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What the New DOL Fiduciary Rule Means For You

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Geeting advice on future investments

Seven years in the making, the Department of Labor’s long-awaited Fiduciary Rule finally went into effect June 9.* The full breadth of the rule’s impact won’t officially be felt until January 2018, when advisors must be fully compliant with the rule’s requirements.

The rule survived an upheaval by the Trump administration, which had hinted earlier this year that it might seek to block the rule’s implementation.

Aimed at saving consumers billions of dollars in fees in their retirement accounts, the Department of Labor’s new fiduciary rule will require financial advisers to act in your best interest. However, the final rule includes a number of modifications, including several concessions to the brokerage industry, from the original version proposed six years ago.

Here’s what you need to know about these new rules and how they may affect your money.

*This story has been updated to reflect the rule’s successful release.

What is a Fiduciary?

So what exactly is a fiduciary? According to the Certified Financial Planner (CFP) Board, the fiduciary standard requires that financial advisers act solely in your best interest when offering personalized financial advice. This means advisers can’t put personal profits over your needs.

Currently, most advisers are only held to the U.S. Securities and Exchange Commission’s suitability standard when handling your investments. This looser standard allows advisers to recommend suitable products, based on your personal situation. These suitable products may include funds with higher fees — with revenue sharing and commissions lining their own pockets —  which may not reflect your best possible options.

What is Changing Exactly?

Affecting an estimated $14 trillion in retirement savings, the Department of Labor’s new fiduciary rule is meant to help you receive investment advice that will aid your nest egg’s ability to grow. Many investors have been pushed toward products with high fees that quickly eat away at profits.

All financial professionals providing retirement advice will now be required to act as fiduciaries that must act in your best interest. This applies to all financial products you may find in a tax-advantaged retirement accounts. Because IRAs offer fewer protections than employment-based plans, the Department is concerned about “conflicts of interest” from brokers, insurance agents, registered investment advisers, or other financial advisers you may turn to for advice.

Despite these new protections, the Department of Labor also made some key concessions. Previously, brokers were required to provide explicit disclosures about the costs of products to their clients. This included one, five, and ten year projections. However, this requirement has been eliminated. After heavy pushback from the industry, the Department of Labor also agreed to allow the use of proprietary products.

Additionally, the Department of Labor has pushed the deadline for full implementation of their new rules. Firms must be compliant with several provisions by June and fully compliant by January 1, 2018.

Despite all of these concessions, the Department of Labor’s highest official insists the integrity of their rule is still in place.

Exceptions You Should Know About

Although advisers working with retirement investments will no longer be able to accept compensation or payments that create a conflict of interest, there’s an exception many brokers will likely pursue.

Firms will be allowed to continue their previous compensation arrangements if they commit to a best interest contract (BIC), adopt anti-conflict policies, disclose any conflicts of interest, direct consumers to a website that explains how they make money, and only charge “reasonable compensation.” The best interest contract will soon be easier for firms and advisers to use because it can be presented at the same time as other required paperwork.

How These New Rules Might Affect Your Investment Options

Although these new rules don’t call out specific investment products as bad options, it’s expected advisers may direct you to lower-cost products, like index funds, more regularly. New York Times also predicts the new regulations may also accelerate the movement toward more fee-based relationships. They also suggest complex investments like variable annuities may soon fall out of favor.

What Will the Larger Impact of These Changes Be?

Backed by extensive academic research, the Department of Labor’s analysis suggests IRA holders receiving conflicted investment advice can expect their investments to underperform by an average of one-half to one percentage point per year over the next 20 years. Once their new rules are in place, they are anticipating retirement funds will shift to lower cost investments, savings consumers billions of dollars.

What You Can Do To Protect Yourself

Although these new rules are a positive step for consumers, it’s important to remember there are still a wide variety of financial professionals out there. And the quality of the advice you receive can vary greatly based on their level of education, experience, and credentials. In order to find someone who is equipped to handle your unique financial situation, you will still need to do your homework.

You may want to start by looking for a fee-only financial planner. Due to the nature of how they are compensated, fee-only financial planners operate without an inherent conflict of interest. They are paid a fee for the services they provide and they don’t earn commissions from product sales.

