Debt, Credit Card & Consolidation Current News Digest

A look at the new Ally Bank Interest Checking account and the Raise Your Rate 2 Year CD.

There are a lot of banking products to keep track of lately. Within the last few months, we’ve extolled the virtues of:

• A free savings account to help you set your financial goals from SmartyPig
• A checking account with debit card perks from PerkStreet Financial
• High yield CD and online savings products from Sallie Mae
• Personal savings accounts from American Express

And these are just the latest in a line of high yield savings accounts and other savings options that we’ve covered here. And there are a few more I’d like to introduce this week. I’d like to take note of the latest products from Ally Bank, which now includes an interest bearing checking account and a replacement to their popular high yielding 2 year certificate of deposit. Following are the details:

Ally Bank Interest Checking Account

Ally Bank boasts a free high yield checking account that has the potential to earn you the equivalent of interest you’d get from a high interest savings account. It’s called the Ally Bank Interest Checking Account with several features that you may like. Just like Ally Bank’s other savings products, this checking account is easy enough to start and maintain, given that it does not require a minimum deposit nor a minimum balance to keep around. Here’s a closer look at its features:

• No minimum balance required. $0 to open an account. Can’t get easier than that!
• No monthly fees
• Maintain a balance of up to $15,000 and receive a 0.50% APY
• Maintain a balance above $15,000 and receive a 1.15% APY
• Free online bill pay and online banking
• Free debit card
• Unlimited check writing
• Get cash back by using your debit card (at select retailers)
• No ATM fees anywhere
• Free alerts on your balance

But bear in mind that the bank will charge you for non-sufficient funds, stop payment and return deposits, although these are pretty standard fees I’ve seen levied by most banks. The one thing I’d like to point out is this: seriously, at the rate some of these banks (online or otherwise) are ratcheting down their rates, there doesn’t seem to be much of a competitive advantage between checking vs savings accounts anymore. Take for instance WTDirect, which is certainly considered a top high interest savings account. If you look at their account’s features, there is no longer much to be desired here, with the long term interest rate lingering at 0.15% for balances under $10,000 and 1.16% for balances reaching $10,000 and higher. So if you’re going to make a comparison here, even the Ally Bank Interest Checking Account looks like a better choice over the WTDirect Savings Account, since you get all the benefits of a checking account when you opt for the former.

Ally Bank 2 Year CD With Rate Increase Option

In addition to the checking account, Ally Bank is replacing their 2 Year High Yield CD with one that has a “rate increase” option. It’s called the Ally 2 Year Raise Your Rate CD and it’s intended to give savers a bit of a break. Typically, when you open a CD account, you’re locked into the current rate for the full term of the CD. But with the Raise Your Rate CD, you have the opportunity to opt for one rate increase anytime during the term of the CD. So if rates go up anytime between now and the next two years, you have one chance to raise and lock in your rate at that level.

Given that we’re in a rate climate that hasn’t exactly been favorable for savers (it’s been a low interest environment for a while now, with no signs of a change in the trends), the “raise your rate” feature may offer a bit of insurance. Here’s how it works:

1. Open an Ally Bank 2 Year CD and lock in your rate. The rate is currently at 2.02%.
2. Monitor the CD rate on this product.
3. If the rate goes up within the next 2 years (during the term of your CD), you have the option to lock in that new rate.
4. Call Ally Bank at anytime to request the new rate.
5. Receive the one time rate increase for the rest of your term.

Ally Bank Interest Checking & 2 Year CD With Rate Increase Option

Meta Payment Systems develops eco-friendly prepaid credit cards Sioux Falls Argus Leader Sioux Falls-based Meta Payment Systems is offering its bank and credit union customers cards that are made of 65 percent recycled PVC core sheet. … and more »

This guest post from the redoubtable Tyler K is part of the new “reader stories” feature here at Get Rich Slowly. Some reader stories contain general “how I did X” advice, and others will be examples of how a GRS reader achieved financial success — or failure. Tyler is an active commenter at GRS, and never afraid to share his opinion!

Like J.D., I once had a big problem with debt. Unlike J.D., I didn’t dig myself out from under that problem gracefully.

About eight years ago, I was a college student, living in an apartment near campus, and working full time while going to school. I felt like I was on top of the world. Here I was, seeing all my friends making $6 or $8 an hour, while I was making about $17. That seemed like a lot of money. It was about $35,000 a year — not just a college student’s salary, but a real salary. I felt like I deserved to be living it up a bit, especially considering all the work I was doing with a full-time job and a full time class load.

I went overboard. I spent well beyond the $35,000/year I was making (it wasn’t as much money as it felt like). I bought a Mustang, and modified it into an amateur race car. I had the latest laptop and a desktop computer with a flat screen display (in 2001). My $35k/year salary was enough to live on, but it wasn’t enough to support spending $1500 on a laptop computer and on a desktop computer and on high-performance cylinder heads, but that’s what I did.

