Limit Six Savings Account Withdrawals Per Month

Many people may not be aware of it, but the Federal Reserve limits the number of transfers and withdrawals you can make from your savings accounts to a total of 6 per calendar month or statement cycle. (A statement cycle is equivalent to one month for most institutions.)

This regulation has been around for a while, but many people still get tripped up by it, probably because it is not talked about often. With more and more people looking to online savings accounts to earn higher interest rates, this is an important rule to be aware of.

Here’s what types of withdrawals are limited on certain accounts.

Savings account transactions that are limited

This savings account withdrawal limitation only applies to certain withdrawals and transfers:

  • Online transfers from savings account to a linked non-loan account (checking, CD, etc.)
  • Outgoing online transfers or payments to third party accounts via wire transfer or ACH
  • Transfers or payments made via telephone or fax
  • Pre-authorized deductions by a third party
  • Checks written from a money market account
  • Transfers for overdraft protection
  • In addition no more than three of the 6 transactions may be made by check, draft, debit card, or similar order and payable to a third party

Savings account transactions that are NOT limited

Good news – these types of transactions are not limited:

  • In person transfer and withdrawal requests
  • ATM transactions
  • Transactions made via mail
  • Transactions to make a payment on a loan account at the same institution

Why does the Federal Reserve limit transactions?

It all has to do with how much money the banks can lend. Savings accounts are classified by the Federal Reserve as a “saving deposit.” The reserve requirement for savings accounts is 0%, which means banks don’t have to hold back any of the money you place in savings with them. They can lend out the exact amount you put in.

Other accounts that are labeled as “transaction accounts,” such as checking accounts, have a reserve requirement of 10%, meaning the banks must keep 10% of the balance on hand and cannot loan that money out. The reason for the difference is the assumption that you will be withdrawing money more often from transaction accounts than from saving deposits.

Be careful when using online savings accounts!

Since most high yield savings accounts are only online, you might need to plan your transactions carefully so you don’t go over the withdrawal limit. I usually keep a local bank handy for paying bills and keep use one of the best online savings accounts strictly for the high interest rates.


High Yield Savings Accounts: What You Need to Know

High yield savings accounts are designed to pay higher interest than other types of accounts. Researching current interest rates and your options is a simple way to learn more about choosing the accounts that offer the most returns. You will want to make sure that your account is FDIC insured before applying for the account.

Insured Accounts

In the world of online banking, there are a wide range of financial institutions to choose from in both your local area and around the world. A bank or financial institution that is FDIC insured is a must, however. FDIC insured accounts are beneficial because if the bank goes bankrupt, get robbed, or had any other problem your money is protected. When choosing online banks, take the time to verify the authenticity of the institution to avoid choosing the wrong bank.

You will also find that higher yield savings accounts have slightly more risk than other types of accounts, but are generally a safe investment that you can depend on. For instance, a money market account pays out slightly more than a traditional savings account but is also riskier than simply opening a savings account. The benefit of seeing more returns is one that makes the slight risk worthwhile.

Fees and Other Fine Print

When opening high yield savings accounts, it is vital to check the fine print of your contract. Some fees, such as ATM fees, will be listed on your contract. You may also have a minimum balance in order to get the highest interest rates on your investments. For high yield accounts, the balance can range from $100 to $5,000 or more depending on the interest rates you want and the bank that you choose.

Some banks offer high yield savings accounts to existing customers without some of the fees that apply to new customers. For instance, you may get free online bill pay for a period of time or you may be able to make free withdrawals from your bank as an existing customer.

The Compounding Period

High yield savings accounts can earn more money during a shorter period of time, called the compounding period. Make sure that you won’t suffer any penalties if you don’t use the account, as well. Choosing one account for your investments is a good idea, and ensures you are aware of the movement in the account. Aim for a quarterly compounding period that accrues interest every three months, and pay close attention to the account and the fine print to ensure you are seeing the maximum amount of returns.

