Money Blue Book

Ask yourself this question - when was the last time you balanced your checkbook? Do you even know what balancing a  checkbook entails? The fact of the matter is, writing checks and issuing payments in the form of paper checks is a steadily dying practice, thanks to the tremendous growth of the Internet and all of the new fangled technological advancements in the area of electronic and automated telephone banking (even phone banking is getting phased out in favor of the web). Much the same way the future of newspapers and the outlook of traditional forms of written news are being called into serious question, and much the same way they are being slowly rendered irrelevant by the overwhelming convenience and cost efficient benefits of the World Wide Web, so too will the practice of check writing and manually balancing accounts ultimately go the way of the dodo bird.

Personally, I can barely recall the last time I actually went through the hassle of balancing my checkbook manually. The tedious bean counting practice of manually comparing my own personal account records with the recordation information provided by monthly bank statements is simply not something I’ve readily adopted over the years. The last time was probably in high school when my mom sought to teach me about basic account management by forcing me to watch her go through the motion of recording transactions neatly on the gridded transaction register that comes with each set of checks. But other than that first initial lesson, I don’t think I’ve ever done it in real practice. After all, I bank online almost exclusively, and other than the monthly rent checks I write, I seldom glance at my checkbooks anymore. In fact, I highly recommend readers do the same. We are entering the new technological age where efficiency, speed, and identity security are paramount concerns. Electronic banking and online bill pay offer the type of convenience and security benefits that paper checks and manual payment systems simply are unable to provide.

Write Personal Checks Sparingly To Minimize The Risks Of Becoming An Identity Theft Victim

If you asked me, checks are nothing but potential identity fraud cases waiting to happen. After all, you wouldn’t go about your daily life randomly handing out slips of paper with your complete personal identification and financial information scrawled on them would you? But that’s basically what you’re doing when you open up your checkbook and issue a personal check. Personally, I write very few checks nowadays, and here’s why. When you write a personal check at your local Safeway or CVS, or when you cut out a check to your local pizza delivery guy, you are opening up a tremendous security risk by leaving the check behind. On that check is your name, address, phone number, bank’s name and address, bank account number, bank routing number, and even your actual handwritten signature. Oftentimes, as is the case at most supermarkets and department stores, cashiers even request additional identification from you and write the information directly on the face of the check. This additional ID request can include sensitive information such as your driver’s license number, your social security number, and even your birth date.

While many banks eventually mail the used canceled check back to you, not all banks do. Some merely scan the checks and upload the displays onto your online account for you to see. It’s almost impossible to know how many sets of eyes have viewed the check and how many scans or copies were made. What’s exceedingly apparent is that anyone who sees the front of your personal check has sufficient information to open fraudulent bank and credit accounts in your name. One very unknown fact about checks is that anyone can take an account number and routing number off the bottom of a personal check and create new fake checks with them. The name displayed on the check doesn’t even have to match the actual customer name on the underlying bank account in question. Oftentimes, retailers and banks simply don’t check to see if the numbers on the check match up with the right names for that account.

While I personally abhor writing checks, viewing the practice as not only archaic but outdated, there are still limited circumstances when I simply can’t get around it. Because I lease my current condo apartment from an ordinary pair of mom and pop landlords, they’re not properly equipped to handle credit card payments. As such, each month I’m obligated to mail a personal check out to them to cover my monthly rent. Sometimes, you have few alternatives and must write out checks, and that’s acceptable in limited circumstances like paying your rent, your mortgage, or paying your monthly credit card bill. But if some traveling salesman or pizza delivery guy comes to your door, don’t write him a check, because all you’re doing is giving him a potential tool (a blank check if you will) for trouble. Even if it’s the seemingly innocent girl scouts selling cookies at your door, I recommend paying by cash instead of paying by check so long as the sum is not too prohibitive. Avoid check payments if you can unless you’ve already established a history or measure of trust with the person or company.

Online Banking Is Truly A Much More Efficient Way To Balance Your Checkbook and Track Your Account Finances

The actual practice of balancing your checkbook is a method to verify and confirm that your own personal records accurately match your monthly bank statement transactions. The purpose is to catch mistakes and unauthorized transactions as they happen. While most bank transactions are processed and recorded accurately, sometimes mistakes occur. Usually, bank customers have anywhere from 30-60 days to bring the accounting error or unauthorized transaction details to the attention of their bank. Failure to notify the bank in time about any account discrepancies may result in forfeiture of the bank’s liability to pay you money to make up for the difference. That’s why it’s generally important to balance your checkbook, or reconcile your account balances as accountants like to put it. The best way to do that is to get in the habit of banking online, particularly with the aid of Internet banking aggregators. Online banking not only affords you accurate and real-time updates of your bank accounts on demand, it also provides a variety of account history information to help you budget your spending.

By giving you instant access to your account balances at all times, online banking  helps you plan accordingly. Failure to know how much money you have in your checking or savings account on a regular basis may lead you to blindly spend more money than you have, through ATM withdrawals, excess check writing, and debit card purchases, causing you to incur unnecessary bank fees and charges. Protecting yourself from overdraft and bounced check fees is a must when it comes to sound financial planning.

