Personal Finance Blog By MoneyRates - June 2008
June 27, 2008
Military families receive some benefits from the government, although many would argue not nearly enough for their service to their country. A number of credit unions have been formed to benefit military personnel (active and retired) as well as people who work in the defense industry. If you have a member of your family that may qualify - alert them to the deals listed below:
5.00% APY from Navy Federal Credit Union on their 7-year Share Certificate with a minimum deposit of $20,000. Credit union membership eligible for all active duty Navy and Marine Corps members, contractors assigned to DON sites, retired Navy personnel, and family members of eligible Navy personnel.
4.60% APY from Pentagon Federal Credit Union on their 5-year and 7-year certificate. Membership includes members (and family members) of the United States Army, Air Force, Coast Guard, Navy, Marines, National Guard, Reserves, Cadets, ROTC as well as employees of the Department of Homeland Security (DHS), Department of Defense, Department of the Army, and the Department of the Air Force. Federally insured by NCUA not FDIC. ($1,000 minimum)
The rates at USAA Credit Union are not quite as competitive with a fixed-rate CD only paying 3.56% for all terms from 90 days to years, but USAA offers a wide range of rate deals including auto loans, credit cards, mortgage rates and even renters insurance at below-market rates. Eligibility for USAA is open to all:
- Active duty officers and enlisted military personnel.
- Former spouses and adult children of USAA members.
- National Guard and Selected Reserve officers and enlisted personnel.
- Officer candidates in commissioning programs (Academy, ROTC, OCS/OTS).
- Former military personnel:- If you're no longer in the military, you are eligible until you turn 35.- If you continue to serve in the military after you turn 35, eligibility expires upon separation or retirement from the military.
Boeing Credit Union is offering a fantastic 7.50% APY on their savings and checking accounts, although the yield only applies to balances up to $500 as well as below-market rates on loans and mortgages for members. Mebership is open to any Washington state resident. If you live, work, worship or attend school in a Washington state school district and past or present employee s(or their family member) of: The Boeing Company, Boeing subsidiaries or affiliates, BECU or The Museum of Flight.
June 26, 2008
M&T Bank, N.A. is a federally chartered bank headquartered in Oakfield, New York. The bank operates as an online bank although accounts can be opened over the telephone and by mail. The bank is mid-sized with $266 million in total deposits reported at the end of the first quarter of 2008, but has received a 5-star rating from the bank rating service Baeur Financial based on their financial strength. A 5-star rating has more meaning than ever with the weakness in the banking sector due to the losses in the mortgage and lending industry. M&T Bank, N.A. is likely to increase their deposits during the second quarter after increasing their bank CD rates to among the highest in the nation. Current rates include:
12-month CD 3.59% APY
18-month CD 4.21% APY
24-month CD 4.34% APY
30-month CD 4.52% APY
36-month CD 4.69% APY
48-month CD 4.91% APY
60-month CD 5.04% APY
CDs can be opened online in about ten minutes at M&T Bank's website and are open to residents anywhere in the United States.
Savings for College: Investment Options, Student Loan Programs, and Savings Programs Designed to Pay for Children's College Education Costs
June 24, 2008
Money-Rates.com has updated their College Savings page with two new sites which offer parents new ways to pay for college for their children. The two sites Simpletuition.com and Greennote.com are described below with the rest of college saving alternatives.
529 Plans - A 529 plan, named after Section 529 of the Internal Revenue Code, is a savings plan designed to encourage saving for future college costs with tax advantages which vary from state to state. 529 plans, legally known as “qualified tuition plans,” are sponsored by either states, state agencies, or educational institutions. Currently there are two types of 529 plans: (1) pre-paid tuition plans and (2) college savings plans managed by fund managers. Investors can palce their funds in any 529 program, but lose potential state tax advantages but not using the designated fund manager in the state in which they reside. A complete list of 529 plans by state with fees, limits, and options is listed here. For investors looking for more information regarding 529 plans the NASD (National Association of Securities Dealers) has an excellent page set up here dedicated to 529 plans.
