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Eliminating Fees

Your neighborhood branch is making $1 million a year in hidden fees


Banks make a lot of money from basic checking and savings accounts. It may seem surprising that boring, basic accounts remain such big money-makers for the banks, but banks are making billions every year, largely because we stay with large traditional banks for no apparent reason. Banks call it “inertia,” and they profit from it.

promo-savings-halfOn savings accounts, banks make money by paying depositors virtually no interest. Most major banks (including Bank of America, Citibank, Wells Fargo and Chase) pay an interest rate of only 0.01% on their savings accounts. And then they use the money customers deposit to make loans at much higher rates. So, we are basically giving interest-free loans to banks.

There is good news: we no longer have to settle with 0.01%.

Branch-free banks are challenging traditional banks by paying interest rates of 1% or more. That may not seem like a big number, but it can be. If you have a $20,000 savings account, that is the difference between earning $2 or $200 of interest a year. We have compiled a list of the highest interest rate savings accounts, which we update daily. The banks do not pay us, so our recommendations are completely unbiased.

After raking in money on savings accounts, Banks turn their attention to checking accounts. Banks make most of their money by charging the following fees:

  • Overdraft fees: which represent approximately 60% of the fees charged by banks. Only 10% of the population pays 75% of the fees, and they tend to be the most economically vulnerable, including our troops.
  • ATM fees: which can add up quickly. If you go out of network, you pay ATM fees to two banks: your bank, and the bank that owes the ATM
  • Monthly fees: which most people get waived. A direct deposit or minimum balance usually takes care of this fee.

And these numbers add up quickly. We have used FDIC data to see which banks charged the most per branch in fees on checking and savings accounts. Although we expected big numbers, even we were surprised at how much fee income was generated. Bank of America was the worst offender of the big banks, generating nearly $1 million per year per branch in fees. Every time you drive by a Bank of America branch, remember that the bank is earning $1 million in annoying fees alone.


We list the fees per branch below. But, just like with savings accounts, there are new alternatives out there. You can now get a bank account with no monthly fee (and no direct deposit requirement), no ATM fees (including reimbursement of other bank ATM fees) and no overdraft fees. Some of our favorite options include Bank of the Internet and Ally Bank. But you can compare all of the account on our checking account page.

If you are drowning in overdraft fees, or travel and are tired of ATM fees, then switching is a no-brainer. But, you may be thinking that you never pay any fees and don’t really have any problems with your bank. I was in that camp. But then I decided that I didn’t want to stay with an organization that just waits for me to make a mistake, and then charges an outsized fees. Like any other industry, I want to reward better organizations with my business, and I switched to Ally.

Stay Up to Date

price checker thumbnailAt MagnifyMoney, we want people to get in the habit of comparing, ditching and switching. If you find a gas station with cheaper gas, you switch. But, most Americans just stay with their bank. We want people to pay attention to the rate, tricks and traps and be ready to switch when a better deal is out there.

To keep you informed, we created our PriceChecker email, which goes out twice a month. With a quick glance, you can see if you have the best rate on your savings account. We also show the best mortgage rates, credit card deals and cashback rewards. And, whenever we find a fine print trap, we let you know about it. You can sign up for our email list here.

#1 on the list is Fort Hood Bank, targeting the people who serve our country in the armed forces.  Their customers will likely have limited assets, and the fee revenue will likely be dominated by overdraft and NSF fees.

#2 on the list is Cole Taylor Bank, which has made news targeting college students on financial aid, who also have limited assets.

#3 on the list is The Northern Trust Company, a private bank.  The average account generated $477 in fees last year. They have 77 offices.

#4 is Bank of America, with 5,319 branches. BofA looks particularly bad when compared to the other big 4 banks:

  • Bank of America charges, by far, the most fees per branch.  23% more than Wells Fargo and 27% more than Chase.

  • Citibank only generates $278,210 per branch, 72% less than Bank of America.  Citi does not have an extended overdraft fee.

At MagnifyMoney, we believe that the overdraft market is ripe for disruption. The revenue generated from the activity bear no relation to the cost of providing the service. My thoughts on how we can make the system better are here.

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Best of, College Students and Recent Grads, Eliminating Fees

Best Bank Accounts for College Students

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.


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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.


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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.


Apply Now

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.


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Ally Bank Checking Account Changes: Fees Are Increasing


Ally Bank is making changes to its checking account, which will go into effect on August 15th. Existing customers will start receiving notification today from Ally. I spoke with a representative of Ally, who explained the changes to me.

Here is the summary:

  • Unlimited reimbursement of ATM fees is gone: Ally Bank will now reimburse up to a maximum of $10 per billing cycle. Ally is joining the Allpoint ATM Network, and use of those ATMs will remain free.
  • NSF and Overdraft fees are increasing: Ally Bank used to charge a maximum of $9 per day for overdrafts. That charge is increasing to $25.
  • All other features remain the same. If you link your Ally savings account, you will continue to receive unlimited overdraft transfers. There remains no monthly fee with no minimum balance and no direct deposit requirements.

We view these changes as unfortunate. Unlimited ATM reimbursement was a big selling point of the Ally checking account. Many customers were willing to take a lower interest rate on their savings account in exchange for the convenience and value associated with the checking account. Ally is paying 0.99% compared to market-leading rates of 1.25%, which can be found on our Savings Account page.

The NSF and Overdraft fees will only impact a small number of customers. However, we liked that Ally was taking a leading position on keeping fees as low as possible. It is unfortunate that the small number of people impacted by this fee will now have to pay more.

And we generally are not big fans of the Allpoint network. Searching for the closest convenience store with an Allpoint ATM is not the same as choosing the closest traditional bank.

How Does Ally Bank Compare

The checking account is now less competitive.

Unlimited ATM Reimbursement

If you are looking for unlimited ATM reimbursement, there are still some good options out there:

  • Bank of Internet USA offers Rewards Checking, which offers unlimited ATM reimbursement (except international), with the fees reimbursed the next day
  • Charles Schwab offers High Yield Investor Checking, which offers unlimited ATM reimbursement both domestically and internationally

Overdraft Fees

Ally Bank still offers the best deal for linking a high yield savings account to a checking account for overdraft protection. You can keep your checking account balance low and have free, automated transfers from your savings account to your checking account. Large, traditional banks typically charge $10 or $12 to transfer funds from a linked Savings Account. And those savings accounts usually pay very low interest rates.

However, if you are running low on cash and need overdraft protection, you may want to consider a different bank. Capital One 360 offers an affordable overdraft line of credit and does not charge an NSF fee.

The Verdict

Ally Bank has long offered the best checking account in the industry. It was an obvious choice. You could use any ATM in the country for free. You could keep your balance low in your checking account and cover transactions from a high interest rate savings account with free, automated transfers.

These recent changes make the calculation a bit more difficult.

The typical ATM fee is $3. If you use an ATM more than 3 times a month, you may need to re-think your strategy. And if you travel frequently and use the ATM a lot, this account can start to get expensive.

If you tend to go overdraft often, you should consider Capital One 360 instead of Ally Bank.

However, if you only use an ATM once or twice a month and never go overdraft, these changes will not impact you. We regret the changes regardless. Ally Bank created a product that was the absolute best. Now it is no longer so clear.

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Consumer Watchdog, Eliminating Fees, News

Banks Generate $30bn Of Abusive Overdraft Fees


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 Bank of America, 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.

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Eliminating Fees, Strategies to Save

8 Savings Solutions for Dynamic Pricing

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 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 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.


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Eliminating Fees, Life Events

The Downsides of Having Joint Bank Accounts

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. 

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College Students and Recent Grads, Eliminating Fees, Life Events

When to Avoid a Company 401k

Man Paying Bills With Laptop

Gone are the days of workers depending upon pensions when they retire. Today, instead of offering defined benefit pensions guaranteeing an employee a monthly payment for the rest of his or her life, employers are moving to more employee-managed retirement savings plans.

Today, more employers offer a 401k plan – if they have an employer-based plan at all. With a 401k, employees make a defined contribution from their income each year. With a pension plan, employees knew exactly how much income they could depend on each month during retirement. Now, it is up to the employees to determine how much they need to save in order to reach their retirement savings goals.

A 401k allows employees to make defined contributions, pre-tax (or post-tax), towards retirement. If you contribute to a traditional 401k, contributions are automatically deducted from your paychecks each pay period, pre-tax. As a result, you don’t pay taxes until money is withdrawn from the account and you cannot withdraw money before 58 ½ without penalties. Some employees offer the option to contribute post-tax in a Roth IRA, so money withdrawn in retirement will not be taxed.

With this change toward employee-directed retirement, rather than retirement guaranteed by the employer, it is up to you to make the best decisions regarding your retirement savings. This could mean it’s best to avoid a company 401k.

Take a look at these situations in which you should not pay into your employer’s 401K, and see if any of them apply to you.

No Employer Match

Many employers provide a match to their employees’ 401k contributions. Employer matches vary greatly by employer, but a common example of this is $0.50 per $1.00, up to 6% of employees’ pay.

Let’s say you earn 40,000 per year at your current job, and your employer provides a $0.50 per $1.00 match, up to 6% of your pay. If you were to contribute the full 6% of your pay annually, you would contribute a total of $2,400 to your 401K over the course of a year. Your employer would then contribute $0.50 for every dollar you contributed, for a total of $1,200 for the year.

In total, over the course of the year your 401K would contain $3,600, and you only would have contributed $2,400 of the balance.

But if your employer does not provide a match, it may be time to reconsider contributing to its 401K plan. Never walk away from an employer match, as it is basically free money, but if your employer does not provide a contribution match, it may be time to consider other options like saving for retirement in a traditional or Roth IRA.

You Have Reached The Contribution Limit

Effective January 1, 2015, the 401k contribution limits are $18,000 if you are age 49 and under. If you are 50 or older, you can contribute an additional $6,000 above and beyond the $18,000 regular contribution, for a total of $24,000. Of course, you are free to contribute less to a 401K, but saving as much as possible for retirement is always best.

Once you have reached the contribution limit on your 401k, you cannot make any more contributions pre-tax, and it is time to consider alternative investments.

One good alternative is a Traditional IRA. Contributions are made to a traditional IRA after tax, meaning that you pay taxes, and then make contributions out of your paycheck. For 2015, individuals can contribute up to $5,500 per year to a traditional IRA if they are 49 and under. You can contribute up to $6,500 per year if you are 50 or older.

Another solution for aggressive savers is a taxable account such as stock index funds or tax-free municipal bonds. When using taxable accounts such as these, you can expect to pay 15% on long-term gains and qualified dividends. Additionally, contributions to these plans are made after-tax. However, the benefits of using accounts such as these include being able to withdraw from them for things such as children’s college expenses before age 59 ½ without additional penalties and fees.

You Qualify For a Roth IRA

If you employer does not offer a 401k match – or a 401k plan at all – and you meet income thresholds, then a Roth IRA may be an excellent option for your retirement savings.

A Roth IRA allows individuals whose modified adjusted gross income, which you can calculate at the IRS website, is less than $135,000, or married couples whose income does not exceed $195,000 to contribute to their retirement.

