Optimize Your Bank Account Setup: Megabanks, Credit Unions, Online Banks, and Prepaid Cards

Posted on May 31, 2016 // 4 Comments

crjan2016cover

Consumer Reports is getting more into financial products, with their January 2016 issue cover article on Choosing The Best Bank For You, most of which was also made available to the public without a subscription. If you haven’t optimized your bank account setup recently and you missed it the first time around, the article is worth a read. Perhaps it was just anecdotal, but I read somewhere that most people are still with their first bank account out of high school.

Here are their high-level conclusions:

  • Mega Banks: Best for Convenience, Technology, Security
  • Credit Unions: Best for In-Person Customer Service, Lower Costs
  • Primarily Online Banks: Best for Online Customer Service, Higher Savings Rates, Lower Costs
  • Smaller Regional and Community Banks: Best for Personal Service
  • Prepaid Cards: Easier to get than a bank checking account but some are loaded with gotchas.

It appears that Consumer Reports is still keeping their specific rankings and numbers behind a subscription paywall. But they do agree with me about the idea of spreading your wealth and choosing your financial accounts a la carte to get the best deals.

Now, I am not the ideal person to emulate as I have too much complexity in my financial accounts. The only good news is that I have tried so many of them. Here are the accounts that I currently have open, and what I think about them. For the most part, my experiences align with the Consumer Reports findings.

Megabank: Bank of America

  • Pros: ATMs and branches everywhere nearby. Good online and app user interface (Touch ID). Good perks when combined with brokerage and credit cards.
  • Cons: Basically-zero interest rates.

Credit Union: Local, Community CU

  • Pros: Free notary, low interest rate HELOC.
  • Cons: Small ATM and branch footprint, poor online and app user interface, current low interest rates (used to have a rewards checking account).

Primarily Online Bank: Ally Bank (see Ally review)

  • Pros: High interest rates, fast and flexible interbank transfers, good customer service, good online and app user interface (Touch ID).
  • Cons: No physical branches.

Prepaid Card: NetSpend (see NetSpend review)

  • Pros: 5% APY on $5,000 balance if card kept active. (Update: 5% APY on $1,000 starting 7/1/16.)
  • Cons: Certain fees and fine print to work around.

In terms of the convenience factor, my new favorite feature is Touch ID with Apple iPhones. (Android has their own version, I’m just not familiar with it.) BofA, Ally Bank, Mint, Fidelity, and Robinhood supporting this app feature, I can now get full access to transaction history and even initiate online transfers in under 10 seconds. I hope Vanguard adds this soon (cough, cough!).

Filed Under: Banking, Frugal Living //

Santander Bank extra20 Checking: Ending July 1st for Existing Customers

Posted on April 28, 2016 // 44 Comments

Update April 2016. I originally wrote about this promotion in October 2013, and many readers have been getting $20 of interest every month on a relatively low balance (worked out to 16% APY on $1,500 average balance). With a 1% APY savings account, you’d need $24,000 to get the same amount of interest! Unfortunately, Santander Bank recently announced that this promotion will end and accounts will be converted to a Simply Right checking account later this year (reports include either July 1st or December 1st, 2016).

I would note that this deal lasted for over 2.5 years, longer than I thought it would. Just like with 5% APY Netspend prepaid cards, you can’t really predict how long deals will last. Some end earlier than you think, some end later. Don’t forget to close your account in July, unless you’ve gotten attached to your Santander account (which was always the idea!).

Original post from October 2013 (deal is no longer available):

[Read more…]

Filed Under: Banking, Deals & Offers //

John Oliver on Why The Credit Report Industry is Awful

Posted on April 18, 2016 // 2 Comments

John Oliver of HBO’s Last Week Tonight did a humorous monologue on why credit reporting bureaus are awful. Appropriately, it was last week and I finally got around to watching the 18-minute video tonight. Here is the full video link, embedded below:

Here’s the condensed version:

  • Your credit report can affect your ability to borrow (and thus buy a home), your ability to rent, the price you pay for all kinds of stuff, and even your ability to get a job. Sheesh, what else is there left?
  • 1 in 20 credit reports have errors that are significant enough to hurt your chances at the rather important things I just listed above. That’s 10 million Americans.
  • In an effort to show Equifax, Experian, and TransUnion how such errors can hurt both reputations and business, they created the three websites Equifacks.com, Experianne.com, and TramsOnion.com. (Warning: I left some of these unlinked because they may be considered NSFW.)