There are a variety of bounced check and insufficient fund fees that banks and merchants levy when there isn’t enough money in your bank account to cover your authorized checks. A single bounced check can easily cause $50 or more as not only the bank will charge you a $20-30 processing fee, but the merchant who received the paper check from you is likely to charge you an additional $20-30 merchant fee as well for passing a non sufficient fund check. Without knowledge and daily tracking of your checking account balance, insufficient fund and late payment fees can quickly add up and spiral out of control. For the overdraft prone, many banks currently offer overdraft protection to ensure that your checks never bounce and that all ATM and debit transactions still go through. While you’ll still have to pay the bank’s overdraft or bounced check fee, at least with overdraft protection you can avoid having to pay the merchant’s return check cost, and stay in good standing with the payee and the people you do business with.

Another service many banks now offer is the option for customers to link their checking accounts with a savings account. In the event the customer accidentally exceeds his or her available checking account balance, funds from the linked savings account will automatically be used to satisfy the shortfall. While there is usually a small transaction fee for this automatic coverage via the savings account, the charge (around $5-10) is often substantially less than having to pay a non sufficient fund charge to the bank and an additional bounced check fee to the merchant.

While some banks also allow checking accounts to be linked up to credit cards as a backup source of funds in the event of a cash shortfall, I don’t recommend this option. In the event of insufficient checking account funds, the overdraft becomes a cash advance on your credit card. Oftentimes the cash advance fee is levied immediately and cash advance interest charges start accruing immediately. The better option is to utilize the linked savings account alternative, mentioned above.

View Your Online Bank Accounts Daily and Mentally Keep Track Of Your Balances Throughout The Day As You Spend Money

When I speak of balancing my own checkbook, I’m not actually talking about sitting down with wads of purchase receipts and manually matching handwritten checkbook transactions to information found on my monthly bank statements. That would be much too unwieldy and time consuming of a regular task to undertake. In this day and age, between writing checks, swiping credit and debit cards, and using online bill pay, it’s simply too much work and too cumbersome to carry around a paper register and write down every single transaction. However, that doesn’t mean I am not tracking my finances and transactions at all times - I’m simply using a broad mental tracking method to keep tabs on my check, debit, and credit expenditures as opposed to using a manual recordation approach.

The whole point of keeping those accounts balanced is primary to catch those rare but pesky bank recordation mistakes and to ensure that you have even funds in your actively used checking accounts at all times to handle payment requests. For those who want to adopt the same mental tracking method that I use, it’s actually quite simple - all you have to do is get in the habit of viewing your online account balances on a regular basis. Ideally, you’ll want to check your bank account balances every single day. There’s nothing particularly obsessive or compulsive about that. After all for example, if you’re looking to lose weight or count your calories, you would want to step on that bathroom scale regularly to track your progress. In the same way, you want to know where your bank account balances stand at all times. You want to always have a mental figure for the day and make sure you spend well below that amount. If you are new to the practice of mental tracking, you may want to keep a small transaction log (like the ones used for checkbooks) on your person until you get the hang of it. But ultimately, the goal is to rely on mental tracking instead of wasting time and effort writing down every single day to day transaction.

Since all of my credit card, checking, CD, and online high yield savings accounts are linked together on the web and enabled to make automatic monthly debit payments without my continuous oversight, I always make sure I have sufficient funds in my checking account to satisfy all upcoming bill pays. For those who utilize automatic debit payments to handle recurring bills as I do, It’s important to establish a sufficient monetary cushion in your checking account to handle unexpected ATM withdraws and debit card uses to avoid having to pay insufficient fund charges or late fees.

Some banks like Bank of America offer special enrollment programs to help customers better track their spending by rounding up purchase amounts to the nearest dollar. With the Bank of America Keep The Change program, each time you use your Bank of America check card (essentially a debit card) to buy something, the purchase amount is rounded up to the nearest dollar denomination and the difference is automatically deposited into a linked savings account. Not does only does the program greatly promote savings, it makes it a lot easier to mentally keep track of daily purchase transactions as you don’t have to contend with adding up cents.

Using Credit Cards Is Actually A Smarter Way To Manage Your Money Than Using Checks or Debit Cards

The practice of using bank debit cards to manage money is a growing trend as society steadily moves away from cash and check transactions. However, the reality is that most people don’t manage their debit card spending very well and most don’t balance their debit transactions daily, either in written form or mentally, like I do. Personally I’m not a big fan of using debit cards. In my opinion, debit cards are simply check writing in glorified plastic form, minus some of the potential identity theft issues discussed earlier. While it’s substantially safer and more secure than writing paper checks, debit cards still come with the same problems inherent in check writing - payment amounts are withdrawn from your checking account immediately and thus you have to make sure you stay within your checking account limit at all times or face having to pay over the limit fees.

The better solution is to go with a payment mechanism that does not rely on immediate account debits - like credit cards. Due to grace periods inherent with credit cards, compared to debit and check payments, there is less worry when it comes to insufficient fund requirements and bounced payment requests. Credit cards also offer substantially stronger fraud protections against unauthorized transactions and charge mistakes. Oftentimes a quick phone call or an explanation letter is enough to get unauthorized credit card charges removed from your bill, and the best part is that you don’t lose any money while the billing dispute is going on.

