale of such kits. I don’t see any such kits available for sale any longer. You can simply buy amber glass vials with droppers on Amazon yourself for under $10 upfront.

I still believe the DIY method can be efffective and safe if done properly. I’ve seen articles from licensed vets and also multiple reader comments saying their own vet approves this practice. Pet shelters and rescues also commonly do this to stretch their limited resources.

More accurate dosing for your pet. By default, Merial categorizes dogs into four broad categories: 0-22 lbs, 23-44 lbs, 45-88 lbs, and 89-132 lbs. This corresponds to vial sizes of 0.67 ml, 1.34 ml, 2.68 ml, and 4.02 ml respectively. I don’t know about you, but I see a pretty big gap between 45 and 88 pounds.

They have to make sure even the biggest dogs in the range are adequately dosed, so if you divide the vial size by the largest size for each category in pounds, you get 0.0305 ml per pound every time. So if you have a 25 lb. dog why give them double the dose of a 22 lb. dog? Just give them a bit more (0.76 ml) and you should be fine. Less meds, less waste, less money.

Example DIY savings. For simplicity, I’ll assume you have exactly a 22 lb. dog. Next, assume you buy the biggest size (Red box) made for 89 to 132 lb dogs and split it into the same 0.67 ml doses as the 22b size (Orange box) using a glass vial and plastic syringes. In other words each single 4.02 ml dose will be split into six 0.67 ml doses. Prices taken January 2019.

Store Cost (w/ shipping) Cost per 0.67 ml dose
Frontline Plus Red at Chewy.com $67.99 for 6-pack $1.89
Frontline Plus Red at Amazon.com $67.99 for 6-pack $1.89
Frontline Plus Red at eBay $53 for 6-pack $1.47
PetArmor Plus 132 lb at Amazon.com $36.17 for 6-pack $1.00

 

Proper precautions. Here are some tips to make sure you split your doses safely and effectively.

  • Use protective gloves. You’d ideally want to do this with the official product anyway, so a box of nitrile gloves is a good investment.
  • Keep medication away from light and air. Either use a dark, glass vial or keep it an airtight syringe in airtight bag in a dark, cool space. When using a plastic syringe as the applicator, remove any needle! You’re just drizzling the stuff on your dog’s skin surface. You can buy 12 glass vials with droppers for $9 from Amazon. The 0.51 ounce bottles hold about 15 ml. The biggest dose packages are 4 ml. A drop is about 0.05 ml.
  • Do not mix and match dog and cat Frontline. The ingredients may differ slightly, which may be quite dangerous or even lethal. The concentrations may differ as well.
  • Dose carefully. As with all these flea medications, you can do some trial and error to see what brand and dosage level works for your dog. You might need more or less than indicated for your dog and environment. I would avoid going over the maximum manufacturer recommendation.

Bottom line. Monthly flea & tick medication is an ongoing cost of owning a dog or cat. You can save a significant percentage by splitting up larger doses and buying in bulk (even if you keep shopping at the same store). You can save even more by buying a generic version (see above) with the same active ingredient, just like Advil vs. ibuprofen. For a small dogs, you can get your cost down to $1 per monthly dose per pet.

Filed Under: Frugal Living //

Vanguard Will Offer Commission-Free Trades on All ETFs (Including iShares, Fidelity, Schwab, Etc)

Posted on July 8, 2018 // 6 Comments

Vanguard made a splash last week when it announced that it will offer commission-free trades on all ETFs in it brokerage accounts. Vanguard ETFs had been free to trade already. Starting in August, they will add nearly 1,800 ETFs from competitors including Blackrock (iShares), Schwab, State Street (SPDR), Powershares, WisdomTree, etc. Also see WSJ article (paywall?).

Pros. It is now cheaper to keep all my assets in only Vanguard accounts. In the past, if I wanted to buy a WisdomTree ETF, I might have held it in external account for cheaper trades. I could buy a Schwab ETF if that flavor is a lot cheaper. I could do some tax-loss harvesting in the same account. Simplicity and convenience are good. (Although, some would argue that it isn’t a bad idea to spread your money across different brokerage custodians.)

This is a bold move meant to disrupt the more limited commission-free ETF lists from other providers including TD Ameritrade, Schwab, and Fidelity. None of their lists include Vanguard ETFs, yet now Vanguard will include all of them. How will this change the competitive landscape? Will others move to match this “deal”?

