Boo to Bank of America's New Fee Schedule

Bank of America recently outlined pricing changes for personal accounts. MyAccess checking will require direct deposit or a $1000 minimum balance to avoid a $8.95 monthly fee. Also Bank of America accounts are subject to up to ten independent $35 overdraft charges per day under certain circumstances.

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Every Student’s Banking Needs

Everyone is taught to save money, and to do so most people open up a savings account. After all, it makes sense right? Maybe you also have a CD or Certificate of Deposit. Do you have a Bank Money Market account?

Usually when you go to a bank and open up an account you get a savings account (or core account) and a checking account of some sort. As a student, your goal is to open up such accounts WITHOUT FEES. Granted you cannot completely escape fees (over drafting, past account history, or returned checks for example), but you should have your banking needs taken care of without paying fees. You do not have the money to throw away for nothing. Usually it’s the checking account that has fees, so make sure to go for FREE CHECKING accounts.

Do not get sucked into an interest checking account. You have a core savings account which will make some amount (and usually always more than an interest checking account) of interest. Usually interest checking accounts average 0.85% or so while your typical savings account will give you maybe 1.25% interest.

Why not get 4.0% or even 5.0% interest on your money that’s sitting in a bank? Here’s where a money market account comes in. A money market is a type of savings account banks and credit unions offer. They usually pay higher interest, but they have higher minimum balance requirements. Sometimes you are limited to the number of withdrawals per month. Your goal is to get one with high interest, low minimum balance, and preferably unlimited transactions.

I personally have the Citi Bank e-Savings account. It currently earns 4.25% APY (it used to be higher, but unfortunately it has gone down in recent months) and has no minimum balance requirements. You can link the account to your Citi Checking Account and transfer money online or using your Citi ATM/Debit card. You MUST open this account online – it cannot be done in a financial center – but once opened you can access your funds any way you like.

Why have a money market account? With online banking and ATM access it’s easy to move money around. You do not have to go into the branch at their in-“convenient hours” but rather just move money online or at an ATM. I do not write too many checks, and I pay for most things using my credit cards (get free stuff that way) so I do not have to worry about over drafting my checking account. This means my checking account needs very little balance in it. Consequently it means I have much more money to allow to sit in my money market account earning gobs more interest, and I am all for getting money for doing nothing.

What if you do not have the discipline not to touch the savings account? Here you have two options. One is to put the money into a CD. Pick a term where you know you will not need to touch the money. If you withdraw the principle before the end of the term, you will have to pay a penalty. CDs earn relatively good interest rates (usually better than money markets), but you have to plan well to avoid penalties for early withdrawal.

Another suggestion is to open up an online only money market account where you will not be tempted to spend money out of. I also have an E*TRADE Complete Savings Account which earns 5.05% APY. You do everything online and can transfer money into and out of your account through other bank accounts.

Other recommended choices include the HSBC Direct Online Savings Account earning 5.05% APY and the ING Direct Orange Savings Account earning 4.50% APY. UFB Direct in California has an account earning 5.31% APY with $1 minimum account balance; however I have had no experience with the bank.

College Dos: Every College Student Should

Many finance options are limited to certain groups of students: athletic scholarships, academic scholarships, financial need grants, etc.  However, there every college student has a few smart moves that they can take advantage of to help them once they make it beyond the gates of academia.  Heck, some of these options even help WHILE your still in college.

TROLL FOR TEXTBOOKS.  My personal favorite way to save is to minimize the textbook hurt.  Sometimes literally.  Depending on your field of study, a majority of textbooks are huge hard cover behemoths that will place the hurt on your back as well as your wallet.  Check out aggregators like www.campusbooks.com to find competitive prices for your books.  They will nearly ALWAYS be cheaper than buying at your campus store.  For example Biology 7th Edition by Neil A. Campbell et al retails MSRP for $158.67.  Half.com by EBay offers used versions for $23.65 after shipping.  New text books can be had from Biblio.com for $59.10 after shipping.

INTERNATIONAL TEXT BOOKS.  International text books sell for much less than the United States.  The Supreme Court has ruled that the reimportation of these books does NOT violate copyright law (New York Times article “Students Find $100 Textbooks Cost $50, Purchased Overseas” by Tamar Lewin dtd 21 OCT 2003).  The same text book above retails new at Amazon.com for $124.34 but Amazon.co.uk sells the International Edition for £44.99 (90.78 USD at 1 GBP=2.01739 USD). 

Places that specialize in the importation and sale of International edition sell for considerably less.  TextbooksRUs.com sells the International edition for $70.53.  TextbooksRUs.com guarantees the book has the same pagination as the United States version or your money back.  Furthermore if you can read another language (especially one with compacted print like Chinese or Korean) you can find books in that language for even cheaper.  The pagination probably won’t match, however.

SHARE THOSE BOOKS.  Statistics show one in five students are not buying all the required text books.  I am guilty of this myself actually.  Sometimes you don’t need the book at all, and most of the time, you can get buy sharing books with your friends!

MINIMIZE THOSE FEES.  A whole new campus also probably means a new set of convenient banks.  Those convenient banks, however, are only worth your time if you can get access to your money without fees and minimum balances.  (You should not be paying these to begin with!)  If you cannot find a bank like this in your area check out online only banks like ING Direct (www.ingdirect.com) which has no fees or balance requirements and offers free withdrawals at more than 30,000 ATMs.

PICK PLASTIC IN ADVANCE.  If you’ve been on a college campus lately, you know that the only thing you see more of than iPods is credit card applications.  Students get bombarded with offer after offer for this and that credit card and it’s easy to leave college with not only a degree, but 15 credit cards and $20,000 in credit card debt!  Picking your plastic in advance will help you in so many ways!