I bought all of them, and more.

This kept up for a year or two. I kept justifying these purchases to myself, and my credit card balances slowly rose along with my required minimum payments. A bout of bad luck exacerbated the problem. I was mugged outside my apartment, and having no medical insurance, ran up an emergency room bill. My race car was stolen, and being 21 and owning a race car, I couldn’t afford comprehensive car insurance, I had liability only. I bought another car to replace it, again with borrowed money.

Things fall apart
Eventually, I realized I was in over my head. I was gasping for air. I couldn’t make my credit card payments and also pay my rent and buy groceries. I was driven to the edge, and I gave up. I stopped paying all my credit card bills, and they went into collections. I voluntarily surrendered my car to be repossessed. I figured if I was going to ruin my credit score, I might as well go all out — I even hired a bankruptcy attorney. She managed to stop the incessant flood of phone calls from creditors, but I found I couldn’t afford even to pay for the bankruptcy proceedings, and so that process stopped shortly thereafter.

At this point, I owed approximately $30,000 on about four different credit cards, the medical bill, and the car loan, all of these in collections. My credit had been destroyed, but my creditors had been silenced by the bankruptcy attorney. I decided to get my life in order and worry about paying back the debts I owed later. It was easy to justify — I could barely put food on the table and the credit card company was still bringing in billions every year. They didn’t need an extra few thousand dollars as desperately as I did. So I let my debts ride, and worked on running my life in a sustainable way.

Turning things around
The first thing I did was give up credit cards entirely.

I decided to only spend money I actually had, and so my purchases of toys slowed dramatically. My extravagances in life dropped to going out to eat with my roommate a couple times a week, and not at particularly fancy places. I got into bicycling as a hobby, on a used, mid-range road bike — not a brand new, high-end model like I would have bought before. And there I sat, content with the computer I already had, my modest bicycle, and the occasional trip out for dinner. I was living quite comfortably on my salary with my new outlook on life. For the first time in years, I felt comfortable with myself. I actually managed to save a few dollars from paycheck to paycheck instead of spending them!

I did decide that I needed a car, though. I hadn’t enough money to pay cash for one, and I doubted anyone would give me a loan, so still being young and in school, I asked my parents to help. This time though, I was much more conservative.

I borrowed about $5,000 from my parents and created a definite plan for paying them back. I bought a nine-year-old but well-maintained Honda Accord, and I stuck to the payments religiously. This time if I were to fall behind, not only would I give up my newfound peace I’d made with myself financially, but I’d be letting my parents down instead of faceless mega-corporations.

No credit needed
Shortly thereafter, I finished school, and took a software engineering job in San Francisco. Rents were higher in the city, but my salary doubled. My brother needed a car, and I worked out a deal with my parents to give him mine, along with the rest of the payments on the loan. I wanted to get a brand new one.

I went down to the car dealership with my pay stubs from my new job, and my ruined credit score, and a pre-approval I’d gotten online for a loan of up to $26,000. I was determined to make something work. As it turned out, this was easier than I’d anticipated. Car dealerships will do anything to sell cars, and that includes selling cars to people with horrible credit and a repossessed car on their credit report. I bought this car with no money down, which in retrospect, is the stupidest financial decision I’ve made since I began my financial recovery.

Still, it wasn’t a horrible decision — I now made a salary that could justify a car like this. Sure, I got a crappy 12% interest rate on the loan, but I eventually refinanced the loan to 10%, and a shorter term, and then I paid the loan off early, about two-and-a-half years after I first bought the car. When I called the bank to pay off the first loan (when I refinanced), they were practically begging me to take a credit card from them, seeing as I’d overpaid my car loan every single month, on time, for the life of the loan. But still, I wouldn’t break my ‘no credit cards’ rule, and I refused.

Renting an apartment was another thing I was scared to do with bad credit, but it turned out easier than I thought, as well. I got my first new apartment with my ruined credit when I moved to San Francisco. I decided to share a place with a friend of a friend. We found a two-bedroom place listed on Craigslist, and went to see it. It was a four unit building, quite common in San Francisco, owned by a little old Chinese lady. She didn’t care to even run a credit check. Two well-dressed young men showed up, with pay stubs indicating an above-average combined annual salary, and job titles of ‘Software Engineer’ and ‘Accountant’. She was more than happy to rent the place to us for $1800/month.

I continued my life living the way I had since I’d given up on my debt a few years ago, but now on a much larger post-college salary. I bought few toys, aside from the car and some furniture. I’d go out to eat with friends sometimes, or I’d go out for drinks occasionally with my new coworkers. I actually found money piling up in my checking account because I was making it faster than I even wanted to spend it. I had nothing I needed to buy.

