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Best Deals with Banks

 

 I. Internet Banks

While a local brick-and-mortar bank is still a valuable option for many people, Internet banks are a great option for both higher interest and convenience.  The Bible teaches that it is wise and a blessing from God to earn interest on one’s money (Matthew 25:27; Deuteronomy 28:12).  I have had accounts with the Internet bank Everbank for almost a decade, and am a satisfied customer.  The advantages of an Internet bank include:

1.) Higher interest rates on checking and savings accounts.  Since an Internet bank does not have to pay for the upkeep of many physical locations, it has lower overhead costs, and those lower costs can be passed on to customers in the form of higher interest rates.  Everbank, for example, promises to always keep its interest rate in the top 5% in comparison to checking, money market, and CD accounts from its banking competitors.

2.) No fees, minimum balances, or other related requirements to keep a checking account open, as well as free online bill payment, and, of course, a free debit card, although the bank does require $1500 to initially open an account.  You can also get overdraft protection, so if you make a mistake in your checkbook and accidentally overdraw your account $100 with, say, five small transactions for five days until your paycheck gets directly deposited into your account, instead of paying $35 fees for each of the five transactions and owing $175 in fees because you were negative for five days, you would pay approximately $0.25 in interest for the days you were negative.

3.) Convenient methods to deposit money.  You can scan and send checks in from your computer at home or use the Everbank mobile banking app, link Everbank to other financial institutions (such as your local brick-and-mortar bank) online and transfer funds between the accounts, set up a direct deposit, or (for a fee, like with just about every bank) wire in funds.  Everbank will also send you free postage-paid deposit envelopes, so if you are not a high-tech person or simply do not want to scan checks or use their mobile banking app, you can deposit a check by just dropping it in your mailbox for free.  Everbank will send you back a deposit slip with another postage-paid envelope after receiving your funds, and you can always request extra postage-paid envelopes.  In my opinion, the incredible convenience of not having to go to the physical bank location to make deposits is a benefit of an Internet bank close in value to the higher interest rates on gets with an Internet bank.  I have saved large amounts of time, along with money on gas and wear-and-tear on my car, by simply going to my mailbox to make deposits instead of traveling to a physical bank location.  The one thing that cannot be easily deposited is cash, since you cannot place cash into a mobile app and it is unwise to send it through the mail.  While I use Everbank for the great body of my banking needs, I also keep a no-fee, no-minimum balance (and, unfortunately, no interest) checking account at a local brick-and-mortar bank in case I need to deposit cash.  I then transfer the cash from that bank account into my Everbank account on the Everbank website.

4.) Customer service representatives are available on the phone 24/7.  While some institutions have impossibly complex automated systems that make it time-consuming and frustrating to find one’s way to a human being, over the years I have found Everbank’s automated system to be user-friendly, experienced short wait times the large majority of the time when I needed a human being, and found Everbank representatives to be very predominantly polite and helpful.

4.) ATM fees are refunded at any ATM in the USA, although this feature requires that one maintain an average balance of $5,000.  I do not generally want to keep that much money in my checking account.  I rarely need to use an ATM, so I do not really have a problem here.  If I need to withdraw cash, I either use my debit card somewhere and get cash back or transfer money on the Everbank website into my local brick-and-mortar bank and then get the cash there.

5.) Everbank is FDIC insured just like your local brick-and-mortar bank; the fact that it does not have a local bank branch does not make your money any less secure.  It is a real bank, headquartered in New York, just as real as the bank in your local town.  (There ARE fraudulent “banks” that are based overseas, often on tiny islands, that have no FDIC insurance but claim to offer higher interest rates.  However, your money can vanish into thin air if you send it to them and you have very limited legal recourse since they are not in the USA.  Such “banks” should definitely be avoided!)

6.) While some people enjoy e-statements, I like the fact that Everbank sends me, for free, my bank statement in the mail each month.  Of course, one can also sign up for e-statements, but it is a definite plus for me that such statements are optional, not required.  Many other Internet banks require e-statements or charge for physical statements.

 7.) Everbank also offers IRAs, lending and brokerage services, a credit card, and business banking.  Internet banks tend to have lower interest rates on home mortgages and other loans than physical banks, but as I have never taken out any loans with them, do not have a brokerage account with them, nor have business accounts or their credit card, I have little to say about these services that you cannot find easily on Everbank’s website.

Other banks that have similar Internet banking products to Everbank include Ally bank, Discover bank, Capital One, and 1st Internet Bank.  I either have had or currently have accounts with all of them, with positive experiences overall, so that I feel comfortable recommending any or all of them.  Each bank has similarities and differences with Everbank.  For example, Discover bank does not pay interest or have overdraft protection, but the bank gives you $0.10 for each check you write, online bill you pay, or debit card transactionAlly bank will reimburse all ATM fees without the minimum balance requirement for this feature of Everbank.  1st Internet Bank’s interest checking account has a $500 average monthly balance to avoid a service fee, while Everbank’s checking account has no minimum balance requirement.  Practically all Internet banks have advantages over banks with local physical branches that make them well worth considering as either a supplement or a replacement to low (or no) interest local brick-and-mortar banks.

When accessing an Internet bank, or, for that matter, the website of a brick-and-mortar bank, the cautions about public WiFi networks here should be taken into consideration.