Once you’ve narrowed down your options you’ll want to ask about their credentials, what types of clients they work with, what types of services they offer, while carefully checking their background and references. Like any professional working relationship, you’ll want to feel comfortable with someone you are receiving financial advice from, so it’s important to make sure your personalities and priorities are aligned. Remember, no one cares more about your money than you do. That’s why it’s essential to carefully vet anyone who is working with you to secure a healthier financial future.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Kate Dore
Kate Dore |

Kate Dore is a writer at MagnifyMoney. You can email Kate at kate@magnifymoney.com

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4 Digital Banks That Treat You and Your Money Well

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4 Digital Banks That Treat You and Your Money Well

If you are still banking with a physical bank, it may be time to go digital instead. Digital banks offer several benefits and features that physical banks can’t, or don’t, offer due to the cost of operating a physical location. Because online banks don’t have these overhead costs, they can offer more benefits to help customers save money on fees, and earn more money via interest too.

There are several online banks from which financially savvy customers can choose from these days. If you are looking to go digital with your banking, here are a few good options to consider.

Ally Bank

Interest Checking Account
Ally is a digital bank with a full range of services, including online savings accounts, money market accounts, CDs, IRAs, checking accounts, credit cards, and more. It has also been named the “Best Online Bank” 5 years in a row from 2011 to 2015 by Money Magazine.

Ally has become a popular place for people to store their savings in an online savings account due to the great interest rates on savings accounts and money market accounts. These accounts offer daily compounded interest, FDIC insurance deposits, and no monthly maintenance fees.

Checking accounts with Ally Bank allow customers to earn interest on their money, which is something that is not as common with physical banks.

Customers of Ally Bank also enjoy the ability to use any of the 43,000+ Allpoint ATMs in the U.S. for free. Plus, Ally Bank reimburses up to $10 per statement cycle for fees incurred at other ATMS. It also offers exceptional customer service with 24/7 live customer care.

Charles Schwab

High Yield Investor Checking Account
Charles Schwab is another bank that started offering more digital products for its customers, including checking and savings, lending, and investing.

The High Yield Investor Checking account is a popular choice for many customers as Schwab offers this account with no ATM fees worldwide and unlimited ATM reimbursement for fees incurred each billing cycle. It also offers no account minimums or monthly services fees, and easy banking 24/7 with Schwab Mobile. The Schwab Bank High Yield Investor Checking account is linked to your existing Schwab One brokerage account so you can manage both accounts with one login.

The interest rate on the Schwab Bank High Yield Investor Checking account is 0.06% APY no matter your balance, but you do have to open a Schwab One brokerage account in order to use a Schwab Bank High Yield Investor Checking account. There are no fees or minimum balance for the Schwab One brokerage account, and you can transfer funds between the two accounts for free.

Schwab also offers a High Yield Investor Savings account with no minimum balance or monthly service charge. The interest rate is 0.10% APY on all balances. It also qualifies for the unlimited ATM fee rebates.

USAA

USAA members USAA offers checking accounts, savings accounts, credit cards, and many different loan products for cars, homes, and more. According to its website, they have been rated 4.5 out of 5 stars by over 16,000 members.

USAA offers free checking with a minimum opening balance of $25. After you open a free checking account, there is no minimum balance, no monthly service fee, overdraft protection, fee bill pay, and free ATMs nationwide. USAA reimburses up to $15 in ATM fees per month.

Like most digital banks, USAA offers interest on its checking accounts, although it is lower than many competitors at only 0.01% APY. Its savings accounts offer rates of 0.05% APY to 0.15% APY depending on the balance of your account.

There is a catch: you need military affiliation to be able to open an account. This can include a connection through a family member, such as a parent or spouse.

Capital One 360

360 Checking Capital One 360 offers “no fees, no kidding” checking and savings accounts with no fees and no minimums. While it doesn’t offer ATM fee reimbursement, Capital One does offer a unique feature compared to many other digital banks: the ability to deposit cash into your checking or savings account with select Capital One ATMs in a 360 Café or Capital One Bank location.

The interest rates on a 360 Checking account range from 0.20% APY to 0.90% APY, depending on your balance.

  • $0 – $49,999.99: 0.20% APY
  • $50,000 – $99,999.99: 0.75% APY
  • $100,000 or more: 0.90% APY

The interest rate on a 360 Savings account is 0.75% APY.

If you’re a Capital One credit card customer, you can also conveniently access both your credit card information and Capital One 360 banking information with a single sign-on.

Another unique feature of Capital One 360 is the ability to create multiple savings account with any nickname you choose. You can also use their “My Saving Goals” section to make automatic savings deposits and set goals for your various savings accounts.

Which Digital Bank Is Right for You?