After a year, my roommate took a promotion that had him moving from San Francisco to Denver. I decided that I wanted to get my own place, but $1800/month was too much for me to spend by myself. The little old lady who’d been our landlord actually asked if we’d reconsider staying, and if I could find another roommate, as we’d been such good tenants, but I told her I had to leave.

I was questioning my ability to get lucky with finding an apartment a second time, but figured I’d done it before, and I could do it again. I looked at one place I like, and decided to take it, but was turned down by the rental agency due to my bad credit. I found another place a few blocks away that actually ended up being nicer — It was an old Victorian house divided into two units, one upstairs and one downstairs. The family that owned the place lived upstairs and rented out the downstairs.

Wary because of my bad credit and previous rejection, I wrote down my story, and gave the owners my bank statement showing the money I’d accumulated in the last year I’d spent living below my means, and the phone number of the landlord that’d asked me to stay in San Francisco. In light of this information, they rented to me regardless of my credit score, and they too ended up extremely happy with me as a renter.

The road to recovery
Several years after I’d given up on my credit card bills, I was finally contacted again by one of my creditors (or really, the collection agency to which they’d sold my debt). They demanded, in a rude and threatening manner, payment in full of an outstanding debt over $10,000.

My girlfriend (now my wife), who worked at a law firm, asked a co-worker of hers to help me out. He was an attorney who had previously worked in this specific area, representing clients being sued by creditors, and had no sympathy for a threatening collection agency. With a single phone call on my behalf, he had the collection agency offering a settlement of about half their initial demand. I paid it in full from the surplus I’d been accumulating.

Slowly, over the course of several years, my other creditors would contact me, and we’d agree on a settlement like this. Eventually, the statute of limitations for them to collect on the debt through legal channels expired. After that, all I needed to mention to creditors was that I knew it was too late for anyone to sue me, and I’d have a reduced settlement offer.

Now, at the beginning of 2010, it’s been nearly seven years since this whole mess started, and these old marks are due to start dropping from my credit report soon. Surprisingly, I’ve found in the intervening time that I haven’t been impacted much at all by my poor credit — certainly not as much as you would have thought, given the emphasis the financial media puts on credit scores.

• I paid maybe 5% more than market value for the car I financed, not a huge deal.
• I was turned down for one apartment rental.

I’ve since rented one other place, where I live now, in a manner similar to the second — it’s a privately-owned little house with landlords that live next door.

I told them my story, showed them my bank statements and pay stubs, and they were happy to rent to me, and I love it here. Aside from the lousy car interest rate and a single apartment rejection, I haven’t even noticed my poor credit score. Employers haven’t cared. Cell phone companies haven’t cared. The electric company hasn’t cared. For the most part, nobody but myself has even looked at my credit score for the past six years.

While all this has been happening, my life otherwise has been going fantastically. My career has progressed well, I make roughly four times what I did when the story started. I got married. I moved back to my hometown, which I love. I’ve been traveling a bit, to five other countries and various places in the US. My life is going as well as I could hope.

Strangely enough, I’m not sure that any of this would have happened if I hadn’t given up on those debts years ago. That began a change in lifestyle — a focus on experiences instead of things, on making do with what you have instead of needing the latest and greatest. Those lessons have shaped my life since then, and I don’t know if I would have learned them as well without going through that experience.

Final words
I was originally hesitant about sharing this story. I was afraid of being judged for the method I used to pay off my debts. I’m not proud about having done this, but at the same time, I don’t feel bad about it.

These credit card companies were willing to do everything in their power to make a profit off me. They had teams of actuaries calculating the exact interest rates and credit limits that would maximize profits from their customers, and they had the legal system at their disposal if they thought it would have been beneficial. I used the same tactics. I was never sued and in the end, I came to mutual agreements with my creditors that satisfied both parties.

Was it an ideal solution for either party? No, but once I was in in over my head, there wasn’t a realistic ‘ideal solution’. The situation was eventually salvaged, and now, years down the line, it’s water under the bridge.

Reminder: This is a story from one of your fellow readers. Please be nice. After nearly a decade of blogging, I have a thick skin, but it can be scary to put your story out in public for the first time. Remember that this guest author isn’t a professional writer, and is just learning about money like you are.

—
Related Articles at Get Rich Slowly:

• My Parents Ruined My Credit!
• National Credit Score Index
• Credit Card Companies Are Closing Unused Accounts
• Your Secret Credit Scores
• Reader Question: Buying a House Without a Credit History?