II. Rewards Checking Account

In addition to internet banking in general, rewards checking accounts are well worth considering for higher-rate FDIC insured investments.  For example, both my rewards checking accounts with Consumers Credit Union and with Nicolet National Bank offer interest rates several percentage points higher than the best offers available on the best available normal savings account rates, even for internet banks, according to the rate comparison tools available at bankrate.com.  How does a rewards checking account work?  I will illustrate it with my account with Nicolet National Bank.  To get the high rate of interest, customers are required to:

1.) Receive e-statements

2.) Have a monthly direct deposit

3.) Use the checking account’s debit card at least 10 times per statement cycle

If these qualifications are met, the high rate of interest is received for up to $15,000, and any ATM fees up to $15 per month are refunded.  Amounts higher than $15,000 in the account receive a (much) lower rate of interest.  If one does not meet the three qualifications, the customer is not penalized by being charged fees; he simply does not receive the high interest rate, and the ATM fee refund does not apply.

Similarly, with the Consumers Credit Union rewards checking account, to receive the high rate of interest (on up to $10,000) and also receive ATM fee refunds, one must:

1.) Receive e-statements

2.) Access online banking at least once in a month

3.) Have either one direct deposit, ACH debit, or one bill paid using the Consumer’s Credit Union online bill payment system

4.) Use the checking account’s debit card to at least 12 times per month, running the card as a credit card, not a debit card (that is, without putting in the account pin).

5.) If one meets all these requirements, also has a CCU Visa credit card and uses it at least 12 times, then one earns an extra percentage point of interest for that cycle for up to $20,000 instead of only $10,000.  (Their cash rebate card is not bad; it gives customers 3% cash back on groceries and convenience stores, 2% back on gas, and 1% back on all other purchases.)

 6.) If one meets requirements #1-4 and spends at least $1,000 with his CCU Visa credit card in a month, then one gets an extra two percentage points of interest for that cycle on up to $20,000.

The interest rates on rewards checking accounts are very attractive.  (You can visit depositaccounts.com to find out what is available in your area.)  How can the banks and credit unions afford to offer these great interest rates?  First, they assume that customers that fulfill all the requirements to get the high interest rates will be involved in their accounts.  The believe that they will be the people who make their rewards checking account their main bank account.  Second, they believe that they will get the money back through the fees merchants pay the bank on the debit card transactions.  Third, some institutions with rewards checking accounts assume they will get even more money in other ways; for example, to get the extra 2% on the Consumers Credit Union account above the already high rate of interest, one must utilize one of their credit card products, which brings in additional money to the credit union.  Through these strategies, banks and credit unions that have rewards checking accounts believe they can recoup the extra money they expend in the high interest rates that they offer.

Some rewards checking accounts can be opened up online; other institutions require a visit to a physical branch location.  It is not necessary that a bank or credit union have a physical branch close to where you reside to make such an account worthwhile, for you can simply open an account with an Internet bank such as Everbank, deposit funds from your home, and then electronically link the two accounts at the Internet bank’s website to transfer money into your rewards checking account.

If you decide to open one (or more) rewards checking accounts, I have a few suggestions for reducing the hassle involved in meeting the requirements.  If you intend to use the rewards checking account as your main checking account, set up a direct deposit from your employer, and so on, then the following suggestions will probably be unnecessary.  However, if you intend to use the rewards checking account as a savings vehicle, while paying bills, writing checks, and so on only on occasion, there are a number of ways you can reduce the hassle of the requirements involved in receiving the high interest rates.  First, for many rewards checking accounts any ACH transfer–that is, any electronic deposit coming in from any other location–counts as a direct deposit.  One can simply set up automatic recurring electronic transfer on the website of one’s Everbank or Ally Bank account; you could, for example, set up your account to automatically transfer in $1 on the first of every month and then transfer $1 back out again on the 15th of every month, and never worry about the direct deposit requirement again.  Second, to be sure that you make the required number of debit card purchases, you can divide items you buy at one time into smaller quantities so that they count as multiple purchases.  For example, at the gas station you can swipe your rewards checking account debit card, fill your gas tank up part of the way, and then start over, swipe your card again, fill up your tank another part of the way, and then repeat the process a third time.  At a self-checkout register in a grocery store, you could also (if there is no line–don’t make people wait!) buy an item or two, swipe your card, complete the transaction, and then repeat the process a few times so that your grocery purchase registers as a number of debit card purchases instead of only one.

Do not wait until the very end of the statement cycle to make your debit card purchases; sometimes it takes a day or two for them to hit your account, and you don’t want to lose out on a high rate of interest because purchase #10 did not hit your bank account until the day after the end of the cycle so you have one purchase too few.  Also, be sure to check if your rewards checking account requires that you run the debit card purchases as a credit (non-pin) transaction instead of a debit (pin-based) transaction.  Some rewards checking accounts require this (such as the Consumers Credit Union account mentioned above), while others (such as the Nicolet National Bank account mentioned above) do not.  If you are happy that the credit union or bank is giving you a high rate of interest, you might want to consider generally swiping your debit card as a credit or non-pin transaction in general even if it is not a requirement, because the bank gets more money that way each time the card is swiped, and so your account is more profitable to them.

Reward checking accounts are not for everyone–they require a degree of organization, and if you end up regularly failing to meet the requirements for the high rate of interest, you lose out on their benefits.  You can always just open a savings account at an Internet bank and get a competitive rate without the hassle of a rewards checking account, although you will almost certainly lose a few percentage points of interest.  You can also consider high interest savings accounts associated with prepaid cards.  Finally, peer-to-peer lending, while it is not FDIC-insured and it leaves your money less liquid than in a checking or savings account, is very likely to earn substantially higher interest rates than even the best rewards checking account or high interest savings account.  Find out more about peer-to-peer lending here.

 

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