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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.

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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.

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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:

PerkStreet

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

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.

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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.

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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.

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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.

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Sallie Mae Debit Card Is A Helpful Convenience For Students, If Handled Responsibly

The student loan company Sallie Mae is preparing to release a student debit card in partnership with Mastercard. The new program, which will start this summer, allows students to receive financial aid money and tuition refunds in a special checking account.

Sallie Mae Debit Card Features

Perks of the accounts include:

  1. A free checking account (Here is a Sallie Mae savings account review).
  2. More efficient receipt of money. Students can expect to receive a refund the day it is issued rather than the typical two- to three-day bank lag.
  3. FDIC insurance on deposits.
  4. Surcharge-free withdrawals at 35,000 ATMs nationwide.
  5. No minimum account balance.
  6. The card will not allow the user to overdraw.

Saves students money. The new Sallie Mae debit card will save students money in the long run, especially compared to some of the main competitors in the space. With the new accounts, Sallie Mae is challenging Higher One, its main rival in student payments. Higher One runs a similar program but only has 600 fee-free ATMs. It also charges fees for PIN-based transactions.

Faster and safer for financial aid refunds. Sallie Mae’s move comes in time to comply with new rules taking effect in July requiring universities to refund unused financial aid money in 7 days instead of 14. In addition refunds and other transactions can be handled electronically, which is faster and safer than other types of financial transactions.

Added convenience. The cards will be convenient for students and provide an incentive to borrow from Sallie Mae. But with financial aid money in hand, they will need to be extra careful not to spend it carelessly since, for most students, it will need to be paid back with interest eventually.

A great option for students. Overall, this card is a solid option for students, since they will have added convenience, free checking, many fee-free ATM options, FDIC insurance, no minimum account balance, and the inability to overdraw their accounts.

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American Express Getting Into Debit Market

American Express has always been the most mysterious credit card company. Besides the fact that many establishments don’t accept the gold and black card, their presence in the debit market has been non-existent. As the companies first step in the wide world of consumer debit, American Express opened last week a new product called Serve.

The Serve web site is a prepaid electronic wallet, where consumers can access and transfer money through smartphones and computers equipped with Visa Inc., MasterCard Inc., and PayPal Inc. Consumers can go to the website on their phones and download an application for iPhones, iPads and Androids. Blackberry will have access to the technology later this year.

There is no initial cost for opening an account with Serve. Also, deposited funds don’t expire, nor is there a minimum balance required. Refusing to use a debit method attached to checking accounts sets American Express debit cards apart from Bank of America and JPorgan Chase & Co. debit cards which will likely see balance minimums and ATM fees due to the Dodd-Frank Act interchange fee cap.

Serve.com account holders will receive plastic cards linked to their electronic wallets. The Serve logo is on the front of the card, and on the back is a blue box that explains which merchants and consumers that it may be used at. Customers using the card will get one free withdrawal a month from an automated teller machine and be charged $2 for each subsequent withdrawal.

Debit cards are becoming the most common form of payment. According to Bloomberg, global consumer spending and cash transactions on Visa and MasterCard debit cards climbed 20 percent to $3.95 trillion last year. In the U.S., spending on debit cards rose 15 percent in 2010, compared with 6.3 percent for credit cards, according to the Nilson Report, an industry newsletter.

With a recent partnership with the social network FourSquare, American Express has made headway in exploring digital markets. Last year, American Express spent $305 million to buy the Internet-based payment processor Revolution Money, which is the tech foundation for Serve.

There’s no charge for using debit cards or checking accounts to fund a Serve account. Fees for funding accounts with credit cards have been waived for the first six months. After that, AmEx will charge 2.9 percent of the transaction total plus 30 cents, which is competitive with PayPal’s pricing, said Joanna Lambert, an American Express spokeswoman.

Customers can shop online without being required to enter sensitive information, such as a credit-card number and mailing address. They also will be able to send money person- to-person in the U.S. by entering a PIN number and the recipient’s e-mail address. The latter feature will be available worldwide later this year.

