Lesson: Banks Use Multiple Routing Numbers
Photo by mrbill
Here is a tip that I was just reminded of the hard way: don’t make assumptions about check routing numbers, as the routing numbers for many banks vary by region.
I recently opened a new checking account with Chase online; the account was setup instantly, with the actual written materials to follow shortly. For reasons that we don’t need to go in to, I set up the account with more initial money than I intend to keep in that account, and so I quickly moved to link the account with my other banks so that I could transfer money around electronically.
In order to link accounts — for anything ranging from online transfers to payroll direct deposit — you need to provide the checking account number and the routing number for the bank. The routing number is a nine digit number assigned to the bank that is used to route transfers, and is located in the bottom left of the checks printed by your bank.
Here’s where I made my mistake — I assumed the routing number on my new checking account would be the same as the other two Chase checking accounts I have. I didn’t know this for sure, as the routing number was not included in the information I was provided online, but it seemed like a reasonable assumption.
Wrong. Within two days, Paypal and Citibank had rejected my attempt to link the accounts online to my new Chase account, telling me the account information was wrong. It didn’t take me long to figure out the mistake was the routing number.
The reason for the different routing numbes? I had opened the other checking accounts in a different state than this one, and, at least with Chase, the routing number is based on the region that corresponds to where the account was opened. See this lovely table of Chase routing numbers.
The worst part is that I attempted to make an online credit card payment using the wrong routing number, which was then rejected by Chase, causing me a whole lot of headache with my credit card company over the rejected payment — but I’ll save that story for next time.
I don’t pretend to understand why the system works this way, but it sure is frustrating. One of the benefits of a national bank like Bank of America or Chase is that they are “national” — I can deposit my money anywhere in the country, make transactions, etc. The fact that the routing number varies by the region the account was opened seems like an archaic holdover.
On their question and answer page on routing numbers, Bank of America’s answer to “What state should I select if I opened up my account online or by mail?” advises customers to contact customer service. That in itself makes this all seem like a silly and complicated system.
Presumably there are not two accounts with the same number in the system, so in this day of electronic banking, why could Chase not accept the transactions using any one of their routing numbers? Can anyone enlighten me more?
Anyway, word to the wise — don’t make assumptions about the routing number?
Update: Closing Bank Accounts, the easy and the not so easy
Photo by Gaetan LeeAbout a month ago I wrote about how I had decided it was time to close some bank accounts. Consolidation of my unwieldy number accounts was overdue, as I simple did not have a need for many of them, and it was becoming increasingly difficult to juggle the requirements necessary to keep all of them maintenance fee-free. So I made a list of accounts that I wanted to close, and sent off signed letters to those banks requesting the account closure.
How did the effort go?
Easy: Bank of America
Bank of America made the entire process incredibly painless. To start with, they appear to be one of the few major banks to actually address this issue on their website, and even provide an address to send the request. From their Account Information FAQ:
We are sorry to hear that you want to close your account. We are constantly looking for ways to make banking work for you in ways it never has before and would like to know how we can make this happen for you. Please call us at 1.800.622.8731 or send us an email if we can assist you in any way.
To close your account, please submit your request in writing to Account Closure, FL1-300-02-07, 4109 Gandy Blvd Tampa Fl 33611-3401. Be sure to have all account owners sign the letter and tell us how you would like to receive your balance.
In my case, I wasn’t closing *all* of my accounts at Bank of America, simply one of the excess checking accounts. So I simply wrote to them asking that they close the second checking account and deposit the balance into my first account. Within days of mailing the letter, the change was visible online, and I received a follow-up letter shortly thereafter.
Nice and easy, as it should be.
Just as Easy: LaSalle Bank aka Bank of America
Another example of a painless process comes from LaSalle Bank — of course, LaSalle is now part of Bank of America, so this may not come as a surprise, but I figure its worth mentioning anyway. I had opened a savings and checking account at LaSalle last year as part of a nationwide promotion they were running, and now no longer had a need for the account, especially since they were now part of the Bank of America family.
I requested that when they close the account, to deposit the balance into my Bank of America checking account if possible, and if not, to provide me with a check. Apparently their system is not yet set up to make that transfer possible, so I quickly received a check in the mail for the balance of the amount.
Again, nice and easy, as it should be.
Annoying: Chase
Chase, on the other hand, decided to make things difficult. Just like at Bank of America, I was not actually closing *all* of my Chase accounts, just a second checking account, so I figured I would not run into much resistance. To start with, not only does Chase (not surprisingly) not mention account closure on their website, they do not seem to offer any mailing address to write in with customer requests. Luckily, the monthly account statements list a mailing address for the bank, which is where I mailed my request to close the accounts.