As digital banks become more popular, it can be difficult to determine which one might be the best fit for you. Of course, it depends on several factors, such as the features and services you most value, how you plan to use your account, and more. No matter which digital bank you choose, the important thing is that you are making the right decision for you and your money.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Kayla Sloan
Kayla Sloan |

Kayla Sloan is a writer at MagnifyMoney. You can email Kayla at Kayla@magnifymoney.com

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Eliminating Fees, Personal Loans

4 Companies That Help You Get Your Paycheck Early

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

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Financial emergencies have a habit of cropping up at the worst possible time — when you’re stuck in-between paychecks. Perhaps you need $250 for an emergency car repair, but you just paid rent and won’t have the funds until your next payday in two weeks. Normally, you might want to turn to a credit card or a payday loan, racking up onerous fees in the process.

What if you could get a portion of your next paycheck early without paying hefty fees or interest?

That’s the premise behind the following four services. They try to help workers make ends meet without taking on debt by giving them access to the money they earn when they earn it.

Activehours

  • Available if you have direct deposit.
  • Withdraw up to $100 each day and $500 per pay period.
  • No fees or interest.

Activehours What it is: Activehours is an app-based service available on Android and iPhone smartphones. Once you download the app and create an account, you connect your bank account and verify your paycheck schedule. You must have direct deposit set up and linked to a checking account.

How it works: In order to use Activehours, you need to upload your timesheet, either manually or by connecting a time-tracking account to the app (your employer must use one of the eligible timesheet partners in order for this to work). Using this information, Activehours estimates your average take-home hourly rate after taxes and deductions.

As you work, the hours will be automatically shared with Activehours, or you may have to upload your timesheet. You can then cash out a portion of your earned pay before payday.

You can withdraw up to $100 each day. Based on your account balances and Activehours use, the pay-period maximum could increase up to $500. The payment will arrive in your checking account within a few seconds, or within one business day, depending on where you bank.

Activehours doesn’t connect to your employer’s payroll. It connects to whatever bank account you use to collect your pay. The next time your paycheck hits your bank account, Activehours will automatically withdraw what you owe. There aren’t any fees or interest charges for using the service, however Activehours does ask for support in the form of tips.

DailyPay

  • Works with popular ride-share and delivery services.
  • Get paid daily for your fares or deliveries.
  • There’s no interest. You pay a flat fee that is subtracted from the day’s earnings.

Dailypay What it is: DailyPay caters to workers who are employed by ride-share or delivery services, such as Uber, Postmates, Instacart, Fasten, and DoorDash. It can also be used by workers at restaurants that use delivery apps, such as GrubHub, Seamless, or Caviar.

How it works: After signing up for DailyPay, you’ll need to connect a bank account where DailyPay can send you payments. Next, you’ll need to connect your DailyPay account with the system your employer uses to track your hours. DailyPay tracks the activity within the accounts and sends you a single payment with the day’s earnings, minus a fee. Restaurant workers get paid for the previous day’s delivery earnings, minus a fee, from all the connected delivery programs.

About those fees…

Fees are based on how much you ear per day. As a driver or on-demand worker, when you make less than $150 during a day you’ll pay a $0.99 fee. For workers who earn more than $150 in a day, the fee is $1.49. Restaurant workers’ fees vary based on order volume, but are often around $2.49 for each payday. In either case, you’ll need to update your account with each service and redirect the payments to go to DailyPay.

PayActiv

  • Employer must sign up and offer PayActiv as a benefit.
  • You can withdraw up to $500 in earned income before payday.
  • $5 fee for each pay period when you use the service.

Payactive PayActiv is an employer-sponsored program that allows employees to withdraw a portion of their earned wages before payday. While you can’t sign up on your own, you can ask PayActiv to contact your employer about offering the service. There’s no setup or operating costs for employers.

Once your employer offers PayActiv, you sign up and withdraw money as soon as you earn it. You can withdraw up to $500 early during each pay period via an electronic transfer or withdrawal from a PayActiv ATM (available at some employers’ offices).

The early payment comes from PayActiv, but it isn’t a loan and you won’t need to pay interest. Instead, your employer will automatically send PayActiv an equivalent amount from your next paycheck.

There is $5 fee per pay period when you use the service, although some employers cover a portion of the fee, according to Safwan Shah, PayActive’s founder. As a member, you’ll also get free access to bill payment services and savings and budgeting tools.

FlexWage

  • Employer must sign up and offer FlexWage as a benefit.
  • You’ll receive a reloadable debit card tied to an FDIC-insured account where your employer deposits your pay. You can add earned pay to your account before payday.
  • There is a flat fee of $3 to $5 for early transfers.

Flexwage FlexWage is an employer-sponsored program that relies on the use of a payroll debit card and integrates with employers’ payroll systems. If your employer offers FlexWage, you can get your paycheck deposited into an FDIC-insured account with the linked Visa or MasterCard debit card. You can also add earned, but unpaid, wages to your account before payday without paying any fees.