In general, I do not micromanage my credit score, but it is scary than an error outside your control could have such harmful effects on your day-to-day life. Perhaps this information will also motivate you to check your credit and consumer reports if you haven’t done so recently. There are also an increasing number of free and/or ad-supported sources of credit reports, credit monitoring, and credit scores. The bad news is that the error dispute process is still slow and complicated, and after you try patience and perseverance, you may need to lawyer up in order to get their attention.

Filed Under: Banking, Credit Cards, Insurance //

Nickel: Kid Allowance App + Debit Card + Set Your Own Custom Interest Rate

Posted on April 13, 2016 // 8 Comments

nickelapplogo

If you’re reading this, you obviously value financial knowledge and creating a secure life for you and your family. If you have kids, then you want them to develop the same skills. The NYT bestseller book The Opposite of Spoiled explored the many modern ways to teach kids about money. One recommendation for allowances is to split it up into three jars: savings, giving, and spending.

For that saving jar, an additional hack would be to pay your kids interest on their savings. For example, you could pay a monthly interest rate of 10%, which is huge in the adult world, but for a kid you need it to be large enough to be “felt” and hopefully teach them the following concepts:

  • Regular, automatic savings. Let’s say you give them $10 a week that is automatically saved. (They don’t manually move money over every week, it just happens like a 401k plan.) Even with no interest, two and half months later, they’ll have a hundred bucks!
  • Passive income. Now you could introduce the concept of paying interest. When they see their $100 pay $10 in interest at the end of the month, perhaps they will start to understand the power of passive income. “I could keep the $100 in there and still get to spend $10 every month forever!”
  • Compound interest. Now show them how they can get interest on their interest. If they start with $100, don’t take any money out, don’t save a penny more, at 10% monthly interest they will still have $314 after 12 months of compounding.
  • Compound interest + regular savings! If they start with $100, don’t take any money out, keep saving another $10 a week, at 10% monthly interest they will have $549 after a 12 months of compounding. This is starting to become serious money!
  • Passive income revisited. A year later, that passive income isn’t $10 a month anymore, it has become $55 a month! This would be a good time to tell you that parents pay the interest, so if you have a little Warren Buffett at home you should set a cap on interest payments upfront. 😉

There are a growing number of “allowance apps” to cater to this market, but Nickel (iOS only, Android “not yet”) is one of the first services that I’ve seen implement this custom interest rate feature. Designed for kids age 8 and up, Nickel offers a reloadable debit card and a smartphone app for you and the kid. The parent can view all transactions and control things like allowance amount, one-time transfers, and interest rates.

Much like adult prepaid cards with 5% APY savings accounts, there are two buckets of money: the “Card” account which is available to spend via Mastercard debit, and “Pocket” account which earns interest. Here’s a 1-minute video explainer and some screenshots of the interest rate feature:

nickelapp2

Finally, apps are cool, but let’s not forget the core values and character traits that lead to good behavior in general.

Filed Under: Banking, Budgeting, Family //

The New Financial Bundle: Checking + Savings + Credit Card + Brokerage + Retirement Advice

Posted on April 11, 2016 // 6 Comments

allytk

Last week, Ally Financial announced that they are acquiring TradeKing. What made this interesting was that they didn’t refer to TradeKing as a discount brokerage firm, but a “digital wealth management company”. This another move from independent start-up (TradeKing merged with Zecco earlier) to big, corporate “bundle”. The traditional communications bundle includes TV, home internet, home phone, cellular phone, and cellular data. The new financial bundle will include:

  • Checking account – Daily cash management, paycheck target, online bill payment, ATM access, debit cards.
  • Savings account – Liquid savings, higher interest rate.
  • Credit card – Easily-accessed credit line.
  • Self-directed brokerage account – DIY investments including individual stocks, options trading.
  • Professional portfolio management – Managed accounts including advice regarding asset allocation, taxes, retirement income, and more. Both lower-cost robo-advisor and higher-touch human advisor platforms.