Flash forward about two weeks, when I get a response from Chase saying that they were unable to close my account because they could not verify my signature on the letter. Seriously? Something tells me they would have had no problem processing a check with that signature, but apparently it (plus account information, last four of social) doesn’t pass muster for closing an account. Their advice was that I either send them a notarized version of my signature or visit a branch. Until then, for my protection, they were keeping the account open. How nice.
Despite the fact that they made no mention of calling the customer service number, I decided to give the phone a try. After a brief hold time, the Chase representative was more than happy to close my account over the phone after I provided pretty much the same information that was in the letter. Of course, I briefly had to talk to their account closure/retention department, but they quickly processed my request after I told them I wasn’t closing all of my accounts, simply consolidating.
So in the end, Chase was perfectly willing to do over the phone what they wouldn’t do via the mail, despite the fact that I provided the same information.
Not as easy as it should be.
Why A Letter?
It might seem silly that I was so insistent on writing a letter instead of calling-in or going into a branch. However, I have a few reasons for doing this:
- I would prefer to have a written record of my account closure. Bank of America and LaSalle provided that to me, Chase did not.
- A template letter requires less time on my part, especially when compared with going in to a bank.
- I have always been under the (perhaps mistaken) impression that many banks penalize their representatives when people close accounts (and certainly don’t reward people for closures). Sending a letter allows me to at the very least avoid wasting a local branch agent’s time and perhaps spares them any sort of penalties for losing me as a customer.
- Finally, and perhaps most importantly, I don’t want to deal with the sales pitch. I can stand up for myself, I would just prefer to not have to.
Regardless, here I am now, many bank accounts lighter, and all the happier.
Student Checking Options
While a free online savings account is certainly a good idea for most students, unquestionably a checking account is most important — a checking account allows students to access money at ATMs, write checks for dues and fees, buy products on a debit card, and more.
The last thing a college student wants to worry about, though, is their checking account. Unfortunately, you’re always going to be responsible for making sure that you have enough money and not overdrawing. However, there are enough checking options out there that a student should never have to worry about maintenance or service fees — not monthly account fees, not check processing and image fees, not any of it.
Some Things To Consider
In my experience, there are a couple of important questions to consider when picking the right student checking account:
- Where are the ATMs? Probably one of the most important factors; with most accounts, it costs money to use an ATM that does not belong to your bank — and those fees can add up. Pick a bank that has plenty of ATMs around where you frequent (school, home, work, etc.)
- What are the fees? Preferably, there should be as few fees as possible. Without question, if you behave yourself, you should not have to pay any fees. However, if you overdraw your account, use a non-bank ATM, etc, expect to pay regardless of where you go.
- Where are the branch locations? Besides ATMs, are there convenient branch locations if you need to deposit a check?
- Can mom and dad make deposits? Some bank accounts make it exceptionally easy for parents to transfer money into their child’s checking account — for example, if you have a Bank of America CampusEdge checking account and your parent’s have a Bank of America account, they can easily transfer money into your account. Almost all banks, however, will let a parent deposit money at the branch if they know the account information. Make it easy on them!
In reality, given that most major banks offer similiar student checking accounts, ATM/branch locations are likely to be the most important factor.
Student Checking at Major Banks
Almost all of the major banks offer some sort of checking account designed specifically for students; these accounts are nice as they are usually fee-free, low maintenance, no minimum balances, etc. — in other words, perfect for a college student. From the bank’s perspective, it is the chance to get a young customer for life (a relationship they are dying to exploit). Without a doubt, the benefit of using a checking account at a major national bank is that they have branch locations and ATMs everywhere — whether you’re at school, home, traveling, or more, it is usually not hard to find a Bank of America, Chase, Citibank, etc. ATM.
Of the major banks, Bank of America’s CampusEdge Checking account seems to be one of the best. In brief: no minimum balance, online access, plus a one-time fee refund if you overdraw the account. From the fine print:
Your account will initially be opened as CampusEdge® Checking with no monthly maintenance fee. After the first 5 years, your account will be converted to MyAccess Checking with no monthly maintenance fee. Student status will be validated upon account opening.
So unlike many other student checking accounts, they won’t convert you to a checking account with fees automatically after a few years, which is nice, as your bank account classification will likely be one of the last things on your mind when graduating.
Chase also offers their own checking account designed for both college and high school students. Standard details: no monthly service fee while a student, for up to 5 years, online access and debit card, etc. Unlike Bank of America, Chase requires you to be under 24 years old to get the checking account, and also does not spell out what happens when you reach your expected point of graduation.