A Roth IRA is different from other accounts, though, because of the way taxes are handled. Contributions are made after tax. However, once the initial contribution is made, you enjoy tax-free growth as long as you follow the rules:

  • 49 and under can contribute a maximum of $5,500
  • 50 and over can contribute up to $6,500
  • You can withdraw your contributions (not growth) at any time without penalty

How much can a Roth IRA save in taxes? If you contribute $5,500 per year to a Roth IRA for 40 years (and increase your contributions to $6,500 per year once your age allows), and your marginal rate is 15%, this is what your account’s growth could look like over the course of 40 years:


In this scenario, you would have only paid in $230,000 during the entire 40 years you worked. You would have paid $34,500 in taxes from your paychecks.

However, your relatively small investment could grow to $1,189,636 – and you will not have to pay taxes on any of that balance when you withdraw it. If your marginal tax rate stayed at 15% when withdrawing money from your Roth IRA, you could save more than $143,000 in taxes alone.

See how much money you can save with a Roth IRA, and how much money it can save you in taxes here, with Bankrate’s Roth IRA calculator.

High Fees

If your employer offers a 401k without a match, a good way to gauge whether it is a good investment vehicle for your retirement savings is to take a look at the fees. Many times both employees and employers are unaware of just how much fees are costing them. After all, 3% seems like such a small number, doesn’t it?

3% may feel like a very small amount to pay in fees, but this example will show you just how much a small percentage can affect your retirement savings.


In this example, the investor is a 29 year old, contributing $18,000 per year to her company’s 401k, and her retirement age will be 65. The current balance of their 401K is $100,000, and fees are 3%.

Just by switching to a plan that cuts fees in half, 1.5%, she could save $801,819.03. Instead of having $1.8 million upon retirement, she could have more than $2.6 million – making for a much better retirement.

You can check out a fee calculator here and find out just how much your fees are costing you!

Even if your 401k has high fees, be sure to consider the employer match. Many times the match will more than cover the fees, making the 401k a good investment vehicle in spite of the high fees.

If You Need Flexibility

401k’s, while they offer tax advantages, and often free money through the form of an employer match, do not offer any sort of flexibility. Contributions are automatically deducted pre-tax from an employee’s paycheck in pre-set amounts, and cannot be withdrawn without serious penalties until age 59 ½.

For many families, saving and investing money is not just about retirement. It is about college, medical expenses, large purchase, and even vacations. Always contribute to your 401k up to the maximum amount that your employer will match, but if no match is available and you need flexibility for other savings priorities, check out some of these options:

A 529 Plan: An education savings plan operated through your state or an educational institution to help families set aside income for education costs. Although contributions are not deductible on your federal income tax return, the investment grows tax-deferred, and distributions used to pay the beneficiary’s college costs come out tax-free. Some states offer tax breaks for 529 contributions, you can find yours here. In addition, there are very few income and contribution limitations, making the 529 plan a great, flexible way to save for college.

A Health Savings Account: An HSA offers individuals and families the opportunity to save money exclusively for medical expenses, and contributions are 100% tax deductible from gross income. For 2015, individuals can contribute up to $3,350, and families are allowed to contribute up to $6,650. HSA accounts holders age 55 and older can contribute an extra $1,000. If using savings for medical expenses if a priority, talk to your employer about an HSA. Not all insurance plans are eligible.

Taxable Investment Accounts: When saving for large purchases or vacations, more flexible accounts are better. As explained above, index funds, mutual funds, or even traditional savings accounts leave the account holder with more of a tax burden, but far greater flexibility for withdrawals. These accounts do not need to be opened through your employer, but can be opened and managed on your own, or with the help of a financial planner.

If your employer offers a contribution match, they are essentially offering you free money, so go ahead a take advantage of the 401k, regardless of high fees or a low income. However, if your employer offers no match, high fees, or you have reached the yearly contribution limit, then it is a good idea to avoid that 401k plan and look into other retirement savings options.

At the end of the day, saving for retirement or other goals is all about you. How much flexibility you need, how much you need to save, and your tax situation. Be sure to weigh all of your options to guarantee that you are making the best decision for you and your family.


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Regions Bank Fined $7.5 Million For Overdraft Abuse


This week, the Consumer Financial Protection Bureau (“CFPB”) fined Regions Bank $7.5 million for unlawful overdraft practices. In addition to the fine, Regions Bank has refunded approximately $49 million of fees to customers. Regions Bank is based in Alabama and has more than $119 billion in assets, making it one of the largest banks in the country.

Regions Bank was fined because it failed to receive the necessary opt-in from consumers, delayed fixing the problem for a year and mis-represented certain fees to its consumers. The CFPB has been looking closely at the overdraft practices of banks. Director Cordray has made it clear that he is not a fan of the way banks treat overdrafts, and bigger reforms are expected later this year. In the interim, we can expect more fines of banks that are violating existing rules and guidelines.

Regions Bank earned $218 million during the first three months of 2015. The CFPB fine does not represent a significant portion of the bank’s earnings.

Abusive Overdraft Practices

Overdrafts in the United States are incredibly expensive for consumers, and unimaginably lucrative for banks. During 2014, banks generated over $30 billion of overdraft fees. When you look at how banks charge overdraft fees, you can see how easy it is for banks to generate so much revenue.

If you make a transaction in your checking account without having sufficient funds in your account to cover the transaction, you are at risk of being charged an overdraft fee. Imagine you have $100 in your bank account, and you try to write a check for $120. The bank has two choices: it can approve the transaction, or decline the transaction. If the bank declines the transaction, it will charge a non-sufficient funds (“NSF”) fee. The average NSF fee is $35. If the bank approves the transaction, it will allow the account balance to go negative. In effect, the bank gives you a loan. Banks charge, on average, $35 for an approved overdraft. So, you will pay $35 if you are approved, and $35 if you are declined.

Even worse, most banks have an extended overdraft fee. For example, Bank of America will charge an additional $35 if you do not bring your balance positive within 5 business days. Some banks even have a per day charge.

Some banks offer “overdraft protection.” That means you can link your checking account to a savings account or credit card. If you spend money that is not available in your checking account, the bank will sweep the money from the linked savings or checking account. However, most banks will charge a transfer fee, which averages $10. Given that most savings accounts only pay 0.01%, you would need to have $100,000 in your savings account in order to earn $10 in one year.

Even worse, if you link your credit card for overdraft protection, the sweep will be treated as a cash advance on your credit card. In most cases, that means you would be subject to an additional cash advance fee and interest would stat accumulating immediately at high double-digit rates.

As if the overdraft process wasn’t complicated enough, many banks reorder transactions to increase the overdraft fees. According to Pew, nearly 50% of banks engage in high-to-low transaction processing. Imagine you have a balance of $100. You make a purchase at 9AM for $10 (your new balance is $90). At 10AM you make another purchase for $10 (and your new balance is now $80). And then at 1PM you make a purchase for $100. The last transaction would cause you to go overdraft, resulting in a $35 charge.

50% of banks would reorder the charges, from highest to lowest. In this example, they would process the $100 transaction first, reducing your balance to $0. The other two charges would each cause the account to go overdraft. As a result, your fee would be $70 instead of $35. And that is all perfectly legal.

Consumer Protection

You do have certain rights. You can opt out of overdraft protection for ATM and debit card transactions. That means that if you use your debit card to make a purchase, and there is not sufficient money in the account, the transaction would be declined and you would not have to pay an overdraft or NSF fee.

However, you cannot protect yourself against checks and other electronic (bill pay) or recurring transactions.

Are There Cheaper Options?

Overdrafts can be incredibly expensive. The best way to avoid high cost overdraft protection fees is to consider an internet-only, branch-free bank. Many of the new start-up banks charge no overdraft fees and offer free overdraft protection from linked savings accounts. You can see some of these new providers here.

If you do not want to switch banks, you should consider opting out of overdraft protection, which will protect you from high fees on debit and ATM charges. You should consider linking your savings account or credit card, because the charges would still be less than standard overdraft fees. Finally, you should consider taking advantage of balance alerts to ensure that you are on top of your balance.

However, many people go overdraft because they have a short-term borrowing need. You should consider opening a low interest rate line of credit with your local credit union, or a personal loan from a marketplace lender. Credit unions and marketplace lenders offer significantly lower interest rates.



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Bank5 Connect High-Interest Checking Review


When I initially signed onto Bank5 Connect to check out account options, I was met with a pleasant surprise. In big bold font right next to “High-Interest Checking” was a nice number- 0.76 percent APY. I figured I must’ve been reading it wrong. An interest rate of 0.76 percent seemed like an impossibly good deal. Surely there had to be a catch.

CheckingBut Bank5 Connect’s High-Interest Checking holds up to its advertisement. The only requirement is to keep a $100 balance, but no stress if you fall below that amount – with no minimum balance requirements or sneaky fees, Bank5 Connect High-Interest Checking is a safe bet.

Like other online only banks Bank5 Connect doesn’t have to shoulder the expense of pricey real estate, live teller salaries, and other brick and mortar banking expenses – which means more savings and perks passed on to you, the user.

You can open a High-Interest Checking account through the Bank5 Connect website or by calling the customer service number, 1-855-522-2655. The minimum opening deposit requirement is just $10 and can be funded through an online transfer from an external checking account, direct deposit, mobile deposit, check, or credit card.


Though you need $10 to open account you will not be penalized if your balance falls below. Bank5 Connect’s High-Interest Checking is among the top fee-free accounts.

  • No monthly maintenance fee
  • No fees at domestic SUM Network ATMs
  • Reimbursement up to $15 for out of network ATM fees
  • No minimum balance requirements
  • No early closure fee
  • Free first order of checks
  • Free cashiers checks
  • Free incoming wires

The account also comes with a debit card with a sweet perk of its own- a debit rewards program. Earn 1 point for every $2 spent using Bank5’s UChoose debit card and redeem points for various items online- vacation packages, gift cards, electronics, etc. The daily purchase limit on the card is $1,000.

Finally, the Bank5 Connect High-Interest Checking account comes with all the staples of online banking convenience- online bill pay, e-statements, e-check deposit, mobile banking, and quick person-to-person payment options.

Bank5 Connect also earned an “A” Transparency Score for creating a simple product with partial ATM reimbursement, disclosure of fees, no minimum requirements and real overdraft protection.


While you can avoid ATM charges by using your UChoose debit card at any ATM within the SUM Network, you are responsible for fees charged by ATMs outside that network should you exceed the $15 monthly fee reimbursement allowance. The bonus reimbursement ATM coverage is also limited to domestic ATMs. Travel internationally and you’ll be on the hook for all fees.

In addition to checking, Bank5 Connect offers a savings account that can be linked for free overdraft protection. If you find yourself in a position of non-sufficient funds however, you’ll be responsible for the $15 overdraft fee.

High interest and low fees make Bank5 Connect’s High-Interest checking account a top option. Thanks to those features, it is consistently ranked among the best accounts. But further research into the customer experience suggests reason for concern.

Despite an absence of physical branches, many online only banks have exceptionally high rated customer service. I had a hard time finding similarly complimentary reviews of Bank5 Connect, so I called in to customer service to check it out for myself.

While the wait time was minimal, my representative wasn’t particularly well informed. She had a hard time recounting some of the most basic account features I had been reading about online. Her responses to my questions were so dubious and unsure that I actually called back later with the hope of being connected to a more authoritative source. My second representative proved a better experience, but I can still see why Bank5 Connect might not be winning a people’s choice award winner any time soon.


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Bank5 Connect High Yield Checking vs. Simple

Though the interest rate on Bank5 Connect’s High Yield Checking Account blows Simple’s out of the water (with Simple coming in at a weak 0.01 percent), Simple has the top-notch money management tools and excellent customer service representatives noticeably absent at Bank5 Connect. Where Simple provides a user-friendly experience, Bank5 Connect provides yield. Both options are first-rate on the debatably most important checking account features though- freedom from fees and transparency.