Cons. Basically… who’s paying for this? Vanguard is known historically for being the “at cost” choice. They paid their employees, did their work, and then charged you what it cost to run the fund. There was no extra profit component for public or private shareholders. You had confidence that when they lowered their expense ratios, that would be a long-term move. Vanguard has never given out big sign-up bonuses or paid for the naming rights of “Vanguard Arena”.

However, in my opinion this move brings them closer to their competitors where they lose money on marketing and promotions and then have to cover that cost by charging a little extra on other things. Vanguard has already increased their ad budget significantly in recent years. I estimate the cost of a stock trade at about $2 per trade. That’s close to what the leanest, high-volume competitors charge when they can’t offset the trade costs with other revenue sources. So basically Vanguard is “paying” $2 a trade and hopefully offsetting that cost somewhere else. This must add up (especially for active traders), otherwise Schwab or TD Ameritrade would have already offer it. Instead, they charge for access to their no-transaction-free platforms.

As a supposed “owner-investor” in Vanguard, I was never asked my opinion on this. Vanguard is basically saying that growth of assets is good for everyone, don’t worry that the money to pay for these trades has to come from your Vanguard ETF and mutual fund holdings. As long as expense ratios only go downward, I suspect nobody will push back too hard.

Vanguard is also heavily pushing their Personal Advisory Services (PAS) at 0.30% of assets. How does the money flow between PAS and their ETFs? If PAS makes more money, does it help lower the expense ratios on my Total Stock Market ETF shares? It’s not very transparent.

In the end, you have to trust that Vanguard is still working for the good of their investors, and not just growing and accumulating a lot of well-paid executives and management. (Owner-investors also don’t know anyone’s salary at Vanguard.) As someone who has seen this sort of more-more-more philosophy in “non-profit” healthcare institutions, I am a little worried. I hope I’m wrong, and this move won’t cost Vanguard investors very much while making ETFs cheaper overall.

Filed Under: Investing //

Barclays Arrival Premier World Elite Mastercard Review

Posted on July 6, 2018 // 1 Comment

The Barclays Arrival® Premier World Elite Mastercard® is no longer available.

Filed Under: Credit Cards, Deals & Offers, Reviews //

Best Interest Rates on Cash – July 2018

Posted on July 4, 2018 // 11 Comments

Here is my monthly roundup of the best safe rates available, roughly sorted from shortest to longest maturities. Check out my Ultimate Rate-Chaser Calculator to get an idea of how much additional interest you’d earn if you are moving money between accounts. Rates listed are available to everyone nationwide. Rates checked as of 7/4/18.

High-yield savings accounts
While the huge brick-and-mortar banks like to get away with 0.01% APY, there are a number of online savings accounts offering much higher rates. Keep in mind that with savings accounts, the interest rates can change at any time.

  • CIT Bank Money Market offers 1.85% APY with no minimum balance ($100 to open). Purepoint Financial offers 1.90% APY, but requires a $10k+ balance. Northpointe Bank is at 2.05% APY, but requires a $25k+ balance. On the flip side, Redneck Bank offers 2% APY but on a maximum balance of $50k.
  • My “hub” bank account is the Ally Bank Savings + Checking combo due to their history of competitive savings/CD rates, 1-day external bank transfers, and overall user experience. The free overdraft transfers from savings allows to me to keep my checking balance at a minimum. Ally Savings is currently at 1.75% APY. I then open other “spoke” accounts and CDs to lock in higher rates.

Money market mutual funds + Ultra-short bond ETFs
If you like to keep cash in a brokerage account, you should know that money market and short-term Treasury rates have been rising. The following money market and ultra-short bond funds are not FDIC-insured, but may be a good option if you have idle cash and cheap/free commissions.

  • Vanguard Prime Money Market Fund currently pays an 2.04% SEC yield. The default sweep option is the Vanguard Federal Money Market Fund, which has an SEC yield of 1.83%. You can manually move the money over to Prime if you meet the $3,000 minimum investment.
  • Vanguard Ultra-Short-Term Bond Fund currently pays 2.39% SEC Yield ($3,000 min) and 2.49% SEC Yield ($50,000 min). The average duration is ~1 year.
  • The PIMCO Enhanced Short Maturity Active Bond ETF (MINT) has a 2.44% SEC yield and the iShares Short Maturity Bond ETF (NEAR) has a 2.47% SEC yield while holding a portfolio of investment-grade bonds with an average duration of ~6 months.