Ideally, credit card usage usage is the way to go in an otherwise perfect world. In a perfect world, all cardholders would be responsible credit users with the self control to not spend wildly beyond their means, and would be able to always make sure they have enough money to pay off their credit card balances every month. Unfortunately, this is not a perfect world we live in and not everyone is qualified to use credit cards as their primary method to pay for things.

As the American and world economies endure a period of economic recession, the once stable and thriving marketplace can seem like a distant memory. Not only does it seem like unemployment warning flags and disappointing corporate earning reports lurk around every corner, it’s all too easy to succumb to the financial despair. When you combine the mortgage market meltdown with increasing housing foreclosures, and you mix that with high gas prices, fears of another major Islamic terrorist attack, and snowballed consumer pessimism, you have a spicy cocktail for widespread financial depression. While I’m not a financial fortune teller, nor am I a guru who can predict when the recession or lingering credit crisis will pass, all I can do is reassure you of areas in your life where you ought not to be overly distraught or paranoid about.

One segment in the economy that has spawned a huge surge of concern and irrational panic is the area of bank failures and bank bankruptcies. Because of the excessive subprime lending to consumers totally unqualified to receive home mortgages made by irresponsible mortgage lenders in the past few years, the economy is now reaping the terrible financial whirlwind result of defaulting loans and home foreclosures. This calamity is currently happening on a massive scale as huge banking giants like Citibank and Bank of America, as well as major thrift saving institutions like Washington Mutual are getting pummeled for their ties to bad mortgage loans. Unable to recoup their housing mortgage investments, many of these financial service providers are having to write off billions of dollars of unrecoverable bad loans, triggering serious questions by creditors, deposit account holders, and shareholders of their ability to continue as viable going concerns.

Bank Failures Have A Way Of Sparking Emotional Panic, Regardless Of The Government Effort’s To Alleviate Fears

While most major banks have healthier segments of their financial businesses to siphon assets and capital from, thereby allowing them to stay afloat, a few have not been so lucky. Netbank, an online banking institution that was one of the first early adopters during the initial Internet banking craze, ultimately keeled over due to the disintegration of its mortgage business segment. When its asset position could no longer meet depositor demand, federal regulators swooped in to shut it down, forcing Netbank to ultimately file for bankruptcy.

Banking and mortgage services giant Countrywide Financial recently faltered under the crushing weight of bad mortgages as well, and was ultimately acquired by Bank of America at an extremely huge discount, saving it from near collapse.

Most recently, IndyMac Bank fell flat on its face, triggering shock waves that signified the United States’ second largest banking collapse in history. Due to the sheer financial size of IndyMac bank, and the large scale and huge number of account customers the banking collapse affected, the news triggered panic attacks and resulted in reports of huge lines of desperate customers clamoring to get their deposit money out of the bank out of fear of the unknown. Despite the federal government’s announcement that the vast majority of deposit holders would not lose a single cent of their money, news of catastrophic bank failures have a way of making consumers go crazy and act in irrationally frenzied ways. As someone who considers himself relatively educated about the subject of finance, even I have to admit I was disturbed by the sheer magnitude of the Indy Mac bank collapse. After all, if IndyMac could fall, who else could potentially be next? I felt a slight tinge of emotional panic despite my otherwise logical and rational mental faculties - and I wasn’t even an IndyMac banking or home mortgage customer. But yet, I still felt the reactive emotional ripples that made me question my faith and trust in my bank and the economy at large. While bank failures are incredibly rare, they do happen - especially when there is a significant and pervasive trigger (the subprime mortgage meltdown) that is causing the financially destructive domino effect.

Thus, that is why it is extremely important for us, as cool headed consumers, to greatly educate ourselves on the types of financial and banking protections the system has in place to shield the money we save up in banks, savings and loans, and credit unions from loss. By learning more about how the federal government, the FDIC, and private bank risk sharing agreements protect our deposits, the more our fears will diminish, thus helping to solidify our faith in our banking institutions. We live in an efficient market where there are powerful protective systems in place, and proper financial education will help to reinforce that confidence. Thus sometimes, “the only thing we have to fear is fear itself - a nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance” (a powerful quote made by former U.S. President Franklin D. Roosevelt during the Great Depression).

How Does FDIC Insurance Keep Our Bank Accounts and Deposit Money Safe?

The Federal Deposit Insurance Corporation (FDIC) is a federal government run entity that provides deposit insurance protection for participating member banks - guaranteeing their deposit accounts from loss. The FDIC system was set up to instill consumer confidence in our nation’s banking system during a time of severe economic recession and financial turmoil. To prevent massive runs on banks triggered by irrational consumer panic to withdraw money during times of crisis, the United States government set up the FDIC to guarantee depositors at insured banks that their money would always be safe, even during the worst of times.