Custodial Accounts - These type accounts (either UGMA or UTMA) can be set up at a bank or brokerage firm and will give the designated custodian full discretion over investment decisions. Custodial accounts have no restrictions on deposits and no penalties for early withdrawal. The disadvantages of a custodial account is that they are taxed annually as well as at withdrawal. In addition at age 21 the child has complete control over the account and funds. The custodial accounts are best used by parents/custodians who are confident that their portfolio
management can outweigh the tax consequences of custodial accounts. Coverdell Education
Savings Account - The Education IRA has been renamed to the Coverdell Education Savings Account. The Coverdell ESA was created to give individuals a way to save for a child's elementary/secondary school education as well as for college, graduate school, or vocational school in the same investment vehicle. The account must be established for the benefit of a child under the age of 18 with all contributions made before the beneficiary's 18th birthday. An individual can contribute up to $2,000 annually to a child's Coverdell ESA if their modified adjusted gross income is less than $95,000 as a single tax filer, or $190,000 to $220,000 as a married couple filing jointly in the tax year in which they contribute. All earnings in the account will accumulate tax-deferred and can be withdrawn tax-free if used to pay for any qualified education expenses.
Independent 529 Plan - The Independent 529 Plan offer parents the chance to pay for college in the future at today's price which can lead to large discounts on future costs. The program co-sponsored between Independent 529 plan and TIAA-CREF allows allows you to prepay tuition today that your child can use later at any participating colleges. This program protects against increases in tuition and has no initial fees, no maintenance fees, and no annual fees��and is free from federal taxes. If one assumes that private college tuition inflation continues at an average rate of 5% per year and an Independent 529 Plan annual discount rate of 1%, then this is the equivalent of earning a 6% increase on those savings funds each year��tax-free. Currently over 200 major universities participate including schools rated in the top 20 academically like Stanford, Princeton, and Washington University. The universities are contractually obligated the tuition payments (called certificates) issued today even if the university withdraws from the program in the future. If a child is not accepted or does not wish to attend a school on the list of participants then there are three redemption options:
(1) You can get a refund and retain all the tax benefits for the withdrawal portion, if the funds are used for qualified higher education expenses.
(2) You can change the beneficiary.
(3) You can roll over an Independent 529 Plan account tax-free into a state-sponsored 529 plan.
More information about the Independent 529 Plan is available here.
529 Reward Credit Cards - Consumers who use a 529 reward credit card can earn rebates for their purchases which go directly into the 529 plan of their choice. Three credit card issuers with 529 reward programs are (1) Fidelity 529 College Rewards Card, (2) Citi Upromise Card, and (3) Babymint College Savings Card from MBNA.
Student Loans - Student loans are financial aid given to a student by a federal or private lender that is specifically intended for education costs. These loans usually carry lower interests than other loans and and can be issued by the government.
SimpleTuition.com is a comprehensive website which details Federal Stafford Student Loans, private student loans, and student loan consolidation options. The site has an interactive loan search tool which will bring up a list of potential lenders for a particular college and loan amount.
GreenNote.com is an innovative site that helps students obtain loans for college by setting up a social network with friends, families, and others. Members of the network can choose to lend money to the student through a secure online platform with flexible lending terms. With a current fixed lending rate of 6.8% students are well below market-rates on student loans which can typically be over 15%. Lenders can make a return on their investment through a professional secure online platform unavailable with most personal loans.
other college savings options include:
College Savings Bank - This bank offers a unique CD which indexes the interest rate paid on the CD directly to the year-to-year increase in college tuition. The College Savings Bank CD is a hedge against inflation (and tuition costs) without the stock market volatility of returns generated in a 529 plan.
Affinity Bank - Offers a 10% rate on kids savings accounts up to $500. While this $500 cap may not go far enough as a college saving program this is an excellent way to sock some extra money away for college while teaching your kids about savings. Imagine the fun when they realize the are earning twice the rate that Mom and Dad are earning.