Short-term guaranteed rates (1 year and under)
I am often asked what to do with a big wad of cash that you’re waiting to deploy shortly (just sold your house, just sold your business, legal settlement, inheritance). My usual advice is to keep things simple. If not a savings account, then put it in a flexible short-term CD under the FDIC limits until you have a plan.

  • CIT Bank 1-year CD is now at 2.50% APY. Early withdrawal penalty is 3-months of interest. Alternatively, the CIT Bank 11-Month No-Penalty CD at 1.85% APY with a $1,000 minimum deposit and no withdrawal penalty seven days or later after funds have been received. The lack of early withdrawal penalty means that your interest rate can never go down for 11 months, but you keep full liquidity. Full review. You can open multiple CDs in $1,000 increments if you want more flexibility.
  • Several other banks now have 12-month CDs at 2% APY and above. Watch the early withdrawal penalties. For example, Synchrony Bank has a 2.45% APY 14-month CD, but the early withdrawal penalty is 180 days of interest. Meanwhile, Ally Bank has a 12-month CD at 2.30% APY with $25k+ deposit (2.20% APY for $5k+) and early withdrawal penalty of 60 days interest.

US Savings Bonds
Series I Savings Bonds offer rates that are linked to inflation and backed by the US government. You must hold them for at least a year. There are annual purchase limits. If you redeem them within 5 years there is a penalty of the last 3 months of interest.

  • “I Bonds” bought between May 2018 and October 2018 will earn a 2.52% rate for the first six months. The rate of the subsequent 6-month period will be based on inflation again. More info here.
  • In mid-October 2018, the CPI will be announced and you will have a short period where you will have a very close estimate of the rate for the next 12 months. I will have another post up at that time.

Prepaid Cards with Attached Savings Accounts
A small subset of prepaid debit cards have an “attached” FDIC-insured savings account with exceptionally high interest rates. The negatives are that balances are capped, and there are many fees that you must be careful to avoid (lest they eat up your interest). The offers also tend to disappear with little notice. Some folks don’t mind the extra work and attention required, while others do. The Insight Card used to offer 5% APY on up to $5,000, but as of July 2018 is completely shut down.

  • The only notable card left in this category is Mango Money at 6% APY on up to $5,000, but there are many hoops to jump through. There is a $3 monthly fee and you need to maintain a minimum $800 net direct deposit each month. This means you can’t direct deposit $800 and also take out $800 via online transfer. Checks and ATM withdrawals have additional fees. The only thing left is to spend the money via the Visa debit feature (and miss out on 2% or similar credit card rewards).

Rewards checking accounts
These unique checking accounts pay above-average interest rates, but with unique risks. You have to jump through certain hoops, and if you make a mistake you won’t earn any interest for that month. Some folks don’t mind the extra work and attention required, while others do. Rates can also drop to near-zero quickly, leaving a “bait-and-switch” feeling. That’s just how it goes with these types of accounts.

  • Consumers Credit Union offers up to 4.59% APY on up to a $20k balance, although getting 3.09% APY on a $10k balance has a much shorter list of requirements. The 4.59% APY requires you to apply for a credit card through them (other credit cards offer $500+ in sign-up bonuses). Keep your 12 debit purchases small as well, as for every $500 in monthly purchases you may be losing out on 2% cashback (or $10 a month after-tax). Find a local rewards checking account at DepositAccounts.

Certificates of deposit (greater than 1 year)
You might have larger balances, either because you are using CDs instead of bonds or you simply want a large cash reserves. By finding a bank CD with a reasonable early withdrawal penalty, you can enjoy higher rates but maintain access in a true emergency. Alternatively, consider a custom CD ladder of different maturity lengths such that you have access to part of the ladder each year, but your blended interest rate is higher than a savings account.

