Why Keeping a Check Register Is Important

I always love training new bankers. I’m actually not “training” the new girl at work, but she’s still a lot of fun to be around.

She came into the credit union today in a bit of a panic. She had checked her account and there was a fraudulent charge showing up. She was nervous and worried that her identity had been stolen. She wanted to know what to do. I’ve been through this many times with many customers so I told her what to do and what we would do for her account.

The charge, she said was for an establishment she’s never been to and she wanted to know how it was possible that someone could have charged the card when she had it in her purse the whole time. I tell her that it’s possible she could have swiped the card somewhere that a crook had set up a skimmer to copy the numbers or they could have gotten a picture of the card number. These things are possible, though I know that’s not what had happened in this case.

If someone gets a hold of your debit or credit card, very rarely do they just charge one item. Usually it’s multiple items in rapid succession of each other, and you’ll almost always find a few gas charges on your account. They’re filling up theirs and their buddies’ tanks on your dime. Taco Bell also seems to be really popular with people who steal other people’s debit and credit cards. Go figure.

So I do a little research on the charge and discover that it’s not from the place she never frequents, but rather from a place she visits ALL the time. I tell her the place and she says she hasn’t been there in….then it hits her! She was, in fact, there the day the charge had cleared her account. She had forgotten. She turns a little red and apologizes for the mistake. I smile knowingly - but only because I just like to pick on her anyway - and ask her if she has a check register. She says she does. I ask her if she’s using it. She looks down and sheepishly answers no. I told her she needs to use it; it will help her avoid the panic next time around. Apparently I sounded like her mom.

Sometimes bankers have the unenviable job of sounding like mothers, but keeping a check register is important on many levels. Not just for keeping balances, though that’s important, too. I get a lot of members that tell me they use online banking and that works for them. Yes, but what happens in a situation like this where you forget that you used the card at a certain place and freak out because you think you’ve lost your card? Or, the reverse where you don’t pay any attention to your charges and you may actually have fraudulent charges on the account. Having a register where you write down your transactions can help you monitor that. Keep in mind that most banks only allow you 60 days to dispute an item, so if you miss something from three months ago, to bad because you’re probably not going to get it back. It’s important to keep up with your account.

The other reason that you want a register is because there’s a difference in how your transactions will post. If you use your card as debit and enter your four-digit pin number, it usually posts to your account right away. I only know of a few who don’t post them right away. But, if you use your card as credit and sign for it, then it can take a few days to show up on your online banking. The reason is that it all depends on when the merchant batches out their credit files and sends them off for payment. Some go through the process every night and post them right away. Others may go every week. But, they have 60 days to post a transaction so if you haven’t written it down and they don’t take it out until 45 days later, it can cause some damage to your account if you’re not expecting it.

Ok, so how many of you out there have check registers and are actively using them? If you’re not, how come? Have you run into any problems not using one?

Popularity: 12% [?]

Debt Collector’s Getting Their Day In Court

Sometimes our legal system amazes me. I mean, who would have thought that a woman could sue McDonald’s for burning herself with hot coffee? I don’t think many people believe in the ‘innocent until proven guilty’ mantra as evidenced by the good number of innocent people that go to jail, only to be determined later that they are, in fact innocent. In short, I think the whole justice system is in need of an overhaul.

In Chicago alone, more than 119,000 civil lawsuits against alleged debtors are swamping the courtrooms. It has been estimated that at least half will result in judgments allowing debt collectors to garnish wages, seize bank accounts, and file liens against homes - all because people are falling behind during the high prices and credit crunch that is affecting the nation.

To be sure, these people still owe the money. I don’t think anyone is suggesting that they don’t. But I have a hard time seeing the justice in garnishing a portion of a retiree’s social security - the only money they live on - for debt repayment. Retirees on limited income are getting hit hardest because of higher medical bills. When they fall behind on their bills due to medical problems, there should be a different alternative than simply taking them to court.