Finally, Citibank offers their own Student Checking account, although it can be somewhat hard to find on their website (try going to http://www.citibank.com/campus/). Again, it is similar to Chase’s: no maintenance fees, online banking access, debit card, etc. You also get to earn ThankYou Network points for debit card purchases. Citibank is fairly explicit about what happens after your expected date of graduation: you get converted to the Citibank Account, which has fees under certain circumstances.
Other options: Local, Cyber
There are other options besides major national banks:
- Go Local - Many local banks cater to area college students by offering very attractive, simple checking accounts for students. Depending on your circumstances, these might be a good fit. However, keep in mind that it can be difficult using a local-bank checking account when you are away from the area. Do you have a future with the bank?
- Go Online – This will likely be covered more soon in a separate post, but there are several online-only checking accounts, including one offered by ING Direct called Electric Orange. These take the branch location out of the equation and often involve you depositing checks via mail. Still, with a little flexibility they can be an attractive option.
Regardless of what you go with, just make sure you choose a checking account that will not add stress to your life — money can be difficult enough to deal with in college without having to worry about the bank complicating things. Have fun!
Is that sketchy ATM safe?
You probably know the type of ATM that I am talking about — that skinny, stand alone ATM that sits outside of that neighborhood convenience store and looks like you could probably pick it up and take it with you . I walk past one of these every morning, always reaffirming my vow never to use it.
I have always wondered, however, just how safe these ATMs really are. As a general rule, I try to always use my bank’s branch ATM, but sometimes that is not the best strategy. Besides, I have been considering opening a checking account at a bank that refunds ATM fees. So are these non-branch ATMs significantly less safe?
Confirming The Obvious
As if answering my question, CNNMoney.com ran an article last month, following a breach of Citibank ATMs at 7-Eleven stores, entitled “How safe is your ATM?”, where on the issue of the safety of independent and stand-alone ATMs, they note that:
…an ATM’s safety depends on where it is. If it’s at a bank, an ATM is somewhat safer than it is in a public place, such as a ballpark, a train station or a convenience store.
“You should never use ATM machines at convenience stores if you can help it because those are much more susceptible to tampering,” added Avivah Litan, a security analyst with the Gartner research firm.
The argument being that bank ATMs are safer since they are usually better protected and are under the watchful eye of trained bank employees. Unfortunately, the CNNMoney article is short on both statistics and on suggestions for protecting yourself. The few suggestions the article offers are:
- Avoid convenience store ATMs if you can
- Report any suspicious activity
- Avoid using your PIN number as much as possible (so select “Credit” when you’re making purchases with your debit card)
- Change your PIN number regularly
- Monitor your statements carefully.
Of course, only the first three suggestions really help protect you from compromised ATMs; the other suggestions are simply meant to minimize the damage of being compromised.
The State of the Problem
It is surprisingly hard to find statistics on ATM fraud, however I was able to find this article from BankRate.com in 2003 on ATM skimming. Among the interesting facts:
- At the time of writing (2003), there were approximately 360,000 ATMs nationwide and only half of them belong to banks.
- ATMs with swipe readers are more susceptible to being compromised, as opposed to ATMs where you slide in your card.
- Their additional suggestions include: look at the ATM before using it, don’t use ATMs with unusual signage or language, and contact your bank immediately if your card is not returned
Card skimming — where thieves don’t interrupt your transaction, but rather attach a device that copies your credit card information as you slide it — is unfortunately increasingly common; in fact, the DVD Kiosk service Redbox recently warned customers about potential credit card skimming on its Redbox devices.
I used to think that I could easily identify a card skimmer attached to an ATM, but this page from the University of Texas Police Department (found on Flexo’s post on skimming over at Consumerism Commentary) surprised me with how hard it can be to identify a skimming device. I’ll have to be more careful!
Skimming
If all of this is not scary enough, here is one final story from MSNBC that should drive this all home.
The article tells the story of a Secret Service investigation into a group of thieves that purchased fifty ATMS (remember, half of those ATMs out there aren’t owned by banks!), connected them to the ATM network so that they would function properly, while at the same time storing the information on users. As a result, over 21,000 accounts at 1,400 banks were compromised resulting in losses of almost $4 million. These crooks simply set up their own ATM and let users walk right into the trap. It is such a simple idea — why hack someone else’s ATM, when you can simply put up your own?
While the MSNBC article notes that banks are taking steps to make the system safer, I think its still worth asking — can you really trust that generic looking ATM?