Here’s my opinionated rundown on some of the bigger firms in this new area. Some of the “pros” aren’t that strong, and some of the “cons” aren’t that bad, but it helps organize my thoughts.

Ally Financial / TradeKing

  • Pros: Competitive interest rates on checking and savings, ATM fee reimbursements, $5 brokerage trades.
  • Cons: No physical branches. No credit cards (yet). Robo-advisor program is still relatively small and new.

Bank of America

  • Pros: Huge physical branch and in-house ATM footprint. Merrill Edge commission-free trades starting at $25k minimum asset balance, $6.95 trades otherwise. Credit card rewards bonus with minimum asset balance.
  • Cons: Low interest rates on banking products. Merrill Lynch advisor network is big and uses traditional fee system, so I’m not a huge fan but others may like it. No robo-advisor program (yet).

Fidelity

  • Pros: Decent cash management account with ATM fee reimbursements, selected commission-free ETFs, somewhat limited but low-cost index fund selection, $7.95 trades otherwise, 2% cash back credit card.
  • Cons: Low interest rates on banking products, human-based Portfolio Advice is relatively expensive and pushes expensive actively-managed funds. Lower-cost robo-advisor is probably coming soon, but yet released.

Schwab

  • Pros: Decent cash management account with ATM fee reimbursements, commission-free Schwab ETF trades with low-cost index options, $8.95 trades otherwise, 1.5% cash back American Express, low-cost robo-advisor via Intelligent Portfolios.
  • Cons: Low interest rates on banking products.

Vanguard

  • Pros: Large selection of low-cost funds and ETFs, commission-free Vanguard ETF trades for all, $7 non-Vanguard ETF/stock trades (or less based on asset level). Portfolio advice includes robo-component plus available human representative.
  • Cons: Limited availability and features on banking accounts. Limited portfolio support for buying non-Vanguard products. No credit cards.

I still believe that the self-directed investor is best off picking individual products a la carte, but it will be interesting to see how things change in the coming years. Each financial mega-institution will likely improve upon their weaknesses, and offer significant perks and discounts for keeping all your money with them.

Filed Under: Banking, Investing //

Bank of America Overdraft Fee Refund

Posted on March 31, 2016 // 265 Comments

boansfUpdated. Although I originally wrote this post a few years ago, 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 $6 billion dollars in overdraft fees in 2015.

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
melissa.d.russell@bankofamerica.com

Crystal R. Peterson
Customer Advocate
Office of the CEO and President
336-805-3126
crystal.peterson@bankofamerica.com

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.

Filed Under: Banking //

MaxMyInterest.com Review: Automated Interest Rate Chasing

Posted on February 29, 2016 // 8 Comments

mmi_logoHere is an updated link to the Best Cash Rates for 2019. But with the growing popularity of “robo-advisors” that manage your retirement portfolio using automated software, what if there was a robo-advisor for rate chasing?

That’s the basic idea behind MaxMyInterest.com (Max). You set a Target Value you’d like to keep in your standard “brick-and-mortar” checking account. Max will then sweep any excess funds into whatever online savings bank has the highest yield. If their rates change, Max can move your money again. If your checking account balance gets low, Max will move money back into your checking account for you. The ole’ hub and spoke graphic:

mmi_spoke

If your balance exceeds the FDIC insurance limits of $250,000 per account type, Max will move the rest into the bank with the next-highest yield, and so on. T

What banks does it work with? They officially support checking accounts from the following big banks. Their application suggests that they may support other checking accounts. (The official list has also expanded a bit since their launch.)

  • Bank of America
  • Citibank
  • First Republic Bank
  • JPMorgan/Chase
  • Wells Fargo
  • Charles Schwab Bank
  • US Bank

Max will use one of these five online banks as your spokes (others may be added in the future, but only these work right now):

  • Ally Bank
  • American Express
  • Barclays
  • Capital One 360
  • GE Capital

You can have them open already, or you can only open a few, or you can use their “common application” to apply for all of them at once.

The cost? 0.02% per quarter, or 0.08% per year.