As a general rule of thumb, the current FDIC insured amount per depositor at each bank is $100,000 (with extra exceptions for different ownership categories). This blanket protection insures member bank accounts from bank failure loss, up to the maximum insured amount of $100,000. The FDIC protection covers a variety of bank deposits, including - checking accounts, savings accounts, money market accounts, certificate of deposits (CD’s), and even bank money orders and cashier’s checks. However, the FDIC protection does not cover non bank deposit type accounts and assets like - stocks, bonds, mutual fund investments, variable or fixed annuities, U.S. Treasury securities, or contents stored in safe deposit boxes. As FDIC insurance only covers bank failure loss, it also does not provide protection against bank fire, fraud, or theft, although in the overwhelming majority of cases, individual banks usually have their own private hazard and casualty insurance coverage against these other types of loss.

The FDIC also provides loss protection for retirement accounts held in member banks in the form of deposits. The FDIC limit for retirement accounts, which includes self directed plans like Roth IRA’s, Traditional IRA’s, SEP’s, and Keogh’s, currently stands at - $250,000. The higher FDIC limit for retirement accounts is a clear recognition by the FDIC of the importance of ensuring that consumers always have their retirement nest eggs to fall back on.

How Does The Federal Government and The FDIC Monitor The Banking Industry?

While by no means a perfect system, the banking industry is highly regulated by the federal government and watched by multiple federal agencies - including the Federal Reserve, the U.S. Treasury’s Office of the Comptroller of Currency, the FDIC, and the Office of Thrift Supervision. Along with state banking regulators, there are multiple sets of eyes at all time on the state of the banking market. While bank failures are incredibly rare, they do happen on occasion unfortunately.

In such an occurrence, as soon as the federal and state regulators determine that a bank no longer has the capacity to meet depositor demands and sustain sufficient capital due to insolvency problems, the FDIC barges in to take command. Once it takes control, the execution is usually fairly rapid as the FDIC is highly motivated to ensure a seamless transition. Until the FDIC can find a suitable buyer of the failing bank’s assets, the bank generally continues to run as usual without significant interruption. In the rare event the FDIC cannot find a suitable buyer, it closes down the ailing bank and sends out checks to all account holders within the FDIC insurance limits along with interest. Usually the FDIC payments are sent out in a matter of days.

For Those Banking Customers With $100,000 Or Less In Total Bank Deposits, Your Money Is Fully Covered By The FDIC

If you are a young student or a person with relatively low income with little in the way of financial or banking assets, you probably won’t have to worry too much about losing your money in the event of a bank failure. If your total bank deposits are less than $100,000, you can rest assured that the full faith and credit of the United States government has your back. The ones that have to be more vigilant in how they structure their checking and savings account deposits are those with more than $100,000 in total deposits. Those with more than $100,000 in deposits will need to pay greater attention to how they break up and consolidate their money among FDIC insured banks to ensure maximum FDIC protection against loss.

For Those With More Than $100,000, You’ll Need To Pay Attention To How The FDIC Provides Separate Coverage For Different Ownership Categories At Any One Bank

While I personally don’t have more than $100,000 in total bank deposits that require me to even worry about this problem (yet!), it’s something I want to know more about because I know one day I will reach that goal (why dream if you can’t dream big). It’s better to know how to structure your bank deposit portfolio now and plan for that occasion, than not know what to do when you reach that point someday in the not too distant future.

While the FDIC insurance program protects individual bank depositors up to a maximum of $100,000 per bank, there are clever ways and not-so-secret methods to get you around this protection limit. The primary way to accomplish this is through deposit account diversification. By splitting your total deposits into multiple ownership category accounts or splitting your assets among different FDIC insured banks, you can ensure full protection of your money. Remember, bank deposit accounts at different banks are insured separately (although all bank branches are considered part of the same bank). Thus, each bank has its own complete set of FDIC coverage limits.

At any one bank, the FDIC offers each category of ownership account its own individual coverage cap. There are different types of ownership categories, each with its own $100,000 FDIC insurance limit. You can go straight to the official source if you want to know more about the FDIC’s policy on ownership categories, but the more common ownership categories are listed here. Remember, each ownership category (single account, joint accounts, etc) gets its own $100,000 FDIC coverage limit:

