Banks for You!

With all the ultra-low returns that we get these days, most people might think that the high-yield checking accounts are extinct but that is not true. There a number of high-yield checking accounts that is still very much around in 2011.

Account holders now have ample opportunities to earn from rewards checking or high-yield checking accounts. They can earn a higher rate of interest but on a capped amount of cash reserves, than what could be earned on any other typical account. This will have all the features of a normal checking account but account holders will have to meet some conditions regarding how their accounts are used.

In order to get a better picture of the high-yielding accounts at present, Bankrate surveyed around 155 banks, credit unions, thrifts etc., and studied their offerings on high-yield accounts in 2011. It found that nationally available high-yield checking accounts were shrinking and the yields on other deposit products were also going downward.

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The checking accounts that were the main component of the financial mainstream seem to have undergone some radical changes in the recent times. Now banks are making a shift towards the business models which have been embraced by the airlines, where a product is unveiled and new fees is being added as and when required even on services that were already present.

What is worse is that consumers may be unaware about the fees that they might be charged until much later. As per the new study that was conducted by the Pew Charitable Trust, it was found that most of the disclosures on checking accounts consisted of 111 pages on an average. There was also lack of transparency with regard to the fee information. Even the research conducted by the watchdog group US PIRG had come to a similar conclusion. Only a very small percentage of the banks actually provided information that was accurate.

During the study, it was noted that at least 23% did not give the proper fee schedule and the remaining 20% gave information that was inaccurate, stated Ed Mierzwinski, Consumer Program Director.

One of the most visible charges on the checking accounts is the monthly maintenance fee that has been implemented by the biggest regional as well as the national banks.

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Checking accounts hardly pay a 0.1% yield and that is a painful reality with any of the average checking accounts. Ben Bernanke, Fed Reserve Chairman had also confirmed today that there was no chance that Washington would bring about a change in rates anytime in the near future. Even the Fed has announced that it had no plans to hike up the Federal Funds rate over an extended period. However, there is a little bit of good news as there are ways of earning more than 40 times of what your average checking account would have offered. According to the latest survey on high-yield checking accounts there are quite a few credit unions and banks that presently offer 4% on these accounts.

Around 27 credit unions and banks are still offering the high-yield checking accounts when compared to 41 the previous year. During 2010, the average payout on the high-yield accounts was around 3.30%, but it has slipped to 2.56%. This slide can be blamed on the extended easing by the Fed Reserve. However, even this interest is pretty fine considering the fact that there isn’t much you can earn now with a checking account.

When you tie up your money in a Certificate of Deposit or in any fixed income for a long term, then there is no liquidity and the rate is locked. B

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Many consumers don’t look into their most widely used financial services product, checking accounts as much as they do compare the statements on other payment methods such as credit cards. It is seen in a study conducted by the Pew Group that when consumers are unaware of such aspects, they end up paying large amounts of penalties and overdraft fees.

There were a number of checking accounts examined in the study from some of the biggest banks in the country and it was found that over draft penalty disclosure is numbering at least 111 pages and the penalty fines can be increased according to the situation to up to $35.  It is quite complex and difficult to understand the terms of their checking accounts and the late fees that can apply on it. This lack of understanding and communication between banks and consumers is turning out to be quite an expensive mistake for most American consumers.

The report which looked at the underlying and unknown risks for checking accounts looked at recommendation to the policy that will ensure that they have a secure and trusted experience with their checking accounts just like there is proper measures to guard against sudden credit card fee hikes.

For consumers who do not have this information, understanding their checking account is quite difficult. Wh

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Most often people tend to get confused with money market accounts and money market funds.  Money market accounts (MMA) are more or less like savings accounts and are advertised by banks.  In reality, they are very similar to the regular savings accounts.  The most distinguishing factors between money market accounts and money market funds are the factors of choice and risk.  This could be the single largest factor one will have to consider while investing – to protect their hard earned money.

MMA or Money Market Account:

The alternatives to money market funds are the Money Market Accounts offered by the banks.   The annual percentage yield (APY) is very good and the money is guaranteed and safe as it is FDIC insured.

The interest rates that are paid out are normally a bit higher than those offered in the normal savings accounts or it may be on par with the savings accounts.  Hence, while choosing the money market account instead of a regular savings account is to keep the check writing and debit card payments within limits.  Due to the ability to write checks, these money market accounts are seen as a cross between the checking accounts and the savings accounts.

Money market accounts also carry added restrictions such as limited number of transactions and higher minimum balances that need to be maintained.  However, sometimes one might see the tiered rate MMA’s, and these can carry much higher rates.

MMF or Money Market Fund:

A comparison between the money fund or the money market mutual fund, and the money market fund will show that these funds carry no FDIC insurance and it is only a collection of ’short-term debt investments’ that are held by the mutual fund.  This fund is more about investments and less about deposits.  Here, you will only buy and sell shares and this is not something where you can withdraw and deposit money.  Investments made in these funds are put into debt securities that will mature in around 13 months.  In order to cut do Read Full Post…