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Debit Card Transaction Limits and $5 ATM Fees

Banks are hurting right now and are doing everything in their power to continue minting the kind of money their shareholders expect. Due to changes in legislation, some banks are considering limiting the size of debit card transactions. Chase Bank recently announced they are considering capping debit card transactions at $50 or $100 to protest government regulations which place a cap on interchange fees. The cap will limit interchange fees to $0.12 per transaction, which could cost Chase up to $1 billion in profits each year. They claim it will no longer be profitable for them to continue making these transactions at such a low cost.

Chase has already ended their debit rewards card program, which was a very popular program. Ending it, and potentially limiting debit card transactions to $50 or $100 has the potential to destroy Chase’s banking business, as many customers will look to go to banks with a more generous online banking program.

$5 ATM fees. Chase is trying out $5 ATM transaction fees on a limited basis in Illinois, and $4 ATM fees in Texas. They want to monitor how many people are willing to pay these higher fees, and if they are still profitable, they will be rolled into more markets.

Other banking fees. We’re not picking on Chase, I promise. We are just highlighting them because of how frequently they have been in the news within the last week or so. For example, Chase is also testing out additional fees including a $3 per month debit card fee, and $15 per month fee to have a checking account.

The big problem is that banks are like the airline industry – where one goes, others will follow. It’s not good news for consumers as most banks are only considered with making their shareholders happy. In the end, we suffer, while they make more money.

What can consumers do? The best thing you can do is put your money where your mouth is. If you have a problem with the fees banks are charging, let them know. If the banks continue to charge high fees or won’t waive the fees, then walk away. It’s as simple as that. There are plenty of great banks which would love to have your business. Here is a list of free online checking accounts, which don’t have minimum balance requirements and offer ATM access at thousands of locations. Why keep your money with a bank that will charge you too much money just for the pleasure of doing business with them?

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Essential Treasury Management Services

What is treasury management and why is it important for your business?

Treasury management is a generic term used to describe popular banking products and services for businesses and non-profits.

Treasury management, also known as cash management, allows organizations to easily control cash flow in an efficient and effective manner, while staying up-to-date with financial statements and collections. There are many tools available, and there is not a one-size-fits-all approach. Hopefully, this article be a valuable resource as you research what banking tools are best for your organization. This is by no means an extensive article, and further research should be done before deciding on your banking solutions.

What are the most popular treasury management services?

Direct Deposit of Payroll:

Direct deposit is quickly becoming the norm for medium to large organizations. This service expedites the paycheck distribution while also providing enhanced security. Instead of mailing out checks, the bank or credit union involved will electronically deposit the funds into your employees financial accounts. It is a great time-saver and should be considered by any business with employees.

Positive Pay:

Positive Pay was developed to eliminate check fraud for organizations. Your financial institution will only pay for checks that match your company profile (i.e. check serial numbers and dollar amounts). If a check written in your company name does not match up with the above criteria, then you will be alerted, or the bank will simply refuse the check depending on the type of positive pay in place.

Merchant Services / Credit Card Processing:

If you are a brick and mortar shop or an e-commerce only business, you will likely need merchant services. This service allows you to accept payments from all major credit and debit cards. It also allows your to automate reoccurring billing. Usually financial institutions offering this service will also provide point-of-sale (POS) equipment and a loyalty card program. Make sure that before you choose merchant services provider that you understand all of the fees associated with credit card processing.

Other Treasury Management Tools:

If you are seriously considering banking services for you business, you may also want to research Bill Pay, Remote Deposit, Wire Transfer, Sweep Account Services, Bill Pointe, Business Checking, and Automated Clearing House.

In conclusion, make sure that you do your research before deciding on your business-banking partner, so that you get good rates and state-of-the-art equipment and services. Also, understand that every business has different banking needs. If you are small “Mom and Pop” shop, you might not need half of the services listed above; however, if you are a medium to large corporation, it is probably essential for your organization to have the best of these services because of the security, efficiency, and reporting available.