Bank5 Connect High Yield Checking vs. Ally Bank Checking

Ally Bank is another online only option boasting low fees. Interest rates on checking start at 0.10 percent, an improvement from those at Simple but a far cry from those at Bank5 Connect. For users with a balance greater than $15,000, the rate jumps to 0.60 percent, but that’s a pretty major requirement considering the small $100 balance required at Bank5 Connect.

Ally customer service is also well rated. Though Ally’s money management tools are not as comprehensive as Simple’s, for basic checking account needs, Ally is consistently a top contender in ratings and customer reviews.

Should You Use Bank5 Connect High Yield Checking?

A minimal fee structure paired with shockingly high interest makes Bank5 Connect High Yield Checking an option worth considering, but I would recommend taking customer service for a test run before singing up. Even when you bank online, you need to feel secure in where and with whom you leave your money.


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Ally Bank Interest Checking Account Review


Since its launch in 2009, Ally Bank has quickly made a name for itself as one of the best and most consumer-friendly online banks around. And its interest checking account is a great example of why it earns these accolades.

Ally Bank’s interest checking account offers all basic the features and services expected of an online checking account, without any fees or minimums. It’s a great option for anyone who is fed up with the fees and hassle of their local bank.

Ally Bank Interest Checking Account Details

Ally’s main selling point is that it offers “everything you need and want from a bank”, without the fees you’ll find at other banks.

With its interest checking account, you get access to a user-friendly online banking experience, which includes online bill pay, easy transfers between accounts (both your Ally accounts and those at other institutions), and the ability to send money to friends using Popmoney®. You can even name your accounts, which makes it easier to keep track of savings goals and earmarking money for certain experiences or occasions.

You can use any domestic ATM without worrying about a fee because Ally will reimburse all ATM fees and won’t charge its own fee either.

You also get most of the basics of a more traditional checking account, like a MasterCard® debit card and a book of checks. You can use you debit card to withdraw money at any ATM and Ally will reimburse you the full amount of any fees.

There’s even a slick smartphone app, which lets you stay on top of your account balances and deposit checks right from your phone.

And you get 24/7 customer support, both over the phone and through live chat support. This is something I’ve used personally on numerous occasions and from my experience has always been excellent.

All of this comes at pretty much no cost to you. There is no minimum balance, no monthly maintenance fee, and no charge for any of the services or features mentioned above.

In fact, Ally actually pays you for having money with them. Account balances of less than $15,000 currently earn 0.10% interest, which is more than most of the big banks pay on even their savings accounts. And if your balance is $15,000 or more, you’ll earn an even higher 0.60%.

Are There Any Gotchas or Extra Fees?

There are no fees for any of the basic services mentioned above, but you may be charged for some less common transactions.

If you’re traveling in a foreign country, you may face a fee of up to 1% to withdraw money from your Ally Bank interest checking account. You will also be charged $7.50 failed deposit to your account, and $15 for a stop payment order. You can see a full list of fees here.

There is a $9 per day charge for any transaction that overdraws your account. This overdraft charge happens a maximum of once a day and only hits if you make an overdraft transaction. However, you also have the option of linking an Ally Bank savings account to fund any overdrafts instead, and that service is provided at no charge.

Finally, you cannot deposit cash to your Ally Bank interest checking account. Doing so would require a separate account for the deposit, after which you could transfer the money to your Ally account.

Here’s a quick stack up of pros and cons:


  • Reimburse ATM fees
  • No minimum account fee
  • No monthly fee
  • Free overdraft protection by linking to a savings account
  • 24/7 customer service


  • $9 overdraft charge without protection
  • Foreign transaction withdraw fee of 1%
  • Cannot deposit cash

MagnifyMoney gives the Ally Bank Interest Checking Account an “A” Transparency Score for charging few fee and being transparent about fees it does charge. There is also a significantly lower overdraft fee compared to traditional banks and the ability to set up overdraft protection without any fees levied against you.


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How Can You Open an Ally Bank Interest Checking Account?

Opening an account with Ally Bank is incredibly easy and only takes a few minutes.

Once you’ve chosen the type of account you want to open, you’ll have to enter standard personal information like name, address and Social Security Number. Once you’ve done that, you can choose to make an initial deposit if you’d like, set up your online banking profile, and you’re good to go!

Once you have an account, opening a new one is as simple as starting up the live chat and asking the representative to do it for you, or going through an abbreviated version of the same process above.

How Does It Compare to the Competition?

In terms of getting all the basics of a checking account without any fees or minimums, Ally Bank’s interest checking account is tough to beat. But there are a few alternatives that are worth considering.

Charles Schwab’s high yield investor checking account is another one that offers all the basic services without a minimum balance and without fees. The account also pays 0.10% interest no matter your account balance. If you typically keep less than $15,000 in your checking account, the difference between these accounts will be minimal. It’s also an excellent contender for the frequent international traveler. Charles Schwab reimburses all ATM fees, both foreign and domestic.

Capital One’s 360 Checking is a similar offering with a slightly better interest rate for lower account balances. Accounts with less than $50,000 earn 0.20% interest, while accounts with more than $50,000 earn 0.75% and those with $100,000 or more can earn 0.90%. The big downsides are that ATM withdrawals are only free at Allpoint® ATMs (as opposed to all ATMs), and if you overdraft you will be charged interest on the amount of the overdraft until it is paid back (currently 11.25%). Capital One does offer cash deposits at select ATMs, which could be a game changer if you deal in cash and live near a cash deposit ATM.

Finally, there is the Rewards Checking Account from Bank of Internet USA. Along with no fees, it’s possible to earn a better interest rate, though there are a few hoops to jump through. Receiving direct deposits into your account each month of $1,000 or more will earn you 0.4166% interest. Using your debit card at 10 times during them money will earn you another 0.4166%, and 15 times will get you another 0.4166%. So it’s possible to earn 1.25% interest on your balance if you’re willing to meet their requirements.

Who Is This Account Best For?

This account is great for anyone who does most of their banking online, doesn’t deal with a lot of cash and is looking for all the basic services at no cost and with no minimums. It’s also great for anyone who wants to easily link their checking account to their various savings accounts because Ally Bank offers an excellent online savings account.



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Capital One 360 Checking Account Review


If you’re searching for a checking account with minimal fees, you’ve likely considered depositing your money into an online bank. But with so many online banks vying for your business, you may wonder which account is best suited for your needs.

The Capital One 360 Checking Account boasts no fees and no minimum balance to open which is pretty standard in the online banking world. However, there are other unique features of this account that set it apart.

The Capital One 360 Checking Account At A Glance

Let’s start with the basics. To qualify for 360 Checking you must be 18 years or older and a U.S. citizen or permanent resident with a social security number.

These are the perks of opening a 360 Checking Account:

  • No monthly fees
  • FDIC insurance coverage
  • A free MasterCard debit card
  • No minimum balance to open or earn interest. Rates are variable and account APY ranges from 0.20% to 0.90% depending on your balance.
  • Use of Bill Pay. Send bill payments directly from your checking account for free. And set up eBills to receive electronic bills from participating merchants.
  • Person2Person payments. Send money free of charge to people who bank with Capital One 360 and elsewhere. Transfers to Capital One 360 accounts occur instantaneously. Transfers outside of the bank take up to two business days to authorize once the recipient approves it.
  • Access to 38,000+ Allpoint and Capital One ATMs for free. Drawing cash from an online account or making a deposit is a breeze, just search for an in-network ATM on Capital One’s mobile app or website.
  • Use of CheckMate for check deposits. Take photos of your checks from your mobile phone to make deposits. No standing in line or locating an ATM necessary.
  • Turn your card on and off. You can deactivate a card yourself online which is helpful if it’s stolen or missing.
  • No overdraft fees. Instead of a fee they offer an Overdraft Line of Credit that charges you a competitive interest rate if your account falls below zero.

Depositing Cash and Checks

Before taking the leap to online banking you may feel apprehensive about giving up access to a live teller for bank deposits. Fortunately, 360 Checking offers several simple ways to fund your account.

You can transfer money from another bank or set up direct deposit from your employer. You can also deposit cash and checks at 360 Cafe and Capital One branch ATMs. Find deposit locations near you with its ATM locator map.

Avoid using an ATM altogether for deposits and take snaps of your checks and upload them using CheckMate. The 360 Checking website offers a short demo to show you exactly what’s involved with depositing remotely.

A Closer Look at Overdraft Protection

promo-checking-halfThe 360 Checking account has a pretty lenient overdraft policy. If you apply for the Overdraft Line of Credit the daily interest on overdrafts will cost you pennies. Though you should keep in mind that during the application process for the line of credit, Capital One will perform a “hard pull” and it can affect your credit score. However, this dip of 5 to 10 points is well worth the protection to avoid overdraft charges.

The rate for overdraft is currently 11.46% APR and Capital One offers a convenient overdraft calculator to show you how much you can expect to be charged if your account goes into the red. For example, an overdraft of $100 for 10 days will cost you just $0.31 based on its estimate.

What happens if you pass on the Overdraft Line of Credit and your account goes into the negative? There’s no mention of the repercussions on the 360 Checking website. However, customer service confirmed there’s still no fee, the transaction is simply declined. They do advise transferring funds into your account promptly, otherwise you run the risk of having your account shut down. Keep in mind that while it’s great you don’t have a fee levied against you, declining a charge could mean an important bill goes unpaid.

Additional Fees to Consider

Although 360 Checking has no monthly fee, it’s important to note that there are some other fees for extra services associated with the account. For instance, sending out overnight checks will cost you $20 and an overnight card replacement costs $25. Your first checks are free, but future checkbooks cost $5. Additionally, if a check is returned for insufficient funds you’ll incur a $9 Rejected Check Charge. And to place a stop payment on a check you’ll have to pay $25.

What Sets 360 Checking Apart From Other Online Accounts?

The ability to make cash deposits at select ATM machines is a key differentiator of this checking account. Other popular online banks like Ally, The Bank of Interest USA, EverBank and Charles Schwab don’t currently accept cash deposits.

In other areas like customer service and fees, 360 Checking has some stiff competition. The Ally Bank Interest Checking Account has no monthly fee or minimum balance requirement as well, but they offer 24/7 customer service. Capital One 360 provides customer service from 8 am to 8 pm.  Furthermore, miscellaneous fees for checkbooks, stop payments and expedited delivery services are higher with 360 Checking than Ally Interest Checking.

How does the Capital One 360 Stack Up With Interest?

This account is decent for earning interest if you can’t put more than $100 into it initially. If you have a little bit more money to deposit, there are other options that will earn you more interest.

For instance, the Bank 5 Connect High-Interest Checking Account currently offers APY of 0.76% for balances over $100 at opening. In order for you to make that type of interest with a 360 Checking account you need to maintain a balance over $50,000.

Just keep in mind that you shouldn’t be hoarding tons of cashing in your checking account. It’s much better to keep high amounts of cash in a savings account, which offers better fraud protection.

A Good Deal if You Value Convenience

Overall Capital 360 checking may not be your first choice if your primary goal is to find a checking account with the highest interest. But it should be at the top of your list if you value conveniences like easy access to your money at thousands of ATMs for free, the option to deposit cash, the ease of bank transfers and no overdraft fees.


