Mortgage Rates Climb Applications Fall

If you were thinking about refinancing your mortgage and been dragging your feet (or maybe your bank has been), refinancing may be less attractive than it was a week or two ago. The 30 year fixed rate was about 4.81% last week. This week it has jumped right around 9% up to 5.25%. Granted this is still at a historically low level, but if you were meaning to lock in a low refi rate, you may want move quickly. There are still some banks out there with low rates, just make sure you crunch the numbers and take into account the closing costs and/or points the lender may be charging. As usual, Bankrate is a good place to start your search for the lowest national and local rates.

Are There Any Safe Investments Left In This Economy?

Maybe this is a sign of the new normal, but I have been searching in vain to find some safe investments to park money that earn a respectable amount of interest. Now I realize that with return comes risk and that nothing in this world is guaranteed, but aside from parking money in a CD that is yielding in the 2-3% range or a money market fund with an equally dismal rate of return, there are not a lot of options. I think the best places to park short term cash right now are FDIC insured online banking institutions. They offer much better rates of return than traditional brick and mortar outfits and more liquidity than treasuries or CD's. A quick Google search can return the usual suspects. As of the posting of this article the banks below were offering rates higher than the national average for 1 year CD's of 2.28%.

E*Trade Bank: 3.01% (no minimum deposit)
ING Direct: 2.5% (no minimum deposit)
FNBO: 2.6% (no minimum deposit)
Capital One: 2.64% (no minimum deposit)
HSBC Direct: 2.45% (no minimum deposit)

If you see any FDIC insured banks beating these rates or offering sign up specials please drop me an email at goldenparachuteblog@gmail.com or leave a comment on this post.

Consolidate and Close Accounts to Keep Better Tabs on You Financial Situation

One of the great things that a steady stream of new entrants into the online brokerage arena had the effect of doing is to make companies compete harder for your business. There are now plenty of good places to hold your investments and with that said I'm a big believer of consolidating your investments and holding them at a handful on institutions rather than have assets all over the place. Below are the reasons that I think this outweighs the minimal benefits you may find from using a number of providers.

1) Reduce Fees: Many providers reduce or even eliminate fees and commissions once you hit a certain threshold of assets. Some investment houses will throw in free trades, free research, or advisory services if you increase your holdings to a higher tier.

2) Increase Your Sensitivity to Fees: With life being busy and time short, I find that I'm more likely to carefully inspect my monthly or quarterly statement if I have two or three to look at rather than 5. I also am more sensitive to being nickeled and dimmed with fees when I see multiple fees on the same statement rather than one from each investment company.

3) One statement: Many investment companies will provide you with one consolidated statement which makes record keeping a breeze and reduces hassles associated with tracking down important information.
4) Availability of Options: Nearly all the well known brokerage companies have been beefing up their no transaction fee mutual fund offerings which makes it easier for you hold a Janus fund in a Fidelity account or an Ariel fund in a Schwab account. This makes for one stop shopping and as stated earlier one statement. The rise of exchange traded funds (and more and more niche EFT's that act more like mutual funds) allows small and large individuals to level the playing field and diversify without the strings some mutual funds attach.

5) Get a Clear Picture of Your Financial Health: Pooling your investments with one provider is a quick way to see your net worth and if you are meeting your financial goals, whatever they may be.

6) Organize Your Affairs in the Event Something Should Happen to You: No one wants to think about death or serious injury, but if you were hospitalized would a family member or friend be able to track down your money to pay bills? Are your investments spread over 10 fund families held in 10 separate accounts plus your 401(k), Roth IRA, and traditional IRA? If you have a financial power of attorney in place you representative will have an easier time tapping funds that may be needed to settle your affairs or care for you.

Things to note. It should be noted that you want to consider FDIC and SIPC insurance limits that may be applicable to the funds you hold at a single institution. There are plenty of good discount brokers like Fidelity (the king of investment houses), OptionsXpress (a newer discount broker that has grown quickly and has no minimums, T.Rowe (one of the biggest discount fund shops), and Charles Schwab (the big time discount broker).

Many of these providers like Schwab and Fidelity have added high yielding checking account and other banking options to their typical securities offerings (read more here). While the new accounts have big benefits over the brick and mortar checking accounts, most people need somewhere to deposit money in person from time to time. I would suggest that if you are interested in consolidating financial holdings that you keep a completely free checking account at a bank close to your house so you can quickly deposit the occasional check (ask, because your bank will probably try to lead you to an account with minimums and/or fees). Once the money is deposited in your local bank account you can easily move the funds through the ACH system to your other account. This method is much faster than mailing a check to the financial institution.

The Economy May Be in a Funk, but Banks Keep Offering Deals

With the economy tanking it makes sense to take free money from anywhere you can get it (provided there are limited strings attached). Below are some of the offers that I saw this week while surfing around. While most require some minimal hassle, if you are in the market for a new account anyways they might be worth your while.