You can get an idea of their target audience from their marketing materials. I didn’t even know Hermes sold ties, let alone that they cost $200 a pop!

mmi_hermes

Recap. I certainly think the idea is a neat one. But considering the cost and restrictions to the specific five online banks, the greatest appeal of MaxMyInterest is probably to people with $250,000+ balances that want the maintain the safety FDIC-insurance without having to juggle multiple accounts on their own. For most people that don’t have that much sitting around in cash, simply picking a single online savings account with a good track record of offering high interest rates should be good enough.



Filed Under: Banking, Reviews //

Consumers Credit Union Free Rewards Checking Review: Up to 4.09% APY on up to $10,000

Posted on February 9, 2016 // 10 Comments

ccu_logo_200Updated May 2020. Consumers Credit Union (CCU) has a Free Rewards Checking account that offers a high interest rate between 2.09% and 4.09% APY if you meet certain requirements. As with similar accounts elsewhere, the catch is if you don’t jump through all of the hoops, you effectively won’t earn any interest at all that month (0.01% APY).

Membership
To open a Rewards Checking account, you must be a member. However, CCU has a very open membership policy; basically anyone nationwide can join if they do the following:

  • Join the Consumers Cooperative Association with a one-time $5 fee.
  • Open and maintain a share savings account with a minimum $5 deposit.

Earn 2.09% APY on up to $10,000 + ATM Fee Refunds if you:

  • Make at least 12 debit card purchases each month. (Reduced to 6 during April and May 2020.) Don’t use your personal identification number [PIN]. In stores, select to run it as a “credit” purchase.
  • Direct deposits, mobile check deposits, or ACH credits totaling $500 or more monthly.
  • Receive e-Documents (enroll and accept the disclosure)

Earn 3.09% APY on up to $10,000 + ATM Fee Refunds if you:

  • Complete all of the tier requirements above, plus
  • Make $500 or more in CCU VISA Credit Card purchase transactions (no minimum number of transactions)

Earn 4.09% APY on up to $10,000 + ATM Fee Refunds if you:

  • Complete all of the tier requirements above, plus
  • Make $1,000 or more in CCU VISA Credit Card purchase transactions (no minimum number of transactions)

A nice feature is that their online interface has a progress tracker, updated daily, telling you number of debit card transaction and the total spend on your CCU credit card. Tracking is also available via their smartphone app (Apple/Android).

ccu_trackerapp

All tiers will also receive:

  • Unlimited reimbursement for any and all ATM fees + 30,000 surcharge-free ATMs nationwide.
  • No minimum balance. No monthly service fees.
  • Free online Bill Pay.
  • Mobile check deposit via smartphone app.

Qualifying Credit Cards
If you don’t have a CCU credit card, the best you can do is the 2.09% APY tier. Here is a list of their credit cards. It looks like the best one is their Visa Signature Rewards card, which offers a 3% cash rebate on up to $6,000 in “Grocery/Convenience Store” purchases annually, 2% cash rebate for “Gas” purchases, and 1% cash rebate for all other purchases. No annual fee.

Note that I would try to take advantage of the Grocery 3% and Gas 2% cash back categories in order to not miss out on the potential cash back from a 2% cash back card.

Cost/Benefit Analysis
Keep in mind that most checking accounts pay very little, leaving you to try maximizing your savings balance while avoid overdrafts. So you might not max out that savings account rate completely.

  • $10,000 times 2.09% APY would be $209 per year, or $17.40 per month in interest.
  • $10,000 times 3.09% APY would be $309 per year, or $25.75 per month in interest.
  • $10,000 times 4.09% APY would be $409 per year, or $34.08 per month in interest.

An extra $100 to $300 a year in interest sounds pretty good. Note that to qualify for the top two tiers, you’d also have to apply for a new credit card, which would entail a credit check. There is an opportunity cost here, as there are other new credit cards that offer close to $500 in sign-up incentives within a few months. You can apply for multiple new credit cards, but once you reach a certain number it will hurt your chances for getting the next one.