• Single Accounts - Most consumer bank accounts fall into this category, which covers checking, savings, and CD’s. Basically, if your bank account is in your name only, its ownership category is probably that of a single account. Single accounts also include sole proprietorship business accounts you may own at the same bank (DBA, “Doing Business As” type businesses). All personal and sole proprietorship business deposit accounts at the same bank are added together as single accounts and insured up to the combined maximum FDIC limit of $100,000.
• Joint Accounts - Joint accounts are simply bank deposit accounts that are owned by two people or more at the same bank. While most joint accounts are held by married couples, joint account owners don’t necessarily need to be married. For example, while I have my own individual bank account at a local Chevy Chase Bank, my mom and I also jointly hold a separate shared deposit account at the same bank. Individuals can have multiple joint accounts at the same bank, each with joint ownership involving different people, but when it comes to calculating the total FDIC limit for the joint account category, all proportional shares that each individual owner owns in all joint bank accounts at any one bank are added together and insured up to $100,000 for each individual. Thus, while a joint deposit account for a married couple may appear to enjoy a higher $200,000 FDIC limit, it’s actually made up of two separately capped $100,000 limits - one for the wife, and one for the husband.
• Trust Accounts - Both revocable and irrevocable trusts get their own FDIC insurance limits of $100,000. By listing others as beneficiaries, one can strategically use trust deposit accounts to get around the usual FDIC individual caps. For example, both a husband and wife can set up 2 separate revocable trusts in each other’s names to get an extra total $200,000 FDIC limit on top of their other single and joint account limits.
• Business Accounts - I’m sure business owners feel the FDIC insurance deposit limit for business accounts are currently much too low, but as it currently stands, bank deposit account funds held by corporations, limited liability companies (LLC’s), and partnerships at any one bank are combined and insured up to a maximum FDIC limit of only $100,000 (much too low in my opinion). Keep in mind, sole proprietorship business accounts are lumped in with single accounts.
• Retirement Accounts - Self directed retirement accounts where the account holder gets to decide what to do with his or her money, are offered much higher insurance limits under the FDIC - at $250,000. This particular ownership category includes the following retirement plans - individual retirement accounts (IRA’s), Roth IRA’s, Simplified Employee Pension Accounts, and Keogh Plan accounts. All retirement account deposits held by an individual at a single bank are added together and insured up to a maximum FDIC limit of $250,000. However, keep in mind, retirement account assets invested in stocks, bonds, and mutual funds are not FDIC insured as you’re actually investing through a broker with a working relationship with your bank. The FDIC coverage only protects retirement bank deposits, not investments.

Those With More Than $100,000 In Bank Assets Should Shift Bank Deposit Money Into Joint Accounts To Maximize FDIC Coverage

Because the FDIC provides $100,000 total protection limits for each ownership category, including $250,000 for self directed retirement accounts at the same bank, consumers may be able to greatly increase their total overall financial protection by splitting their money among different types of ownership accounts at the same bank. For example, if you have an individual savings account with total deposits valued at $275,000, you need to be extra careful about bank failure. In the event your bank fails or is suddenly unable to meet depositor demands, you stand to potentially lose $175,000 because only $100,000 worth of assets in the single account category are covered. The solution is not to open up multiple bank accounts like checking accounts or CD’s as they are all of the same ownership category and doing so won’t increase your overall FDIC limit. The best way to diversity and boost your FDIC limit is to spread your deposit among different ownership categories or among different banks. In the case of the hypothetical individual $275,000 savings account, it would be advisable to take at least $175,000 from that savings account and shift it into a joint account with your spouse, thereby sheltering the $175,000 under the $200,000 total joint account FDIC limit. You might even want to make sure you give each deposit account extra room under the FDIC cap to allow interest to accrue, but still remain fully protected.

To reiterate the point about ownership categories, let’s say you went to Washington Mutual and opened up a brick and mortar checking account, an online high interest savings account, and set up a few CD’s - your total coverage limit will still only be $100,000. However, if you opened a joint account with you and your wife or husband, while opening up your own individual checking account at the same time, you will be able to receive $100,000 coverage limit for the checking account, and another separate $200,000 total marital pool coverage limit for the joint account.

Business Accounts Are Covered By FDIC Insurance, But Depending On Type Of Business Entity, They May Or May Not Boost Your Overall Coverage

Depending on business type, a business bank deposit account may or may not enjoy its own separate $100,000 FDIC limit apart from the individual’s cap for single accounts. Because a sole proprietorship and the individual running it are regarded as one and the same for taxation and legal purposes, the FDIC treats sole proprietorships as single accounts for assessing the extent of FDIC coverage. Thus, opening a sole proprietorship business at the same bank as your consumer checking or savings account will not allow you to gain extra coverage.

Only partnerships, limited liability companies (LLC’s), and corporations are able to qualify as separate ownership categories for additional FDIC insurance coverage. Because the FDIC regards certain business entities as separate ownership categories for FDIC insurance purposes, it is not uncommon for clever but sneaky business types to express interest at creating phantom, dummy businesses for the sole purpose of inflating FDIC limits. However, FDIC regulations expressly forbid this practice and stipulate that business accounts for partnerships, corporations, and other unincorporated associations need to be engaged in an “independent activity” such that the business is not engaged primarily in boosting FDIC insurance coverage.

Further Bank Account Diversification Strategies Using Multiple Banks To Increase FDIC Coverage

Because FDIC insurance coverage is offered for not only different account ownership categories, but also for different banking institutions, the recommendation by some pundits for high networth individuals is to spread one’s assets among a multitude of banks. Because each bank offers its own set of bank failure protection limits by the FDIC, savvy account holders are often advised to sacrifice some of their deposits made at just a handful of high yielding banks for greater diversity by spreading it among a greater number of deposit institutions. Let’s say you have $300,000 in a high yield savings account at HSBC Direct that you want to fully protect under the FDIC. If setting up joint accounts to boost FDIC coverage is not available to you as a viable option, you could instead open up accounts at say, Bank of America and Wachovia, shifting $100,000 into each of those two new savings accounts. Thus, your total $300,000 portfolio would now enjoy separate $100,000 FDIC coverages at three different banks. As I mentioned above, in such an event, you may actually want to consider breaking up the $300,000 into four total banks instead of just three to give yourself room to grow in interest and stay fully protected.