Even more interesting is that there are cases making it into the courtrooms for debts that have already been paid. A resident of Chicago started receiving phone calls from a debt collector and their law firm demanding payment or they would take her to court. She repeatedly told them that the debt had been settled the previous year AND she faxed over the release letter as proof. But, they took her to court anyway.

Apparently, the woman and her lawyer didn’t show up in court because they had been assured by the debt collectors that they would investigate her complaint, but because they weren’t there, the judgment was awarded against her - a move that would allow them to garnish 15% of her wages. Now, it seems to me that the law firm representing this company should have been aware of the “complaint,” but the way they phrased it was that the judgment was an innocent mistake and that they had vacated the judgment and dismissed the suit when they learned of the complaint.

Innocent for whom? Certainly not for the woman who paid the debt off a year earlier. The law firm should have practiced due diligence to make sure that the files were in order - particularly since they also received copies of the release letter. That wasn’t an innocent mistake; that was a waste of taxpayer’s dollars for not having their ducks in a row.

This seems to be a reflection of things to come as the credit crisis gets worse; the remnants of easy credit gone sour and a collections industry determined to get paid. But at what point does the justice system say enough is enough? The government is talking about bailing out lenders who just handed out money to people who weren’t qualified. If such a program exists for lenders, then something similar should be available to consumers.

I’m not suggesting that all debts should be wiped clean. And I’m not suggesting that this type of program be available for everyone. Deadbeats who just don’t want to pay their bill can have their wages garnished as far as I’m concerned. But, those that have experienced job loss, medical issues, or something along those lines should have a system in place where they can seek help. I think a type of structured settlement where the individuals can have late fees and things reduced to help lower the debt would be a start.

Now, along with that, I think these people should be required to take credit counseling classes. Part of the problem is their spending patterns and not having any emergency fund to fall back on. The economy is not solely to blame for everyone’s financial problems.

I’d love to hear your thoughts on this. Is it justice to have that many lawsuits clogging the system? Am I wrong in my opinion that if the government is going to help lenders, they should institute a program to help consumers?

Popularity: 13% [?]

The Business Credit Score

Just as creditors will look at a personal credit score before making a decision to lend to an individual, business lenders look at a business credit score before determining whether or not to lend to the business. While there are certain similarities between the two systems, they work a little differently.

There have been a number of business credit reporting agencies that have cropped up over the years, but the primary one - and probably the only one I’d concern myself with - is Paydex from Dunn & Bradstreet. The main difference between business credit scores and personal credit scores is that while the consumer side takes many factors into consideration, Paydex only considers two things: whether a business makes their payments on time and whether they satisfy the creditor’s payment terms.

A Paydex score ranges between 0 and 100 with 80+ being in the top tier. A score of 70 means you were 15 days late on your bills and a score of 50 means your were 30 days late. Jut like the consumer side, as you pay your bills on time and practice good credit habits, your score will increase. If you’re trying to establish credit, there are a couple of ways to go about doing this.

1.) You can enroll in the CreditBuilder or Scorebuilder programs offered through D&B

The drawback to this is that these programs can cost several hundred dollars. But, they are a quick way to establish a credit rating.

2.) Apply for a D-U-N-S number

This is a nine-digit identification number that you can use to establish a small line of credit with a company that reports to D&B. Note: if a company doesn’t report to D&B, then don’t waste your time applying there if you’re trying to establish a Paydex score.

It’s not required that you build credit through D&B, of course, though this is the most respected. And it’s not required that you build credit for the business at all. If you’re more comfortable, you can always continue applying for credit under your personal info. However, there are drawbacks to that such as the tax benefits that you’re missing out on.

Like consumer credit, business lenders want to see continuous activity. Once you’ve established your Paydex score, you have to keep using it. Too often business owners make the mistake of stopping and that can cause the score to drop. Even if you’re only using small lines of credit from some of your vendors - like an office supply chain - at least there is some activity to keep your business credit positive. A further note of caution is to continue to be diligent with your personal scores as well. In most cases, a lender will pull your personal credit along with your business credit to get a complete picture of the company’s strength. A poor personal performance can cause problems for the business.