My Check-Up: What to do with my Savings
Continuing my financial check-up, its time to decide what to do with my savings. I think using an online savings account is almost a no-brainier — online savings accounts offer significantly higher interest rates (right now around 3.0 – 3.5% APY), are easy to open and maintain, and by-and-large are fee-free, safe, and liquid. I have been very happy with my high-yield online savings account for years, but lately I have been wondering if I should move account elsewhere in pursuit of better rates.
My Situation
Several years ago I opened up my first online savings account at Emigrant Direct, and that is where the majority of my savings has been ever since. When I opened up the account, Emigrant Direct was one of the few major online savings accounts available, and their rates were very competitive. These days, however, there are many more banks offering high-yield online savings accounts, and Emigrant Direct has consistently been about 0.5% behind the highest rates.
My thoughts on Emigrant Direct? By and large, I have been happy with them. Honestly, I have almost nothing to say about them, which is exactly they way it should be with an online savings account — the website is visually and functionally simple and easy to use. Since I try not to touch my savings often, I don’t require many fancy features. Except for a few kinks when they updated their site a year or two ago, I have had almost no problems with their website. Transfers to or from my Bank of America checking are also quick, which is nice. Currently they offer 3.0% APY.
I also have an ING Direct savings account which I opened a year ago, and while I have not moved the majority of my savings over (since they are currently offering the same 3.0% APY as Emigrant Direct), I have been impressed with how easy, responsive, and friendly the ING Direct website is — it really is a great choice for those that might be easily intimidated.
The Question: To Rate Chase or Not To Rate Chase
The difficult question with online banks, though, is whether or not it is worthwhile to constantly move your money around to chase the highest interest rate. The rates these banks offer fluctuate, especially when the Federal Reserve adjusts interest rates, and they are never guaranteed at any given level. While HSBC Direct may offer one of the highest rates today, tomorrow another online bank might. In my own experience, I have witnessed Emigrant Direct slip from being a rate-leader to a rate-follower. So should you stick with a bank that is no longer out front?
Some say you should always chase the highest interest rate. Over at Money Blue Book, Raymond described how he actively manages his bank accounts to maximize interest earnings. This is not nearly as difficult as it sounds, as most online savings accounts will transfer money for free electronically within a few days; furthermore, account aggregation services like Yodlee and Mint allow you to monitor all of your accounts in one place. Combine that with the fact that there is virtually no cost to opening as many online savings accounts as you want, and rate chasing no longer seems that crazy.
On the other hand, some suggest it is more complicated. J.D. over at Get Rich Slowly suggests that customer service and other factors are worth considering in addition to interest rates. He points to the example of a specific bank that many of his readers signed up with and later were upset with over its poor customer service. While that is certainly the exception rather than the rule, it does suggest that other considerations might be worthwhile. Again, it seems that features like customer service and account fees, etc. are critical to consider, but may not be enough to whittle down to a final choice.
Beyond other considerations, some suggest that, from a numbers perspective, the money gain is often not there. Jim over at Blueprint for Financial Prosperity stresses that the amount of money you are chasing is often just not significant enough to make it worthwhile when you stop and look at how much money you stand to gain in interest combined with any opportunity costs in the transfer. For one thing, rates are not guaranteed — they can change at any time, and different banks change by different amounts. Combine that with the fact that every time you make a transfer, you lose a day or two worth of interest, it suddenly becomes far less enticing.
Consider this: The difference between ING Direct (3.0% APY right now) and HSBC Direct (3.5% APY right now) is 0.5% APY. That means, for every $1,000 in savings, the difference between what you would earn at HSBC and ING Direct is $5. And that is before you take into account any taxes. That is a pretty small amount, even if you have thousands of dollars in your account.
My Decision
So back to my own situation. For a while now, Emigrant Direct has not been offering the highest rate, and I have to admit that it has been bothering me. But as I have sat down and evaluated the situation, the interest I am losing out on is just not that great at all – $5 for every $1,000.
As a result, I have decided not to open a new account at HSBC or FNBO Direct for now. It is just not worth the few dollars I would gain. I have, however, decided to move more of my money over to ING Direct from Emigrant Direct, which in addition to offering the same interest rate and a very intuitive webpage, also makes it incredibly easy to set up subaccounts for targeted savings. I am not going to close my Emigrant Direct account, as they have been good to me, but I am going to change my focus. However, if ING Direct falls even further behind the rate leader, I may consider moving my savings in the future.