Imagine that you’re in a financial bind: would you be able to resist those ubiquitous ads around the web that entice you to “get a fast cash loan”? You may be one of those wondering how to get a personal loan in these tough economic times. These days, many people with little to no money are turning to high interest payday loans to assist them when financial emergencies arise or even to pay monthly bills. However, many do not realize the danger of payday loans until they are deep in debt with no way out.

What exactly is a payday loan?

To put it simply, a payday loan is a short-term loan. An individual goes to a payday lender, writes a check for the amount they want to borrow plus a fee. The payday lender then holds the check for a short period, typically two weeks, and cashes it at the end of that period. The borrower may also have the option of extending the loan at the end of a two-week period if they don’t have the sufficient funds to pay. Now this is where people get into a lot of trouble because when loans are extended, these loans accumulate more fees. This is precisely why payday loans are dangerous — they’re extremely expensive because they charge an enormous amount of interest and fees, typically with an over 100% annual percentage rate. They are in no way, shape or form, a good way to manage money or borrow money.

Whom do payday lenders target?

It’s always the most financially vulnerable who fall prey to these arrangements. These loans are targeted at lower income individuals who have no other means of borrowing money when an emergency arises. You will notice that you will never see a payday lender in an upper class neighborhood, but you’ll often find these establishments well ensconced in geographically low-income areas. Customers of these establishments are individuals who need quick cash and are looking for an easy way to get it. And indeed, it can be a tempting “way out” for many poorer clients, since by simply writing a check (whether or not you have funds at the moment), you can get a loan and worry about the consequences later. It’s fast and easy, with no credit check required!

What are the consequences?

Financial counselors and experts will tell you that clients who begin using payday loans typically have a very difficult time paying them off. What typically occurs is an endless cycle of borrowing and paying until the individual reaches a point when they can no longer afford the fees and interest charges that have compounded from extending payday loans every two weeks. At this point, the borrower will call a credit counseling agency for help with paying things off. Unfortunately, it’s also at this point when their credit gets shot as they’ve become delinquent on their loans and see no way out, given the amount of income they are bringing in.

Have A Cash Advance Payday Loan? 3 Tips For Paying It Off

Unfortunately, most credit counseling agencies are unable to place payday loans on a debt management plan. Payday lenders rarely offer benefits or lower personal loan interest rates through credit counseling programs. Still, there could be constructive ways to help a payday loan borrower in a bind. If you find yourself in this position, then here are some options to consider:

1. Talk to the payday lender.
The first option is to try to negotiate. Call the payday lender and see if it is possible to speak with the manager of the establishment. You can then ask this person if they can place you on some type of hardship program where you can afford the payments and possibly have a lower interest rate. The same ideas apply here as you would if you wanted to lower your credit card interest rates. While payday lenders are in the business of making the most out of each loan they approve, they’re also eager to salvage agreements with those borrowers who are sincere about working out their payment problems.

2. Wait for your payday loan to go into collections.
Another option is to wait until your loan goes into collections. If you have borrowed money and the accounts are past due, you can expect your payday lender to go to great lengths to coerce and threaten you to pay. If you continue to be uncooperative, then eventually, your loan will be turned over to a collection agency. Once this happens, you may be able to roll over your accounts in collection onto a debt management program. This will provide you with a more manageable payment and an estimated payoff time.

3. Settle your debt.
Finally, you can try to contact a debt settlement company and proceed with a settlement, or file for bankruptcy. With this approach, you’ll need to deal with a bankruptcy attorney or debt professional.

Final Thoughts

You should avoid getting a payday loan as much as possible. Still, there are people who insist on securing such loans regardless of the consequences. If you are one such borrower, then make sure it’s truly your last resort to go down this path. Weigh the risks and the benefits of a quick cash advance or short term loan. The risks here are great, so your benefits (per your particular situation) better be worth the money you end up forking out, if you do decide to opt for a loan like this.

Always do your best to find other alternatives to borrowing. Perhaps you can find out how to apply for a loan through other avenues and sources. As an alternative, do your very best to save up for an emergency fund in a high interest savings account, so that you do not have to depend on a credit card, bank, or payday lender to get yourself out of an emergency. This is the best way to avoid falling prey to payday lenders.

Have A Cash Advance Payday Loan? Tips For Paying It Off

This post is from GRS staff writer April Dykman.

I’ve been thinking a lot lately about a quote from J.D.’s review of The Total Money Makeover:

Printed on the bottom of every page…is the book’s motto: “If you will live like no one else, later you can live like no one else.”

My husband and I recently made an unusual decision, and I’m in need of a motto that I can repeat to myself every time I question our choice, which I probably will at some point.

A loan story
I’ve mentioned in previous GRS posts that my husband and I are building a house. As we started on the final construction documents, we began working with a lender to sort through the construction loan. It’s not a fun process, let me tell you. Half of what the lender said went right over my head, despite my short-lived foray into the real-estate industry.