And that’s really all there is to it. Many people think the best way to build credit for the business account is to get a business credit card, but the problem with that is that business credit card applications generally require the owner to pledge their personal property as collateral. Going the Paydex route means that your personal property stays personal and as long as you maintain a balance with your personal score and your business score, you’ll be able to deal quite easily with business lenders.

Anyone with a business deal with Paydex for their scores? If not, who do you use and why?

Popularity: 11% [?]

Credit and Debit Card Blocks at the Pump

With gas prices soaring to over $4 a gallon, there’s a little something many consumers are running into that’s never been a problem before - limits and ‘blocks’ at the pump. Issuers and merchants have always had these limits and ‘blocks’ in place, but it’s never been an issue before because gas prices haven’t been as high.

What this means is that issuers and merchants set a predetermined limit that you can spend for at-the-pump purchases. This is usually anywhere from $50-75. When you swipe your card - debit or credit - the merchant does an authorization with the card company. Since the total purchase is unknown at this point, there is a ‘block’ on a specific amount of funds - usually the $50-75, but it can be as little as $1. The problem that people are running into is that since gas prices have increased, so is the amount that folks are putting into the gas tank. When the amount reaches the limit, the pump shuts off. Consumers are left there with their tanks unfilled - already aggravated by the high prices they have to pay.

In addition to the annoyance, there’s something else happening as well. When you use credit at the pump, that hold isn’t automatically released once the transaction is complete. According to Visa, merchants and/or financial institutions - depending on who is holding the funds - have three business days to release the holds. But, for some, these holds can cause all manner of fees to hit their accounts if it causes them to go over their limits or overdraw their accounts. Some banks have it set up where you’re not actually charged that fee as long as the actual purchase clears for less than what you have in the account; however, credit card companies are not always so gracious.

Naturally, the number of complaints to merchants has significantly increased, but in most cases it’s not the merchant’s fault, it’s the card issuer’s fault. The problem is that there’s nothing you can really do about either. These limits are set in place to help avoid fraud. The first thing someone who steals your card is going to do is go fill up their gas tanks. By limiting the amount the fraudsters can get, the credit card company or financial institution limits their liability when you report the purchase as fraudulent.

Fortunately for me I have a small car so this has not been an issue in recent times. However, I did experience this once when I was moving. In addition to using the gas station three times that day, I was also filling up a U-Haul and that ended up sending me over my limit for that transaction. It wouldn’t let me fill up any further and I had to go inside to actually complete the transaction. I didn’t think about it at the time, but there’s another way to circumvent that as well - a second transaction.

These limits and holds placed on the card are only on a per transaction basis. You can complete the first transaction with the hold and then reinsert your card for a second transaction. It’s a little bit of a hassle for consumers to do that, but if you really don’t want to walk inside, you at least have this option. Unfortunately, this option tends to hit merchants hardest because they pay on a per swipe basis. If each customer swiped their card two or three times, that would be one outrageous bill for the merchant at the end of the month. It impacts us because they have to compensate somehow, which is usually in the form of higher prices on gas and convenience items.

Have any of you experienced this problem at the pumps? Do you think the limits should all be raised in light of the gas prices, or left as they are because it’s only a temporary situation?

Hey, I’m optimistic that gas prices will go down!

Popularity: 17% [?]

How Young Is Too Young for a Credit Card?

Well, the answer to this question will probably vary greatly, depending on the child. As most credit card companies don’t have an age limit on authorized users, mom and dad can add little Johnny any time they want to. But, financial education needs to start early in order to prepare children for responsible credit card use. At 18, they’re legally able to apply for their own cards; however, children really should have an understanding of finances and credit cards long before that.