I think with all of this discussion of rate chasing, there is really something to be said for simplicity - the simplicity of not having to constantly move money around. One of my goals for the last few weeks has been to cut out a lot of my extra bank accounts in favor of a more simplified system, and I think I am far happier as a result.
So what do you think? Do you chase interest rates?
Online Savings Accounts — Is Rate All That Matters?
Last month, a friend of mine was looking to move her savings, and I immediately recommended that she choose an online high-yield savings account — specifically ING Direct. Besides offering a competitive 3.0% interest rate and a $25 sign-up bonus, ING Direct also has a very intuitive, easy to use system. Seemed like a smart choice for my friend.
However, a few days later, my friend came back to me, telling me that a third mutual friend had told her that ING was not the best choice, as HSBC offered a higher interest rate, and that she should go with them. So is the interest rate the only factor to consider when opening an online savings account?
Major Online Savings Accounts
The online savings account landscape has changed dramatically over the past couple of years, and there are now numerous major players:
- A Rate Leader: HSBC Direct – http://www.hsbcdirect.com/ – offering 3.50% APY as a promotional rate.
- A Rate Leader: FNBO Direct – http://www.fnbodirect.com/ – offering 3.50% APY
- E*Trade - http://www.etrade.com/ – offering 3.30% APY
- ING Direct – http://www.ingdirect.com/ – offering 3.00% APY
- Emigrant Direct – http://www.emigrantdirect.com/ – offering 3.00% APY
* Note that these interest rates are current as of the date of this posting — these rates are almost certain to change with time!
In addition to that list of major online-only banks, many large national banks are also offering competing high-yield savings accounts, such as Citibank with the Ultimate Savings Account, although most of the accounts offered by these major national banks are not nearly as attractive as those offered by the online-=only banks listed above.
Does anything besides interest rate matter?
You might be wondering — how on earth do you pick which online savings account to go with? That is a fair question. The Savings Toolbox recently took a look at how to compare online savings accounts, suggesting you look at interest rates, amount limitations, customer service, fees, transfer limitations, ATM card access, and new account bonuses. All are definitely important things to consider, but unfortunately most of those banks I mentioned have similar fees, limitations, and more – so while you can use those factors to weed out the bad seeds, you’re likely going to find yourself with a small list of the online banks which appear largely equal except for interest rate.
Bank stability has never been very important to me. This is a hot topic right now with recent bank collapses, and there are certainly websites (like Bankrate.com) that evaluate the health of a bank. However, given that all of these accounts are FDIC insured up to limits that I come nowhere close to reaching, I rest easy. Even if my bank failed, I would only be away from my money for a day or two at most — not a big deal.
So what can you use to compare them, besides interest rates? Customer service is important, but most banks have decent customer service, and a quick search on the internet will usually identify any banks with customer service problems. Besides, you are unlikely to need to interact with customer service that often; usually, the only time I find myself calling my bank concerns fees, and most online savings accounts are largely fee-free. Given the very simple tasks that need to go with an online savings account, and that most of these accounts are associated with very reputable banks, I am not too concerned about customer service.
Personally, I think website functionality is probably the only other differentiating factor at which you can look. Some are more intuitive than others (ING Direct), while some are deceptively simple (FNBO), and some offer some pretty unique features (such as subaccounts at ING Direct — more on this later). While it is true that you are unlikely to need to interact much with your online savings accounts, minor differences in how responsive or how many clicks are necessary to perform a task can make a difference.
So go with the interest rate?
All things considered, though, interest rate should probably be a key deciding factor when you open an online savings account, if only because there is so little else to differentiate. A lot of other bloggers try to evaluate minor details of online banks, but a lot of these points often seem trivial. If one of the online banks has a feature or interface that speaks to you, you should go with what is most comfortable. Otherwise, I would follow the money. For example, many other bloggers argue that ING Direct’s simple interface and ability to open sub accounts makes it worth choosing over the slightly-higher-interest competitors. If that is a compelling argument to you, ING Direct might make sense despite its slightly lower interest rate.
The beautiful thing about online savings accounts, though, is that there is only a marginal opportunity cost to opening them (and virtually no monetary cost) – usually no minimum balances, no fees, etc. So if you do not like the bank account you go with, it usually is not a big deal to open up a new one somewhere else.
Why I Recommended ING Direct
If ING Direct has a rate that is 0.50% lower than HSBC Direct, why then did I recommend ING? First of all, I truly believe that ING has a very intuitive and friendly attitude that makes opening, using, and maintaining an online savings account easy and fun. For someone who is very comfortable banking online and moving money around, I might not recommend ING Direct. But for those who are uncomfortable or who have concerns, ING is great — there is a reason so many people applaud ING Direct on the internet.