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Best Bank Accounts for Foreign Travel & Expats


My sister is studying abroad in New Zealand this semester, and yes, I am totally jealous. A few weeks before she left, our entire family was running around like chickens with their heads cut off trying to make sure everything was in place for her departure- passport, visa, international phone, and my responsibility- appropriate bank accounts and financial tools for her time away.

Not only do I write about money for a living, I’ve spent my fair share of time traveling and working around the world- most notably on a cruise ship around South America and prior to that, touring through Asia for seven months. If only I’d known then what I know now about accessing basic financial services internationally, I’d have saved myself a whole lot of cash on simple things like accessing my own money.

My sister is lucky enough to have the benefit of my experience (and mistakes) to avoid any unnecessary headaches that could potentially arise from minor financial details, allowing her to enjoy her international journey without stressing over mundane money realities.

Banking abroad can be simple and affordable if you know before you go and prepare properly with these steps.

Set Up Online Access

Before leaving, make sure you’ve set up online access to whatever accounts and bills you’ll need to maintain or access abroad. You don’t want to hassle over basic set up or linking appropriate accounts when you’re already on the road. Have systems in place so that payments can be made quickly, easily, and hassle-free. Designating a trusted parent or sibling equipped with your passwords to serve as a back up stateside financial monitor can give you additional piece of mind should secure internet access prove more difficult than originally anticipated during your travels.

Get the Right Credit Card

I know a lot of college students are being introduced to credit for the first time, and throwing traveling abroad into the mix can make things even more complicated. Credit cards are a great resource to have though- not only for day-to-day purchases, but also as valuable “in case of emergency” tools and added layers of fraud protection when making purchases.

While roughly 90 percent of credit cards charge foreign transaction fees there are some fee free alternatives. Not having to pay an additional two to four percent per purchase can save you quite a bit over the course of a semester. Notable fee free options include:

As soon as you’ve committed to dates for your semester abroad, start researching credit options. If, as a student, your credit profile is thin or your score is low, you may have trouble qualifying for cards that carry perks like free foreign transactions. I added my sister as an authorized user on my credit card so that she could enjoy the benefits of my good credit history during her time abroad. Don’t worry, I laid out the ground rules before she left and I can monitor all her purchases should spending start getting out of control.

Regardless of what card you choose, be sure to notify your credit card company of the locations and dates of your travel. You don’t want your card to be flagged and deactivated, leaving you financially stranded.

Use the Right Bank

Some checking accounts and debit cards are better suited toward international travel than others. The best way to get your hands on local currency abroad is not through currency exchange companies- that while convenient, charge huge transaction fees and inflated exchange rates- but through ATMs.

While ATMs are known for giving the best exchange rates, they can also come with hefty fees if you don’t use the right bank. Chase for example, charges a $5 withdrawal fee at ATMs outside the U.S. That’s a high price to pay for accessing your own money.

The Global ATM Alliance provides an affordable cash access alternative. The alliance is a group of major international banks that allows customers to use their debit card at another bank within the alliance with no international withdrawal fees. Members include:

  • Bank of America (USA)
  • Barclays (UK)
  • BNP Paribas (France)
  • BNL (Italy)
  • UkrSibbank (Ukraine)
  • TEB (Turkey)
  • Scotiabank (Canada, Peru, Chile, and the Caribbean)
  • Deutsche Bank (Germany and Spain)
  • Westpac (Australia and New Zealand)

Other fees- like an international transaction or currency exchange fees- might still apply though.

Some alternatives are even more flexible, allowing you to avoid international ATM fees, regardless of which ATM you use.

Research your options and put appropriate accounts in place before leaving. Again, you’ll want to notify your bank of all your travel dates and locales prior to departure.

Exchange Emergency Currency Prior to Departure

Banks don’t always have the best exchange rates, but changing over some money at your local branch prior to your international departure can be helpful in case of an emergency situation or snafu upon arrival in your host country.

When I traveled to Germany last year, I went directly to the airport ATM to withdraw some Euros. The ATM wasn’t accepting my debit card so I had to use my credit card to take out a cash advance. It cost me $35 in fees just to get enough cash out for a cab ride to another ATM outside the airport. Save yourself from last minute financial stress and fees by having local currency already on your person when you land.

Dealing with a different form of currency, ever changing exchange rates, and long lists of potential fees can be a bit overwhelming at first. Do your research well in advance of your departure to make sure your money is easily accessible in the country of your study while minimizing any fees from the banks and credit card companies. If you can set up all the appropriate accounts before your trip, you can enjoy the life of the Kiwis or the history of Europe or the culture of South America without stressing over banal money needs- like how you’re going to pay for your newly assigned textbook or that skydive you’ve been talking about with your new international friends.


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The 6 Best Free Checking Accounts in 2015


Some bank customers don’t even know checking accounts used to be free. I remember visiting my local bank branch, requesting a new account, and receiving a fee-free checking account. However, it seems those days are gone. Today, checking accounts come with a variety of fees. Some banks charge fees to speak with a teller, fees for low balances, fees to use an out-of-network ATM, fees to cash a check, or fees for writing too many checks. Stop the madness!

Fortunately, the rise of the digital age created more competition between banks. Online banks are competing against each other and traditional brick-and-mortar banks by offering superior products. Thanks to these digital competitors, the truly free checking account exists again. The following accounts provide you with the opportunity to never be hit with a monthly fee, overdraft fee or ATM fee again.

1. Bank of Internet USA

bank-of-internet-usa (1)Need to withdraw cash? Visit any ATM with a Bank of Internet USA account and have all US ATM fees reimbursed. Bank of Internet USA never charges an overdraft fee, and there are no monthly fees.

BofI offers two different checking accounts: the Rewards checking account and the Cash Back checking account. Both accounts request a minimum opening deposit of $100, but after that there is no minimum balance required.

The primary difference between the two accounts is the interest payments versus cash back. The Rewards checking account offers daily compounding interest of up to 1.25%. To earn this rate on your balance of $150,000 or less you need:

Direct deposits totaling $1,000 or more

Use your Rewards Checking Visa debit card 15 times or more on purchases of $3 or higher in a month.

The Cash Back checking account offers cash back of 0.50% for signature-based transactions. Those are debit card purchases without using a pin number. You can earn up to $1,000 per month on these signature-based transactions.

Remember, we don’t advise regularly using your debit card for purchases because it makes you more susceptible to fraud. Credit cards offer better fraud protection and better cash back value. If your debit card becomes compromised, crooks having direct access to your money and can drain your bank account.

Apply Now


2. Fidelity Cash Management Account

fidelityFidelity Cash Management Account reimburses all ATM fees the same day, has no monthly fees, and no overdraft fees. The FDIC insurance covers up to $1,250,000, which is 5 times larger than the standard bank account. Get free checks and check writing, mobile deposits and bill pay, all with no minimum balance. And because this account can be linked to your Fidelity investing account, you can easily move money between your Fidelity accounts.

The downside? There is no option for a line of credit to protect from an overdraft. Instead, you’ll need to link a savings or brokerage account to sweep funds if you go overdraft and want all items to clear. Without a linked account, purchases that would cause an overdraft are simply declined.

Apply Now


3. Ally Interest Checking

allyAlly Interest Checking Account reimburses all ATMs in the U.S., offers free overdraft transfers from savings to checking and you get a high 0.60% rate on balances higher than $15,000. If that’s not enough to get excited about, the account also offers free checks and free cashier’s checks. On the downside, there is a $9 fee if you overdraft without a linked savings account. However, the bank charges overdraft fee only once per day and there are no extended overdraft charges.

Apply Now


4. Simple

simpleSimple offers a simple account with no overdraft or monthly fees. Stay in the Allpoint network for ATM withdrawals otherwise you will pay the other bank ATM fee. How do you know if the ATM is in the network? Use the Simple ATM finder and type in your location or allow the map to find one near you. I found 5 ATMs within a 5-mile radius of where I live.

Apply Now


5. EverBank Yield Pledge

everbankEverBank offers a promise to keep your yield in the top 5% of competitive accounts. Earn 0.93% APY in the first year and a bonus for the first 6 months. The ongoing interest rate is nothing to get too excited about, but if you find that you want a higher rate, you can simply move to one of the other accounts listed above or use this tool to find the best high yield savings account.

Everbank only reimburses ATM fees if you keep a minimum of $5,000 in your checking account and each overdraft fee costs $30 with no daily cap.

Apply Now


6. Moven

movenMoven also offered a reimbursement of ATM fees but only when using ATMs within the Star network. Doing a quick search, I found 8 options within a 5-mile radius of my zip code. There is no monthly fee, or overdraft fee because any transactions that exceed your available balance will be declined.

Apply Now

Find the Right Account For You

Take a moment to calculate how much you could earn using the free checking account comparison tool. Enter your zip code and how much you have to save and find the right account for you.


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The Best Banks for Linked Checking and Savings Accounts

Today we are pleased to introduce a new product category: Linked Checking and Savings Accounts. Many people want to keep both their checking and savings account in one place. We have reviewed thousands of products to find the best combination accounts.

When looking for the best account, we considered:

  1. Monthly Fees: the best accounts have no monthly fee, with no direct deposit requirement, and no minimum balance requirement
  2. ATM Fees: the best accounts do not charge an ATM fee, and reimburse ATM fees charged by other banks
  3. Savings Account Interest Rates: the best accounts pay an interest rate close to 1%. If the savings account pays at least 0.5%, it is eligible for an A+
  4. Overdraft protection: the best accounts do not charge a fee for transferring money from your savings account to your checking account to cover a mistake

If an account does all of the above, than we give it an A+. We are pleased to announce that the following banks have achieved that score:

We have reviewed thousands of banks accounts, and only these two accounts offer the combination of value and simplicity. At MagnifyMoney, we hear many complaints from consumers about the tricky way that banks can generate fee income. For example:

  • Monthly fees are often charged if you fall just a bit below the minimum balance on one calendar day in the entire month
  • ATM fees can quickly run out of control. Between your bank’s charge and the other bank’s charge, you could be spending $2 – $6 just to access your own money.
  • Savings account interest rates are painfully low. Large, bricks and mortar banks pay close to 0% on their savings accounts. For example, the Big 4 Banks (Citi, Chase, Wells Fargo and Bank of America) pay only 0.01% on their savings accounts. You can do 100x better than those rates
  • Overdraft fees in this country are outrageous. Last year, banks generated $32 billion in fees. Even if you sign up for overdraft protection, you will still pay the bank a fee to transfer funds between your savings and checking accounts. The average fee is between $10 and $12 to transfer your own money. In order to earn $10 of interest in a savings account paying 0.01%, you would need a balance of at least $100,000!

Traditional banks offer terrible deals. The interest rates on savings accounts are non-existent. The monthly fee waivers have catches. The out of network ATM fees are outrageous. We are thrilled that a new breed of Internet-only banks is completely changing the game.

I am the co-founder of MagnifyMoney, and I switched to Ally Bank. I have really enjoyed the experience, and am never going back to traditional brick-and-mortar banks.


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Should Banks Start Shutting Down Branches?

Overdraft_lg_mobile vs trad

As an early adopter of online-banking, I used to only set foot in a bank branch once a month when I needed to deposit rent. It wasn’t even my bank’s branch either. My landlord requested I directly deposit money into his checking account. He gave me his routing number and I would dutifully trudge three blocks to his community bank, handover my check and deposit slip and refuse a monthly pitch to open an account myself.