Most experts agree that 7-year olds are probably not ready to use mom and dad’s card as an authorized user. A mature 12-year old may do well with their parent’s card, though if your preteen is a bit impetuous when it comes to spending, you may be better off using reloadable gift cards or debit cards to practice with. Now, we’ve posted before on how to teach your kids about money and so forth and the same basic principles apply here. However, I’m going to include some tips to help parents develop the credit card skills necessary for success for kids at three different stages: preteen years, teenage years, and young adult years.

Preteen Years

Financial education in general should begin around 4-5 years old. You can wait a little longer if you feel it necessary, but this is typically the age where they begin to understand the concept of money. I don’t recommend starting any later than 6-years old. At this stage parents play an integral role in how much their children understand where money comes from and how it’s used, so it is important that parents take the time to really work with their children.

In terms of building good credit card skills, parents can provide a safe environment for children to learn how they work. It may prove to be too cumbersome to try and explain the ins and outs at this stage; however, by becoming their first creditor you can instill the lessons they will need for later. To become their creditor, lend them the money they need to purchase the item they’ve been coveting, but give them terms - just as a bank would. Explain that if they are late with their payments, the amount they have to pay back will increase and if the money is never paid back, then the item is taken away.

Once they’ve mastered the concept of repaying the money, it may be a good idea to give them a dry run using a reloadable gift card. Explain that they can put their money on the card to be used at stores instead of carrying cash. Because the concept of credit cards is rather abstract to kids in this group, using the gift card affords parents a little illustration. The idea of a credit card usually triggers the thought of “free money” to children, when we all know that’s the furthest thing from the truth. Using the gift card puts their cash in these abstract terms and they can see that they’re still limited to what cash they have on the card. They have a limit that they can’t exceed. Once it’s gone, it’s gone.

At this stage, children should learn that borrowing money costs money and that when you borrow money, you make a promise to repay it. Failure to do so results in consequences. Combining that lesson with the gift card lesson gives preteens the foundation they need to understanding credit cards.

Teenage Years

Once they’ve mastered the lessons from the preteen years, you can add them as authorized users to your credit card - that is, if you’re so inclined. Even if you’re a little wary of doing so, it really is beneficial to your child’s financial education. If they make a mistake or error in judgment, then they’re learning in a safe environment. However, parents are still responsible for the bill, so it is important to make sure the teen understands that they just can’t go wild. The credit card is to be used for emergencies only and be sure to spell out what constitutes an emergency and what doesn’t.

The major downside to this is obviously the risk to the parent’s finances. If a child is reckless about their spending, it could cause problems. This is why parents must talk with their children about what they are spending and it’s a good idea to monitor the account regularly. However, parents and teens both need to understand that any damages done to the credit account also affect the teen’s credit report as activity is reported on an authorized users credit file now. It may help to explain that poor performance and bad choices can negatively impact them as well. They may be more inclined to watch what they’re doing if they know it impacts them - let’s face it, the teenage years are all about what’s good for them.

For those parents who are concerned about their children making financial mistakes with their credit cards, try a debit card. A debit card will allow you to still monitor your teen’s activity and discuss their purchasing choices if need be. The thing to remember here is that you will still have to be on the account as a responsible adult, so if the teen overdraws the account, you’re responsible for bringing it current. You can use it to teach the teen about over the limit fees on credit cards and how much that eats away at their money, because they will be charged for overdrawing the account.

The lesson at this age is that there are benefits and drawbacks to having credit. While it makes things easier in the event of an emergency to have something on hand, being reckless can create financial problems later down the line.

Young Adult Years

These are the years where your child can get a credit card themselves. By this point, they should have a solid understanding of finances and the best ways to manage their money and their debt responsibly. Parents should let their children spread their wings, only offering advice as needed and not in a forceful way. Experience is often the only way people learn.

Here’s the part that’s tough for many parents. Do not rescue your kids when they make financial mistakes. Studies have shown that students whose parents have bailed them out when they get into trouble have higher average balances on their cards because there is no recourse for their actions, mommy and daddy will simply take care of it. You’re not doing them a favor by teaching them to rely on you. Those students who knew that repaying the card was their sole responsibility had lower overall balances and managed their money better. If you want to offer your financial help in other areas, fine. But don’t make the credit card payments for them. They need to learn.

