It’s hard to believe that back in August 2008, I was able to get a 5% APY 12-month CD from Washington Mutual (now Chase). Since it’s almost time, I called today to see if I could designate how I wanted the funds to be disbursed upon maturity. However, I was told that I actually had to wait until the actual maturity date, and then call them within a 7 day grace period. If missed that short window, then it would automatically renew into another CD of the same term, and I’d be subject to early withdrawal penalties. (Up to 6-months of interest, which can mean you get back less than your initial principal.)

After a bit of research, it seems that many of the big banks do this. For example, with Bank of America, for CD account terms that are 7-27 days, there is a 1 calendar day grace period. For CD account terms that are 28 or more days, there is a 7 calendar day grace period. Yes, one calendar day, not business day, so if it’s a Sunday or holiday you still have to contact them? I’ve also read that some banks require you to physically enter a branch or send a snail-mail letter.

On the other hand, other places that I’ve dealt with, like Pentagon Federal Credit Union, allow you to choose how the CD should be treated right when you open it. I can have the CD renew, have the funds transferred to a PenFed checking account, or have it sent to me by check. I can even choose to either reinvest the dividends or have them sent to me monthly. I guess this is another example of credit unions often being more consumer-friendly.

Meanwhile, I guess I’ll just have to set up some Google Calendar alerts to text me repeatedly when this thing matures. The current traditional CD is paying only 0.25% APY, and the online CD is 1.25%.

You can keep up with where I’m putting my cash here.

I saw that Vanguard has a new account called the VanguardAdvantage account. On the surface, it looks great. In addition to having full brokerage features (buy individual stocks, ETFs, options, and even brokered CDs), you also get full checkwriting abilities, ATM access, and online billpay. Since I have most of my retirement assets there, this would be good tool for added convenience and simplicity.

But then I found the catch. You need to have $500,000 invested at Vanguard to even be eligible for the account. Even at $500,000-$999,999 in assets, you have to pay a $30 annual fee for the privilege of getting what is basically a checking account, and you must pay $4.95 per month for Online Billpay service. No ATM refunds either (free at PNC banks only).

Vanguard seems to have an overall policy of grudgingly offering services that their customers ask for, but only if the less-wealthy are willing to pay a premium. I feel like they don’t want to stray from their basic roots of low-cost mutual funds, or maybe they just don’t want the hassle, but their competitors are leaving them behind.

Checking account features. For example, I can get the brokerage + checkwriting combo for free at Fidelity or Schwab, with no minimum balance requirements and ATM rebates. I don’t know about Chuck, but Fidelity has as-good if not better customer service reps than Vanguard.

Commission costs. The Vanguard Brokerage Services (VBS) account still charges $25 for an online trade + a $30 annual fee if you have less than $100,000 invested. Contrast that with 100+ free trades annually at only $25,000 in assets at both Zecco and Wellstrade.

I guess I’ll have to wait until I have a million dollars to get free checking at Vanguard. Doesn’t that just sound odd?

The standard maximum insurance limits for both FDIC and NCUA-insured accounts will remain $250,000 for at least until December 31st, 2013. Previously, it was temporarily increased from $100,000 to $250,000 only until December 31st, 2009. The extension was included as part of the Helping Families Save Their Homes Act, which was signed into law on May 20th. I wish it was made permanent, but I suppose this is better than nothing.

Here is the media release from the NCUA. Here is the FDIC fact sheet outlining the new changes. FDIC is for participating banks, and NCUA is for participating credit unions.

You may actually have more than $250,000 of coverage, depending on how you have titled your accounts and where you hold multiple accounts. Here are the official online calculators:

NCUA Electronic Share Insurance Calculator (ESIC)
FDIC Electronic Deposit Insurance Estimator (EDIE)

On May 29th, the FDIC issued a ruling [PDF] that would limit future interest rates offered by FDIC-insured banks which were deemed “less than well-capitalized”. This was viewed by some as a response to a complaint filed earlier with the FDIC by the American Bankers Association (ABA), a bank lobby group representing all the mega-banks. The ABA said that it was unfair that Ally Bank could offers such high interest rates when its parent GMAC was accepting government assistance.

