Personal Finance Blog By MoneyRates - August 2008

Professor Kenneth Rogoff who was the chief economist for the International Monetary Fund for 5 years has issued some stark warnings about the banking and credit crisis in the United States which have reverberated around Europe and Asis. Among Rogoff's predictions:

* A major bank in the United State will fail

* The financial crisis in the United States is at the halfway point

* Fannie Mae and Freddie Mac are not likely to survive in their current form within the next few years

* Inflation will continue to increase in the United States

* Consolidation among big banks and financial services companies will occur

International reaction to the dramatic predictions are mostly geared towards the threat of the nationalisation on Freddie Mac and Fannie Mae which could lead to losses for holders of the GSE's under a recapitalization. While Professor Rogoff's statements may be dismissed as inaccurate or over-the-top by many Americans, the reaction by foreign central bankers is important to monitor.

One of the best places to park cash today might be bank money market accounts which offer yields that beat mutual fund money market accounts and offer more flexibility than savings accounts or CDs. Money funds offered by the largest mutual fund companies like Fidelity, Vanguard, and Dreyfus are currently yielding between 2.00% and 2.45% - well below the large number of +3.00% yields available from online banks on their money market accounts. While savings accounts do not allow check-writing privileges and CDs have penalties for early withdrawal, bank money market accounts offer limited check-writing and no penalties for withdrawals. Also in an increasing-rate environment (which is widely anticipated for the remainder of 2008 and into 2009) a consumer has an advantage in a money market account because banks typically increase their money market rate quicker than their savings rates and the consumer is not locked-in to a lower rate on a CD. It is also easier to switch banks to find a higher rate if the original bank does not increase their rates accordingly.