The lesson learned at this age is about building a good credit file. They need to understand that they must be independent in their financial matters and they must take care to protect their credit rating.

Let’s discuss what you’re currently doing with your kids. Have any of your tried the suggestions I’ve listed? Are you doing something else? How’s it working out?

Popularity: 13% [?]

Carnival Love and Link Roundup!

We were lucky enough to have our posts listed in the Carnival of Financial Planning over at The Skilled Investor, the Carnival of Money Hacks at Daily Money Hack, and the Carnival of Net Worth at Llama Money.

And be sure to check out this weeks edition of the Finance Fiesta: Margarita Edition at Wide Open Wallet, where we got an ‘Editors Pick’. Nice!

Lots of great posts this week from the Personal Finance Blogosphere.

• First off, Penelope Pince over at Our Fourpence worth has a great piece on staying out of debt. Her verdict? Keep it simple.
• Mom from Wide Open Wallet writes on how to ‘unspoil’ your children. If only my parents had read this article back when I was a kid!
• Seb from Pinching Copper announces the death of the SUV. With gas prices heading towards $5 a gallon, he may well be right.
• Kevin from No Debt Plan has an article on using spare change and snowflaking to boost your emergency fund. Well worth a look!
• Future Millionaire reviews a recent study by CNN Money that indicates money doesn’t (necessarily) buy happiness. Apparently, while the data demonstrated that there was a correlation between wealth and happiness, participants who rated themselves as happiest were generally less wealthy than those further down the scale. Check it out!

• And finally, Living almost large has a fascinating (if a little scary…) post on what your medical costs will be like in retirement. The verdict? Better start saving now!

Hope you’ve all had a good week so far! And if not, stay strong - Friday is just around the corner :)

Popularity: 10% [?]

It’s Just Money!

And you can’t take it with you to the grave, so why bother saving at all? Enjoy the one life you’ve got to live and don’t worry about the rest!

Ok, I got that argument spewed at me today by someone who was unwilling to see the dangers in not saving. For him, money was just something that existed as a by-product of our wants and needs. He didn’t see the value in saving long-term.

I spent a good two hours talking to this guy about his financial picture. He genuinely was not concerned with money. While it must be nice not to experience the everyday stress most of us associate with money, I have to wonder if he had given any thought to his situation. He had no savings, two credit cards that were close to being maxed out, a minimum wage job with no desire to move beyond it, and nothing else that he actively wanted to pursue. I was concerned.

I asked him what he’d do in an emergency and he said that he’d use his credit cards - which were close to being maxed out, at 16%, and had nothing to offer him but high interest debt. I asked him how he would protect his family in the event that something happened to him. He said there was just him. I finally asked him how he planned to enjoy life when he was broke and living on the streets because he didn’t have two nickels to rub together. He looked at me, blinked, and then shrugged his shoulders. He hadn’t thought about it.

Sigh!

The fact is, unless you’re a monk living in a monastery, everyone needs money for one reason or another. It’s not about being able to take it to your grave. If you don’t want to worry about becoming a millionaire, fine. But money is a necessity for everyday living. Bills, food, gas they all cost money. Even if your sole mission in life is to enjoy each day to the fullest and not give a worry to tomorrow, you still need money to make that happen. Want to pick up and move, travel the world, go save the whales? Guess what, that all costs money.

I often find this mentality of living for today and not tomorrow in younger adults, yet they don’t really think it through in terms of their finances. The perception from the younger generations is vastly different from that of the baby boomers. Retirement was the goal, the end-game. It was where you pursued your passions and enjoyed the fruits of your labor. But, the younger generations these days don’t want to wait until retirement to experience the world. They want to enjoy it now, while they’re younger and able to actively be a part of whatever moves them. I understand the mentality and pursuing passion, I’m a big advocate of that. BUT, you still have to have a plan for your financial future if you hope to have a roof over your head and food on the table.

