CLOSE-UP: WHATS IN THE FINE PRINT?

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Most ordinary checking accounts do not have the kind of contractual fine print associated with the loan agreements.  These are few regulations governing checking accounts, so most of the details of the account are found in promotional brochures, pamphlets, and advertisements.

However, checking accounts with a debt card attached to them often have a page or two of fine print.  Debit cards, also known as bank cards, fall under the regulations contained in the federal Electronic Funds Transfer Act.  Look for several items in your bank-card agreement:

Your Liability for Unauthorized Transfers   
The agreement should outline your liability.  By law, if you inform your bank about a lost or stolen card within two business days of your discovering its loss or theft—not two days from when it was actually lost or stolen—your liability is limited to $50.  (Many banks have 24-hour phone numbers for reporting lost cards, making it even easier for you to meet the two-day deadline.)  If you do not tell the bank within two days, your liability could be as high as $500.  Seguir leyendo CLOSE-UP: WHATS IN THE FINE PRINT?…

CLOSE-UP:SPECIAL SITUATIONS IN CHECKING

While you are scrutinizing a bank, the bank is often doing the same to you.  Banks clearly prefer certain groups to others.  No group can be barred from a bank, but the favored ones can be attracted with such incentives as better services and higher interest rates for higher balances.  The less favored groups can be provided with dis-incentives: high minimum-balance requirements before interest can be earned, and poor-quality service.  Following are the four major groups most bank either love or hate. 

The Wealthy   
As one might expect, people with plenty of money are favorites of a bank—and for good reason.  The wealthy individual has an abundance of what a bank needs—money.  In recent years, banks have moved to provide wealthy customers—often defined as high-balance customers—with so-called priority services.  For checking accounts, that has meant special, shorter teller lines, highly personalized service, and fee waivers.  In some cases, banks will go to extremes in personal service to please a wealthy depositors.  One New York banker helped a customer get a car into and out of the country; another intervened to rescue lost luggage from the clutches of an airline’s bureaucracy. Seguir leyendo CLOSE-UP:SPECIAL SITUATIONS IN CHECKING…

Choosing an Account - Factors to Ignore when opening a bank account..continuation

Miscellaneous Fees  
In the wake of bank deregulation, banks have begun charging for miscellaneous services that once were provided free.  Such fees should not weigh heavily in your choice of bank unless you are likely to incur them or if the fee is for routine and frequent service.  For example, Mellon bank (east) in Philadelphia imposes a $30 penalty for a check returned because of insufficient funds in the account.  Other banks will charge $25 if you deposit someone else’s check to your account and it is returned.  Stop-payment charges can be huge, too.

Bankers claim that such large fees are necessary because of the expense of returning a check.  However, according to Federal Reserve estimates, the real cost of returning a check is only about 12 to 25 cents.  Thus, a $20 returned-check fine amounts to at least a 5,600 percent profit for the bank.  Seguir leyendo Choosing an Account - Factors to Ignore when opening a bank account..continuation…

Choosing an Account - Factors to Ignore when opening a bank account

Factors to Ignore

It is almost as important to recognize what factors are not worth considering as it is to know what factors are more important.

Gifts and Advertising Campaigns
Some of the less important distractions are obvious:  You should never open an account at a particular bank just because it offers free toasters, electric blankets, or other gifts as an enticement.  You shouldn’t choose a bank based on its advertisements.  Sometimes the ad will be overstated or will omit important details.

One large New York bank, admired in banking circles for its marketing ingenuity, ran an ad campaign focusing on providing instant cash for any deposited check.  What the ad copy failed to mention was that a depositor had to have other deposits at the bank – perhaps a savings account—to be able to get instant cash for a deposited check.  A hold is placed on those other funds, and they cannot be withdrawn until the check they’re covering actually does clear. Seguir leyendo Choosing an Account - Factors to Ignore when opening a bank account…

Choosing an Account - Automated Teller Machines/debit Cards

Automated Teller Machines/debit Cards   

ATMS have both positive and negative attributes.  On the one hand, they offer a major convenience in the form of numerous locations (there are an estimated 68,000 ATMs nationwide) and 24-hour access to funds.  They also speed up routine banking transactions.  ATMs can frequently be used to get cash advances from your Visa or MasterCard accounts.  And with the rapid expansions of regional and national ATM networks, which allow a checking account holder of one bank to make withdrawals through the ATMs of another bank, more and more people now have access to hundreds or even thousands of these machines, depending on the network of which their bank is part.

But keep in mind that the machines limit your access to personal service.  Thus, it is again most important that you assess whether a bank places its emphasis on efficient ATMs or on people.

Another potential negative is that ATM’s and the estimated 152 million debit cards Americans use to work these machines are laying the groundwork for a society of paperless financial transactions.  Since 1981, some 200 banks, S&Ls, and credit unions in Lowa have been experimenting with so-called point of sale (POS) transactions.  Other banks around the nation – among them, Florida’s Barnett Banks and Bank of America in California—have also been exploring the POS business.  In a POS transaction, you present a store with your debit card when you make a purchase.  The card is run through a card-reader, you punch in your personal identification number, and funds are instantly transferred out of your account and into the stores account. Seguir leyendo Choosing an Account - Automated Teller Machines/debit Cards…

Choosing an Account - Federal Insurance,Check-Clearing Policies and Tie Ins

This is a continuation of the series regarding choosing a Checking Account. See previous article here.