One alternative way to shift your banking assets among different banks without actually having to run around the neighborhood or Internet looking for new banks is to participate in a Certificate of Deposit Account Registry Service (CDARS). Banks that are members of the CDARS network do the leg work for you by breaking up CD deposits into smaller size chunks that are separately held at different participating network banks. However, your funds continue to enjoy a single point of access at your primary bank with one statement and one interest rate. The practice is rapidly growing in popularity and I highly recommend it as a wonderful and hassle free way to diversify your banking holdings for maximum FDIC protection. Here’s a list of banks that participate in the CDARS network. One downside of using a CDARS bank is that they tend to be smaller, regional size community banks. Some people like smaller community banks, the type of place where everybody knows your name. However, I highly prefer mega-corporate size banks as they tend to resonate more stability and are better capitalized in my opinion. There are only a tiny handful of large institutional banks participating in the CDARS network at this time. Furthermore, because of the CDARS network fees that banks pay for each CDARS transaction (there is no fee to the customer), CDARS deposit account interest rates tend to be lower than that offered by more competitive non-CDARS banks.

However, if I had financial assets in the neighborhood of millions of dollars and account diversification was on my mind, it is unlikely I would be spending my time worrying about FDIC insurance limits. I would probably have the bulk of my money either invested in mutual funds, index funds, money market funds, or other broadly diversified investments that have never been known to actually fail. Frankly, I don’t even think broadly diversified investment assets could ever technically fail - in the worst case scenario, they would simply gradually lose their stock value over time. Buying super secure assets like U.S. Treasury Bills and Treasury Bonds would be viable alternatives for high net worth individuals as well. While U.S. Treasury products are not FDIC insured, they are fully backed by the full faith and credit of the United States government. The federal government could simply print more money if financial Armageddon necessitated that course of action.

I consider myself one of many rate chasers out there - savvy savers who hunt for the best annual percentage yield (APY) interest rates at banks and credit unions, and who are keen on quickly moving large sums of money from one account to another in pursuit of that financial ideal. High yield interest rate chasers seek out the highest available interest rate offerings possible, whether available at popular brick and mortar branches or whether available only through obscure online banks. We keep tabs on them all regularly and shift our bank balances around in pursuit of that elusive, but perfect high yield savings account. Rather than be content with letting our savings accounts sit idle, earning stable, yet passive interest growth, rate chasers such as myself prefer to actively manage our bank accounts to maximize interest earnings. Interest rates periodically change, thus so should we. Currently, I use my compiled list of the Best High Yield Savings Accounts to actively keep tabs on bank rate updates and changes.

High Yield Savings Accounts Offer Not Only Liquidity, But Rock Solid Financial Security and Reliable Growth As Well

While I have a diversified investment portfolio made up of high performing stocks, bonds, exchange traded funds, and mutual funds, I still try to put a sizable amount of what I own in cash form, invested in stable interest bearing savings accounts. The type of money I put in a savings account is money I can’t afford to risk or jeopardize, and the type of funds that I may need to call upon to weather difficult financial times or unexpected financial emergencies. While I personally use credit cards for emergency fund purposes at least in the short term, stable savings account funds make up the bulk of my long term emergency money strategy. I try to keep at least 6 months worth of liquid assets on hand at all times - money that can be quickly converted into usable cash to pay current bills and liabilities on a moment’s notice. You never know what type of sudden unemployment, cash flow, car trouble, or health problems might befall you that might necessitate the need to call upon such an emergency influx of readily available funds. I choose to invest my emergency fund money into savings and money market accounts because they not only provide a modest degree of interest growth that usually outpaces or at least keeps up with inflation, the invested funds are liquid and extremely well protected from loss. I plan to work certificate of deposits (CD’s) into my emergency fund planning approach in the future, but wish to save up more in my savings before dabbling with higher yielding, but less liquid assets like CD’s.

Some people call rate chasers - day traders of the banking world, but I think that’s a terrible analogy. Unlike day traders who trade on short term, violent swings in the stock market, we do not take actions that could even remotely be construed as gambling or high risk stakes. Interest rate chasers tend to be risk adverse, and are almost always play-it-safe type investors and emergency fund builders who seek safety and pursue predictable rates of return, rather than high flying, speculative investments.

Besides, bank accounts, whether checking, savings, or money market accounts are one of the most stable, reliable, and dependent sources of asset preservation. While most traditional banking institutions do not provide investment assets that will make one rich as their rates of return are generally lower than that offered by other investment options such as stocks, bonds, options, or foreign currency exchange, they do provide a very stable and predictable rate of return. Insured by the Federal Deposit Insurance Corporation (FDIC), the potential risk of loss of assets stored in a banking account is virtually nil. The FDIC, an independent agency of the United States government utilizes the full faith and credit of the federal government to protect the assets of all insured banks. Most major savings and banking associations are FDIC insured, and as such most traditional accounts offered by the insured bank, including checking, savings, money market accounts, CD’s, and even IRA retirement accounts are protected from loss. Even if the bank fails, goes bankrupt, goes out of business, gets robbed, burns down, or succumbs to some market catastrophe like the mortgage meltdown or credit crisis, the money stored in a FDIC insured high yield savings account remains 100% safe, up to the coverage amount. For savings accounts, the legal coverage limit is $100,000. If you own substantial assets that exceed this basic coverage limit and want to be 100% safe, you may want to consider spreading your assets among difference asset categories or banks.