Annual compounding periods aren’t ideal, and typically aren’t available. Some banks provide interest on the account balance on a monthly basis rather and quarterly. Take the time to research your options carefully to ensure you have the best interest rates possible when opening a high yield savings account.


How Accepting Credit Cards Can Increase Customer Base

The day of unaffordable credit card processing is over.  In the past small businesses often found that a merchant services provider was too costly for their business to contract, due to their fees.  These fees ranged from a minimum monthly processing fee, a service fee for every swipe, and monthly rental fees.  This pushed many start-up and small businesses to hold cash only establishments.  With the emergence of e-commerce, an industry that allows consumers to shop from the comfort of their homes and pay by simply entering their credit card information into a secure server, these traditional brick-and-mortar businesses have no choice but to start accepting credit cards.  In fact during the beginning stages of the economic turmoil, the e-commerce industry posted a gain of 10.8 percent in 2009.

Although these numbers may cause one to draw the conclusion that e-commerce is going to overtake the traditional brick-and-mortar businesses, it’s wrong. Even with a 10.8 percent gain in 2009, a whopping 92 plus percent of retail transactions are still completed offline.  Americans still prefer shopping in person where they can physically see the items that are being purchased and monitor the processing of their credit/debit cards to ensure no fraud is taking place.  Many Americans still do not trust putting personal information on the internet even if the site is proven secure.

Shopping In Person

It is a proven fact that online sellers can offer a lower price to consumers and that they are more effective.  But this leads us to question why they only hold roughly 8 percent of retail sales.  If we American consumers are as shrewd as some say, wouldn’t we always be looking to the internet for better deals?  Especially with sites like Amazon and Overstock offering us basically anything we could ever want for a discounted price you would imagine that e-commerce would account for more than 8 percent of retail sales.  After all an over whelming amount of Americans (about 80 percent) have access to the internet on a daily basis.  The answer is simple: Americans are not consumers, they are shoppers.  What’s the difference one might ask?  A consumer purchases a service or a good because he/she needs it.  Yes, a shopper does do the same but there is a major difference.  The shopper enjoys the activity.  They get pleasure of going shopping, trying on new clothes, and conversing with salesmen.  To many Americans shopping is a hobby.  This claim has been backed by poll after polls.  Americans enjoy shopping, and would prefer to physically do the shopping to ensure everything is the correct; whether that is the fit of an article of clothing or the use for a good.  Who likes ordering a shirt online, waiting 5-7 business days for deliver only to find out the fit is wrong and it needs to be sent back for an exchange?  In instances like this it may take up to two weeks before you can actually wear the shirt you purchased.  Compare this to physically shopping in which one ensures the fit is right before purchasing and has the opportunity to wear it on the same day.

Credit and Debit Cards

Few modern businesses can survive off of a cash only check out policy.  Sure every neighborhood has those ma and pa nooks that have been around since what seems like the stone ages that are cash only, but they are already established and the customers going there already know that plastic is not an acceptable form of payment.  This is not the same when it comes to shopping.  Customers expect stores to cater to their wants and needs and in the end, want a pleasurable shopping experience.  If their experience is not pleasurable they will go elsewhere.

So why do some stores refuse to accept credit and debit cards?  In order to be able to process electronic transactions, a merchant service account must be obtained. These accounts are offered by banks and other authorized financial institutions, and they charge fees for each swipe of the card.  After the customers’ card is swiped the merchant service provider will either approve or deny the transaction.  When it is approved the provider will send an electronic bill to the cardholders company.  Once the necessary funds have been remitted the provider will transfer them into the merchants account with a fee deducted from the total deposit.  This process can take a few days.

Why are they Necessary?

If you want to see your small business grow, or your startup businesses succeed it is extremely necessary to accept plastic as a form of payment.  Six out of ten purchases are paid for with a credit or debit card.  Cash accounts for less than thirty percent of retail transactions, and that number has been steadily dwindling for the latter part of sixty years.


The main reason companies and businesses remain cash-only is they do not understand the fees associated with these accounts. Yes it is true that when a customer pays with plastic the merchant will receive less than if that customer paid with cash.  This is just an unavoidable part of this industry.  Providers charge transaction fees and discount rates on every single purchase.