Federal Insurance   

Bank only at commercial banks insured by the Federal Deposit Insurance Corporation (FDIC) and at Savings & Loan Insurance Corporation (FSLIC).  Federal insurance protects each person’s total deposits at the same bank up to $100,000 (see p. 32).

Check-Clearing Policies 
Once a major issue, the unrestricted length of the time that banks could deny you access to funds from a deposited check has been curtailed legislation passed in 1987. 

When you deposit a check, the bank has only a piece of paper until it collects the cash electronically or otherwise from the bank on which the deposited check is written.  This process usually takes about a day for local checks and rarely more than two or three days for out-of-state checks.  But banks have typically made customers wait much longer before giving them access to the ready-collected funds. Seguir leyendo Choosing an Account - Federal Insurance,Check-Clearing Policies and Tie Ins…

Choosing an Account - Interest Paid and Convenience

Last entry we discussed the factors to consider when choosing an account. We’ve already discussed about Pricing and Actual Cost and several fee structures banks applied. Today we’re going to discuss about factors concerning Interest Paid and convenience.

Interest Paid
To complicate matters, many checking accounts also pay interest.  So your final cost maintaining the account becomes a matter of subtracting fees and charges, then adding back any interest earned.

Many accounts now offer interest rates that may changes periodically in relation to rates n the money markets.  If interest rates in general rise, interest bearing checking account rates may rise.  If rates fall, interest-bearing checking account rates will likely fall.

Bank advertisements almost always claim that their Super NOW accounts pay “market rates”.  Actually, while Super NOW rates bear a relationship to market rates, typically they are below the real market rate.  For example, in summer 1988, Super NOW accounts were paying an average of 5.77 percent interest (before monthly fees, and subject to minimum-balance requirements).  At the same time, the average money market fund yield—which is the true yardstick of “market rates”—was 6.93 percent. Seguir leyendo Choosing an Account - Interest Paid and Convenience…

CHOOSING AN ACCOUNT

In trying to determine which checking account is best for your needs and income, several factors warrant close evaluation.  The relative importance of each will vary depending on your own financial needs and practices. This is a continuation of the series regarding managing your money in banks. If you haven’t read the previous entry, you can click here.

Factors to Consider

Pricing and Your Actual Cost
The monthly charge on your account is one of the most important dollars-and-cents aspects of checking.  Unfortunately, it is also one of the most complicated.

In the not-too-distant past, if u kept only a couple of hundred dollars in your checking account, the bank gave you free checking in exchange for the lending power you gave it.  Today, however, some banks require balances of $1,000, $5,000 or more before they waive checking fees. Seguir leyendo CHOOSING AN ACCOUNT…

KINDS OF CHECKING ACCOUNTS

During the last 10 chaotic years of consumer banking, depositors may have been overwhelmed by the many options available. But it is important to understand that all checking accounts boil down to two basic types: non interest-bearing accounts and interest-bearing accounts.

Non-interest-Bearing Accounts

Also known as regular checking, noninterest-bearing accounts pay customers no interest on the amounts kept on deposit. You simply pay the banker to provide the checking services you need.
Because of various pricing methods, regular checking accounts are typically—but by no means always—cheapest for those who tend to keep modest balances ($100 to $500 daily) or who write a relatively small number of checks per month. According to various studies, however, statistically the average person writes 21 checks per month.

Interest-Bearing Accounts

As the name implies, interest-bearing accounts pay the depositor interest on balances kept in the account according to a number of balance-calculation methods. “NOW accounts” and “Super NOW accounts” are the generic names of interest-bearing accounts, but each bank often uses its own “brand” name – such as “Market-Rate Account,” High – Interest Checking,” or simply “ Checking with Interest.” Seguir leyendo KINDS OF CHECKING ACCOUNTS…

CHECKING ACCOUNTS: THE WORKHORSE OF PERSONAL FINANCE

Almost no one enters the world of personal finance without first passing through the portals of a bank to open a checking account. Like money, checking accounts are one of the necessities of financial life; they have been so since the end of the World War II. Today, according to Federal Reserve estimates, some 40 billion checks are written annually to transfer more than $30 trillion in salary payments, tax refunds, utility bills, credit card payments, grocery bills, and other transactions.

Until the mid-1970’s, checking accounts were relatively simple.
They all did the same thing: transferred money from one party to another. And regular checking accounts were inexpensive. When Consumer Reports surveyed 35 bank checking accounts in 1975, it found that monthly maintenance fees ranged from 25 cents to 75 cents. Pre-check charges, which may or may not have been imposed along with the above-mentioned monthly fees ( depending on the bank), commonly ran from 10 cents to 15 cents. According to a 1973 American Bankers Association study, an estimated 13 percent of all U.S. banks offered totally free checking with no minimum balance requirements. Seguir leyendo CHECKING ACCOUNTS: THE WORKHORSE OF PERSONAL FINANCE…