Last month, I’d had enough.

After an inciting incident of noticing I merely had a handful of checks left, I asked my landlord if we could transition to a simple wire transfer. Instead of taking 15 minutes of my time to walk to a community bank and deposit rent, I could simply click a few buttons on my computer and pay my rent.

He agreed and I, like many others, am back to being an exclusive online-bank user, with no need to visit a bank branch.

As Internet-only banks continue to spring up and online-banking becomes the new normal, traditional banks will be forced to answer a tough question: “Should bank branches be getting shut down?”

Brick-and-mortar branches are expensive

According to data from Federal Deposit Insurance Corp, the number of U.S. bank branches has dropped 5 percent since 2009.

American Banker noted some of these closures are due to mergers and acquisition deals between banks, which would naturally cause consolidation of branches that overlap.

Brick-and-mortar branches, especially underperforming ones, are costly to banks as they must pay for staff, property, and utilities expenses. Transitioning more customers to online-banking and cutting under-performing branches could help banks reduce costs.

Underperforming branches are qualified as banks doing no more than 3,000 transactions per month. Underperforming branches have risen from 21.9 percent in 2011 to 25 percent in 2014.

Internet-only banks provide less expensive products

It is no secret leaving money with traditional banks can incur asininely high fees for customers.

In fact, your neighborhood bank branch may be incurring one million dollars in hidden fees between overdraft charges, account maintenance fees and out-of-network ATM fees.

Internet-only banks, such as Ally, Bank of Internet USA and Charles Schwab offer products with little-to-no fees.

These banks are able to afford these cost-effective products and give customers a better deal by forgoing the traditional brick-and-mortar branches.

You can get fee-free accounts (yes, including no ATM fees)

Internet-only banks actually do offer fee-free accounts, even no ATM fees. Bank of Internet USA offers a fee-free checking account with no ATM fees (and reimburses fees charged at an ATM terminal), no overdraft fees and no monthly minimums or maintenance fees.

And lest we forget to mention, Internet-only banks also offer much higher interest rates on their savings accounts.


What about grandma and grandpa (or non-smartphone users)?

Traditional branches from banks and credit unions aren’t likely to completely go away anytime soon. However, banks looking to protect their revenue by closing underperforming branches will need to education their customers on how to use online portals. Or long-time customers and non-smartphone users may leave their bank in favor of one offering an in-person experience.

From a financial perspective, banks will likely starting shutting down branches (or at least some) over the next few years. But it will be a long time before a bank branch is as antiquated as a CD player.

[Inspired by this original article on American Banker.]

Want regular updates about the best financial products available? Then sign up for our Price Checker Newsletter. Twice a month, we’ll deliver the best-of-the-best right to your inbox. Don’t forget to follow MagnifyMoney on Twitter @Magnify_Money.


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Tech Companies (and customers) Help Banks Fight Mobile Deposit Fraud

CC Fraud large

“Please write VOID or destroy this check”

Like other online banking customers, I’ve been seeing this message flash up at me since 2011 when I made my first mobile deposit via an iPhone. But why are we expected to do this?

Traditionally, when a customer deposits a check at a bank or an ATM, the check does not remain in his or her possession. After using a cell phone to deposit a check, the bank relies on the customer to destroy the check or at least write “VOID” across the front, because it reduces the risk of fraud.

Unfortunately, some customers are trying to take advantage of retaining the check and attempting to “serial deposit” or cash it again with a check cashing center or another bank.

Banks try to prevent this double dipping of deposits by putting holds on checks as well as setting limits on mobile deposits. Others may have various risk profiles on a customer, such as duration of relationship and type of accounts he or she has with the bank.

According to an article in American Banker, tech companies are working on a solution to help more banks embrace mobile deposit platforms and feel secure raising limits.

To combat this fraud, tech companies are developing various solutions including enhanced imaging which will scan the checks and look for red flags like restrictive endorsement on the back of the check.

Others solutions include banks sharing deposit data to crosscheck for previously deposited funds.

As the technology develops to fight fraud, more banks will feel comfortable raising the limits on mobile deposits and banks who currently don’t offer mobile deposits will hopefully embrace them in the future. Online deposits help banks such as GE Capital, Ally and Bank of Internet USA keep costs low by forgoing traditional brick-and-mortar branches. In turn, they are able to provide better, fee-free products to customers.

Wishing you could just deposit your check via mobile instead of going down to a bank branch? Check out our database of Internet-only banks for both checking accounts and savings accounts.


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5 Small Steps to Help You Earn More Money

Male hand putting coin into a piggy bank

“22% of Workers Would Rather Die Early Than Run Out of Money” declared the headline of an October TIME magazine article. The article overviewed a Wells Fargo Middle Class Retirement survey, which found nearly 61 percent of middle class workers say they aren’t sacrificing many comforts to save for their twilight years. And almost 75 percent admitted they should’ve started saving sooner. For the sake of the study, middle class was defined as a household with incomes between $25,000 and $100,000, who held investable assets of less than $100,000.

The TIME article went on to state a third of participants in the study contribute absolutely nothing to a retirement account and 50 percent are not confident they’ll be able to retire. To top it all off, the average balance of Middle-class Americans’ retirement savings is a paltry $20,000.

If the average American family can only scrape together $20,000 for retirement savings – clearly, they need to be finding other ways to pad their bottom lines and decrease their spending. These five small, actionable steps can help everyday Americans earn more money (or save more) to the tune of hundreds to thousands of dollars each year.

1. Automate paying yourself first

While the advice sounds generic, many earners (regardless of class) fail to participate in the simple act of automating savings and thereby paying themselves first.

Automated savings means a dedicated percentage of income goes towards a retirement fund and a savings account before an employee even sees his or her paycheck. This small step makes it far more likely savings will accrue for both retirement and a personal savings fund, because an individual gets used to living on the money remaining after savings. It’s a way to work around the thought of “oh well, I guess I’ll just save next month because I really need the extra $200 this month to go towards those shoes I want to buy.”

Employees can set up automated savings through their employer by auto-deducting a percentage towards a savings account before the money arrives in checking.

2. Reduce interest rates on debt

Our study showed nearly half of Americans carry credit card debt with an average balance of $10,000.

Of those carrying debt, 75 percent deal with interest rates north of 15 percent.

Let’s say Samantha’s Visa card carries $10,000 in debt at an 18 percent interest rate. She can only afford to pay $250 a month towards her debt. It will take Samantha over five years and cost her $5,384 in interest alone to pay off her debt. [Calculation done using the MagnifyMoney calculator]

Instead of paying over a $1,000 a year in interest to her lender, Samantha could save herself $4,680 by slashing her interest rates down to zero with multiple balance transfers. That’s nearly a year’s worth of retirement contributions to an IR (the limit for 2014 is $5,500).

[Compare balance transfer offers here]

Balance transfers are typically only available to people with great credit scores. Those with good credit should consider a personal loan to reduce interest rates on debt.

[Find personal loan offers here]

3. Avoid bank fees

Are you losing $9 a month in “maintenance fees” or paying an occasional $35 in overdraft charges? These small leaks can add up quickly. In fact, a year of maintenance fees and two $35 overdraft charges equals $178 owed to the bank.

The creation of Internet-only banks like Ally, GE Capital, and Bank of Internet USA now provides consumers with access to checking accounts with little-to-no fees.

These banks don’t need to shell out massive amounts of money to keep the lights on at their local branches, so they use those savings to provide a better experience for their customers, including fewer fees.

If you find yourself routinely paying the bank for the privilege of keeping your money there, then switch to a different bank! There is no reason to pay a monthly maintenance fee or a $12 charge to move your money from savings to checking to cover an overdraft charge.

[Compare checking accounts here]

4. Get more for your money with a higher interest savings account

The average savings account with a big bank (like Chase, Wells Fargo, Bank of America and Citibank) offers about 0.01 percent in interest.

Those insultingly low interest rates essentially amoun to a free loan to the bank. The bank takes that money and turns around to lend it out at significantly higher rates.

Internet-only banks offer much higher interest rates on their savings accounts. Even though most savings accounts are still less than one percent in interest, the difference between .90 percent and 0.01 percent can be significant.

You’ll earn $135.61 by simply depositing $15,000 into a savings account with a .90 percent APY. By leaving that $15,000 at 0.01 percent, you’ll earn a $1.50. So, do you want to buy one soda with your interest or 27 lattes?

Moving your savings from a low to higher-interest savings account could add a couple hundred dollars to your annual income.


5. Maximize reward credit cards

Credit cards. They lead some people down the path of over-consumption and reckless spending. Others learn how to harness the power of rewards (and reign-in their desire to splurge) by maximizing their spending habits for cash back – or other rewards.

A die-hard credit card rewards seeker strategizes to have the best card in each category of his or her spending habits: gas, grocery, travel, entertainment, eating out etc.

Others look to take advantage of upfront bonuses, like 30,000 miles for spending $3,000 in three months.

If constantly looking for the best reward card and keeping track of a dozen or more cards doesn’t sound appealing, then identify the best flat-rate cash back card. Currently, Fidelity Investment Rewards and Citi Double Cash Card both offer two percent cash back on all spend. If you spend $15,000 a year on a credit card– that’s a simple $300 in cash back for purchases you’re already making.

Remember: pay your bill on time and in full. If you start revolving and paying interest to your credit card lender, you’ll defeat the point of earning rewards.

[Find the best credit card for your spending habits here

Case Study: Hannah

Hannah keeps $13,000 in savings with Bank of America. She also keeps money in a checking account with Bank of America and has accidentally gone overdraft twice this year. Hannah has overdraft protection, but got charged $12 per incident to have her money transferred from savings to checking. She spends about $12,000 a year on a credit card that only earns one percent cash back with rotating five percent categories, which she never seems to use.

Right now, Hannah is earning:

  • Savings interest: $1.30
  • Credit card rewards: $120
  • Overdraft: -$24

Total = $97.30

Finally fed up, Hannah makes some changes. She moves $12,500 of savings to GE Capital Bank where it earns .95 percent. She opens a checking account with Ally, which offers real overdraft protection and doesn’t charge to move money from savings to checking. Hannah puts $500 of savings with Ally in case of overdrafts. She then gets the Citibank Double Cash Back card and earns two percent on her $12,000 of spend.

Now, Hannah earns:

  • Savings interest: $119 (GE Capital), $4.52 (Ally – if it stays at $500)
  • Credit card rewards: $240
  • Overdraft: $0

Total =$363.52

By making a few simple changes to her financial plan, Hannah earns an extra $266.22 a year.

Moral of the story

Little tweaks to a financial strategy can have a meaningful pay off. Earning $363.52 a year from interest and cash back could go towards IRA contributions, other investment vehicles or back into a savings account to keep preparing for the future.

Want regular updates about the best financial products out there? Then sign up for our Price Checker Newsletter. Twice a month, we’ll deliver the best-of-the-best right to your inbox.

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Wells Fargo and Overdrafts: They Still Don’t Get It

ChexSystems Big

Today, Wells Fargo lost its appeal to overturn a verdict requiring the bank to compensate customers $203 million for manipulating transaction posting in order to increase the amount of overdraft fees that they charged.

In 2001, Wells Fargo changed the order in which they posted transactions. Rather than posting transactions in the order in which they happen (which would seem obvious), they would batch post them from “high-to-low.” Essentially, they were posting transactions in the order they wanted them happen, rather than the order they actually happened.