Furthermore, to refute my friend’s interest argument, I pointed out that if you only have $1,000 in your savings account, it would take five years for the added interest from HSBC to surpass the $25 sign-up bonus at ING direct. Let’s be honest, the difference between 3.0% APY and 3.50% APY is just not that great.
That being said, it does not seem worth spending too much time trying to decide between ING Direct, Emigrant Direct, E*Trade, HSBC Direct, FNBO Direct, etc. — they are, on some level, all very similar with very similar interest rates. I spent a lot of time trying to figure out which one was best for me, when in reality any of them would have sufficed.
How did you choose your savings account? What is important to you?
Check-Up: Time To Close Some Accounts
Enough is enough — I have too many bank accounts. This has been something I have been somewhat aware of for a while, but it was not until I recently started reevaluating my personal finance choices that I decided it was time to do something about it.
So, partially inspired by Clever Dude from earlier this year, I have decided to go through and close many of the bank accounts that I am no longer actively using.
Why Close Accounts?
The rationale for closing some of my bank accounts is pretty simple:
- Too Much of a hassle — Many of these accounts require some sort of activity to remain free of maintenance service fees; while I have done a good job of staying on top of them up until now, it is inevitable I am going to slip up at some point. It has become too difficult to keep so many accounts fee-free.
- Too confusing to track – Even using a website like Yodlee or Mint, it is difficult to keep track of money spread across so many accounts. Many of my dormant bank accounts require a few hundred dollars to be kept in them, and as a result it can be difficult to know exactly where all of my money is.
- Too complicated — Finally, even setting aside any concerns over fees or tracking, it just makes things feel complicated to have so many accounts. I am hoping that closing a few of these accounts will result in some much needed finance simplification.
Any Reason Not To?
Before embarking on this task, I briefly considered whether there were any reasons to keep some of these accounts open, and two reasons came to mind. First, it is nice to have a variety of banks you can use for branch services or ATM access for free. Sometimes you need quick cash or to deposit a check, and having bank accounts open at the major national banks can help make this easier. Second, it certainly doesn’t hurt to keep a relationship with many of these major banks, as you never know when it might come in handy.
Also, as a commenter pointed out in a previous entry, it might not be a bad idea to take some of the free accounts and use them for some sort of targeted savings or spending. This is not a great solution when you are dealing with accounts that have potential fees, but is a very good idea to consider for accounts that are completely free. You already have the account, why not use it if you can?
My Situation
Those reasons notwithstanding, I think it is in my best interest to close some of these accounts. Many of the bank accounts I have active were opened for sign-up bonuses or promotions and have outlived their purpose, especially the instances where I have multiple accounts at the same bank.
Currently, I have:
- Over nine checking accounts at major national banks, including more than one checking account at two different banks. I plan on keeping my accounts open at Bank of America, Citibank, and Chase, as I like the branch access, but the rest are likely to be shut down.
- Two online savings accounts. Since these have no minimum balance, instead of closing one, I am likely to just keep a few dollars in it. While I am not a fan of rate chasing, I do not see any harm with leaving a few dollars in an account to keep it open.
- Two savings accounts at traditional banks. These were both opened for promotions, and have since outlived their usefulness; the interest offered is pitiful compared to what you get at someplace like HSBC Direct or ING Direct. No point whatsoever in having them.
Closing the Account
I am the first to admit that I am not a big fan of having to interact with customer service agents at banks, as I do not like being pressured into trying to change my decision. I guess I am a bit of a coward in that regard. Especially given that I am not in a particular rush to close these accounts, I have opted to send a written request to most of the banks.
While the letter varies depending on circumstance, I usually follow a general template. This is the letter I used when closing two of my three accounts at a particular bank.
At your earliest convenience, I request that you close the following two accounts in my name:
- Savings Account XXXX XXXX XXXXX XXXX
- Checking Account XXXX XXXX XXXXX XXXX
As part of this consolidation, please transfer any remaining funds in those two accounts to my primary checking XXXX. My debit card should remain active and attached to my primary checking. Also, please insure that the scheduled monthly transfer from my checking to savings ceases. At this time, all automated deposits into these two accounts have been halted.
Please note that I am closing these accounts simply because I no longer have a need for the extra accounts; I remain quite happy as a customer.
I appreciate your prompt attention to this matter.
In instances where I am closing my only account at a bank, and therefore can’t transfer my money anywhere in the bank, I usually transfer as much out as I can before the request, and then ask that they issue me a check or money order for the remaining account to my home address. While I realize that doing this by writing is not the most expedient way of closing accounts, it is the easiest for me and should result in it getting done within a few weeks.