Top 50 Highest Money Market Rates posted on Money-Rates.com

EverBank 4.76% APY (introductory offer), minimum $1,500

First East Side Savings Bank 3.75% APY, minimum $100,000

TriState Capital Direct 3.75% APY, minimum $95,000

Corus Bank 3.85% APY, minimum $10,000

Union Federal Savings Bank 3.75% APY, minimum $1

Wachovia Bank 3.75% APY, minimum $10,000

IndyMac Federal Bank 3.70% APY, minimum $50,000

Imperial Capital Bank 3.65% APY, minimum $100,000

Virtual Bank 3.56% APY, minimum $50,000

Zions Bank 3.56% APY, minimum $2,500

Amegy Bank of Texas 3.55% APY, minimum $10,000

Nationwide Bank 3.52% APY, minimum $1,000

Seacoast Commerce Bank 3.52% APY, minimum $25,000

Century Bank Direct 3.57% APY, minimum $1,000

Flagstar Bank 3.50% APY, minimum $1

Bank Mutual 3.51% APY, minimum $25,000

Bank Excel 3.50% APY, minimum $10,000

OnBank 3.50% APY, minimum $1

Bank of Internet 3.46% APY, minimum $1

California First National Bank 3.40% APY, minimum $1

Intervest National Bank 3.40% APY, minimum $2,500

Kaiser Federal Bank 3.40% APY, minimum $75,000

Imperial Capital Bank 3.40% APY, minimum $50,000

Umbrella Bank 3.40% APY, minimum $1,000

AIG Bank 3.35% APY, minimum $50,000

WT Direct 3.31% APY, minimum $1

Virtual Bank 3.30% APY, minimum $25,000

Greystone Bank 3.30% APY, minimum $100,000

Bank Provident 3.30% APY, minimum $1

H&R Block Bank 3.25% APY, minimum $50,000

Acacia Federal Savings Bank 3.25% APY, minimum $125,000

M&T Bank 3.25% APY, minimum $1

Amegy Bank 3.20% APY, minimum $10,000

Advanta Bank 3.20% APY, minimum $50,000

AIG Bank 3.20% APY, minimum $10,000

Earthstar Bank 3.16% APY, minimum $100,000

Discover Bank 3.14% APY, minimum $50,000

GiantBank 3.11% APY, minimum $1,000

Advanta Bank 3.10% APY, minimum $50,000

Imperial Capital Bank 3.10% APY, minimum $25,000

Amboy Direct 3.05% APY, minimum $30,000

Virtual Bank 3.05% APY, minimum $10,000

Earthstar Bank 3.04% APY, minimum $75,000

KeyDirect 3.00% APY, minimum $1

GMAC Bank 3.00% APY, minimum $500

Domestic Bank 3.00% APY, minimum $2,500

First Banking Center 3.00% APY, minimum $250,000

Security Savings Bank 3.00% APY, minimum $1,000

Capital One Bank 3.00% APY, minimum $1

Stonebridge Bank 3.00% APY, minimum $1

Transportation Alliance Bank 3.00% APY, minimum $1,000

MetLife Bank 3.00% APY, minimum $25,000

UFB Direct 3.00% APY, minimum $50,000

View the complete list of money market rates

Many banking consumers who shop for rates online are looking for a bank that offers a simple savings account with a good rate and an easy sign-up process. Finding that bank is not as easy as it sounds with all the promotional teaser-rate deals, complicated applications, extra fees, and confusing tiered-rate structures. Heartland Bank based in St. Louis, Missouri is offering an online savings account through their online division Heartland Bank Direct called the Performance Savings Account. The current yield of 3.55% is more than double that of the national average on savings account and best of all the yield has stayed in the top 25 highest yields in the country for over one year. The minimum deposit for the online savings account is only $500, but there are no fees for balances which drop below $500.

from the Heartland Bank Direct site's Frequently Asked Questions:

What is the Heartland Bank Direct Performance Savings Account?

A Heartland Bank Performance Savings Account helps you earn more while enjoying flexible access to your money. Other online banks offer high rates but then force you to accept high minimum balances and limited access to your money. Not Heartland Bank Direct.
With an opening balance of only $500, you'll start earning our high APY of 3.55% with no service charges and convenient access to your money.

How Do I Open a Performance Savings Account?

Fill out an Online Application, and Heartland Bank Direct will verify your identity online. You may need to answer questions about your credit history, such as providers and dollar amounts of loans in your name. During the application, you will identify an existing checking account from which you'll transfer money into your Performance Savings Account. If you choose to fund from that account electronically, Heartland Bank Direct will verify your access by making two small trial deposits, each under $1. Once these trial deposits arrive in your funding account, you enter their amounts on your Heartland Bank Direct application, and then you'll be on your way to earning more.

Are There Any Fees or Minimum Balances?

While there is a $500 minimum opening balance requirement, there are no fees on normal transactions or deposits and no charge if your account balance falls below $500 after opening.

How Long Will My Opening Deposit Take?

If you mail us a check, we will deposit it immediately, but the funds may be held for up to ten business days. If you fund your Performance Savings Account electronically, the amount will be credited within three business days. During that time, your external account may be debited for the amount of your deposit before you see a credit to your new Performance Savings Account.

What Is A Linked Account?

To help you earn more and have flexible access to your money, you will "link" your Heartland Bank Direct Performance Savings Account to any account at a U.S. bank that allows electronic transfers. You can move money between your Linked Account and your Heartland Bank Direct Performance Savings Account 24/7 by logging into Online Banking and selecting Funds Transfer.
How Do I Link My Outside Account to my Performance Savings Account?

Once you enroll in our Funds Transfer service, you provide a routing/ABA number and an account number for each account you want to link up. For your security, we verify your access to accounts you wish to link to your Heartland Bank Direct Performance Savings Account by making two small trial deposits, each at or under $1.00. You then return to our Funds Transfer screen and enter the exact amount of each deposit. Once this is done, you'll be able to initiate transfers -- inbound or outbound -- with the click of a button.

Will My Interest Rate Change as My Deposit Balance Changes?