Here is an example of how that can impact you. Imagine you start the day with $100 in your bank account. Then:

  • At 9AM you spend $10 at a coffee shop (new balance $90)
  • At 12PM you spend $25 on lunch (new balance $65)
  • At 5PM you spend $30 at the bar, and (new balance $35)
  • At 8PM you spend $50 at a restaurant (new balance -$15. You are overdraft)

If you processed the transactions in the order that they were posted, then you would have one overdraft transaction, costing you $35 (the typical overdraft fee).

Wells Fargo was not happy with making only one overdraft fee. So, they changed the rules. Instead of posting them in order, they waiting until the end of the day, and then posted the transactions from the highest to the lowest. Here is what that means. Your start with $100, and then:

  • Post the $50 restaurant transaction (new balance $50)
  • Post the $30 bar transaction (new balance $20)
  • Post the $25 lunch transaction (Overdraft #1, -$5 balance)
  • Post the $10 lunch transaction (Overdraft #2, -$15 balance)

Once you reorder the transactions, you increase the number of overdraft transactions. In the re-ordered example, you are now going to pay two overdraft fees, which would be a $70 charge (instead of $35).

When I explain this process to people, most people can’t even imagine that this could be legal. But it is legal. In fact, nearly 50 percent of banks still process transactions in this way.

In 2001, Wells Fargo clearly made this change to increase revenue. And customers clearly did not understand it. (In fact, it is such a crazy way to post transactions that it takes a bit of time to explain.) The lawsuit is not about the legality of high-to-low processing (which is legal). It is about false and misleading statements that cost people a lot of money.

Wells Fargo has been appealing. They don’t think it is misleading, and they don’t want to reimburse the fees that they charged. And they will likely continue to appeal. I find that the most distressing part of this case (and others like it). If banks continue to defend this practice, and the way the explained it to customers, publicly, then I have severe concerns about their ability to service customers.

Do you think you were a victim of this?

To find out the current status and how to claim, visit At this website, you can see exactly what you need to do

If you still have questions or concerns, you can and should make a complaint directly to the Consumer Financial Protection Bureau.

How to deal with a bank that thinks reordering is fair

Overdrafts, even without the devious cheating of transaction reordering, are some of the most expensive and extortionate ways to borrow short-term money in the country. A payday lender charges $15 to $20 for every $100 that you borrow. At the worst bank in the country (Citizens), you will pay $83 to borrow $100.

There is good news: new internet-only (branch-free) banks are looking to shake up the entire fee structure. Because they don’t have branches, they have much lower costs. And they pass that savings along to consumers by paying higher interest rates on savings accounts and eliminating virtually all fees.

You can find the best checking account for your needs in our checking account marketplace. And some of our favorites include:

  • Bank of Internet Rewards Checking, which charges no monthly fee, reimburses all ATM fees, offers a free transfer from savings to checking, and has no overdraft of NSF fees.
  • Ally Bank, which charges no monthly fee, reimburses all ATM fees, and will automatically transfer money from a high-rate savings account to your checking account for free to cover an overdraft. If you have no money, then you will never be charged more than $9 per day in overdraft fees

Want regular updates about the best financial products out there? Then sign up for our Price Checker Newsletter. Twice a month, we’ll deliver the best-of-the-best right to your inbox.

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The Best and Worst Banks for Overdraft Fees

Overdraft_lg_mobile vs trad

This week, MagnifyMoney provided information to American Banker for a story on overdrafts. The CFPB has indicated that it will start treating overdrafts as short-term lending. We couldn’t agree more: overdrafts are short-term loans, plain and simple. However, because banks charge “fees” instead of interest, they get away with outrageous pricing. In my entire banking career, I have never seen a more expensive form of short-term borrowing than an overdraft at a large American bank.

In our analysis, we looked at a simple $100 overdraft. The customer would pay back the $100 in 10 days. And then we ranked the biggest banks to see which institutions charged the most, and the least.

The absolute worst bank was Citizens Bank, where it would cost $83.93 to borrow $100 for 10 days. The best was Ally Bank, where it would cost $9.


Why such a big difference? 

If you really want to save money on banking fees, you need to ditch the traditional brick-and-mortar banks. New, challenger brands like Ally (and others, which you can find on our checking account page) have completely re-written the rulebook. They just don’t charge punitive overdraft fees.

But, even with the big banks, there are big differences between them. Although the headline overdraft fee ($35 per incident) is high and relatively consistent, there are other bits of the fine print that you have to navigate. Namely:

  • How many times per day will they charge the fee? For example, Chase will only charge three times per day, whereas Citizens Bank will charge seven times. Yes – seven times in a single day!
  • Is there an extended overdraft fee? Some banks will charge you again if your balance remains negative. At Bank of America, they will charge you $35 after five days. Citizens, the worst of the banks, will charge $6.99 per day, from day four. And Capital One will not charge any extended overdraft fee.

So, that $100 overdraft would cost $34 at Citi, $49 at Chase and $71 at PNC.


What should I do?

At the very least, don’t bank with Citizens. Their pricing is outrageous.

The best option is to switch to an internet-only bank, where the overdraft fees have been virtually eliminated.

If you want to stick with a bricks and mortar bank, make sure you choose one that limits the per-day charge and does not have an extended overdraft charge. Citibank and Capital One Bank are both good examples in that category.


Why is American Banker doing this story?

Banks that depend upon overdraft fees for their income need to be concerned. This is “easy money” for them. Any time you have predatory pricing on lending, you can generate sizable revenues. But, those revenues won’t last.

Thankfully, the CFPB is going after overdrafts. We will see where it ends, but the profit pool will definitely shrink. American Banker was interested in seeing who are the winners (like Ally, who don’t depend upon overdraft fees), and who are the losers (like Citizens Bank). Not only can the losers expect to lose significant income streams in the future, but also they should be wary of potential punitive action, lawsuits and customer attrition.

Want regular updates about the best financial products out there? Then sign up for our Price Checker Newsletter. Twice a month, we’ll deliver the best-of-the-best right to your inbox.


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You’ll Be Shocked Where We Found The Best Savings Accounts

Male hand putting coin into a piggy bank

Interest rates are low, but just because they are doesn’t mean you can’t shop around for a much better savings rate.

If you’re keeping your savings at your local bank branch you’re missing out on the best rates. In fact, there are safe online-only alternatives that pay 100 times more interest than the 0.01% rate you’re probably getting at your local bank.

On $25,000 in savings, that can mean an extra $247 a year in interest. And unlike CDs there are no early withdrawal penalties. Your deposits are also fully FDIC insured.

Here are some of the best rates available right now from nationwide online banks as of September 15, 2014:

1. Salem Five Direct (1.00%)

Salem Five Direct offers 1.00% on all balances up to $500,000 with no fees or other restrictions. Salem Five Direct is the online subsidiary of Salem Five bank in Massachusetts, founded in 1855.


> Learn more here

2. Synchrony Bank (1.05%)

Formerly GE Bank, the Synchrony Optimizer Plus High Yield Savings offers1.05% on all balances. There is a $5 per month fee if you let your balance fall below $50. You can withdraw over the phone, with an ATM card, or by online transfer.


> Learn more here

3. CIT Bank (1.00%)

If you hold a daily balance of $25,000 or more, CIT will offer a 1.00% rate. Otherwise you will earn a lower 0.95% rate. This is less generous than Synchrony, which has no daily balance requirement to earn the highest rate. CIT has been in business for over 100 years as a commercial bank.


> Learn more here

4. Ally Bank (0.99%)

Ally is a great simple bank that is well known for its customer service standards, winning Best Online Bank three years in a row. Ally offers 0.99% with no minimum deposit or maintenance fees of any kind. When you want to withdraw funds, you can do it over the phone, online, or do a check request or wire transfer. Just note that wire transfers have a $20 fee.

Many people with an Ally Savings account have a checking account with them, and enjoy no ATM fees of any kind. Ally reimburses any ATM fees other banks may charge at the end of the month, so you’re free to access your money anywhere.

> Learn more here

Be sure to use our customizable comparison table to find the best savings account for you.


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Shockingly, Bank of America Is Actually a Good Option for Someone


This week, two new products have been announced that specifically target the un-banked:

  • Citibank Access Account
  • GoBank, in partnership with Wal-Mart

Nearly 10 percent of Americans do not have bank accounts, and these new products promise to make it easier and cheaper for people to enter the banking system. These accounts come after the introduction of Bluebird (by American Express), Liquid (by Chase), Safe Balance (by Bank of America) and Opportunity (by Wells Fargo).

If you need access to a basic account, but have difficulties opening an account (because of bad previous history that is now reported on your Chexx Report), or you want to avoid the high overdraft fees, these accounts could be for you.

None of the accounts offer the ability to borrow money. So, you should only view these as low-cost transaction accounts, and will need a separate strategy (like a credit card from your local credit union) for any borrowing needs you might have.

We have reviewed the products to see which offers the best deal.

No account is perfect. In summary:

  • If you need to write personal checks, and you don’t mind a six day hold on check deposits, then BlueBird is for you
  • If you don’t need to write checks, then:
    • Citi is best if you have a monthly direct deposit, or you can keep at least $1,500 in your account
    • Bank of America is best if you don’t have a direct deposit or high level of funds to keep in the account

And the cheapest account is….

Bluebird by American Express is the cheapest account:

  • $0 monthly fee, with no direct deposit requirement and no minimum balance requirement
  • No overdraft and NSF fees
  • MoneyPass ATMs are free; $2.50 at other ATMs

If you have a monthly direct deposit, you can have a fee-free account at GoBank, Wells Fargo or Citi. However, GoBank has long check hold times, and Wells Fargo still has expensive overdraft fees.

If you do not have a direct deposit, then the cheapest accounts are Chase and Bank of America (both at $4.95 per month). However, Chase does not offer BillPay, whereas Bank of America does.

The most services are offered by….

Bluebird by American Express enables BillPay and the ability to write checks. None of the other accounts offer check writing.

If writing checks is not important, you still have access to BillPay at Bank of America, Citi, Wells Fargo and Go Bank.

Ability to Deposit Funds

The banks (Chase, Bank of America, Citi and Wells Fargo) enable access to their branch and ATM network. In addition, for any deposited check, $200 would be made available on the next business day.

However, Bluebird and GoBank have very long hold times (they do not promise less than six days).

In Conclusion

None of these products are perfect, but they could be useful if you need access to a bank account.

If you don’t deposit checks, than BlueBird could be a great option. The Wal-Mart cash register becomes your branch, and you can keep this account completely free. However, the long hold time may make this account impossible to use.

If you do need to deposit checks, and don’t have a direct deposit, than Bank of America has the best offer. You will need to pay $4.95 per month, but you get access to the entire Bank of America network.

Unfortunately, none of these products offer overdraft protection at reasonable prices. If you need to borrow money, you will need to find other options.



Do you have experience with being “unbanked” you’d like to share? Get in touch withus on Twitter, Facebook, email ( or in the comment section below.


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When Free Actually Means Free: Shockingly Good Checking Accounts

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

People hate paying fees. And there is nothing worse than hidden fees, ridiculously expensive fees, or both.

Checking accounts have been around a long time. In all of that time, banks have found lots of ways to charge annoying, expensive fees. And, the big banks (Citi, Chase, Wells Fargo and Bank of America) are the worst. With checking accounts, banks make their money in four ways:

  1. Monthly account fees
  2. ATM fees
  3. Overdraft / NSF fees
  4. Big balances (with no interest)

We have reviewed thousands of bank accounts. And here we introduce you to the best. There is a theme: if you want an amazing account, you have to give up branch banking. You are paying far too much for the “convenience” of branches. And we will show you why.