However, when these payments are being made in person, the merchant is charged with lower servicing fees.  This is because the threat of fraud is at its lowest when a payment is made with a credit/debit card in person.  By simply choosing to accept credit cards a business’ customer bases grows as you provide more options of payment and create a more enjoyable shopping experience for all customers.


ING Direct Sale: Who Will Fill the Void?

I’ve been a satisfied customer of ING Direct for nine years, so imagine my dismay to learn that this arm belonging to ING Group of the Netherlands will be sold off soon. If you are not familiar with ING Direct, I’ll explain. An easy-to-navigate online bank, ING offers high-yield on savings and checking accounts along with investments and mortgages. Unfortunately, ING Group was one of the banks to receive a government bailout. The Dutch government gave the bank €10 billion (roughly $14.9 billion), which it must pay back. To do this, ING plans to have its U.S. company, ING Direct, sold by 2013.

Who will replace ING Direct?
Who will replace ING Direct?

Several banks have bid on ING Direct, but no deals are in place yet. The most noteworthy player in the game right now is Ally Bank, owned by GMAC. Frankly, I don’t trust Ally because of its parent company. It seems impossible that such a bank could keep ING Direct running with the same set of customer and corporate values. It seems I’m not the only one concerned either. Financial bloggers everywhere are raising eyebrows and wondering where they will put their money if ING falls into the hands of this undesirable competitor.

In a perfect world, Motley Fool would buy ING Direct and run it with sound financial values, but that’s not going to happen. Some may choose to stay with ING Direct because Ally already offers similar banking products, making it less likely that the account structures will change. The rest of us are looking at other options, but few make the grade. Here are the options I’m considering:


As an existing PerkStreet Financial customer and frequent guest writer on their blog, placing my savings at PerkStreet may be the best option. This is really a checking account, not savings, but I see no difference so long as I earn the cash. Balances over $5,000 receive 2% back on all non-pin purchases with the PerkStreet debit card. Everyone else gets 1% back. Special deals come up every month where you can get 5% off from selected retailers. Although I have yet to take advantage of the 5% cash back offers, I have been satisfied with the 1% earnings. Transferring my savings from ING Direct would add another 1% cash back to the account, yielding me an additional $600 a year for my trouble. No savings account can touch that return.

Smarty Pig

Another big contender, Smarty Pig, is an online savings account that currently pays 1.35% Annual Percentage Yield (APY). As far as I know, that’s the highest savings yield currently available. In addition, when you make non-pin purchases from selected retailers, you get 10% back on your spending. The social savings aspect of the bank allows family and friends to contribute to your account. Although the 10% on purchases is tempting, it only applies at retailers that have partnered with SmartyPig.


Ally Bank competes well against ING Direct, with a comparable 1% APY. This is the least likely option for me, given my distrust of the company. However, I like to keep an open mind and am willing to consider Ally if it turns out to be the best option. Checking accounts also earn interest, but at only .9%. So far, the bank has created some highly competitive banking products that should appeal to ING Direct customers, if they can get over the difficulty many have in trusting a bank spawned from the notoriously unfriendly GMAC.


One Year Later, Debit Cardholders Still Confused About Overdraft Protection Fees

The Federal Reserve’s implementation of new policies last summer has essentially backfired. It was intended to protect debit card users from unexpected overdraft fees and clarify bank policies. Instead, it seems to be helping banks rake in the money by signing account-holders up for overdraft protection plans. Plus, according to a new study by the Center for Responsible Living, the majority of debit-card holders are still confused about what exactly they’re agreeing to.

The New Rules

The Federal Reserve implemented new policies last year to clarify and protect debit-card users against overdraft fees. With these new rules, banks are required to have account-holders agree to their terms before they can go into effect. Basically, an account-holder either decides to opt in or opt out of a protection plan. By opting into a protection plan, you are guaranteed to pay more in fees and maybe even accumulate a little debt. Who knew that was possible with a debit card?