Umbrella Bank - The Education Money Market offered by Umbrella Bank is currently yielding 3.40% on accounts of $500 or more. Umbrella Bank also offers a one-year Education IRA CD which yields 3.25%. HSBC Bank - Offers a 3.05% savings rate on joint accounts opened with both an adult and child's name. This may be an appropriate investment for parents who wish to park funds temporarily or maintain some discretionary control of the funds through college.
Zions Bank - Parents or grandparents can sign up their child for the Zions Bank Kidsgreen Savings Account which features no minimum deposit or monthly fees, new account kit with kids activity book explaining the fundamentals of banking, and a free session with a savings account specialist
State Farm Bank offers Fixed Rate CDs, Market Rate CDs, and mutual funds (via State Farm Insurance) which can be purchased in a Coverdell Education Savings Account and managed for the benefit of paying for a child's college costs.
June 23, 2008
Very few online banks are offering competitive depost rates for business accounts, but ING Direct is making good rates available for sole proprietorships, partnerships, limited liability companies, corporations, and not-for-profits. Today's business rates include:
Business Savings Account 3.15% APY for a $1 minimum with no fees, no service charges, and multiple authorized account log-ins allowed.
Business CD Account Rates:
12-month CD 3.30% APY
3-year CD 3.30% APY
4-year CD 3.50% APY
5-year CD 4.00% APY
ING Direct has one of of the best online platforms available and has held their deposit rates in the top fifty in the nation for well over one year.
Rate Update: Mortgages, Home Equity Loans, Money Markets, Checking, Savings, CDs, and Reward Checking
June 20, 2008
A bad week for the homebuyers looking to lock-in 15-year and 30-year rates as economic reports drove up rates on fixed-rate mortgages. Freddie Mac reported that the nation's average 30-year fixed-rate mortgage increased all the way to 6.42%. Analysts are forecasting higher rates continuing at least through the summer. The best news for the real estate market may be that the Congress-enacted higher jumbo-conforming loan limits (as high as $729,750 in some markets) is adding liquidity to the jumbo loan market and has already eased rates on jumbo loans closer to those of conforming loans. More mortgage rates and news.
Home Equity Loans
The good news for Americans with balances on a home equity line of credit is that with the prime rate set at 5% and the LIBOR down from the levels seen last year the lower benchmark rates used on most home equity loans are providing relief to borrowers on their monthly payments. Unfortunately the slow real estate market and mortgage market crisis has caused tighter lending standards and higher rates for those homeowners whose loan-to-home ratio has become higher. More home equity loan rates and news.
Money Market Rates
Many banks have increased their money market rates although the national average is still very low. EverBank is offering an intro-APY of 4.01% (good for 90 days) and Bank Mutual is offering a 3.75% yield. More money market rates.
Typically savings account rates are the last deposit rates banks will adjust, but a few banks increased savings rates a quarter point. Many of the nation's largest banks are still paying below 1% on savings account so make sure your savings account is earning at least 2.50%. Plenty of 3.50% and higher yields are available from online banks. See the highest bank savings rates.
Checking Account Rates
EverBank is the offering the highest yield on a checking account with their 4.01% intro-APY offer.
Certificate of Deposit Rates
CDs with terms between 2 years and 5 years have seen a good increase in rates this week as leading banks EverBank, US Bank, KeyDirect, Third Federal S&L, E*Trade Bank, and Discover Bank are just a few of the banks to bump up rates. Short-term rates under one year are still for the most part under 4%, but may see a bounce over 4% next week. Find the latest CD rates.
Reward Checking Account Rates
The yields on reward checking account have been mixed with several of the banks who were previously paying over 6% on their reward-style checking account dropping their top-tier rates, but a few others increasing to match the top yield in their local market. Reward checking accounts are worth investigating if your household uses debit cards, check cards, direct deposit and banks online. Find the reward checking account that best meets your needs.