There are many reasons people choose to save. Among them are retirement needs, more choices when it comes to life, emergencies, and helping family and loved ones. Those who don’t care to wait until their retirement to enjoy life need to understand that money plays an integral part in everything we do from living expenses to backpacking through Europe. Almost everything we do requires money. Saving is the best way to make it happen.

What would you say to someone who told you it was ‘just money’ and not really important to save?

Popularity: 11% [?]

Is Outsourcing of the Financial Industry Feasible?

I read an article today that talked about the possibility of the financial industry outsourcing some of their positions. That got me thinking, is such a thing even possible? I mean I know it’s possible, but what I mean is, would it work? It’s not like the IT department that does everything remotely in most cases anyway. And the finance industry doesn’t manufacture anything. But, the fact is, the CFA test-taking numbers suggest that more and more people outside of the U.S. are fully capable of taking on Wall Street. analyst jobs.

For those of you not familiar with the CFA tests, they’re a three-year self-study course in financial analysis. It covers accounting, corporate finance, statistics, economics, equity and debt securities, derivatives, ethics, portfolio management, and much more. But, the test is really tough. They certainly don’t make it easy and it’s rooted in American accounting practices and given in English. Those who pass the test have the right to add CFA after their name, i.e. Kristy Young, CFA (I’m not, by the way, just giving an example). The acronym CFA stands for “Chartered Financial Analyst”, in case you didn’t know.

As I was saying, the test is really hard. But what’s interesting about this is that over 40% of this year’s 175,000 test-takers (remember we’re only half way through the year) were in Asia. And, according to news reports, job ads in the South China Morning Post actually require a CFA to even be considered. Now, if you’re a kid right out of college going to work for Wall Street with your CFA firmly in hand, your going rate is about $100,000 with a company car, phone, and laptop as your standard package. Depending on the company, you could even get an entertainment budget for those nights when it calls for you to entertain clients. But, we’ve all seen the effects of outsourcing. It costs the company far less overall. There is no need to provide a company car, phone, or laptop and there is certainly no need to provide the entertainment budget. Outside of that, the salary for outsourced jobs is less than what they pay the college kid on Wall Street.

While I’m not suggesting this is something that would happen overnight, if at all, I have to wonder just how feasible an option it might be. Financial analysts will always be in need, but with the economy in it’s current state, the weakening of the U.S. dollar, and the loss of jobs on Wall Street, who isn’t considering options to decrease their expenses right now? These savvy CEOs have probably considered outsourcing some of the analyst jobs to save a buck or two, and by ‘buck or two’ I mean thousands. Still, can people outside of the U.S. really offer the same kind of analysis someone in the thick of things can? The argument that someone outside the situation could probably provide a better understanding of the problem is valid, but somewhere there needs to be a line drawn. I don’t presume that any of us, no matter how well we did on a test, would fully understand the complexities of Asian governments enough to hold jobs offering strategic advisement of their markets. Because of that, I think the same holds true in reverse. There is no way that someone outside of the U.S. can fully understand the complexities of our markets to the extent that they can fully replace someone here. That’s just my opinion though, I’ve been known to be wrong before. However, I think these big companies will need to consider what such outsourcing would do to the economy. Wall Street’s a big place and that many job losses could really throw the market for a loop if they decided to outsource most of those positions.

What do you guys think? Would it bother you that someone managing your assets lived outside of the U.S.? Are any of you CFAs? I’d love to get your opinions on, first do you see such a venture happening, and second, how you would feel about it.

Any of you living outside the U.S. hold a CFA? How effectively do you think you can (or do) manage and analyze U.S. markets?

Popularity: 12% [?]

Bank of America Review

I thought I’d try something a little different and add a bank and credit union review, sort of like the credit card review that Jonathan did with the Amex card. Each week I’ll pick a bank or credit union and give a review of their services and fees - you guys are welcome to throw suggestions out there for ones you’d like to see reviewed!