The first issue that arose was that we’d have to have a two-time closing. This means there’s one closing at the start of construction and a second closing after the home has been built to refinance into a permanent mortgage. Apparently one-time closings, which are loans with a single close for both the construction term and the mortgage, are a thing of the past.

The problem is that my husband and I couldn’t have a change in employment until the house was finished and the second closing was complete. But he’s planning to start his own business. Also, if one of us happened to lose our jobs, we’d be at the mercy of the bank. Even if we could easily make our payments from my freelance income, the bank wouldn’t recognize that income source until I had two years of tax returns on the business. It was a concern, but we decided to move forward.

Charges, interest, and fees
The lender sent the estimates for interim and permanent loans. As I sorted through the initial fees worksheets, I saw the standard stuff:

• Origination fee
• Appraisal fee
• Processing
• Underwriting
• Closing
• Document prep
• Title insurance
• Recording fees
• Survey costs

And on and on and on…

It’s not that I didn’t expect these fees, but they were sure adding up quickly. Also, we could expect a good interest rate on our mortgage, but the interest we’d pay for a 30-year loan would double the total cost of our home. Again, not unexpected, but still disconcerting when I was plugging in our numbers.

Closing delays
Another issue was that we’d need $15,000 to close the interim loan. With an interim loan, the bank requires 20% of the total value of the land plus improvements (i.e., the house). We have a lot of equity in the land, but not enough to cover 20% of land and house value. Since we were unwilling to tap our savings, we’d have to wait until autumn to start building.

I was getting a sinking feeling in my stomach, like we were going to be trapped. My husband couldn’t start his business. If one of us lost our jobs, it would be the bank’s decision whether to work with us, on their terms, or not.

Finally, the relationship with our architect, who also was to be our builder of record (another lender requirement), was deteriorating, causing us to reconsider the arrangement.

Assessing our situation
My husband and I are in a unique situation. My parents own land in the country, and we live next door to them, rent-free. This has allowed us to build a lot of equity in the land we purchased, which is five minutes away. My dad also is in construction, and he’s able to do the majority of the work to build what he can for us and subcontract the rest.

It might sound crazy not to take advantage of our situation, but there’s something to be said for having your home finished with all of the amenities you want, such as a dishwasher, carport, bigger kitchen, laundry room, and more space to host guests. I have this dream of what our home will look like, of what it will feel like to wake up in it every day, and it’s hard to be patient.

Number crunch
I started to run numbers on how long it might take to build our home if we paid in cash; assuming no change in income, it looks to be five years — six if I’m being super conservative. I assumed a completion date of April 2015. If we went with the loan, we’d probably complete the home in September 2011. By waiting about four years longer, we’d own our home and land outright, as opposed to paying on it for 30 years. Even if it takes longer than expected, it’s still a good deal. Owning our home sooner would give us so many options:

• We could scale back on work hours.
• We could travel more.
• We could put more into savings.

The point is that we’d have those choices. Our decision came down to having the home now, or having more freedom later. Again I thought of Dave Ramsey’s quote:

“If you will live like no one else, later you can live like no one else.”

You can probably figure out what we decided to do. We’re going to pay in cash, building as we can. Impatience is not worth the headaches, fear of losing a job or the house, and the interest we’d pay if we continued with the construction loan.

Patience and resolve
I realize we’re in a fortunate position. If our circumstances were different, this might not be an option, however, I believe our choice and Ramsey’s delayed gratification advice is relevant to everyone.

Every time I’ve put my impatience aside, the outcome has been positive. This was the case when we put off buying a second vehicle and when we moved out to the country, originally thinking we’d buy a house in the city as soon as possible.

Besides patience, delayed gratification also requires resolve. When you make choices outside of the norm, friends and family members might think you’re nuts. They mean well, and they’re only thinking of you, but some of them will definitely think you’ve lost your mind. One car for two people?! You’re just asking for a divorce! It can be hard when you’re already questioning yourself. The trick to not letting these comments derail you is to remember the reasons why you made your decision, and maybe find an affirmation, which is why I’m going to print Ramsey’s motto and read it often.

Delayed gratification isn’t easy, but it usually brings the most rewards.

How has delayed gratification benefited you? How have you exercised patience and resolve? Share your tips — I’m probably going to need them!

—
Related Articles at Get Rich Slowly:

• Cost-of-Living Comparison Calculator
• Ask the Readers: How to Live Debt-Free?
• Possum Living: How to Live Well Without a Job
• Ask the Readers: Help for a Broke New Yorker?
• Reader Survey: How Do You Cope with a Limited Income?

This article is by staff writer Adam Baker, whose own blog featured the hit post 42 Ways to Radically Simplify Your Financial Life.