The new policy is relevant to point-of-sale transactions which are approved by the bank when there are insufficient funds in the person’s account to cover the purchase. Before this new rule, the bank would approve the purchase rather than declining it, costing the average account-holder $35 in overdraft fees. According to Time, 80% of debit cardholders said they would rather their card be declined in this instance to avoid fees.

Isn’t the whole point of a debit card to only spend what you have?

Same Old Confusion

A study recently released by the Center for Responsible Lending found that 33% of cardholders opted for overdraft protection fees. The Center also found that 60% of these account-holders did so in order to avoid fees in the event their debit card was declined, meaning they do not want their debit card to be approved when there are insufficient funds in their account. The study also found that for nearly half of the participants who opted in, getting the bank to quit advertising the overdraft protection through email and other methods was a factor in their decision. Despite the questionable behavior of the banks, consumers still seem to be confused about debit card policies. These overdraft protection plans are only bringing in more revenue for banks, which are set to make $38.5 billion this year, up from $36.5 billion last year.

Debit cardholders who opt into this service which allows them to use their debit card when it would otherwise be declined, are probably better suited for a credit card. With so many credit card offers currently featuring low interest rates and no annual fees, a cardholder could save money on fees even with an outstanding balance rather than continually paying overdraft fees on his/her debit card.


Dormant Bank Account Fund Approved

What happens to money left unclaimed in bank accounts that people have forgotten about? In some cases, the account holder will remember (or be reminded) that it’s there, but in others, that simply doesn’t happen. In the United States, each state runs a missing money program where unclaimed funds go. Each state is required to keep the money or other valuable property in an individual’s name until it can be claimed. If it isn’t claimed after a certain point, it can be used by the states.

But things are different in the UK. In cases when there is unclaimed money it could be put to use helping good causes – and that’s exactly what’s happening, thanks to a new initiative involving a major financial group of businesses…

The Co-operative Financial Services will run the fund that collects money from dormant bank accounts to use in the Big Lottery Fund, after receiving authorization from the Financial Services Authority (FSA), which regulates providers of financial services in the country.

As reported on Think Money, the new fund will be known as Reclaim Fund Ltd, and will be run on a purely non-profit basis. As such, it will operate independently from the rest of The Co-operative Financial services, with its own Executive and its own Board.

It’s part of government plans in which all money held in bank accounts that have been untouched for 15 years or more will be put towards charitable causes. However, some of this money will be held back by Reclaim Fund Ltd, just in case account holders do realize they have a dormant account and want to claim their money back.

It is thought that the Reclaim Fund will receive a total of £400 million or so from dormant bank accounts, with the first distribution to the Big Lottery Fund in the region of £60-100 million, transferred in phases over the next 12 months.

In England, some of the money will be used to fund the ‘Big Society Bank’, which according to the Financial Times will lend money to businesses whose goals will produce “a social benefit”.

It’s good to see the UK government doing good things with the money – and it’s something the US might want to consider in the future.

saving money

How to Establish a Savings Account for College

The cost of college is slowly creeping higher as the return in pay for a college graduate slowly declines. The average college student will make significantly less than the average college student made as little as ten years ago. This is mostly due to a struggling economy so beginning a college savings account for your child or children can be extremely helpful to their future.

There are different types of savings accounts

Saving for college is essential to avoid taking out large student loans. The type of savings account that will best fit your lifestyle and income varies so there are a few options out there to establish a savings account for college. The most commonly used option, and the only one available across the United States is the 529 Plan. Option number 2 is a savings account through a private bank or college fund company. One of the newest options are called Loyalty programs like Upromise and BabyMint. One other choice is a minors trust fund.

How to make the best choice for your family

Research states that the 529 Plan is the best option for almost any family situation. The money is saved through your state treasury, is tax free until the year funds are withdrawn, and also remains in complete control of the parent(s) who funds the account rather than going into the hands of a not as responsible college student. A private savings account can effect the expected family contribution when your child applies for financial aid.