With FlexWage, the employer determines how often you can make early withdrawals and the maximum amount you can withdraw. Unlike PayActiv, FlexWage doesn’t act as a middle-man. Your paycheck advances will come directly from your employer’s account.

Bottom Line

These four companies work slightly differently, but they share the same basic premise: giving you early access to the money you earned, without saddling you with a painful assortment of fees. If you’ve had to rely on borrowing money in the past when funds are tight, these could be a better alternative to credit cards or payday loans.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Louis DeNicola
Louis DeNicola |

Louis DeNicola is a writer at MagnifyMoney. You can email Louis at louis@magnifymoney.com

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FamZoo Review: a Virtual Family Bank to Teach Kids About Money

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FamZoo Review

When it comes to banking, most kids learn the hard way just how expensive their mistakes can be — with every sting of an overdraft fee or bounced check. Parents who would rather teach their kids how to manage their money without the risk of fees might consider FamZoo, a virtual family banking program. For a modest subscription fee, FamZoo provides the tools parents need to teach their kids about money management and banking.

Is FamZoo worth the cost?

In this review we cover:

  • What is FamZoo?
  • FamZoo Fees
  • FamZoo Benefits
  • Who Should Consider FamZoo?
  • FamZoo Drawbacks

What is FamZoo?

FamZoo is a “Virtual Family Bank” that allows parents to teach their kids about banking

FamZoo

without requiring kids to pay fees (as a parent, you will pay a monthly subscription fee).

FamZoo has two versions. The first version is a virtual IOU account that formalizes and tracks money flowing between parents and kids, but is not a bank at all. The second version gives prepaid debit cards to parents and kids that can be used anywhere that debit cards are accepted (including ATMs). Both versions cost the same amount for parents.

In addition to basic banking, FamZoo offers family oriented features. For example, family member can request reimbursements from other family members, and parents can offer loans to their kids and teach them to pay back loans in installments. With parent approval, money moves between family accounts instantaneously. FamZoo allows parents to fund allowances, and it helps kids divide their money between saving, spending, loan repayment and giving. As a parent, you can set a parent paid interest rate to encourage savings.

If you opt for prepaid debit cards, the cards will not allow your kids to overdraft, and parents and kids have access to a website to check balances, to review transaction history and more. Kids can also withdraw money fee free from in network ATMs.

FamZoo Fees

Subscription fee: Parents pay $5.99 per month (or $60 for 2 years with pre-payment) for up to four prepaid debit cards including a parent loading card. If you want more than four cards (for example to separate giving, saving and spending accounts, or if you have more kids), you pay a one-time $2 fee per card. If you lose a card, you can receive a replacement card for free.

Aside from the monthly subscription fee and the one-time extra card fee, FamZoo does not assess any fees, even if you manage to overdraft (which is possible if your transaction “settles” for an amount greater than was initially assessed).

Load fees: Depending on which financial products you use, as a parent, you may pay a fee to load your card. If you have access to Wells Fargo Sure Pay, Dwolla or PayPal, you can transfer money to your FamZoo account for free, or you can fund the account for free via direct deposit from your paycheck. Other loading options cost between $.95 and $7.00 per transaction. The institution where you initiate the transaction charges these fees, but FamZoo doesn’t add any extra fees.

ATM fees: FamZoo is part of the MoneyPass ATM network and withdraw cash at no fee. However, FamZoo warns that the other institutions usually charge a fee for out-of-network ATM use, and these fees aren’t reimbursed.

FamZoo Benefits

Parents have control: FamZoo is a stripped down bank that gives parents banking control, but it also has a few mainstream financial benefits. For example, MasterCard Zero Liability Protection backs FamZoo cards which means that they have fraud protection. Like other debit cards, they offer transparency, the ability to freeze an account if the card is lost or stolen, and the ability to track spending. And, each account has its own routing and account number so kids can get their paychecks deposited like it’s a regular bank account.

Helps teach saving and budgeting: The primary benefit of FamZoo is the way helps parents raise financially savvy kids. The software allows you to teach your kids to track expenses, set budgets, and split money into various accounts (a modern version of the envelope system). As a parent, you can add complexity (adding interest, loans, etc.) as your kids mature.

FamZoo Drawbacks

False sense of real-world banking fees: FamZoo puts guardrails in place, so kids don’t get hurt when they fail to manage their money well (they can empty out their bank account, but they won’t pay overdraft charges and they cannot go into debt except to their parents), but parents who use the software also need to teach their kids about banking fees outside of FamZoo. This will be especially important as teens set up their first checking accounts.