When I was 14 years old, I opened my very first checking account at Bank One. That’s where my Dad banked and so that’s where he drove me when I asked to open an account. Over the years, I continued to give them my business.

By 16, I had opened another checking account (don’t ask me why) and a new savings account, too. At 20, I started my journey into credit cards with… yep, a brand new Chase credit card. (Note: Chase ate Bank One in 2004.)

At 21, I opened my first Chase business checking account and, at 22, I funded $1000 into my new Chase investment account. When my wife and I married the following year, we canceled her National City account to combine our finances with… Chase.

You get the point. While this may not seem too out of the ordinary, there’s only one problem: Neither of us really likes Chase Bank.

In fact, I’ve never really liked them that much. I’ve wanted to switch to a local credit union for years, but just haven’t done it. I’ve been eyeballing USAA ever since they opened their checking and savings accounts up to civilians. Mentally, I want to change…but physically I’m still a Chase customer.

What does it take to make you switch banks?
There are plenty of reasons why someone might switch banks. A couple factors that come to mind:

• Higher rates. This not only applies to rate chasing, but any form of benefits offered. Maybe there’s a 0.5% better savings rate at the bank across the street. Maybe another is offering a free $100 when you open a new account. These are all situations where the bottom line may be the primary influence.

• Customer service. I love great customer service and I’m willing to pay more for it. In banking, this now includes both in-person and online customer service features. While I abhor having to call Chase (try it someday, it’s terrible),I love a couple of the people at my local branch. I know the branch manager and business banker well, and they always greet me by name. In addition, I have specific online banking features set-up that I’ve been using for years. Their online services aren’t perfect, but they’re above average.

• Length of history. As I outlined above, I’ve had a Chase account for over a decade now (and I’m only 25). In this day and age, customers will longer histories at a single bank are more rare. Anytime I have an issue on the phone, I immediately have them look up my history. While I’m not a big fish to them in terms of money, my account history tab shows dozens of accounts over nearly a dozen years!

• Principle. The longer I’m involved in personal finance, the more I prioritize this category. I’m not a huge fan of big banking. I’m not a conspiracy theorist and I won’t be picketing in Washington, but I like the idea of giving my business to a local bank. “Principle” is a major reason Courtney and I reject credit cards, and many people point to this reason giving their business to credit unions.

• Accessibility. Years ago, the only factor I cared about was how close my bank was to my house. Here in the Midwest, no one does that better than Chase. It’s almost as bad as McDonald’s (almost…)! With the rise of online banks, the walls of this one are coming down. For some, however, it remains a huge factor in choosing a bank.

So, will I walk the walk? I’m not sure whether Courtney and I will switch our bank. We want to, but we aren’t compelled to…at least not yet.

I’d enjoy supporting a local credit union or a testing out a bank with a reputation like USAA. I’m not much of a rate chaser and accessibility isn’t a huge priority. I much would prefer a bank I feel good about supporting and that offers me fantastic customer service.

At this point, Chase seems to be just doing enough to keep us around. But after writing this, we’ll see how long that lasts!

Have you recently switched banks? What was your motivation? Any suggestions for me?

J.D.’s note: I stuck with a lousy bank for a l-o-n-g time. Ultimately, I moved my accounts to a local credit union, and I love it. I’ve since added an online bank to the mix (ING Direct). Neither of these banks is perfect, but they both provide excellent customer service and above-average deals, so I’m pleased to stay with them.

—
Related Articles at Get Rich Slowly:

• From Bank to Credit Union
• My $300 Morning
• Ask the Readers: Should I Chase Higher Interest Rates?
• Fix Your Own Printer and Save Money
• A Cheaper Cup of Coffee

Telegraph.co.uk

Area bank: Partner issued credit cards used in Dubai killing Sioux City Journal STORM LAKE, Iowa — Some suspects in the slaying of a top Hamas leaders used stolen IDs and fake passports to fraudulently obtain MetaBank prepaid credit … Suspects in 'hit' got credit cards via fraud, Meta saysDesMoinesRegister.com Dubai asks FBI to check credit cards in Hamas hitReuters South Africa US lender MetaBank ties credit cards allegedly used in Dubai Hamas hit to …CanadianBusiness.com all 860 news articles »

Payday loans allow people who are strapped for money to get cash between paydays. The no credit check loans allow even people with bad credit to get access to cash in an emergency. Although it’s easy to get a payday loan, it’s not always the smartest move because of the high interest rates.

Personal Loans Carry Extremely High Interest

Payday lenders are often criticized because of the exorbitant interest rates they charge customers. Getting a personal loan this way usually costs about $15 for every $100 borrowed. Now some banks are getting in on the payday loan business.