Loyalty programs are typically created by business or credit card companies to help you build a savings account. Kroger works with Upromise, and every time you buy groceries and use your Kroger Plus card they contribute a small percentage of the cost of certain items to an account. This is basically a hassle free way to help you save up for your child’s future and can be used in tandem with any of the other accounts.

Making tough decisions

If you are having difficulty choosing the correct savings account for your needs, contact a financial planner who specializes in future and family planning accounts to discuss your options thoroughly. You may decide to take a completely different route than the ones discussed above but most generally they will suggest one of those options. After you have made a decision, take your time thoroughly setting up an account with a specialist. Contact your state for a 529 Plan, research banks and private companies for the best interest rates for a private account, or set up an account online to manage Upromise or BabyMint.


Bank Accounts 101: Which One is Best for You?

In this day and age, pretty much everyone over the age of 18 should have some type of bank account. Bank accounts are essential if you want to get direct deposit from your job or if you want to pay for your everyday purchases with a debit card. However, with so many different types of accounts out there to choose from, it can be confusing to know which type is best for you. Here is a brief overview of the different types of accounts available and the basic features of each one.

Savings Accounts

Savings accounts provide an incentive for customers to save money. Savings accounts with banks and credit unions will usually come with an interest rate that is higher than a traditional checking account, but lower than CDs or money market accounts. Savings accounts will allow you to make deposits and withdrawals, but there is usually a cap on the amount that you can make in a monthly period. Some banks will even charge you a fee if the balance on your account falls below a specified minimum amount. You should not use your savings account to pay for your everyday expenses. This is what your checking account is for. Most banks will let you open a savings account for free, so customers can easily open both a savings and a checking account.

Checking Accounts

A checking account is the most basic type of bank account. You will usually get checks and a debit card for free when you open an account. You will use these items to pay for your everyday expenses. Most people will also set up direct deposit with their employer so that their pay check will automatically be credited to their account. Because you will have a lot of money going in and out of your account on a monthly basis, you will want to choose a bank or credit union that does not place any stipulations on this.

Money Market Accounts

A money market account is an interest-bearing account that invests your money in short-term debt including CDs, Treasury Bills and commercial paper. Money market accounts usually offer rates that are higher than other types of accounts, providing you with more money-making potential. However, these accounts usually require you to deposit a large amount of money initially to even open an account. Additionally, these accounts do not typically come with debit cards or checks and some banks will charge a service fee if your account balance falls below a specified minimum.

Certificate of Deposits (CDs)

CDs are also known as ‘time deposits’ because you have to agree to keep your initial deposit in the account for a specific amount of time. For this amount of time, typically lasting from three months to several years, the money will be virtually inaccessible. Because of the stringent terms of this type of account, the rewards are greater and you will be paid a much higher rate of interest. If you do end up taking take the money out for any reason, you will usually be charged a substantial early withdrawal fee. Therefore, do not open up this type of account if you expect that you will need the money before the maturity date.


Five Reasons to Use a Credit Union Instead of a Bank

As the economy continues to suffer and big name banks continue to take flak for unscrupulous practices, credit unions have begun to grow. Many people fail to realize the advantages a small credit union has to offer because they cannot see past the blaring marketing plans of big name banks. The major difference between credit unions and banks is that big banks are businesses. Commercial banks have one intention: to make more money from their customers (you). Big name banks often have very low interest rates, loan rates are competitive, and they are always trying to sell you things. On the other hand, credit unions exist to help their members. The following are five reasons why credit unions are your best banking option today:

1. Member Owned: This means that every person with an account at a credit union is a partial owner of that credit union. While wealthy shareholders typically own major banks, you don’t have to be a wealthy shareholder to have some say in the business procedures of a credit union. The minute that you open a credit union account, you own a portion of the credit union. You will get to vote on who you want to serve on the Board of Directors and therefore help guide the direction of your credit union. You are able to provide personal input into what financial services you are interested in having through the credit union.