Who should use FamZoo?

FamZoo suits parents with kids who don’t yet have jobs or their own bank accounts who want to teach their kids financial principles. FamZoo makes teaching basic finances easy, and if your kids make mistakes, they don’t have to pay outsized fees.

Parents of early elementary through early high school will appreciate the valuable teaching opportunities that FamZoo provides, and parents with older teens and college students can advantage of transferring money with ease.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Hannah Rounds
Hannah Rounds |

Hannah Rounds is a writer at MagnifyMoney. You can email Hannah at hannah@magnifymoney.com

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Best of, College Students and Recent Grads, Eliminating Fees

Best Bank Accounts for College Students

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

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Best Bank Accounts for College Students

For most students, the college experience is like dipping one’s toes into the “real world”. Yes, a student may be living away from home but their parents are probably still helping financially. Before anyone blushes, it’s okay. According to a University of Michigan study, more than 60% of adults between the ages of 19 to 22 still receive financial support from their parents. They receive, on average, $7,500 per year. This includes costs like college tuition, rent, and transportation. This makes it important that parents find an economical, fee-free way to send money to their children.

But remember, college is typically a transition period in which child should begin having more control over their financial lives, which means finding the best checking and savings accounts. Our round up of bank accounts for college students below offer options for parents to send children money without fees, stellar overdraft protection and even foreign ATM reimbursements.

For Parents Sending Money to Students

Bluebird by American Express

You may have seen these blue cards at Walmart checkouts. They’re quite popular. The Bluebird card serves as a prepaid debit card of sorts. It’s free to set it up online. It costs $5 for an in-store Set Up Kit to begin using right away.

It doesn’t cost anything to send or receive money. Parents can load the card in a number of ways. The fastest way is to send money to the card via an electronic bank transfer (yes, there is an app). Simply connect a checking or savings account to the card and begin transferring funds. It’s just like transferring funds from one bank account to another. Funds can also be added at a Walmart checkout register via cash or debit. Finally, parents can also load the card even by sending in a paper check.

A cardholder can request money for free. They can simply send a request for ‘new shoes’ and a parent can simply transfer ‘x’ amount of dollars to cover the cost. It’s pretty simple.

Another unique aspect of this card is you can add Walmart Buck$. These are funds that can only be used at Walmart. The funds cannot be redeemed as cash, cannot be withdrawn at ATMs and cannot be transferred to a bank account. This may stop the hold holder from using the money irresponsibly.

Fees and Fine Print

  • No activation fee
  • No monthly fee
  • No annual fee
  • No overdraft fee
  • No ATM fees when in-network. Out of network ATM transactions are $2.50 each plus any surcharges from the bank that owns the ATM. $2.50 is a pretty high fee.

The information related to Bluebird by American Express has been collected by MagnifyMoney and has not been reviewed or provided by the issuer of this offer.

Best Bank for Overdraft Protection 

Ally Bank

This is our pick because Ally Bank offers a unique overdraft protection plan. Simply link an Ally savings account to an Ally Checking account and it’s protected from overdrafts. However, if the savings account balance isn’t sufficient, an overdraft fee of $25 will be charged. The overdraft fee $25 and is charged a maximum of once per day. But that is still low compared with most banks, with the Big 4 Banks all charging over $30 per incident and often four or five incidents per day.

Ally also provides $10 worth of ATM fee reimbursements per monthly statement cycle, which enables you to take out money at out of network ATMs and still get refunded. But what about other fees?

Fees and Fine Print

  • No monthly maintenance fees
  • Free standard checks
  • Free cashier’s checks
  • No fee for having a zero balance
  • No incoming wire fees (domestic or international)
  • Free Allpoint® ATM usage (43,000+ in the US) plus $10 worth of ATM fee reimbursements each month.
Ally Bank

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Best Bank Account for Free ATM Reimbursements

Charles Schwab High Yield Investor Checking Account

Thinking about studying abroad? The Charles Schwab High Yield Investor Checking account reimburses all ATM fees, even internationally. This account is ideal for traveling students. Even for those not studying abroad, this may be a good option for any travel overseas.

Charles Schwab High Yield Investor Checking Fees

  • No ATM fees
  • No monthly service fee
  • No overdraft protection fee. Although owners must also have a Charles Schwab brokerage account or savings account to link for overdraft protection. Should funds in the overdraft account be insufficient, a $25 fee will be charged for up to 4 incidents daily. This overdraft protection is pretty abysmal when compared with Ally.