Fifth Third Bank is allowing checking account customers to borrow up to $500 until their next paycheck is direct deposited into the account. Once the paycheck is deposited, the loan is paid off. The bank also takes a fee of 10% of the loan or an annual percentage rate (APR) of 120%, according to WTHR. While a 120% APR isn’t as high as what most payday lenders charge, it’s still extremely high.

Quick Loans at Banks Is New Trend?

Wells Fargo and US Bank are also giving customers personal loans to tide them over between paychecks. So what’s going on? Why are banks getting into the payday loan business?

“It’s a combination of the fact that we’re in an economic situation where there would be a demand for it in addition to the fact these banks are going to be losing money from fees that they’re not going to be able to assess for overdraft protection,” Dr. Rachel Smith of the University of Indianapolis told WTHR.

Fast Loans Aren’t Cheap Loans

Should you get a payday loan from a bank or cash advance store? Not unless you are super desperate. If you are using payday loans to get through the month because you don’t have enough income, it can be very easy to get into a never-ending cycle of borrowing and accumulating more debt. Lenders who make payday loans are always going to charge high rates of interest to protect themselves from not recovering the money from borrowers who are seen as very risky.

Get Help If Necessary

It can be scary and stressful to not be able to cover all your expenses no matter what you try. But instead of borrowing a personal loan at interest rates that stretch well into the triple digits, consider finding a knowledgeable credit counselor who can work with you to straighten out your finances. You also may need to consider getting another job to boost your income.

Another high yield savings account and a suite of certificates of deposit to consider for your stash of cash.

Guess who just launched a couple of online savings products with competitive rates, along with the strong endorsement to try out Upromise? The largest private originator and service agent for federally guaranteed student loans, that’s who! That would be Sallie Mae, otherwise known as SLM Corporation. While this outfit is best known for granting and managing more than $180 billion in debt, they’ve branched into the savings (and even credit business), having purchased Upromise.com in 2006 and now, by elbowing their way into the savings realm.

Well, that’s great! We certainly need more options here when it comes to our short term savings. Recently, I’ve seen some interesting products such as the PerkStreet Financial Checking Account, which offers rewards or perks instead of a yield (see our review of PerkStreet Financial), as well as SmartyPig, which is a savings account that allows you, along with other people, to make savings contributions to the same account. It’s an account that allows you to collaborate with others to fund a savings goal. I actually consider the Sallie Mae (SLM) offerings just as interesting. So let’s take a look at some details on the SLM savings products.

Sallie Mae High Yield CD & Online Savings Products

Sallie Mae offers two types of accounts for your savings.

#1 Sallie Mae Online High Yield Savings Account

This high interest savings account sports an APY that’s 5 times the national average. Currently, this account is returning a 1.35% APY. In addition, this savings account has the following desirable features:

• It requires no minimum balance, making it easy for anyone to open an account.
• It’s got no monthly fees.
• Interest is compounded daily.
• It’s FDIC insured.
• You’ll earn an interest of 1.35% APY.
• You have the potential to earn a cash bonus based on some additional requirements.

The Upromise Connection

So what’s the cash bonus all about? While all this sounds pretty standard for a savings account, with the advertised interest rate falling in the middle of the pack when compared to other online savings accounts, there’s one thing that makes this product stand out. And no, it’s not just that this product is being offered by Sallie Mae, a familiar entity that you can feel you can trust with your loans AND savings; the fact is, Sallie Mae is also the institution behind Upromise, which they acquired a few years ago.

I am actually a member of Upromise and one who can really vouch for the program, whose goal it is, is to help you save for college. Through Upromise, you can get anyone to help you save for college through everyday spending. You can shop online, dine at participating restaurants and purchase groceries, and by using a registered credit card or Upromise credit card, you’ll earn rewards — actually, cash back that will help fund your Upromise account. You can then link your Upromise account to 529 college savings plan accounts in order to further your investment. And much like SmartyPig, you can invite your family and friends to participate in the savings process with you.

That said, the extra feature that the Sallie Mae Online High Yield Savings Account provides is the ability for you to receive a 10% annual match on your Upromise earnings, and it works this way:

• Open a Upromise Account and a Sallie Mae High Yield Savings Account.
• Link these two savings accounts together in order to be eligible for the 10% annual match.
• Set up an automatic savings program with a contribution of at least $25 per month OR deposit a minimum of $5,000 into the SLM account (within 90 days of opening the account).
• Start earning through Upromise by spending on everyday things.

After these requirements are met, then at the end of the calendar year, your Upromise earnings will be assessed. Upromise will then match 10% of these earnings and will deposit this bonus into your SLM savings account in February of the next year (given that your accounts remain in good standing).

Note that these terms may change at any time.