A Happier Life?
My hope, then, is that by taking these steps, I will be able to stay on top of my active bank accounts much better than in the past. Less paperwork, especially around tax time, is definitely a good thing. Simplification.
So how do you handle extra bank accounts? When do you choose to close one as opposed to keeping it open?
My Financial Check-Up: Introduction
I have finally gotten around to beginning something that I have been meaning to do for a while — a sort of “financial check-up”, taking a moment to re-evaluate my financial management and allocations and make sure that I am happy with the way things are going.
It is almost certainly a good idea to try to do something like this on a regular basis, perhaps annually. Much can change over the course of a year: you might have changed jobs, gotten a raise, relocated to a new area, had a major life event happen, or more. Even if your life seems the same, financial products can change, too - banks cut rates, introduce new accounts, and more.
I plan to cover my financial check-up as a series of individual posts over the course of the remainder of August, covering each issue as I research it for myself. I want to take a moment, though, to introduce some of the questions I plan to look at over the next couple of weeks.
My Primary Checking Account
Should I switch to ING Electric Orange? By and large, I have been pretty satisfied with my current checking account — I have a MyAccess Checking Account with Bank of America that is fee-free as long as I maintain direct deposit, and BoA has convenient ATM and branch locations for me.
But lately, I have been tempted by ING’s Electric Orange account, which is an online-only checking account that offers 1.75% APY for my balance range and no fees. The downside is that you give up branch access, and have to rely on their affiliate network of ATMs. I need to evaluate for what uses I really need a checking account and whether ING will meet those needs, how important branch access really is to me, and whether ING’s ATM network of affiliates will work in my case.
My Primary Savings Account
Am I with the best bank? I have been with Emigrant Direct for years now, and have had almost no complaints with the service they have offered. I’ve stuck with them lately even though they have not had the most competitive rates around (right now, ED has 3.00% APY, HSBC Direct has 3.50% APY). I am not a big fan of rate chasing - moving money around constantly in pursuit of the highest rate, but HSBC might be offering enough of an incentive to move my money over.
How much do I need in my savings? At least right now, with the exception of the small amount of money I keep in my checking account, almost all of my money ends up in my savings account. As I contemplate other factors like a Roth IRA and Emergency Fund, I need to consider how I want to balance the savings with the other accounts.
A Retirement Account
I need to open a Roth IRA. This is not so much a question as it is a statement – I have read the advice for a while, and I have finally convinced myself that it is in my best interest to open a Roth IRA even though I am still in school. Even a little bit of money for a few extra years can make a huge difference when it comes time to retire. The issue for me, however, is that I need a brokerage firm that offers a Roth IRA with low minimums and (hopefully) no fees — so which brokerage is best for me? I suspect that I will ultimately end up going with a Vanguard Roth IRA.
My Credit Cards
I am pretty happy in this regard, and suspect that my combination of Citi mtvU and Chase Freedom cards for almost all of my purchases will continue to be the best situation for me. The only real question I have is how can I best put my rewards to use? I currently have more than enough Citi ThankYou Points to start considering how best to put them to use.
My Emergency Fund
I need to create an emergency fund — how best should I go about this? I have been nurturing my savings account for a while, but I have not taken the step of creating a separate emergency fund. I have read enough posts about emergency funds from other bloggers, however, that I think I need to take the step of creating a separate emergency fund.
My Other Bank Accounts
Which bank accounts are dead weight? Especially in 2007, I frequently opened up bank accounts for the sign-up bonuses which would often be quite lucrative. Now, however, I have all of these checking and savings accounts open at over a dozen banks. Not only is it difficult to stay on top of keeping these accounts maintenance fee-free, but it is also difficult to get an adequate picture of my financial health. I plan on looking into closing some of these accounts and reporting back.
Road Ahead
As part of this process, I also plan on sitting down and taking a look at where my money has been going – I have never really created a literal budget, but I think it will be helpful for me to get a clearer sense of what I am spending my money on as I look for ways to be more fiscally sound. I also plan on both better documenting my finances for myself, creating a sort of financial “master document” that details all of my accounts, as well as improving my records system.
So, these are some of the thoughts that are going through my head as I begin my financial check-up. Stay tuned for more!
Yes, an Online Savings Account is a Good Idea.