The areas of the review are as follows:

1. Checking
2. Savings
3. CDs
4. Cool Features
5. Customer Service

This week’s pick: Bank of America

Checking Accounts

Bank of America has four main checking accounts - MyAccess Checking, CampusEdge Checking, Bank of America Advantage Checking, and Regular Checking.

MyAccess Checking:

The minimum opening deposit is $25, no minimum balance required thereafter. According to the website and their phone representatives, the online offer does not require direct deposit, but if you go in person to open the account, direct deposit and other service fees may apply. This is a non-interest bearing account.

CampusEdge Checking:

Same as the MyAccess, except it’s for students - high school and college. Students are also eligible for a “Stuff Happens” card which allows the owner to waive one fee assessed to their account. Once the student is no longer in school, the account converts to a MyAccess.

Bank of America Advantage Checking:

The minimum opening deposit is $100 and the monthly service fee can be waived with a daily average balance of $5000. Account allows loan and investment balances to be included to avoid monthly service fees. All loan and investment balances - except mortgages - must have at least $15,000 outstanding. Mortgages can be any amount. If requirements are not met, the monthly service charge is $20. This is a tiered interest bearing account; however as of now, all tiers are earning .05% APY. Users also get priority calling for telephone banking - means they get a special number to call and skip the line.

Regular Checking:

There is a $25 minimum opening deposit. To avoid a monthly service fee, users must keep a minimum of $750 in the checking account, or $2500 in the savings account. If below either of those balances, the monthly fee is $9 with direct deposit or $11 without direct deposit.

All checking accounts come with a free debit card (with picture), online banking, bill pay, telephone banking, and unlimited teller transactions. Non-Bank of America ATM fees in the U.S. are $2 for withdrawal or balance inquiry. Non-Bank of America fees in foreign countries are $5.

NSF fees: $25 per item for the first offense. The second offense and up within a consecutive 12-month period is $35 per item. Each day limited to 5 items.

Savings Accounts

There are two main savings accounts - Regular Savings and Balance Rewards Money Market.

Regular Savings:

There is no monthly fee with a $300 minimum or automatic transfers of $25 or more from a Bank of America checking account. Users are limited to a total of six withdrawals per month, three free and the remainder are $3 per withdrawal if the balance falls below $2500. Continued violations of the six per month will result in the savings account being turned into a checking account or shut down completely. It is interest bearing, .20% APY, compounded daily and paid monthly.

Balance Rewards Money Market

There is no monthly fee when linked to an Advantage checking account or with a minimum balance of $25,000. Otherwise, the fee is $20 per month. The account offers an annual cash bonus based on the balances in the account - a complete bonus schedule is available online. Offers limited check writing capabilities and can be linked to checking account for overdraft protection. The interest is tiered based on the balances, and runs from .5% APY to 1.55% APY.

CD Accounts

Bank of America offers CDs in terms of 28 days to 10 years. Interest rates are tiered based on the balance and run from 1.4% APY to 4.00% APY.

Cool Features

The cool feature for Bank of America is the “Keep the Change” program. When consumers use their debit cards, the purchase is rounded up to the nearest dollar amount and moved over to the savings account. For the first three months of a new account or set-up, Bank of America will match the savings penny for penny. Thereafter, they will match a total of 5%, not to exceed $250 a year.

Customer Service

Terrible. I went inside to get some information and was left sitting in the lobby for 25 minutes. When I asked for some literature on their accounts, the representative told me they didn’t have any but that he would be glad to explain the accounts to me. I agreed to hear him out and then he proceeded to basically read me off a memorized script about the accounts. It was methodical. I’ve heard from other employees that have left Bank of America and come over to other banks that they do require the employees to read an approved script.

Beyond that, the guy was interested in asking a bunch of personal questions without telling me what he was doing. I knew what he was doing, but from a customer’s standpoint, he should have explained. Not doing so put me on the defensive since I just wanted account info. Instead, I was bombarded with questions about my investments, mortgage, and car loans.