The Best No-Fee Checking Account (without the ability to go overdraft)

NO monthly fee, with no minimum balance or direct deposit requirement

NO ATM fees,including reimbursement of fees charged by other banks. You can use any ATM in the country for free

NO Overdraft or NSF fees, ever. If you make a mistake, the transaction will be declined and you will not be charged a fee.

In addition, they have great online and mobile functionality, as well as an onshore call center that can help you with your customer service needs.

In addition, you do have the opportunity to earn interest on your checking account. You can earn a total of 1.25%. Each of the following items helps you to earn 0.42%:

  • 0.42% for a direct deposit of at least $1,000
  • 0.42% if you use your debit card 10 times a month

Another 0.42% if you use your debit card 15 times

So, if you have direct deposit and use your debit card 15 times, then you earn 1.25% (0.42% + 0.42% + 0.42%)

If you often go overdraft, then this is not the account for you. However, there is an account made just for your needs.

The Best Checking Account for Overdraft (you need short-term borrowing)

If you find that you regularly go overdraft and need the option for short term borrowing, then there is no better option than Capital One 360.

NO monthly fee, with no minimum balance or direct deposit requirement.

NO ATM fees. However, you will not be reimbursed for other bank ATM fees. To avoid ATM fees, you have to use Allpoint ATMs

To sign up for overdraft protection, you have to apply for a line of credit. Once that line of credit is set up, then Capital One does not charge a fee for transferring money from the line of credit to the checking account. You are only charged interest for the days that you borrow the money.

For example, if you borrow $100 for 10 days, then you would be charged:

  • $70 at Bank of America
  • $0.31 at CapitalOne 360

But, don’t I need a branch?

Both of the accounts that we highlight in this article are internet-only banks. That means they do not have branches. (At CapitalOne 360, you do not have access to the Capital One branch network).

For most people, branches are truly a thing of the past. However, you may still need a branch if:

  • You handle a lot of cash, including the need to make frequent cash deposits
  • You need to generate cashier’s checks on a moment’s notice. (That may only happen once a year, when you sign a lease)

To get access to a branch network, without getting stuck into their fee structure, we recommend that you:

  • Choose the internet-only bank account that makes the most sense for you, and then
  • Put the minimum amount required into a traditional checking account so that you have access to their branches.

To find a traditional branch where you can open a bank account, you can use the MagnifyMoney checking account tool. Input your zip code, a very small amount of money that you would keep in the account (for example $215) and look for the first cheap option near you.




In this zip code, you find M&T Bank with no charge. It is completely free checking. (The other fees are very high, so you don’t want to use it for everyday banking. But, you can open an account so that you can use the branch if you ever need to deposit cash, get a cashier’s check, or do any other branch-based banking).




Branch-free banks are great. You can get an account with no monthly fees, free use of any ATM (of any bank) and no overdraft fees. Checking accounts are old and boring. You shouldn’t have to pay for them.



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Eliminating Fees

Banks That Will Pay For Your Broken iPhone

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

Buying a new iPhone 6? You might want to think twice before shelling out $99 for AppleCare protection.

That’s because several banks and credit unions offer credit cards with a little known perk called Cellular Telephone Protection coverage, which will reimburse you if your phone is damaged or even stolen.

It’s a leg up on AppleCare, which won’t cover you for theft. And it’s on top of warranty extensions or purchase protection your card might already offer. reviewed the coverage of over 25 banks and credit unions that offer this feature, and here are the findings:

What do you need to do?

Just pay for your monthly cellular plan with the eligible credit card. Each month you do, you’ll be covered. You don’t need to buy your phone with the card, so any phone you have can get coverage as long as you start paying the monthly bill with your card.

How much does it cover?

It varies from $200 to $600 per incident, with Wells Fargo offering the most generous coverage at $600 per incident reimbursement:

Wells Fargo: $600
First Citizens Bank: $500
Hancock Bank: $500
Credit Union West: $250
Kinecta: $250
Purdue Federal Credit Union: $250
Quorum Credit Union: $250
Suntrust (Visa Signature only): $250
Community State Bank: $200
Energy Capital Credit Union: $200
Fidelity Bank and Trust: $200
Fifth Third: $200
Spirit of Alaska Credit Union: $200
University and Community Credit Union: $200
US Alliance Credit Union: $200
Aggieland Credit Union: $200
American Partners Credit Union: $200
Education Credit Union: $200
Friends and Family Credit Union – With Checking Account: $200
Greater Texas Federal Credit Union: $200
Hudson Valley Credit Union: $200
IBM Southeast Credit Union: $200
MCT Credit Union: $200
Scott Credit Union: $200
Tarrant County Credit Union: $200
UnitedSA Credit Union: $200

And you can do it for as many years as you’d like, unlike AppleCare which will only cover you for two years and ends completely after two incidents.You can request reimbursement twice per year, so for example with Wells Fargo you could get $1,200 covered each year.

What is the deductible?

It’s better than AppleCare, which charges you $79 per incident for damage.

Wells Fargo charges just $25 per claim. Most other banks and credit unions with the coverage charge $50, still better than AppleCare.

How does replacement work?

If your phone can’t be repaired, the insurance provider will pay for a replacement purchased directly from the store (in person or online) of your wireless carrier.

There is a catch: your phone might be more expensive than $600 when bought brand-new without a contract extension.

New iPhones run $649 to $800+ depending on features.

So, you might be on the hook for an extra $200 or $300 if you badly damage the phone in its early days.

But that’s a reasonable price to pay considering you’re getting the insurance at no upfront cost to you.

Insurance direct from your wireless provider often costs $50 per year or more, and it carries deductibles as high as $150 or more for more expensive phones.

If you’re someone who wants insurance on your phone, it’s probably worth opening up an account with a bank or credit union that offers superior protection.

Have questions? Get in touch via TwitterFacebook, email or in the comment section below!


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Eliminating Fees

Personal Finance Education Can Prevent Overdraft Charges


The simple mention of overdraft charges is enough to cause metaphorical steam to start pouring out of people’s ears while their eyes fill with very real rage.

During a financial literacy workshop at Brooklyn College, the team discovered one simple way to prevent future debt and unnecessary bank charges: education.

Unfortunately, modern collegiate curriculums are woefully lacking in personal finance education. While personal finance is arguably one of the most important skills a person uses throughout his or her life, there is little to no mention of how to handle money during a students’ college career.

The two-hour workshop with Brooklyn College students proved how quickly important financial information can be passed along in a meaningful, understandable way.

MagnifyMoney’s co-founder, Nick Clements, looked around at a group of 40 students and inquired, “how many of you have paid overdraft fees to your bank?”

About five students shot their hands shot into the air, before ten or so more cautiously admitted to a financial fumble.

“And how many of you felt paying $35 to your bank for a potentially small mistake wasn’t a big deal?” Clements pressed?

The anger about being charged an overdraft charge suddenly electrified the room before one student broke the tension.

“I felt duped,” he said. “I didn’t even realize my account was so low and then an unexpected charge came in and caused me to go into overdraft for just a few dollars.”

Another student admitted to being charged about $70 because he ended up with two overdraft charges on the same day.

“Have you ever considered ditching your bank to find one that didn’t slap you with such heavy fees?” Clements asked the group of students.

A pregnant pause followed his question before he continued to explain you don’t have to remain in a bad banking relationship.

In fact, emphasizes how banks don’t reward loyalty, so customers needn’t give their banks the same kindness.

Banks are focused on acquisition. The way banks can afford to lure in new customers with deals like $250 bonus to open a checking account or $100 cash back after the first $1000 spent on a card, because they increase costs on existing customers.

Overdrafts are just one way that banks rake in massive amounts of money to protect their bottom line while spending the money to court potential customers. In fact, Bank of American annually generates nearly one million dollars per bank branch in hidden fees alone. Hidden fees include overdraft charges, ATM fees, monthly maintenance fees and non-sufficient fund fees. So just one Bank of American on the corner of a city block is bringing in almost a million bucks simply by charging existing customers fees.

The rise of Internet-only banks has made it much easier to get rid of many of these hidden fees. Banks like Ally, Simple, Bank of Internet USA and Charles Schwab reimburse ATM fees, don’t require a minimum deposit or monthly maintenance fee, and provide legitimate overdraft protection or much cheaper fees or even no overdraft fees.

For those ready to take the plunge and leave their bad banking relationships behind, offers a simple way to evaluate the best bank (or credit union) for you. Simply go to our Checking Accounts comparison table and customize it for your situation. We also recommend doing a separate search for a savings account to ensure you’re getting the highest interest rates available.

Don’t deal with a bank that may slap you with a $35 fine for a $2 mistake. The punishment simply doesn’t fit the crime. Switch to a financial institution that will treat you with respect and save you money in the process.

If you find yourself consistently slipping into overdraft, then please reach out to us for help.  You can reach the MagnifyMoney team at or on Twitter @Magnify_Money or Facebook.


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Eliminating Fees

New Study: Overdrafts confuse, extract and exploit



The Pew Charitable Trust has just released a report on bank overdrafts. Not surprisingly, the report shows that consumers are confused, unhappy and willing to take action. The report also shows that, although the median overdraft fee is $35, people paid an average of $69 for their most recent overdraft. In the majority of overdrafts people borrow less than $50 for fewer than 4 days.

So, people spend, on average, $69 to borrow $50 for 4 days. No wonder they are confused, unhappy and willing to take action. Overdrafts in the US are often more expensive than payday lending. And their structure makes them one of the most expensive forms of short-term borrowing in the world, as I have previously outlined here.

Unfortunately, the complexity of the system makes it difficult for people to understand the true cost of overdrafts, compare options and – when they do take action – switch to a bank that is actually better. At MagnifyMoney, we are trying to help people compare, switch and save.


52% of overdrafters do not believe they have opted into overdraft coverage.

One of the biggest myths out there today is that you can opt out of overdraft protection entirely. You can not.  Regulation E only allows you to opt out of overdraft (and avoid fees) for any ATM or debit card transaction. So, even if you opt out of overdraft coverage, you could still be paying overdraft fees on checks and electronic payments (like your car insurance that is debited monthly, or billpay that you complete online).

No wonder people are confused. They are told they can opt out of overdraft coverage, and they think they have. But then the car payment is automatically debited and they are hit with a fee.


Most overdrafters paid 3 or more penalty fees

An overdraft is simply a short-term loan. But, rather than charging interest on money borrowed, banks charge fees per incident. You make one mistake and get charged $35 (the famous $40 latte).

Even worse, many banks levy extended overdraft fees. Every day that you are overdraft could result in more fees being charged. At Bank of America, for example, you will be charged another $35 if you do not pay back your overdraft in 5 days. So, you could be charged $70 to borrow $5 for 5 days.

The report shows that 58% of people learn about their overdraft via the monthly statement or the mail. Given the time lag, that increases the chance that people will pay an extended overdraft fee. And it is not surprising that the average incident costs $69 in the study, compared to an average $35 fee.

This adds up to a lot of money. We looked at fee income by branch, and every single Bank of America branch is making nearly $1 million every year.

Willing to Take Action

28% of overdrafters say they closed a checking account in the past because of overdrafts. 19% wanted to discontinue the service.