First, apply for a credit card under your own name and not your parents.  It used to be that you could start building your credit as an authorized user of someone else’s card.  NO LONGER!  You need your own card under your own name to build your credit score.

Second, shop around for cards that give you things.  As a student you can probably only get cards with $500 or $1000 credit limits, but you can get these cards with other goodies.  Check out Citi’s mtvU credit card (www.citi.com) which rewards timely payments (up to 25 points month) and good grades (up to 2000 points per semester).  You get five points for every dollar charged at fast food, restaurants, bookstores, music stores, video stores, and movies and one point for every dollar spent elsewhere.  These points can be redeemed at the ThankYou Network (www.thankyounetwork.com) for gift cards to 50+ popular stores, cash, student loan rebates, statement credit, travel, etc.  You can also get more points by shopping through the ThankYou Network at places like Target, The Gap or 1-800-Flowers.  You can also get 25 more points a month by having a Checking, Savings and debit card (that you don’t even have to use by the way) with Citi Bank.  Note: Gift Cards and Student Loan Rebates give you the most back ($1 for every 100 points).

Third, remember how I said your credit limit is low?  What happens if you need to spend more than that in a month?  This is when you take advantage of your parent’s credit and carry an authorized user card on their account.  This way you can purchase that airfare home to visit and best of all hopefully do it such that you and your parents get benefits and/or free cash (parents consider getting a mileage card from Citi or Capital One to take advantage of your child’s – and your own – travel expenses.).

GET SOME SORT OF JOB.  I know that there are many things you would rather be doing than working, but getting a job will give you a HUGE head start.  I recommend a 10 to 20 hour job as a student assistant on campus as an easy way to do this.  First, not much is usually expected of you.  Sure it might be boring, but on the other hand you might have someone PAYING you to study when there’s not much to do.

Second, you have additional income to spend and save.  Try striking a deal with your parents to help you save some money.  For example, for every dollar you put into an IRA, they’ll put in a dollar or fifty cents or whatever.  Not only are you getting free money with this deal, you’re planning for your future which could (and probably will) take YEARS off your working life and allow you to RETIRE YOUNG!  The dollar you put into your ROTH IRA in college will probably turn into $15.34 by the time you retire and maybe even more*

Third, when you go into the job force a requirement job requirement might say Bachelor’s plus two years job experience.  Guess what?  YOU HAVE FOUR!  Sure it was at a nothing job.  Sure, you had very little responsibility.  But it’s still experience, and that counts.  Four years of job experience might also be the difference between starting at $35,000 a year and $40,000 a year.  That itself means you can contribute to your IRA with money you essentially would not have had.

READ MY BLOG.  I’m only halfway kidding here.  In all seriousness every college student should read websites or magazines that can tell you tons of ways to save money.  Just be sure to use your head to find out whether or not the technique or offer is illicit or not.

*Assumes you are 19 and put $2000 into a Roth IRA for four years while in college and then put in $4000 a year until you retire at age 62.  You will have put in $168,000.  Assuming 10% annual percent yield on your money your account balance at age 62 will be $2.5 million.

Schwab’s New 4.25% APY Checking Account

Going after 'lazy money' with 4.25% checking
By Jon Birger, Fortune Magazine senior writer
April 26 2007: 4:33 PM EDTNEW YORK (Fortune) -- When Charles Schwab Corp. unveiled its new high-yield checking account Thursday, the most startling feature was its yield: 4.25 percent. With the average interest-checking account now yielding only 2 percent, you wouldn't think Schwab would have to double that to make a splash....The Schwab account includes free checking, free online bill-paying and free rebates on any ATM fees customers incur worldwide. While there are other checking accounts offering high yields - ING Direct has one with a 4 percent yield, and E-Trade's yields 3.25 percent - most have strings. ING's, for example, doesn't offer conventional paper checks, while E-Trade's has a $5,000 minimum account balance. Schwab's, on the other hand, is pretty straightforward.

The new checking account is clearly intended to attract new clients, something that's been a problem for Schwab of late. Even as Schwab's total client assets rose 18 percent last year, new-client assets increased only 4 percent. And the total number of active Schwab brokerage accounts actually fell, from 7 million to 6.7 million.

Each Schwab checking account will be automatically be linked to a brokerage account, into which customers can transfer funds in order to buy or sell stocks, bonds or mutual funds. Those who sign up for checking won't be required to trade, but Schwab still believes the account will serve as a gateway into the other brokerage and banking products Schwab markets.

"We wouldn't have offered it otherwise," Schwab said.

...

Read the full article here: http://money.cnn.com/2007/04/26/pf/schwab_checking.fortune/index.htm?section=money_pf

The catch that is not metioned in this article is the $1000 minimum balance.  However, this minimum is waved if you open a Schwab One brokerage account.  This account is definately something to consider if you travel a lot or use ATMs for convenience without going out of your way to use a no-fee ATM.  The ATM fees are rebated to you in one lump sum at the end of every statement period.  Schwab reserves the right to suspend said rebates at any time (of course).

I HIGHLY recommend that everyone move their money into higher yeild accounts so that as little of their money as possible is sitting making trivial interest (or worst no interest).

I personally use Citi Bank's e-Savings account which is earning 4.50% without monthly fees if you have an EZ Checking or better account with Citi.  You also own ThankYou network points which helps those already earning points with a Citi Credit Card.

Limitations with e-Savings is that it is offered exclusively online.  You cannot apply for it in a branch.  Additionally, while you can access your e-Savings balance from any Citi ATM without fees, you will be charged fees for using another bank's ATM.  On the plus side all 7-11 ATMs carry no fees for Citi card holders so there's almost always one near by.  If you use your Citi CheckCard or POS card, keep in mind the money is drawn from your CHECKING account not your e-Savings account and overdrawing on your Checking account can initiate fees.