These types of checking accounts are not for everyone. Not only do you have to jump through hoops each month to get a reward (higher interest than no-hassle account), if you don’t you’ll actually get punished in a way (lower interest than a no-hassle account). Try to create a reliable system where you satisfy the requirements early on in the month, for example putting some automatic insurance, phone, or utility bills on the credit card. My favorite feature is their qualification tracking; I wish all rewards checking accounts had this feature. CCU has been running this rewards checking account now for well over 10 years (with several tweaks), so hopefully they have crunched the numbers and set the rates at sustainable levels.

Bottom line. Consumers Credit Union (CCU) has a Free Rewards Checking account that offers a high interest rate if you meet certain requirements. This is a unique account, but CCU has been running it for nearly a decade now. It would work well if you want to one single high-interest checking account and your balance rarely exceeds $10,000.

Filed Under: Banking, Deals & Offers //

FileThis App Review: Automatically Backup Your Online Statements

Posted on December 10, 2015 // 13 Comments

Update 2023: FileThis is shutting down.

Old post:

filethis_applogo

A few months ago on my post about Paperless vs. Paper Statements, I received this helpful comment from reader Daveraham:

I like the services FileThis.com. It’s setup similar to MInt, where it stores account information, but instead of fetching dollar amounts and transactions, it grabs every statement available and stores them where you direct. Personally I store it an evernote account and then periodically pull it off to store on a removable HD that get’s stored in a fireproof box. Overkill?? Sure…. But its the point. You want to keep that snapshot of data for a long period of time.

I made a mental note to check the site out and… promptly forgot. I was again reminded in this Liz Weston article about apps to organize your financial life. In November 2015, FileThis announced their 2.0 version with new features. You can use the FileThis.com website, iOS app, or Android app (1.0 version only for now).

FileThis is now one of many “bill organizers” that ask for your account passwords in order to sift through your accounts and remind you of due dates. Personally, I don’t need or use due date reminders. I sit down at the end of every month, read through all my paper statements, track expenses, and pay my bills. I’m an old fart like that (although I do use free online billpay).

I previously shared that I maintain physical statements for critical financial accounts and have it mailed to a secure PO Box. But I also have several other financial accounts which are either dormant, temporarily opened for reviews or experiments, or have low balances which are set to paperless. Ideally, I would still log in and download those PDF statements every month and back them up. But I never do.

FileThis will log in and automatically download all your paperless statements and then save them to your cloud service of choice: Evernote, Dropbox, Google Drive, Box, Amazon Cloud, and more. You can even use their in-house storage (500 mb free). The cost options:

  • Free for up to six (6) connections. Checks weekly.
  • $2 a month ($20 a year upfront) for up to 12 connections. Checks weekly.
  • $5 a month ($50 a year upfront) for up to 30 connections. Checks daily.

Besides things like bank accounts, credit cards, and brokerage statements, FileThis will grab stuff from your mortgage provider, car loan servicer, cell phone bill, utility bills, insurance bills, and even online shopping accounts like Amazon. An added bonus is that they will even grab tax documents like 1099 forms.

I linked up a few accounts, the list is relatively extensive but it couldn’t find a local credit union. Here are some screenshots from my website and smartphone app.

filethis1

filethis2

Remember that the actual files are on your cloud service. Here’s a screenshot from my Dropbox app. The files are stored in the folder Dropbox > Apps > FileThis.

filethis3

This is pretty cool. The initial download basically grabbed all the older documents that were available as well (up to last 3 years, supposedly). They’ll even grab PDF statements if you also get mailed paper statements (assuming they are available), giving you an additional backup copy.

By allowing backups directly to a third-party cloud service (Dropbox in my case), I will still have all of my online statements even if FileThis shuts down some day (remember Manilla?).

The trade-off here is that another FinTech startup has your account logins and passwords. Their security measures seem fair enough (encrypted SSL transmission, passwords are encrypted on server, the documents can be stored at your cloud service). I already track my paperless accounts in real-time with Mint, but I am willing to make this trade-off as I think it’s worth it to have my old statements backed up for me. (Why can’t Mint do this for me too?) The only other service I know that offers something similar is Finovera, but I think they store the statements on their own servers as opposed to your personal Dropbox.

As an existing user, if you sign up using my referral link, both you and I will receive an additional free connection (so you’d have a total of 7 free to start) and an additional 250 mb of free in-house cloud storage.