#2 Sallie Mae Certificates of Deposit

In addition to the savings account, Sallie Mae is also offering certificates of deposit with the following terms:

• A one year CD returning 1.50% APY
• A three year CD returning 2.20% APY
• A five year CD returning 3.00% APY

These online CDs won’t require any minimum deposits, have no hidden fees and no monthly fees, and can be automatically renewed. And as usual, they’re FDIC insured.

You can also review our article on the best CD rates if you’d like to see additional options for bank CDs.

High Yield CD & Online Savings Products From Sallie Mae

This guest post from Maria is part of the new “reader stories” feature here at Get Rich Slowly. Some reader stories contain general “how I did X” advice, and others will be examples of how a GRS reader achieved financial success — or failure. This story very much reminds me of the book for unmarried couples I reviewed earlier this week.

This is a story about a relationship between two people and some money.

Part 1
Boy meets girl. Boy moves in with girl. Household expenses are split and all seems well. Years pass. Boy wants to change cities for professional reasons. Girl wants to finish grad school. They make a deal: They’ll move when the degree is finished.

Warning signs: She is paying a greater share as the years go by and her career advances. He doesn’t take any concrete steps toward advancing his own career. He has sold his car ‘to save money’ and relies on her to drop him at the train station for his job. He has no real friends and his ‘project partners’ (in six years, there’s only one finished project) all seem to be women. And then:

Part 2
The degree is finished and true to the deal, she starts organizing a move. She researches new jobs cross-country. She rents a truck, makes hotel reservations, and arranges for a friend to drive the car in caravan with them. Oh, by the way, she’ll pay the friend’s airfare home. She puts down the money on an apartment. She lands a job, but he says he needs some time off work to get things going. They make a new deal: She’ll cover the rent for a while so he can concentrate on jump-starting his career. Years pass. His career hasn’t started. The subject comes up fairly often, but she hates to fight.

Warning signs: By the end of three years, not only is she paying all living expenses, she’s giving him an allowance to cover his “career-building” expenses. He hasn’t held a job since the move. His ‘project partners’ still all seem to be women. He has built no social or professional network and does not participate in her social life. (This didn’t bother her much when she was in grad school, but life is different now.) She doesn’t really want to live alone, and she tells herself he isn’t costing her much more than it would cost to live alone; but their relationship has become that of roommates. And then:

Part 3
She takes up an activity she’s passionate about. He isn’t interested. She meets someone new and tells her roommate she wants to pursue the new relationship. He panics. He asks her to marry him. He argues. He threatens. He marches her into the bank and stands at her back while she takes cash advances on six credit cards, a total of $30,000. He deposits the money in his own account. She tells him that they can’t continue to live together, and she can’t afford to move because she doesn’t have the money for a deposit. He won’t move out. She starts spending most nights and weekends away.

Warning signs: The whole situation.

Part 4
After months of misery, she is able to finally get him out by renting a truck, packing it with almost all their possessions, and driving it to his sister’s home nearby. With the expenses of the move, her own living expenses, and the extortion debt, she is barely making ends meet. She has no savings and no assets. She talks things over with the new partner. They decide bankruptcy may be the best solution. She asks around and gets the name of a firm of attorneys.

Part 5
The attorneys hear the story, go through all the paperwork, and agree that going after the ex in court would be both expensive and unlikely to result in restitution. A bankruptcy petition is prepared and filed, at a cost of a few hundred dollars. She has to appear in court. She feels like an idiot, a failure, a disappointment to herself. The judge hears a brief statement of her reasons for the petition, nods, signs off. That’s all. Ten years later, the bankruptcy is off the credit report. Had she not filed, she would still be making payments on the debt.

Author’s note
This is a true story. I’ve heard similar stories from half a dozen women, and a couple of men, in my city. At least I never married him. At least I didn’t have to smuggle my belongings to my office and store them under my desk until I had all the essentials together, and leave for a new state from the office, like one of my friends did. At least I wasn’t that scared.

In hindsight, perhaps I should have either moved out immediately or had the bank call the police. But I didn’t want to feel responsible if he hurt himself, I surely didn’t want him to hurt anyone else, and his behavior was sufficiently frightening that I believed one of those outcomes was possible. So I bought him off.

What is the moral of this story?
Don’t cover expenses for another able-bodied adult without a contract, and don’t make financial deals that only favor one party.

Reminder: This is a story from one of your fellow readers. Please be nice. After nearly a decade of blogging, I have a thick skin, but it can be scary to put your story out in public for the first time. Remember that this guest author isn’t a professional writer, and is just learning about money like you are.

—
Related Articles at Get Rich Slowly:

• Reader Success Story: Debt Free on $2,000 a Month
• Sometimes Free is Expensive: A Cautionary Tale
• You Can Learn a Lot From a Rich Girl
• This American Life: Something for Nothing
• Blogathon Theme: Funny Money

« Previous entries