Brick-and-Mortar Options

If the parent is more comfortable with having physical locations, there are still brick-and-mortar banks, which offer good benefits and low fees. Before committing to a big bank, check the local credit unions. They often offer a better value. Compare the credit unions with the other banks listed in this post. Ask about overdraft protection, overdraft fees, minimum account balance, and monthly maintenance fees. The good thing about a local credit union is the customer service. Don’t be too shy to ask about fees.

The downside to local brick-and-mortar options is the parent may be in one location and the child in another, making it difficult for one party to withdraw or deposit money. However, most credit unions today have good online banking systems. They may not have mobile deposits or an intuitive app but they have what counts. If ease of use is still a concern, look for a big bank with many locations. Fees will likely be higher and interest lower, but convenience is very important for a college student. After all, they need to spend their time studying.

Don’t Be Afraid to Break Your Routine

Technology has really changed the way banking works today and it’s provided an option for fewer fees and easier transactions. Just because you’ve always banked at a certain establishment, doesn’t mean you should stay there – especially if you’re trying to make it cost-efficient and simple to send money to your college-aged children.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Will Lipovsky
Will Lipovsky |

Will Lipovsky is a writer at MagnifyMoney. You can email Will at will@magnifymoney.com

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Consumer Watchdog, Eliminating Fees, News

Banks Generate $30bn Of Abusive Overdraft Fees

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MagnifyNews-02-01

Banks generated $7.65 billion of overdraft revenue during the first three months of 2015, according to the Wall Street Journal. On an annualized basis, banks are poised to generate $30.6 billion in overdraft revenue this year. Despite the passage of Regulation E, multiple lawsuits and the threat of regulation from the Consumer Financial Protection Bureau (“CFPB”), fees have only reduced by 4% compared to 2014. Overdraft fees have historically accounted for an outsized percentage of checking account revenue at the largest banks in the country, and it looks like these fees will remain a meaningful contributor to revenue in the near future.

Are Overdraft Fees Predatory?

The average overdraft fee is about $30 per incident. In addition, many banks charge extended overdraft fees. At some banks, it can cost $70 to borrow $6 for six days as a result of the extended overdraft fee. Even worse, nearly 50% of banks in the country will re-order transactions to increase the number and amount of overdraft fees charged. Rather than debiting money from your checking account in the order that the debits occurred, banks often debit your account in the order that they wished the transactions would have occurred.

Because overdrafts are so expensive, the vast majority of people avoid them. In Europe, an overdraft line of credit is a cash management product that makes sense for everyone. Keeping too much cash is expensive, because it could be better invested or placed into a long-term certificate of deposit. People of all economic backgrounds take advantage of generous overdraft lines of credit, which charge very low interest rates. Borrowing $6 for six days would only cost a few pennies in most large European banks.

However, American banks have made going overdraft a sin and high overdraft fees the punishment. As a result, people with money have completely avoided overdrafts. Only a small percentage of the population uses the overdraft product. 8% of bank customers generate 75% of overdraft fees. Overdrafts have become a short-term borrowing mechanism for people who have no other option. And overdrafts offered by banks are often more expensive than payday lenders. The typical payday lender charges $15 to borrow $100 for 2 weeks. As I mentioned in the Bank of America example, large banks are charging much more than that.

A banking practice is considered predatory when it meets a few definitions:

  • It targets people with low income or limited financial means
  • It charges a price that is dramatically higher than the cost of providing the service
  • It has opaque and complicated pricing that makes it difficult to understand the true cost of the product
  • It charges the fee when someone is in a vulnerable position and has few alternatives

Overdraft fees meet all of those requirements. The price of an overdraft is dramatically higher than the cost of providing the service. Banks charge an average of $30 to decline a transaction, which costs the bank close to nothing. When banks approve a transaction, credit risk is taken. However, the banks are charging effective interest rates above 400% in the form of fees. The banks are addicted to the revenue, which is why the revenue remains despite the backlash.

As overdrafts become more expensive, fewer people will use the service. Banks will extract more revenue from people who have fewer funds and a lower net worth. In my opinion, overdrafts are predatory and action is required.

Isn’t The Situation Improving?

Most headlines have reported the reduction in overdraft fees. And a 4% reduction is material. This reduction has come from banks eliminating high-to-low transaction ordering and putting limits on the number of overdraft fees that can be charged per day. At many banks, it used to be unlimited.

However, banks have not reduced the headline rate. Bank of America has been bragging about its commitment to the customer. But lets look at what they have really done:

  • The overdraft fee remains $35 per incident, and 4 incidents can happen each day
  • The extended overdraft fee remains in effect, charging $35 after 5 days
  • The bank eliminated the option to opt in to debit card and ATM overdraft fees. However, very few people are opting in to this service

In short, the changes have been cosmetic. And without rules from the CFPB or competitive pressure, I doubt the policy will change. The poorest Americans will continue to find Bank of America more expensive than most payday lenders.

