Great Time To Open A Checking Account

Right now it is a good time to open a new checking account. If you are looking to switch banks, do it now! However, when considering a new bank; you must first do your research. Many banks are offering great deals on checking accounts that are FREE and give you great benefits and rewards.

Now days, you should never pay maintenance fees for having a checking account, unless your CHEX System status prohibits you from qualifying for standard products (read post : Does You Name Appear on Chex System).

Look for free checking accounts that give you major benefits like free atm withdrawals, points for your debit card purchases, on line bill pay with free bank to bank transfers, free savings account, discounts on loans, better rates on cd's. The customers with the checking accounts get better deals. Also, check that your account is free of restrictions, like direct deposit and minimum balances and minimum amount of transactions per month.

Look for cash incentives too, banks offer cash bonuses for opening and activating your checking account. Do not open a checking solely for the purpose of getting a reward or a better rate, if you open a checking account under these circumstances than do not expect to be considered a valuable customer. Banks measure their client's value by the way their checking account is maintained. The checking account is the core of a banking relationship.

As always, feel free to post your comments about your bank, we can learn a lot from each other!

High Class Jobs, Low Class Thieves

Yesterday, I read an interesting yet troubling article on compensation that is given to retired CEO's from major financial institutions. Perks that are rewarded to these guys that no longer work for the company but make you think…. why? In many instances these retired CEO’s who are heavily compensated when leaving the company are given office space and a secretary or assistant and their former employers pay for all of it. Perks like a company car with a driver and use of the company jet, these perks are given as part of their contracts and usually for several years after they leave the actual job. The tens of millions of dollars that they make in a year are not enough for them to pay their own transportation and office space. These perks can cost the banks hundreds of thousands per year and yes in the grand scheme of things it’s a drop in the bucket. However, the institutions that are doing this are the ones crying for bailout funds! I don’t get it; can someone explain this to me?

There's no point in getting specific with names because they are not ones that you haven't heard before. It is just alarming how money is thrown to these fat cats that are not worthy. It's this same mentality that has brought this economy down. The feeling that they are untouchable and indestructible, so arrogant! The stories you hear in the news these days it just makes you wonder.........What happened to common sense?

It makes me sick to think about it and I’m sure that you are sick of hearing about it but we have a reason to voice our opinions because everyone has been affected by the greed that is displayed in Wall Street. Whether it’s losing a job, your business slowing down, your investments and 401k dwindling, increase in the cost of living, everyone has been affected.

My advice to you, find a bank that is sound, study your bank’s financial stability and its so-called leaders. Are they spending lavishly at your expense? Why should they deserve to have your business? Think about it.

Bankers, how much do you appreciate your customers?

Here is an old concept that may have been lost in this modern era of fast paced lifestyles and business relationships, the concept of thanking a customer. How often do we thank our clients for their business? How often do we call them as a courtesy to see how they are doing? I believe that now more than ever it is crucial that we practice such behaviors. The banking business is in deep trouble and we can't wait for the government to bail everyone out, we need to take self initiated steps to improve our banks. It all starts with you, the retail banker.

Obtaining new business is always in high demand, especially with so many banks competing for the same clients. There are so many ways to reach a prospective customer, however, maintaining those clients that you already have is just as important. Value your customers and let them know that their business is welcomed and that you are grateful for the opportunity to service them. The customers is what keeps us working and keeps banks in business. 

Customers should feel welcomed when they enter a place of business and should be acknowledged almost instantaneously, they should be addressed by their names, they should know your name, they should be thanked as they leave the branch. These are a few steps that will aide the retention of your clients. Try it and you will see the difference in your customers. 

Unavailable Funds vs. Non Sufficient Funds

Do you know the differences between these two?

Many times customers do not realize that checks can be paid on funds that have not been made available yet by the bank. When checks are paid against uncollected funds or unavailable funds, you will pay a fee. Ok so what if you have overdraft protection? Overdraft protection will not work in this case because you have the funds in your account, it's just that they are not available for withdrawal or payment yet but banks will take on the risk of paying these items. Many customers are not aware that overdraft protection can't help you avoid the fee paid against unavailable funds.

Non sufficient funds is simply not having enough money in your account to pay the items that were presented. Now, regardless wether those items are paid or returned; you will be charged a fee. If you have overdraft protection then you will avoid thse fees.

Ways to avoid unavailable funds fees:

• Instead of deposting the funds into your checking account, deposit them into your savings account and transfer the money you already have available in the savings account to the checking account.
• If the funds you are depositing come from any government agency or municipality, ask the manager if the funds can be available the next day, most banks if not all, have special deposit slips for these types of checks
• Ask for a funds availability schedule from your bank, each check depending on it's routing number will have different availability schedules. The routing number determines the location of the issuing bank.
• If you are depositing a large amount of money, like proceeds from the sale of a home; then you may want to ask for the funds to be wired to your account instead of receiving a check.
• Sign up for direct deposit from your employer, pension, social security, etc.