E*Trade Savings $25 Bonus
Details: $1 minimum to open an account. Bonus will be deposited within 30 days of opening the account. Another plus, the 3.15% APY is one of the best out there.
Direct Link

INGDirect Savings $25 Bonus
Details: $1 minimum to open account, but if you want the $25 bonus you must fund the account with at least $250. ING was paying 3% APY as of 5/28/2008. (Full Disclosure: If you sign up for an account with one of the links below I receive $10). If one of the links doesn't work try the next. In none of them work for you, send me an email and I'll get you a fresh one.
Direct Link 1; Direct Link 2; Direct Link 3; Direct Link 4; Direct Link 5

American Express Nest Credit Card $50 Bonus
Details: You receive 5,000 bonus points after your first purchase (redeemable for $50). The card also gives you 1% back in points that are redeemable for cash and an additional 10,000 points (equal to $100) for any year you charge over $15,000 on the card. You also receive a financial planning kit that is supposed to help newlyweds budget. Plus, everyone will think that you're a newlywed as you throw down the AMEX (even if you're not).
Direct Link

Fidelity mySmart Cash v. Schwab High Yield Checking

I'm currently debating moving my primary checking account - the two alternatives I am deciding between are the Schwab High Yield Checking and the Fidelity mySmart Cash account. While I'm not sure which account I'm going to go with yet, I decided to post the pros and cons (as I see them) of each for other people who may be unhappy with their current checking options.

Schwab High Yield Checking

The Schwab High Yield Checking is a relatively new offering from Schwab. The account is basically a standard FDIC insured free checking account, but offers more perks than your average local bank. The account offers no fees, zero minimum balance, ATM fee refunds, a variable APY now hovering around 3.01%, free checks, a free check card, and a free brokerage account.

Fidelity mySmart Cash

The Fidelity myCash account is similarly a fairly new offering from Fidelity. mySmart Cash is a cash management account that operates as a quasi-checking account. A client opens a mySmart cash account and links it to a current Fidelity offering (like a money market fund). The mySmart cash account has no minimum balance requirement, no fees, ATM fee reimbursement, free checks, and free self-funded overdraft protection. The client is free to withdraw funds at an ATM or write a check on the account regardless of the balance, Fidelity will then move the appropriate amount from the designated account to cover the balance if the mySmart cash accounthas insufficient funds.

Comparison

Outside of a few minor differences the offerings from Fidelity and Schwab are pretty similar. However, there are a few relatively major differences that may contribute to the decision for some people. First, Schwab currently offers a higher APY on its checking account. However, this is probably offset by the fact that the mySmart cash account can be set to automatically draw from a higher yielding account (like a money market or mutual fund). A second difference is that the Schwab account comes standard with a free brokerage account. If you aren't already set up with a brokerage account then this may be an advantage to you - especially since the brokerage account has no minimum balance or opening amount. Below I have made a quick chart to show the features of both accounts, you'll see that they are pretty similar. I have a feeling that for most people the decision to chose one of these accounts would be based on whether they currently have a Fidelity or Schwab holdings already.


Do you find either of these accounts compelling? Do you already have one? Let us know how you like it.

Link: Schwab High Yield Checking

Link: Fidelity mySmart Cash

ATM Fee Hikes On Horizon

As consumer banks look to juice returns during a down period for new loans and mortgages be on the watch for rising ATM fees. In certain areas of the country JP Morgan, Bank of America and Wachovia have started charging $3 for non-account holders. Add that to the $1 or more that many banks like Chase already charge consumers themselves for the use of ATM’s not natively owned by the bank and consumers are getting a raw deal. You may be getting charged up to 20% of your withdrawal if you are making a withdrawal of $20 for example.

The average ATM fee today is $1.78, but five years ago it was about $1 at a bank where you didn’t have an account. My response, switch to a bank that refunds ATM fees that other institutions charge…. or if that isn’t a practical option for you use a point of sale cash back option – there are Walgreens and Wal-marts everywhere and a pack of gum costs a lot less than a $4 ATM fee.

If you are in the market for a checking account that has ATM refunds, some possibilities with decent interest are

Schwab High Yield Checking: 3.21% APY Variable with no min.

E*Trade: 3.60% APY Variable with $5,000 min.

Readers, do you have other suggestions? Comments?

Link to story @ ABC News

Image: wrestlingentropy @ Flickr

How Healthy Is Your Bank

I stumbled across an interesting page on Bankrate.com today. Using what they call their "Safe & Sound" system you can look up your bank and see generally how its financial stability is compared to its peers. If you have your money in an insured account such as a FDIC savings account or SIPC brokerage account and are under the insured limits you don't have much to worry about -- however, it's still interesting to see how your bank fares.

Ratings are broken down as follows:

Safe & Sound CAEL rating system

Safe & Sound CAEL rating Definition Star rating 1 Superior ««««« 2 Sound «««« 3 Performing ««« 4 Below peer group «« 5 Lowest rated « No Report Complete data not available No Report "U" Closed Institution is closed Closed G Designates high growth --

Image by: PixelJones @ Flickr

If Banks Were People... Which Would Be a Deadbeat Dad?

Okay, so it's far from scientific, but if you are interested in marketing or branding this poll might be worth a look. Currently in the lead for the hypothetical deadbeat is Bank of America. You can get in on the action and vote too if you want here.

I'm going to guess that BOA is overpaying some consulting marketing guru's as I type this. This is one time where it isn't the marketer's fault. I doubt a marketing VP decided that it would be a great PR move to get entangled in the very polarizing illegal immigration debate.