  • Connexus Credit Union is offering a 1-year Share Certificate at 2.50% APY (90-day early withdrawal penalty), a 3-year Share Certificate (180-day early withdrawal penalty) at 2.75% APY, and a 5-year Share Certificate (365-day early withdrawal penalty) at 3.25% APY. All have a $5,000 minimum deposit. Anyone can join this credit union via partner organization Connexus Association for a one-time $5 fee.
  • You can buy certificates of deposit via the bond desks of Vanguard and Fidelity. These “brokered CDs” offer FDIC insurance, but they don’t come with predictable fixed early withdrawal penalties. As of this writing, Vanguard is showing a 3-year non-callable CD at 3.00% APY and a 5-year non-callable CD at 3.30% APY from a few banks including American Express and Citibank. Watch out for higher rates from callable CDs listed by Fidelity.

Longer-term Instruments
I’d use these with caution due to increased interest rate risk, but I still track them to see the rest of the current yield curve.

  • Willing to lock up your money for 10+ years? You can buy long-term certificates of deposit via the bond desks of Vanguard and Fidelity. These “brokered CDs” offer FDIC insurance, but they don’t come with predictable fixed early withdrawal penalties. As of this writing, Vanguard is showing a 10-year non-callable CD at 3.40% APY. Watch out for higher rates from callable CDs from Fidelity. Matching the overall yield curve, current CD rates do not rise much higher as you extend beyond a 5-year maturity.
  • How about two decades? Series EE 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 0.10% rate). I view this as a huge early withdrawal penalty. You could also view it as long-term bond and thus a hedge against deflation, but only if you can hold on for 20 years.

All rates were checked as of 7/4/18.


CIT Bank No-Penalty CD

Filed Under: Banking, Deals & Offers //

Chase Bank $600 Bonus 2018 – $300 Total Checking + $200 Savings + $100 For Both

Posted on July 2, 2018 // 21 Comments

Update October 2018. Here is a new promotion link with an extended expiration date and an extra $100 on top of the previous bonus. The requirements are nearly identical to before, but now you can get $300 for Total Checking + $20 for Savings + $100 for doing both.

Original post about previous similar offer:

Chase Bank has a Total Checking + Savings account promotion offering up to $500 total for new customers. The notable requirements are that you must switch over a “real” direct deposit to get the $300 checking bonus, and you’ll need a $15,000 deposit for 90 days to get the $200 savings bonus. You enter your e-mail address, and you will get a unique code for your online application. Some of the language suggests you should reside near a physical Chase branch, but the link lets you apply online and it should work from anywhere (you will know via instant approval). If you already have a Chase credit card, the application can be pre-filled.

Chase Total Checking $300 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. You must:

  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.

Avoid monthly service fees on Total Checking 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 $200 bonus details. You must:

  1. Open a new Chase Savings account, which is subject to approval.
  2. Deposit a total of $15,000 or more in new money into the new savings account within 20 business days of account opening;
  3. Maintain at least a $15,000 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 5/7/18. Interest rates are variable and subject to change.

Avoid monthly service fees on Chase Savings 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 Checking, Chase Premier Platinum Checking, or Chase Private Client Checking account.

With a total opening deposit of $15,025 in new money, you can open both accounts and avoid both monthly fees. You’ll still need to change your direct deposit (any amount). I have read no reports of a “hard” credit check, and did not experience one myself either this time around or from a previous Chase offer from a couple years ago. Looks like a “soft” check to confirm your identity only (which is all banks should do…).

As reader R. Dannewitz helpfully points out:

Account Closing: If either the checking or savings account is closed by the customer or Chase within six months after opening, we will deduct the bonus amount for that account at closing.

After getting the bonus, you can avoid monthly fees until the 6 month requirement is over by taking the $15,000 out and just maintain a $500 direct deposit and a $25 auto-transfer from checking to savings. Alternatively, you could leave all but $1,500 in checking and $300 in savings and no worry about any other activity (my plan).

Bottom line. If you can switch over your paycheck direct deposit, Chase is offering $300 to try out their checking account. If you can move over $15,000 of new money for 90 days, Chase is offering another $200 to try out their savings account (a “savings” account that pays 0.01% APY??). Earning $500 on $15,000 in 90 days is the equivalent of 13.3% annualized return. That’s a lot more than a bank CD. The bonuses are considered interest and will be reported on IRS Form 1099-INT.

Filed Under: Banking, Deals & Offers //
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