Register With The Top High Yield Savings Accounts And Manage Your Fund Transfers As Interest Rates Periodically Fluctuate

There are certain basic steps savvy rate chasers and high yield online bank arbitrage seekers (as I like to them sometimes) take to properly manage their pursuit of high interest savings rates:

1) Open High Yield Accounts With Online Banks That Consistently Offer the Highest APY Interest Rates For Savings Accounts

I currently own several savings and money market accounts with the top online banks that have consistently offered the best APY interest rates. Personally, I avoid savings accounts from major brick and mortar retail banks like Wachovia, Wells Fargo, Bank of America, or even Citibank, since most rarely offer attractive interest rates as they don’t need to offer them to attract customers. Most of these big retail banks rely on convenience and physical location presence to attract clientele. On the other hand, online banking sites, blessed with lower operational and maintenance costs, are highly motivated and more willing to offer competitive interest rates for account holders.

Most of my recently opened high yield savings accounts are with generally well known online banking institution favorites like HSBC Direct, Countrywide’s Savings, Washington Mutual, WT Direct, E-trade Savings Bank, and Capital One Direct Savings. Oldies but goodies like ING Direct Savings (get an ING Direct Sign Up Bonus), and Emigrant Direct still remain alive and well as members of my complete savings account tracking roster. While the actual order in the interest rate sliding scale changes periodically, the mentioned banks tend to offer consistently high rates. After opening accounts, it’s simply a matter of tracking APY changes and shifting funds around accordingly.

It’s important as a rate chaser to have target bank accounts ready for quick transfers as interest rates change. Back in the old caveman days before the advent of the Internet, opening new savings accounts was cumbersome and limited to local brick and mortar branches, and phone banking was a pain. With the emergence of the Internet and the development of fully functional online banking websites, online funds can now be shifted around instantly with a few strategic key strokes. To manage your online accounts and prep them for transfers, all you have to do is register for online account access and set up linked ACH electronic access. To set up ACH transfer permissions, you’ll be required to submit information about the bank account that you want to link up - including the bank account number and the banking institution’s ABA routing number (you can ask your bank for this information). Frequently the online system will initiate two small denominational test deposits into your linked bank account, the amounts which you’ll have to verify to confirm that you are the actual owner.

2) Be Watchful Of New Bank Account Credit Report Check Penalties, and Electronic Bank Transfer Limits

If you’re like me, you try to maximize your money whenever possible. In my case, so long as the resulting effects don’t put myself in a potentially worse off financial position and the necessary actions to get me there aren’t too prohibitive, I try to go for the gold whenever possible. For those looking to open multiple bank accounts, one thing to keep in mind is the health of your credit score. When a new savings or money market account is opened, some banks initiate a hard credit check. The resulting hard credit pull, as it is sometimes called, may result in a small credit score hit in the nature of a request by one seeking credit. Not all banks initiate a hard credit pull that will ding your precious FICO score for new savings account applications, but some do. Examples of online bank account applications that result in harmless soft credit pulls include - Capital One Direct Savings, Countrywide, Emigrant Direct, E-Trade Savings, FNBO, HSBC Savings, ING Direct savings, and Washington Mutual.

Another thing rate chasers have to watch out for as well is the federal savings account limit of 6 ACH transfers a month. However, unless you are shifting your savings around every few days, the 6 ACH transfer limit per account should not be too much of a limitation or restrictive hassle. Be mindful that the transfer limitation also applies to money market deposit accounts as well. For most comparative factors, savings and money market accounts have little differences except money markets usually provide slightly higher interest rates and sometimes offer check writing privileges. However, money markets usually have higher tiered minimum balance requirements, although that is not always the case.

3) Manage Your Portfolio Of Multiple Savings Accounts By Using An Account Aggregation Service

To keep an eagle eye on your bank balances and army of savings accounts, I recommend using an account aggregation service like Yodlee, or Mint. Yodlee in particular offers its banking account consolidation service through other financial providers as well, such as Bank of America. In my case, I utilize Yodlee through Fidelity’s Full View access, which allows me to link up all of my high yield savings accounts and money markets to Fidelity Investments, storing my account passwords securely so that I can easily view my regularly updated account balances from one location. To make actual transfers however, you’ll have to log into the desired bank account directly.

4) Periodically and Regularly Shift Your Bank Balances Around As Major Interest Rate Changes Are Issued By the Federal Reserve

One thing to note is that I’m not a rabid or fanatic rate chaser. While some hardcore rate chasers shift their money around as soon as interest rate offerings change the slightest, I prefer to my make shift once or twice a month at the very most - call me a mild rate chaser if you wish. Usually I only shift my balances around in pursuit of higher APY rates every two or three months on average. Thus I don’t go hog wild over every slightest budge in APY, although there are lots of super online rate chasers who do though. Just look at those crazies who post on Fatwallet forums - they go nuts over a single .01% change.