These tips will help you have your funds available sooner. 

What's the best way to save for my kids?

There are several ways to do this but in my opinion if you know that this money is specifically earmarked for college then you will want to consider a 529 plan or college savings plan. They call these plans 529 because they are named after the IRS tax code 529. These plans allow you to save for your child's college education without having to pay taxes on the interest earned. Better yet, if all the monies in the plan are used for college expenses like tuition, books,  room and board, etc., you will never pay taxes on the interest earned. That's the advantage, whenever you can (legally) avoid paying the taxes on interest earned on your money, the money grows at a faster rate because your real rate of return is higher. Just take a look at your savings or CD 1099 statements that you receive from your bank. The interest earned on your bank accounts is taxable and depending on your tax bracket then you might not be taking home much after paying those taxes. 

Here is what I suggest:                          

• Set up a minor savings account (UTMA) for your child so that you can teach them to make deposits and get them into the habit of saving. Some banks still offer the passbooks for these types of accounts so the child physically sees their balance grow after each deposit. These accounts are typically free and do not require minimum balances. Gifts from birthdays, holidays, christenings, etc., can be deposited into this bank account. 
  
• Open a 529 plan and make monthly contributions via direct debit from the savings account you have set up for your child. Additional contributions can be done at any time. Keep in mind that there are different types of investment options with the 529 plans, some riskier than others. Check the fund's performance when making a selection. You can also choose a fund that is automatically invested and shifted based on the child's age so the investments becomes more conservative the closer they get to college. 

Ok, so these are two very different ways to save for your child. With the first option, when your child turns the age of majority, he or she is entitled to the money and is now sole owner of the account. With the 529, you remain in control until the money is ready to be used, regardless of the child's age. If the funds are not used for college than you pay a fee and you also pay taxes. 

I have included a link that explains in detail the 529 savings plan, this one is offered by Alliance Bernstein Investments. Always consult your tax advisor to find out how much you can contribute to 529's.

Click here: College Bound Fund Program Description

Relationship Banking: Are you in the right one?

All banks have different levels of relationship banking. If you have several accounts and are still paying fees on your checking account, then you need to ask your banker if you're in the right type of checking account that meets your needs. Banks have checking account packages that are tiered, based on your deposit balances and in some instances, loan balances.

Banks will reward you for having a mortgage or home equity or even a personal loan and these loan balances may help you qualify for a higher tiered relationship and help you avoid any maintenance fees. The best thing to do is to pick up a brochure of the types of checking accounts that your bank offers and review your accounts and loans to see if you're in the right one. In addition, if you have a basic checking account that does not give you added benefits like free checks or a free bank checks and you have the qualifying balances to upgrade to a better checking account then by all means request for that upgrade. You could be losing out on free stuff or even losing out on higher interest rates by not having the type of checking account that fits your balances.

You as a customer always have life changing events like marriage, new job, birth of a child, retirement, etc. and these life changing events often have an effect on your finances and most likely have an impact on your banking relationship.

When you go into a bank to start an account, make sure you allow the banker to ask the qualifying questions so that you can be placed in the proper account. It is the job of the banker to ask the right questions about your finances without feeling like you're being pressured into something. I think it's Chase that says "the right relationship is everything", and it's so true. So don't settle for that free checking account if you have other accounts and/or loans and investments, you could be leaving money on the table in the form of lower interest rates or free stuff like checks or discounts on safe deposit boxes. Ask your banker for a review of your accounts and start building that relationship.

Will it ever end?

Today we hear about how Citigroup will start to dismantle parts of their businesses that they think are not profitable for the bank in order to salvage the already wounded giant. They sold off 51% of their brokerage house, Smith Barney to Morgan Stanley at a mere price of $2.7 billion and Morgan Stanley has the option to buy the rest off in 3 years at whatever price is deemed appropriate at that time. Whoever thought Citibank, a household name, a giant among dwarfs would be in so much trouble. The bank will now focus on wholesale banking tending to large corporations and retail banking that focuses on the everyday client. Personally, I think there are still many changes to come in the banking world and although as shocking as they may be, they won't surprise me at all.
Source: NY Times

I also think that many heads of banks were greedy in the sub-prime era as well as investors and failed to regulate the mortgage industry. When everyone was making money, nobody questioned anything, the American dream of owning a home was deceptively package just like the loans that were being sold.