There are no direct numbers for a branch, which is really frustrating. If you want to speak to someone at your local branch for something as simple as directions, expect to be on hold with their 1-800 number for a period of time. The individual I finally got had an extremely thick accent that I couldn’t understand and I finally had to ask to be transferred to a supervisor just to understand what I was being told.

Bottom line:

Not my favorite. The products are decent - I especially like the “Keep the Change” program. But, interest rates are average and their service is terrible. They seem to be a company that does well for those with a lot of money - as evidenced by the priority calling for the Advantage folks; but those who don’t have a lot of money don’t get much for the hassle.

I’d recommend Bank of America for those who have a chunk of change they want to deposit or for those who like the nationwide aspect. Otherwise, you may find another institution better suits your needs.

Popularity: 16% [?]

Person-to-Person Online Lending

We’ve talked a lot about the fact that the credit crunch is affecting everyone. But take a group of people looking for loans at a reasonable rate coupled with a group of people looking for better rates of interest than the paltry sum banks are offering these days, and you get person-to-person online lending.

In case you’ve never heard of this, it works like so. A borrower can go onto an online lending site - like Prosper or Zopa - and request to borrow a specific amount of money for a specific amount of time. Then they’d list the max interest rate they would be willing to pay. From there, lenders will then bid on the requested loan amount. Most lenders will only lend any one person $50-500 because there’s a certain amount of risk for them if the borrower defaults.

These third party websites hosting the transactions between lenders and borrowers do a lot of the leg work for the lenders. They run the credit score of the borrower and assign a risk grade based on the score. That risk grade is shown to lenders and from there they can make their decision on how much, if any, to lend to that specific borrower. The websites also take care of the disclosures, paperwork, and collecting and distributing of payments in most cases. There’s also a bunch of U.S. regulations that these companies have to go through, so it’s perfectly legit. They’re licensed lenders and registered with the SEC, and some of them even have direct relationships with certain credit unions to make things more secure.

The benefit to lenders is of course the higher rates of interest. The minimum loan that these sites usually allow is $50. As I said, most lenders spread the risk a little bit so they don’t take such a large hit if one borrower defaults, but many people on these sites looking to borrow are there because they can’t get loans through the normal channels. So, they’re willing to pay higher rates of interest just to get the money they need. As a lender, you could potentially have a borrower paying you 18% interest for one loan, which is marginally better than 3% at your bank. And even if you have multiple borrowers that you’ve lent to, you’re still likely to have higher returns than what the banks are paying.

The companies providing this service to people are expecting over $100 million dollars in loans this year as people borrow to pay down their credit card debt, use the funds in lieu of student loans, and various other needs that arise. According to a study conducted by Javelin Strategy and Research, the number one reason people want to engage in person-to-person lending is to pay off credit card debt.

Neat concept, but does it work? Well, my coworker lent out $1000 on Prosper. She chose her borrowers very carefully and she never lost anything. Both of her borrowers paid their payments on time every month. Other lenders have reported equal amounts of success, citing only that some borrowers paid late on occasion, but their payments were always made.

Not having tried this either way, you’ll have to take my opinion with a grain of salt. I think it’s a great concept for those willing to take a little risk and lend to complete strangers. You can get some great returns on your money and unfortunately, banks just can’t compete with that. However, for borrowers, I’m not so sure that it will always work out to their advantage. Sure, they’re likely to get a loan when they really need it - and in those situations, that’s great - but someone with a 660 credit score can get a better rate than 18% with a bank. My suggestion would be to weigh the options and the interest rates and see which route is better.

I also don’t think this kind of lending should be for student loans. While I understand that the student loan companies are cracking down on their lending policies, at least through them payments are deferred until after graduation. With person-to-person lending, the due date is set from the date of closing and then you’re required to make your payments. Ultimately though, there are things both good and bad about such a venture.

I’m curious to know what you think - especially from those who’ve participated with these sites in one way or another. Would you borrow from such a forum? Would you lend?

Popularity: 12% [?]