Frequently, I fashion my fund transfers from one savings account to another around major interest rate moves by the Federal Reserve when I know major changes are coming my way. Upcoming federal reserve meeting dates on the calendar greatly interest me because decisions by the Federal Reserve frequently have a correlative effect across the board on the interest rate offerings by major banks. Rate cuts by the Fed usually signal subsequent APY interest rate drops by banks in a matter of days. Similarly, raises in the Fed Funds rate usually signal potential banking interest rate increases. Thus I usually try to make my electronic fund transfers as major rate changes are made across the board in response to Fed interest rate moves. Usually there is a lag time of about 1-2 weeks before banks at large fully and collectively respond to Fed announcements. Keep that in mind as well, lest you shift or chase that higher APY interest offering prematurely.

Countrywide Bank is currently offering the Countrywide Rewards Platinum Visa Card for a remarkable 2% cash back on all purchases. Very few other credit card offers come close - except maybe the similarly advertised 1.5% cash back Fidelity Visa Signature Card. Most other top value cash back credit cards restrict higher rebates to special purchase categories such as grocery stores, gas stations, and restaurants. This card’s one of the best non-restrictive purchase cards out there.

The only caveat is that to get the high 2% cash back rebate, you’ll need to redeem your rebate points as a deposit to your Countrywide savings account, money market account, or as a payment towards a Countrywide mortgage loan. With the offer, you’ll receive 1 purchase reward point for every $1 you spend using the credit card. Everytime your rebate balance reaches 2,500 points, you can redeem your points for an instant $50 Countrywide bank deposit or mortgage payment - essentially a 2% cash back offer.

This offer is basically your base 1% cash back offer for non Countrywide bank account holders with an additional special bonus rebate on top for those who are. With the standard purchase offer, you only get 1% back, redeemable for gift cards to a participating merchant of your choice, or a $25 check to use towards home improvement and related supplies. But if you are a Countrywide bank or mortgage customer as well, you’ll get double the rewards, effectively. There is no annual fee, and best of all for high credit card spenders, there is no cap or limit to the amount of rewards you can earn.

While the card has been around for some time in one form or another, it wasn’t until relatively recently that the Countrywide Platinum Visa started to allow customers to redeem points as a savings account deposit as well - becoming a true cash back credit card. Before the switch, the card was just one of those real estate mortgage payment credit card offers.

Take Advantage Of The Max 2% Cash Back Offer With A Countrywide Savings Or Money Market Account

As a credit card buff, I’m always on the prowl for new credit card bonus rewards and purchase rebate offers. I didn’t pay much attention to this credit card offer (since it was just another 1% rebate credit card to me) until I recently opened a Countrywide SavingsLink account so I could write a review about the company’s interest rate offerings. I was personally able to open a Countrywide savings account instantly with no hard credit check performed. If you’re an interest rate chaser, it’s hard to beat a consistent performer like Countrywide. Countrywide Bank has historically offered very high APY interest rates for its interesting bearing savings and money market services. In my regularly updated list of the best high yield savings accounts, I have consistently listed Countrywide Bank as a top performer for its high rate of return for account holders and reliability in offering fast ACH transfer services for those with multiple linked bank accounts. For the high yield SavingsLink, there is a $1,000 minimum balance to open and you’ll need at least $10,000 to get the highest APY rate. For those of you who maintain less than $10,000 in your savings account, there are better choices elsewhere.

Converting An Existing Chase (First USA) Credit Card Into The Countrywide Visa Platinum Card

Since I try my best to keep my FICO credit score rating high, I would rather not recklessly submit an application for a new credit card offer unless I had no other option available to me (new credit card applications ding your credit score ever so slightly everytime). Therefore, I turned to my existing portfolio of cards instead. Since the Countrywide credit card is currently being run by Chase (First USA) card services, I was able to call in and convert an old Chase branded Platinum Visa card into the new Countrywide Visa Platinum Card. Keep in mind, this type of conversion without a new card application is only possible if you have a current Chase or First USA credit card with either the Signature or Platinum designation.

What Will Happen To Countrywide Banking Services With Bank Of America’s Upcoming Acquisition?

It wasn’t too long ago that Countrywide dodged the bankruptcy bullet due to heavy involvement in the subprime mortgage loan mess. With its pending acquisition by Bank of America still being processed and Bank of America already having indicated that it intends to operate Countrywide separately under its existing Countrywide name for at least until 2009, there remains speculation as to what will become of the current line of Countrywide products. One possibility is that the 2% cash back Countrywide credit card will get serviced by Bank of America. But it’s also possible that the program might get shifted onto another card provider like American Express. I’m just speculating at this point, by the way. When Bank of America acquired MBNA, it took the pre-existing 2% rebate MBNA Fidelity 529 Mastercard and hammered it into a new American Express card with a lower 1.5% rebate offer. However and very importantly, existing cardholders were allowed to keep and maintain their old 2% rebate offer as is.

Changes are definitely going to come, but if you are willing to take a little bit of chance, you might be able to secure yourself a great 2% reward card good towards all purchases. How Bank of America plans on integrating or modifying the Countrywide bank account redemption portion of the current offer is a good question. If you’re not willing to take the leap and roll the dice, you might want to consider going with a more predictable and less drama-filled cash back credit card program.