What Alternatives Exist

I personally do not like doing business with institutions that create intricate webs of “gotcha” fees. That is why I switched to Ally Bank, which has virtually eliminated overdraft fees from its product offering. Most internet banks have done the same thing, and you can compare accounts here.

Unfortunately, if you need a branch, most branch-based banks remain expensive. And most credit unions are not far behind, charging $25 when the big banks are charging $30. Community banks, credit unions and large banks are all getting fat from these fees. Despite the regulatory pressure, lawsuits and negative press, our nation’s poorest will give banks another $30 billion of overdraft fees this year.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Nick Clements
Nick Clements |

Nick Clements is a writer at MagnifyMoney. You can email Nick at nick@magnifymoney.com

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Eliminating Fees, Strategies to Save

8 Savings Solutions for Dynamic Pricing

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

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Pretty Young Multiethnic Woman Holding Phone and Credit Card Using Laptop.

This article comes to us from consumer savings expert Andrea Woroch.

One of the most powerful tools retailers use to trick you into spending money is dynamic pricing. This refers to the practice of fluctuating prices on products throughout the month, week or even day. Both online retailers and brick-and-mortar stores use analytical tools to manipulate prices based on demand, time of day, weather and even zip code with the ultimate goal of maximizing profits. For example, a study tracking Amazon found the online giant changed the price on a GE microwave nine times in just one day.

By adjusting prices based on consumer and market behavior, retailers can capture more customers while getting the most money from each sale. That means the price you viewed on a product in the morning could change by the time you get home from work at night. These analytical tools may also identify an IP address for repeat searches and subsequently send a price soaring.

With such advanced technology working against you, dynamic pricing may seem unbeatable. However, the following tactics can put you back in control of your spending and help you snag the best price on a purchase.

Clear Your Cookies

Cookies (in Internet-speak) are what help you avoid entering your login information every time you check your bank statement, but they’re also responsible for tracking your buying patterns across the web. This creates a digital profile of your purchasing behavior and sites adjust pricing and search results accordingly. Erase your cookies before your next online shopping task to receive unbiased results.

Shop Covertly

A study about price discrimination from Northeastern University in Boston revealed registered users to sites like Orbitz were sometimes presented with better deals than non-registered users. Clearing your cookies as advised above could impact member pricing, so in these cases it’s best to browse covertly. If you’re a repeat customer with a login, use Chrome’s Incognito mode or Firefox’s Private tab to search for prices and compare them to traditional browsing to determine any price differences.

Compare and Track Prices

The biggest weapon against dynamic pricing is price tracking. Knowing the history of a product’s price can show you how high or low it’s been, and during what times. CamelCamelCamel offers price history and tracking for Amazon products, while TrackIf.com helps you track products from other retail websites. You can also use price comparison search engines like PriceGrabber to find out who has the best price at the moment. Finally, browser add-ons like Invisible Hand alert you when a product you’re looking at is better priced elsewhere.

Set Sale Alerts

When you’re short on time, setting sale alerts is helpful to learn when a product’s price drops due to a promotion or available coupon. Pinterest actually has a setting to alert you when something you’ve saved (or “pinned”) from a retail website drops in price. You can also use SnapUp, an app that organizes your mobile screenshots of products into a database and lets you organize by category (“clothing” or “John’s birthday”), and sends you an email when product prices drop. PoachIt offers similar price-tracking features but highlights specific coupon codes that help you offset the cost of your purchase.

Apply a Coupon

Obvious, yes, but oh-so-important! If a checkout page has a field for a promo code, take a moment to look for one before you proceed. Search for coupon codes on deal sites like CouponSherpa.com to easily find deals from specific stores or within product categories. If you’d rather not search through coupon sites, install the Honey browser extension and have available codes automatically pop up during checkout.

Price Match

To compete for your business, several major retailers are willing to match one another’s prices, making your pursuit of savings much easier. Plus, if you have perks with one retailer (like rewards cash), you don’t have to sacrifice those rewards to get a better price. Review the retailer’s price-match policy or open up a live chat session with an online rep. You’ll have to provide proof of the better price but it should be as simple as copying and pasting a link from the other store.