Filed Under: Banking, Deals & Offers, Time Management, Tools & Calculators //

Square IPO, Direct Deposit Loans, and Controlling Your Cashflow

Posted on November 23, 2015 // 4 Comments

squaredongleAs you’ve probably heard, the Square IPO was completed last week. For a while, I didn’t understand how a company could have a $4 billion valuation when they basically offer a simplified merchant account. They let small businesses accept credit cards, which means they skim a tiny bit off the 2.75% they charge while most of it goes straight to the networks. (Add in their other expenses, and Square has never made a profit.) Wouldn’t you rather own Visa or American Express directly?

Then I read this Bloomberg Businessweek article How Two Guys Lost God and Found $40 Million (And sold Wall Street on a shady new kind of finance). Although I try my best to avoid carrying any debt, I do try to keep up with the industry. With a normal credit card, you are waiting around for the borrower to pay you back your principal + interest. The borrower gets their paycheck, pays for rent and food and whatever else, and hopefully gets around to pay you some interest. Here’s a cashflow visual:

cashflow_classic

What these guys profiled in Businessweek did is give struggling small businesses a merchant account, and also lend them money. The key difference of their “merchant cash advance” service is that they would take the loan payments (including interest) directly from their gross credit card receipts! They were lending to horrible credit risks at sky-high rates (because nobody else would lend to them), but they knew they’d be fine because were first in line to snatch any incoming money before the business owner could even touch it. Here the modified cashflow visual:

cashflow_square

Hmmm… if Square can pull something like that off on a big scale, maybe they can be worth billions. It turns out that both Square and Paypal do this same sort of lending. They lend to small businesses and taking money out from the incoming transactions. From a WSJ article dated May 2015:

Paypal said it has doled out $500 million in loans in the first year-and-a-half since it introduced the lending program. And rival Square recently said it had extended more than $100 million in cash advances in the year since it started its own version. […] PayPal, like Square, deducts money from merchants’ accounts based on their receipts, so that they aren’t on the hook if business slows.

From another WSJ article dated September 2015:

At both PayPal and Square, payments are taken as a portion of transaction volume, meaning merchants repay more when sales are high and don’t pay on days without sales. That allows for easier repayments, but makes it difficult to calculate an annual interest rate.

Wow. Ingenious or evil genius? It would be like lending to everyday people but being able to intercept their paychecks before they even landed in their bank accounts. You’d get the money before people could even have the chance to default (or pay for food). Some banks already have something called “direct deposit loans” allow them direct access to bank accounts, taking payments almost immediately after your paycheck arrives. It is possible for motivated people to switch off their direct deposit or move banks, but you’re giving the lenders a built-in advantage.

(A problem for Square is that competitor PayPal also does the free credit card swiper thing, but PayPal can avoid paying Visa and Mastercard whenever a user buys something with their existing PayPal balance. They just move some money around internally and pocket the savings.)

So what’s my point? For one, Square may have a growing profit source from these first-in-line loans to small businesses. Second, as a smart consumer, you should be careful to stay in control of your cashflow. I’d never give a lender permission to withdraw money at any time from my bank account. They should have to wait for me to pay them.

Filed Under: Banking, Credit Cards //

Capital One 360 Savings Promo – Earn Up to a $500 Bonus

Posted on November 22, 2015 // 10 Comments

Capital One 360 Savings has a limited-time sign-up bonus for up to $500 for new customers, tiered depending on your opening deposit. Here’s a quick recap of the features of 360 Savings accounts:

  • No monthly fees or minimum balance requirements.
  • No minimum deposit required to open an account.
  • Free electronic fund transfers to a linked checking account.
  • 24/7 online and mobile access, or talk to a real person 7 days a week 8AM-8PM.
  • % APY as of 2/10/16

Bonus instructions.