2. Non-Profit: As mentioned before, big name banks are businesses. They run off of the profit they make from their customers. Because credit unions do not exist to make a profit, they often offer better services at lower costs. They are community oriented and tax-exempt. A credit union is not going to try to sell you something or dupe you into a service that you don’t want or need just to make some money. They are more customer-oriented because their customers are also their members.

3. Better Interest Rates and Loans: Credit unions offer higher interest rates on your savings, money market and CD deposits than typical banks do. They tend to also offer lower interest rates on your mortgage, auto loans, and credit cards. This is possible because of the way the non-profit aspect of a credit union works. The credit union makes profit and then returns the profits back to its member in the form of better interest rates.

4. Lower Penalties on Overdrafts: One of the most aggravating aspects of a big bank is their overdraft charges. Most everyone is going to have an overdraft or two at some point in their life. And most banks are going to take advantage of those times when we lose track of our balances or run out of cash. Big banks tend to charge outrageous fees even for the slightest overcharge. Because credit unions are smaller and more member-oriented they are typically more willing to work with individuals who are having financial difficulties. Many credit unions will not even charge for overdrafts and instead send you a notification and try to solve things with you.

5. Better ATM Access: It is a common misconception that credit unions have highly limited access to ATMs. Although credit unions are typically small, many allow you to access ATMs of other credit unions for no additional fees. So, while they will likely not have as many ATMs nationwide as some of the big national banks, they do offer fairly thorough ATM access, often through an ATM network.


What Should You Keep in Your Safety Deposit Box?

Safety Deposit Boxes at your bank are important for keeping items that are difficult to replace. These are private, so not even the bank knows what is in them. Keeping items in a fire-proof safe in the house is not as good protection from theft, fire and flood. Many are only fire-proof up to a certain temperature.

Write down the date you open your safety deposit box and where it is located, in case you forget. Write down the contents of your safety deposit box and store in a file in case you are looking for a certain document. “Did I put the birth certificate in my safety deposit box or is it somewhere else?”

You usually get the best deal on a safety deposit box with your current bank or credit union. The usual cost per year is $30 to $75.

What should you keep in your safety deposit box?

  • Birth certificates
  • Marriage certificates
  • Social security cards
  • Adoption records
  • Death certificates
  • Divorce records
  • Child custody documents
  • Military records
  • Deeds
  • Titles
  • Mortgages
  • Leases
  • Stocks
  • Bonds
  • Certificates of Deposit
  • Insurance policies
  • Expensive jewels
  • Medals
  • Rare stamps
  • Collectibles
  • Photos – and back ups of digital photos on CDs or DVDs, photo negatives
  • Videos
  • Video and pictures of house with its contents for insurance purposes
  • Copies of your driver’s license
  • Copies of the contents of your wallet (front and back of cards) in case your wallet is stolen
  • List of your credit card numbers
  • Account numbers account numbers, balances, online banking ID’s & passwords. Deposit accounts, PayPal, eBay, ClickBank and anything else a family member would need to know in case they had to take over the finances.
  • Copy of your will (not the original)
  • Current credit reports
  • Hard to replace items

Put these in air tight containers or zip locks to help prevent any damage in case something happens to the bank. Their vaults are highly resistant but not 100% guaranteed.

What not to keep in a safety deposit box

Safety deposit boxes are available only during bank hours so emergency items are not a good idea to store.

  • Passport
  • Power of Attorney
  • Medical directives
  • Funeral Instructions
  • Cemetery deeds
  • Estate documents
  • Will

Some states allow co-renters or family members to get wills out of safety deposit boxes. But other states require a court order, so check your state before putting your will in a safety deposit box. You can also get a co-renter for emergencies who will have access to your box. Or you can get an agent in the presence of the bank who will have access. Many times power of attorney does not give access to safety deposit boxes.

Law enforcement can obtain a court order if they suspect something illegal in your box. The IRS can also freeze your assets (Including your safety deposit box) in disputes.

See if your insurance will cover Safety Deposit boxes because the FDIC does not cover loss of these.

Make sure you know where your most important documents and valuables are.