Name Your Own Price

Ideally, you could always pay the price you think something is worth, but in retail it doesn’t typically work that way. However, when it comes to gadgets, electronics and, um, baby gear, Greentoe gets us to that point. Search for your desired product and Greentoe shows you the lowest and average online price, plus gives you an idea of how well your offer will be received. Submit an offer and the first retailer to accept it gets the sale, and you get the product at the price you want. You also have the power to name your own price through portals like Craigslist or Facebook Groups, where you can negotiate your preferred price with the seller.

Call Customer Service

When in doubt, give customer service a call and speak to someone. You’d be amazed what you can get by simply asking. A friend of mine was disappointed with part of a purchase she made over Black Friday weekend, and was torn about whether to keep it anyway because the return-shipping fees would be outlandish. I encouraged her to call customer service and let them know she wasn’t satisfied with the product. She did, and the company sent her a return-shipping label, no questions asked. I’ve also used this tactic countless times and have had expired coupons honored or been granted free overnight shipping.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Erin Lowry
Erin Lowry |

Erin Lowry is a writer at MagnifyMoney. You can email Erin at erin@magnifymoney.com

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Eliminating Fees, Life Events

The Downsides of Having Joint Bank Accounts

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

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Joint Banking

Although I am a big supporter of having joint accounts with your spouse, I won’t deny there are downsides. Currently, my husband and I use Charles Schwab for most of our banking and investment needs.

We opened that account when we moved out of the country because Charles Schwab charges no foreign transaction fees and refunds all ATM fees. They also have excellent customer service and were able to help me with getting my paycheck deposited and a laundry list of other issues as we tried to navigate the tricky waters of international banking.

Although joint bank accounts inspire teamwork and openness in marriage, my husband and I definitely had some tense moments over the last five years of banking together. 

1. Analyzing Each Other’s Purchases

One of the most common reasons men and women want their own bank accounts in a marriage is because they want the autonomy to spend as they please. Early in our marriage, before we had regular money dates or discussed our financial goals, I frequently went through our online accounts pointing to various charges and asking my husband why he made them. After several months of this, he was scared to make a purchase at all, not knowing if I’d point it out or not. Over the years, we’ve remedied this problem by having our own cash spending money and also starting a rule that you only have to ask the other one about a purchase if it’s over $50.00. That way, I overlook all the little Starbucks charges and he overlooks all the small updates I make to my business.

So, depending on your upbringing or the personality of your spouse, having this oversight can be difficult on a marriage, which is one of the reasons I’m counting it as a downside of having joint accounts.

2. Difficulty in Gift Giving

A week before Mother’s Day this year, my husband told me to look out for any packages addressed to him. He didn’t want me to see the return address because it was a Mother’s Day present. I asked, “Is it from an Etsy seller?” and he was so disappointed.

Technology and our joint banking accounts ruined a little of his surprise. My Mint App (one of many financial tools I use) already told me he spent money at Etsy. I assured him that Etsy was a pretty big range and that I wasn’t disappointed at all, but it was more about the principle of the matter.

This has happened several times in our relationship, to the point where we tell the other one around Christmas time to not look at our account for a few days, which isn’t good either. Many people have suggested that we simply buy gifts with cash, and although that works at times, we both prefer the convenience of online shopping.

3. All Your Eggs in One Basket

In 2005 my family’s life completely changed after Hurricane Katrina blew its way through our town. It was so hectic after the storm. Banks were closed, ATMs weren’t working, and it was difficult to do anything that required using local banks. Everything was underwater. My mom was able to call an open branch of her bank and stop the large check she just wrote for my student housing expenses at my college (which was by then totally closed because of the storm.) I remember how stressed they both were.

Having a joint checking account and putting all your eggs in one basket can be detrimental in an emergency or if your bank has a breech or some other security issue. Spreading out your accounts and your money in different banks and different accounts provides a layer of security that you can’t get with just having one main joint account.

My husband and I feel comfortable banking with Schwab because it’s such a large company but for an extra layer of security, we do have separate accounts in Smarty Pig, an online high yield savings account, which does not allow joint accounts. So, if you do like having joint accounts, you should know that some banks are better about allowing joint accounts than others.

It’s All About Communication

Really, when it comes to joining finances with your spouse (or not), it all comes down to communication and trust. I know many couples that are happily married with joint accounts because they have to work together on all of their money decisions. I also know other couples that are equally as happy with their separate accounts because they trust each other to make wise financial choices and feel like they have a sense of independence.

Whichever path you choose, just remember to have regular financial check-ins to see the status of your combined net worth so you know how far you have to go before you can reach financial goals and ultimately retire.

Find the best accounts for your joint banking needs by using our comparison table. 

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Cat Alford
Cat Alford |

Cat Alford is a writer at MagnifyMoney. You can email Catherine at cat@magnifymoney.com

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