  1. You must open your first 360 Savings Account by the promotion expiration date, 11/30/2015 at 11:59 PM EST. (If you’ve had a Savings product with Capital One 360 or ING DIRECT before, you won’t be eligible for the bonus.)
  2. To qualify for a bonus, your account must be funded within the first 10 days of account opening. Deposits from an existing Capital One 360 account will not qualify for the bonus.
  3. The amount of your bonus will be determined based on the highest amount you deposit within the first 10 days of account opening and maintaining that balance on a daily basis for the next 90 days following the 10 day period. You must deposit a minimum of $5,000 and maintain a daily balance of $5,000 for 90 days after the initial 10 day period to qualify for any bonus. The amount of the bonus you actually earn will be determined based on the following balance tiers during the initial 10 day period and the 90 day period after that: $5,000+ earns a $50 bonus, $10,000+ earns a $100 bonus; $20,000+ earns a $200 bonus; $30,000+ earns a $300 bonus; $40,000+ earns a $400 bonus; and $50,000+ or more earns a $500 bonus. The maximum bonus you can earn is $500.

Essentially, if you deposit an amount exactly on the tier level, you will earn 1% of your deposit (i.e. $50 on $5,000 or $500 on $50,000) with a minimum holding period of 90 days following the 10-day deposit window. This is in addition to the existing interest rate.

For more details on the account interface and such, please check out my 360 Savings account review.

Disclosure: I will receive a referral if you open an account via one of the links above, as a paid endorsement. To my knowledge, this is also the best publicly-available 360 Savings bonus offer out there. I won’t be participating myself because I’ve had an account (ING Direct) since 2005. Please refer to my full advertising disclosure.

Filed Under: Banking, Deals & Offers //

Ally Bank Savings Account Review

Posted on October 8, 2015 // 50 Comments

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Update. I’ve done a significant amount of my banking with Ally for years (checking, savings, and multiple CDs), but the “gateway drug” for me and probably most people will be their Ally Online Savings Account. You can use this savings account as a companion account to your existing primary checking account (perhaps at Chase, BofA, Wells Fargo, etc), or as a companion to the Ally Interest Checking account.

The Ally Online Savings Account has no minimum balance, no monthly fees, and currently pays 1.45% APY (as of 4/2/18). Their interest rates may not be the absolute highest, but they have consistently been within 0.10% of the temporarily top banks, making it not worthwhile to move my money. (See my rate chaser calculator). Let’s go through the important factors.

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

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

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

Awards. Ally Bank was named “Best Internet Bank” and “Best for Millennials” by Kiplinger’s Personal Finance Magazine in July 2017. Ally Bank was named “Best Online Bank” for the 5th year in a Row by MONEY® Magazine in 2015.

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

Funds Transfers. With no physical branches, online savings accounts should have maximum flexibility as they are often secondary accounts (given most megabank checking accounts pay either no interest or a sad 0.01% APY). Ally Bank allows you to link any other external bank account using the standard routing number and account numbers. As long as you initiate the transfer before 7:30 pm Eastern Time, transfers both in and out are free and can take as little as 1 business day. You can link up to 20 different accounts (it used to be unlimited; but other banks limit to 3 or even just 1). This is about as good as it gets for online banks. Here’s their updated timing chart (see details here):

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

ATM Debit Card. You don’t get a debit card with their Online Savings Account. You can get a debit card with either their Checking or Money Market accounts, but note that those have lower interest rates.

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

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Mobile app. Available for iOS and Android… you can do all the important stuff – see transactions, transfer funds, deposit checks, pay bills. It can remember your username, but you must type in your password every time. I usually just use my Personal Capital app for checking balances. The overall design is acceptable, and the ATM locator is helpful if you have the Ally Checking account with free AllPoint ATMs and $10 in fee rebates each statement cycle for any ATM.

Details

  • Interest Compounding: accrued daily, compounded daily, credited monthly
  • Minimum to open: $0
  • Minimum requirements to avoid monthly service charge: None
  • Number of external bank account links allowed: 20
  • Routing Number: 124003116

Bottom line. The Ally Online Savings Account is a solid offering with with no monthly fees, no minimum balance requirement, and a historically competitive interest rate. Additional features like a flexible funds transfer system and solid 24/7 customer service help differentiate themselves from the competition. It works fine on its own as a “piggyback” or companion account to your existing checking account.

You can also combine it with the Ally Interest Checking Account (my review) which offers ATM fee rebates (up to $10 per statement cycle), free online billpay, and the ability to use the savings account as a free overdraft source. Ally also has certificates of deposit which offer competitive rates at times.

Filed Under: Banking, Reviews //
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