How weak is weak?
A bank can be classified as “well-capitalized”, “adequately-capitalized”, and different levels of “under-capitalized”. An insured depository institution is “well capitalized” if it “significantly exceeds the required minimum level for each relevant capital measure” set by the FDIC. According to this Bloomberg article, only 3% of banks are not well-capitalized.

Rate cap details
If a bank is not well-capitalized, then it cannot offer interest rates greater than 0.75% higher than the “national rate”, which is just an average of rates paid by all U.S. depository institutions. As of June 1st, these maximum rates would theoretically be:

Not exactly yields I’d whip out my SSN for. I dislike the idea of messing with free markets and competition, but I can see how the FDIC would want to prevent weak banks from offering high yields as a last ditch effort at survival, only to end up needing even more FDIC funds. However, using an average can be misleading as there are plenty of big banks (ABA members *cough*) with piddly yields for no good reason besides they have inertia and can get away with it. Of course some banks will offer yields well above market to attract money. How else do you propose they do it?

Not as bad as you think
This announced stirred up a lot of speculation that a bunch of high-yielding banks like Ally would soon be forced to lower their rates. But we have already seen that only 3% of banks are not well-capitalized, so there will still be 97% of banks competing to get our money. Also, the ruling does not become effective until January 2010, so rates aren’t going to be capped any time soon.

Specifically, the GMAC/Ally Bank CEO Molina has just publicly responded by stating that Ally Bank is definitely well-capitalized, in fact better capitalized than some of the ABA’s members. Ha!

I received a notice that EverBank is making a few changes to some of their more popular accounts as of June 1, 2009. Below is a summary.

FreeNet Checking
The Everbank FreeNet Checking account is their high-yield checking account with ATM rebates. The current promotion is a introductory rate of 1.10% for the first 6 months, and then a tiered yield from 0.70% to 0.86% APY.

• Online Billpay Requirements. The minimum balance required to get optional online billpay for free increases from $1,500 to $5,000. Otherwise, the monthly fee for billpay rises from $4.95 to $8.95. In my opinion, this doesn’t make any sense. Most banks offer billpay for free in order to attract balances. If you pay bills, you gotta have money flowing in, right? However, if you don’t use this service, there is still no monthly fee or minimum balance requirement for just the checking account.
• Automatic ATM Rebates. EverBank will now automatically reimburse up to $6 per calendar month in U.S. ATM fees if you maintain a $5,000 average monthly balance. Before, you had to send in ATM receipts in prepaid envelopes. They continue to not charge any ATM fees on their end, for either domestic or international ATM usage.
• $50 Satisfaction Guarantee. They always had it, but had stopped advertising it for a while. To qualify, first you must be a new customer, open an account, and make 3 bill payments. Then, if you still choose to close your account within 30 days of your 3-month anniversary, they’ll send you a check for $50.00.

Yield Pledge Money Market
The Yield Pledge Money Market account is their high-yield savings account, offering a 6-month bonus rate of 1.10%. The regular rate is currently 0.86% APY. The account “pledges” to stay amongst the top 5% of competitive banks. Sadly, these rates are competitive these days.

• Minimum Balance Requirements. The monthly account fee if you don’t maintain the minimum balance will rise to $8.95 from $4.95. The minimum balance itself will rise to $5,000 from $1,500.

I guess they are trying to clear out the lower balance accounts. These follow changes from Bank of America and WaMu/Chase. You can read my Everbank application review here.

I recently received a pamphlet about the “improvements” that Bank of America is making on several of their checking accounts. But after reading through it, all I see are a bunch of small fee increases.

For example, many people have the MyAccess checking with no minimum balance requirement and no direct deposit requirement. Now, the monthly fee is either $8.95 or you need a direct deposit. And you can now be dinged by the $35 overdraft fee up to 10 times in one day. I guess they aren’t scared of another class action lawsuit. You can see all the pricing changes outlined here.

I guess they need to drum up some more money somehow, and most of the fees are still avoidable. But given that around 27% of their revenue comes from fees, and that there were $36.7 billion of overdraft charges by banks last year, I really think this is another reason banks are pushing their debit cards so much. Not only do they earn transaction fees, it makes it that much more likely that people rack up more overdraft fees. Imagine this: You lose track of your balance once, but make 5 small purchases over two days before realizing. That’ll be $175, please!

Be careful out there… those “free” checking accounts have to be paid for somehow.