When friends ask where they should keep their money, my first response is always to ask where they keep their savings, and if its at a local bank, to suggest that they open an online high-yield savings account. These high-yield savings accounts — like ING Direct, Emigrant Direct, HSBC, and more — have been around for a while, and offer extremely high interest rates. Yet I always seem to have trouble convincing some of my friends that it almost certainly is worth it for them, and I’m not quite sure why.
1. The interest is nothing to scoff at.
One of the most common reactions I get to the idea of opening an online savings account is that it can’t possibly make that much of a difference.
Some basic numbers, current as of this posting. A regular savings account at Bank of America has an APY of something like 0.20%, meaning if you leave $1000 in a savings account, you’d earn $2.00 in interest over the course of one year — not much. Open a bank account at ING Direct, which has an APY of 3.00% right now, and with that $1,000 you would earn $30.00 in interest over the course of a year.
In my opinion, the difference in interest (an extra $28 in this example for every $1,000) seems like its worth it — but maybe that’s just me.
2. Easy: Easy to Set Up, Easy to Maintain
For some reason, another common reaction is that it is too much trouble to set up an online account.
Setting up an online savings account could not be easier. The online application at most banks like Emigrant Direct or ING Direct takes only a few minutes; you’ll supply your contact and identity information, necessary to open any bank account in the United States, and you’ll have to provide an existing checking/savings which will be linked to your new savings account to transfer money. If anything, the only lengthy part of the application process is the waiting – it can take a few days for the bank to mail you a form to sign and to verify that you entered your linked bank account information correctly.
Similarly, these online savings accounts are easy to maintain. With that Bank of America Savings Account, for example, you are charged a monthly fee if your account balance falls below $300. Most of these online savings accounts, however, have no minimum balance. You don’t have to worry about making sure you keep enough money in your savings account; you can keep whatever balance you want.
3. It’s Liquid
Whereas perhaps more lucrative investments might require you to lock-in your money for a fixed amount of time, these online savings accounts provide a nice return while keep your assets (mostly) liquid. Need to get money out of your online savings account and in to your local checking/savings account? With most of these banks, you can complete a free transfer within two or three business days. While it is true that (in most cases) you can’t have “instant access” to your money, with two or three days notice you won’t have any problem getting to it.
Why Debit Cards Scare Me
I’ll be honest, debit cards scare me. I know that I am probably in the minority on this; if my close friends are any indication, debit cards are quickly replacing cash as the average student’s primary means of payment, and are perceived as responsible, safe, and easy to use. But while there are certainly benefits to debit cards, compared to credit cards, there are risks, too. What scares me?
Bankrupt Airlines
I cringed the other day when a friend bought an airline ticket home using his Visa Debit Card. Within the last month, Aloha Airlines, ATA Airlines, and Skybus have all completely ceased operations. For customers with tickets on those airlines, the airlines themselves gave no refund option — the only advice was that if you purchased using a credit card, you could contact your credit card company for a full refund. Otherwise, out of luck.
If you have the choice, you should always purchase travel arrangements using a credit card. Over at Money Blue Book, Raymond wrote an excellent post recently covering this very topic, “Always Pay By Credit Card to Protect Against Airline Bankruptcy Loss,” which does a very detailed job of explaining how credit cards offer federally-mandated protections that you just don’t get with debit cards. With a credit card, under the Fair Credit Billing Act, you can dispute charges within sixty days for services that were not delivered as agreed to, and get a full refund. With debit cards, you simply don’t have the same protections; some banks may offer more limited debit protections, but these policies are not standardized and are on much more uncertain territory.
These protections, of course, do not just apply to airlines, but also to any transactions where the goods or services weren’t delivered as agreed.
The Blank Check
The other major factor that scares me with debit cards is how they are directly tied to your checking account. Now, many people consider this to be a major positive over credit cards — with debit cards, you pay immediately out of money you currently have. However, consider the danger if you lose the card: the thief has the ability to drain all of the money in your checking account. For me, that is a scary proposition.
Most banks these days try to reassure you with zero liability protections. Bank of America says that it guarantees “reimbursement for fraudulent transactions when reported within 60 days from statement date.” Chase has a similar claim, promising that “your account will be credited by the end of the next business day as we resolve the unauthorized transaction dispute.” What is the problem, then?
The problem is that your money is still taken out of your account to start. Unless you are in the habit of checking your bank account every day, it may take a while to realize that someone has gotten your debit card number. During that time, your account could have been wiped out, and you might be bouncing checks to utilities, having debit card transactions declined for insufficient funds, or not have immediate access to that money in an emergency. Its true that in all likelihood the bank will get you your money back quickly, but you may still have quite a headache to deal with. This is where a credit card comes in handy; you always get to see the final bill before paying it.
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