Overdraft policy at traditional branch-based banks is like the song lyrics of Hotel California: you can check out, but you can never leave.

People trying to opt out need to recognize that they can not. They will only be able to opt out of debit and credit overdraft coverage. But checks and electronic payments will still continue to hit them.

Comparing overdraft policy between traditional branch-based bank accounts can be very difficult, and banks make it difficult on purpose. But, if your goal is to avoid the risk of either a $35 overdraft fee or a $35 NSF fee, it will be almost impossible to find a traditional bank that does not charge fees that high.

Only banks without branches (internet banks) are truly revolutionizing the way that overdraft fees are being charged. For example:

  • Ally Bank only charges $9 per day that you go overdraft.  And, if you have money in a linked savings account, they will transfer the money at no cost.
  • Bank of Internet USA has no overdraft fees and no NSF fees
  • Capital One 360, the internet-only bank of Capital One, will transfer money from a line of credit for free and will only charge interest for the days that you borrow the money. They treat an overdraft like the loan that it is, and dramatically reduce the costs as a result.

We find it interesting that Capital One has re-written the rules on overdrafts for their online bank, but have kept the old system in place for their branches.

People are angry and unhappy. But, switching from one traditional bank to another will not solve the problem. And opting out will not provide complete protection. For people looking to eliminate overdraft fees entirely, they will need to consider branch-free banking.  You can compare bank accounts here.  And we have put together some educational material (including video) on overdrafts as well.

Banks will continue to charge overdraft fees as long as they can get away with it.  The fees are completely out of proportion relative to the service provided.  I encourage you to consider ditching your traditional bank completely.  I switched to Ally, and haven’t looked back. With overdraft fees, you are paying a lot for the convenience of a bank, and you have to ask if it is worth it.


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The Cost of an Overdraft in Chattanooga



If you go overdraft, banking fees can be very expensive. And the rules are not always clear or easy to understand. went on the road last week, and spent 3 days in Chattanooga, working with people and helping them save money.  We met a lot of people who have been hit with overdraft fees.

We have reviewed the FDIC regulated banks serving Chattnooga in Hamilton County.  There are $6 billion of deposits sitting in 14 banks, with 104 branches.

The average overdraft fee in Chattanooga is $33 per incident, with a range of $24 (Citizens Tri-County Bank) to $36 (SunTrust, Regions Bank, FSG, BB&T, Synovus, First Citizens Bank & Trust).

But beware the extended overdraft fee.  If you account remains negative, 43% of Chattanooga banks will continue to charge you fees.  That is why the actual cost of $100 overdraft for 15 days can range from $29 to $77.  Choose your local bank wisely if overdrafts are an issue.

We also think you should consider an online bank (like Bank of Internet), which charge no overdraft fees and no NSF fees.  I switched to an online bank, and haven’t looked back.  You can look at the options on our checking account comparison page.

Here is the result of our survey:




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Eliminating Fees

Do You Have the Right Overdraft Protection?


Unless you keep your money in a tin can underneath your bed – which we don’t advise – you’re subjected to the fine print policies of whatever financial institution you trust with your assets. Unfortunately, the banks sometimes come off as something more akin to Tony Soprano than a knight guarding your wealth.

The restructuring of transactions (or “high to low processing” as the banks call it) is one way to force you into paying more fees if and when you go overdraft.

Be sure to read What are Overdraft Fees?

I thought the government passed a law to protect me?

Yes, the government did pass Regulation E, but most of the old tricks remain in place and high to low ordering is legal. Some of the biggest banks stopped the practice in an attempt to appease regulators, but ironically smaller banks are the ones most likely to still be reordering your transactions.

The protection of Regulation E is related to debit and ATM transactions.  You have the right to opt out of overdraft for debit and ATM.  If you opt out, then your transaction would be declined and you would not be paying the overdraft fee for going into negative numbers. But remember that some banks still charge you a NSF (non-sufficient fund) fee. But for checks, electronic transactions (which include using your debit card as a credit card) and bank fees, the practice remains exactly as it was.

Can I enroll in protection?

Yes, you can.

Protection means that you link an account (usually a savings account, credit card or line of credit).  If your checking account does not have enough money, then money is transferred from your savings, credit card or line of credit.

This doesn’t save you from fees though. Banks will typically charge a transfer fee to the checking account. The fee is usually somewhere between $10 to $12 per day that you have an overdraft.

If you link your savings account, then it is very straightforward. You pay the bank to transfer money from your savings account to your checking account. You’re still forking over $10 to $12 for something that costs the bank fractions of a cent.

If you link a credit card, the story is more complex. Most credit cards will charge you a cash advance fee, and will start charging interest at the cash advance rate from Day 1. That rate is usually close to 30%.

Linking a line of credit is usually the cheapest way to borrow. Typically there is no fee on the line of credit, and the interest rates tend to be lower. Not surprisingly, lots of credit unions offer a line of credit. Of the Big 4 banks (Bank of America, Chase, Citi and Wells Fargo), only Citibank offer a line of credit.

Overdraft protection doesn’t protect from fees

Back to the Tony Soprano reference, buying protection doesn’t entirely protect you. Even if you enroll in overdraft protection, you can still be charged an Overdraft or NSF fee. If you link your savings account, and there is not enough money in the savings account, then you would be charged an NSF or Overdraft fee.

Is this fair?

We don’t think so. But our job is to help you understand the rules and find the best way to avoid fees.

Find out how certain banks are starting help consumers


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Eliminating Fees

How Overdraft Fees Silently Rip You Off


It’s Thursday, the day before payday. You only have $50 left in checking and have forgotten that your gym membership of $70 will be automatically debited from your account today. Normally, you’d transfer a little bit out of savings to cover the cost if you needed to, but you didn’t do it in time. The bank approved your gym’s charge and now your balance is negative $20.

Whoops, you’ve gone overdraft.

33% of Americans have gone overdraft in the last year

In a recent survey, MagnifyMoney discovered 33% of Americans have gone overdraft in the last year. If you haven’t yet, it is bound to happen at some point. Either we make a mistake, or we actually run out of money.

Going overdraft in the United States – even accidentally – is one of the most expensive ways to borrow money in the world.

  • Banks charge effective APRs > 1,000% – making them worse than payday lenders

  • Banks have purposefully made the system obscenely complex.

  • Banks regularly re-order transactions in the background, increasing the fees you pay and stacking the deck against you

The U.S. always wants to be #1…

Unfortunately, overdrafts in the US are the most expensive form of short-term borrowing I have seen in the world.  Yes – it is more expensive to borrow here than in the UK, Russia or Mexico! Banks made $32 billion last year in overdraft fees alone.  And, in our survey, borrowing $100 for 7 days could cost up to $300 in fees!

How do fees work?

In the example of the gym membership, the bank has 2 choices: approve the transaction or decline the transaction.

If they approve the transaction, then you go overdraft and will be charged an overdraft fee. The average fee is about $35 per incident.  You can be charged multiple times a day.  One of the worst examples is Citizens Bank, which charges $37 per incident, up to a shocking 7 incidents per day. I’ll save you whipping out the calculator, that’s $259 in fees for a single day!

When your account is overdrawn, the balance is negative. You have to bring the balance positive (by putting money into the account), or else you will be charged an extended overdraft fee.

At Bank of America, you would be charged another $35 if the account is negative for 5 days. And remember: you have to cover both the amount you borrowed and the fee.  In the case of the gym membership – you would have to pay the $20 you borrowed and the $35 fee in 5 days, otherwise you are charged another $35!

If the bank decides to decline the transaction, you still get charged a fee.  This fee is called an NSF fee aka non-sufficient-funds fee.  And, guess what?  The fee is still a shocking $35 per incident.

So: you are charged $35 if it is approved or declined.

Doesn’t the bank also mess with how my transactions are posted?

In a normal world, transactions that take place at 8AM will be deducted from your checking account at 8AM.  Unfortunately, the rules are stacked against you.  Rather than posting the transactions when they actually happened, a lot of banks post transactions when they wish they would have happened.

Nearly 50% of banks use what is called “high to low processing.”  They take all of your transactions from the day, and deduct them from your account from highest amount to lowest amount (and they do this at the end of the day).  That means you will go overdraft sooner, and you will pay more fees.

Imagine you have a balance of $50.  You have 2 transactions: a morning trip to Starbucks for $5, and then dinner for $55.  If the transactions were posted in order, then you would only have one overdraft transaction: the dinner for $55.

If the transactions were posted from high to low (and not in the order they happen), then you would have 2 overdraft transactions!  At an average bank, that would increase the fee from $35 to $70!

And that is perfectly legal.

Tell us about your worst overdraft fee and then read on about overdraft protection.


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Eliminating Fees

Calling Out the Banks: Fix the Overdraft Market



Overdraft protection sounds like a program that would, I don’t know, protect you? Instead it helps lessen the fees but still gives banks the opportunity to charge you $10 to $12 (if not more) for transferring your money to cover an overdraft.

Understand what you’re up against

When I worked in banking, we would look at certain warning signals.  If a product is excessively complex and extracts revenue that is exponentially higher than the cost of providing the service, then something is wrong.

I believe the overdraft market in the US is fundamentally broken, and has morphed into the worst type of predatory lending.

I have a really simple solution, and banks all over the world are already doing this.

  • Declining a transaction costs banks fractions of a cent, so charging consumers a $35 decline fee is obscene.  The most they should charge is a few dollars. Some new entrants charge nothing at all – and they are right to do so.

  • An overdraft is a short-term loan.  Lets stop talking about fees, and start talking about interest rates

    • Checking accounts should have a disclosed overdraft limit.  In other words, you should know that you can go up to $500 overdraft

    • The bank should charge a fair interest rate for the money you borrow – and only for the days that you borrow the money

Some banks are reasonable when it comes to overdraft

First Direct, one of the most popular banks in the UK, offers the following:

  • Free overdraft protection up to $250

  • A line of credit above $250 (the better your credit score, the higher the available line).  The interest rate is about 15%.  You don’t pay a fee-only interest for the days that you use the credit line.  So, if you borrow $100 for 7 days, you would pay about $0.29.

  • If you use your entire overdraft line, and the bank declines additional transaction, you pay nothing.

Banks should make money.  This is not a charity.  But they should offer transparent pricing that is easy to understand and compare.  And the profit should be in line with the cost of providing the service.

Consumers should be able to compare and choose the best option – just like any other consumer product. Fortunately, we’re helping you do just that.

Banks that respect you and your money

Consider switching to an internet-only bank. I have made the switch.

If you have a few instances of going overdraft because of a simple mistake, then consider Ally Bank.  You get one of the best interest rates on the market for your savings account. And, if you go overdraft, Ally DOES NOT CHARGE YOU for transferring money from your savings account to your checking account.  Why you ask? Because, it doesn’t cost them anything to do it!

If you go overdraft because you need the money, then Capital One 360 might be right for you. This is the old ING Direct.  They act a lot like First Direct of the UK: no overdraft transfer fee, a line of credit, and you only pay interest for the days that you are overdraft.

If you never want to go overdraft again – and wish the bank would just decline your transaction and not charge you a fee, then look into Bluebird or Serve (both from Amex). Bluebird is in partnership with Wal-Mart.  You can never go overdraft, and you will never be charged an NSF fee.

Even if you love brick-and-mortar bank branches, do the math to see if switching to an internet-only bank could save you a substantial amount of money in fees – and don’t forget the cost of gas!

Want to know more about Internet banking? Check out this article.