No. As a Heartland Bank Direct customer you will enjoy one of the highest interest rates offered through direct banking regardless of your balance.

What Is the Difference Between the Interest Rate and Annual Percentage Yield (APY) on My Performance Savings Account?

An APY measures how much return you can expect on money that is left alone in order to accrue interest. Interest on a Heartland Bank Direct Performance Savings Account is compounded daily, so you're earning interest on your original deposit plus any previously earned interest. That compounded interest is the APY; an account that compounds daily will you get a slightly higher return than with just its stated interest rate.

Finicity is a money management site which combines their money management tool called Mvelopes with advice and data from mentors, groups, and financial experts for their members. The envelope-style money management tool allows to track their monthly spending versus their monthly budget and make adjustments on the fly. The social finance part of the site allows users to compare their finances to other members or by a particular demographic. For instance, recent data on the site in their Money Trends sections shows which areas of the country have been hit the hardest by the economic downturn. The ten state listed below had the biggest decrease in spending when comparing January 2007 to March 2007 to the same period in 2008 according to Finicity:

(1) Arkansas

(2) Ohio

(3) New Hampshire

(4) Nevada

(5) Indiana

(6) Florida

(7) New Jersey

(8) Minnesota

(9) Illinois

(10) Missouri

With consumer spending now a very relevant topic for Americans the comparision data on sites like Finicity and Mint.com are extremely valuable. The same group-think which at one time drove consumers into internet stocks or overpriced real estate may steer them into balanced budgets and comparision shopping. In addition to the money management tools available for Finicity members, there are personal mentors, support groups, and expert advice waiting to help deliver personalized help.

Many Americans are quick to criticize banks for their never-ending fees and spotty customer service. The larger the bank, typically the more greedy and uncaring we assume that bank will be. This month one bank has shown us that greed is not good and that banks can be charitable. ING Direct has launched a program to voluntarily alert customers who are in danger of having their funds turned over to the state. Abandoned funds as they are called are sometimes a result of consumers who set up deposit accounts for their children or move residences and then lose track of the account. Abandoned funds can also be uncashed checks issued by the banks. Banks are not required to go find the new address or contact person on a bank accounts when account information changes, instead the banks turn over to state government the unclaimed funds after a set period of time. Most banks do this process with little or no communication to the accountholder, but ING Direct has committed to going the extra step to find the rightful owner before the funds are swallowed up by the state.

from the ING Direct press release:

"States require financial institutions to file “unclaimed property” in the Fall and Spring each year. ING DIRECT is currently notifying thousands of Americans that their savings may be in jeopardy via email, phone and snail mail. Earlier this year, ING DIRECT helped nearly 40,000 customers who were in danger of having funds escheated to their state get their money back through a careful and effective new notification process to its account holders. However, ING DIRECT has been forced to turn over nearly 15,000 “abandoned” accounts valued at nearly $4 million. Most account holders will never see their money again, and some may get it back at a loss, as escheated assets generally do not collect interest.
Minors especially tend to fall victim to escheatment, as parents leave their children’s accounts untouched for years. These accounts are often set up by parents or relatives for distant expenses like college, and they leave these funds untouched on purpose, and for good reason. In 2006, state governments collected $5.1 billion in abandoned assets, up from $3.6 billion in 2003. Nationwide, the total value of the escheated properties in state custody is more than $33 billion, and less than a third will ever wind up back with its rightful owner.
Americans can help avoid escheatment by performing annual transactions on all bank accounts and keeping their contact information current, including new or changed mailing or email addresses and phone numbers, with their financial institutions."

In addition to their awareness campaign ING Direct also raised their CD rates. The new rates include:

6-month CD 3.50% APY

1-year CD 3.70% APY

2-year CD 3.80% APY

2.5-year CD 3.85% APY

3-year CD 3.90% APY

4-year CD 3.95% APY

5-year CD 4.00% APY

source: INGDirect.com