The Top Online Banks Just a Click Away

Online or internet banking is not a new concept to many people nowadays. While some are still more comfortable with the brick-and-mortar banks, a growing number of consumers today are also adapting to the more convenient method of handling one’s finances which is through online banking.

Plus, an online bank ideally offers higher yields and lower fees because it is able to do away with overhead expenses normally maintained by the traditional bank. Everything is transacted online, through the phone, or by mail.

Two banks in particular, ING Direct and HSBC Direct have lorded it over other virtual banks in terms of customer base and overall client satisfaction.

ING Direct has been one of the forerunners in the virtual banking industry, having started operations since the year 2000. Backed by parent company ING, a global financial institution, ING Direct serves over 6 million clients in the US and has 15 million more clients in over 50 countries all over the world.

HSBC Direct on the other hand, is a fully-owned subsidiary of the HSBC Group, which boasts of 10,000 offices in 82 countries spread out across Europe, in the Asia-Pacific region, the Americas, Middle East and Africa.

Rates, Products and Services

ING Direct offers various savings accounts and investment options to suit the needs of the average consumer. The more popular of ING’s products are the Orange Savings which currently offers 2.75% APY, the Electric Orange, an interest-earning checking that could give 1% to up to 3.25% APY depending on the account average balance, and the Orange CDs which is offering up to 4% APY for a 12-month investment. 

Aside from these, ING Direct also offers stocks and investment options, business savings accounts and CDs, and mortgage loans.

HSBC Direct as well, offers an array of pretty much standard products and services. The bank has classified its products into four major categories: Online Savings Account, Online Payment Account, Online CD Account and Credit Cards. HSBC right now offers a rate of 3% APY for its Online Savings Account, 2.25% APY for the Online Payment Account and 4% APY for a 6-month Online CD Account.  

HSBC or ING?

The question as to which is the better online bank has spawned a number of interesting discussions over the internet. Both banks have already a steady following of clients, most of whom have their own reasons for staying with the bank of their choice.

In some aspects, the two are evenly matched up. ING and HSBC both do not require minimum balance requirement, charge no fees, and take about the same time in bank account transfers.   

On other features though, one may tend to pull ahead of the other.

High Yield vs. Customer Service

The best thing about HSBC Direct is that it consistently offers higher yields than that of ING. With rates currently at 3.00% for HSBC and 2.75% for ING, HSBC would definitely score points with consumers who are continually shopping around for the best options for their everyday funds and hard-earned savings.

Longtime patrons of ING Direct on the other hand, are very comfortable with its superior customer service – an aspect that can make many clients look beyond the lower interest rate and give ING their vote of confidence. 

Other services

Clients also claim that opening an account with ING Direct is a simple process that requires only basic info gathering and identity verification. With HSBC on the other hand, the procedure is much more tedious and requires the client to wait for his passwords which are sent through the postal service. Quite ironic for an online bank; but this is of course, done for security purposes.

Being online banks, websites and online banking user interface also count for a great deal with bank costumers. In this regard, ING also emerge as the better choice, with its user-friendly and straightforward interface. HSBC however, claims the upper hand when it comes to ATM service with its extensive network of bank-owned ATM machines.

Final thoughts

So, who should get the consumer’s vote? Ultimately, the choice would always boil down to what the client looks for in a virtual bank. While choosing the one with a higher rate for investment returns may be a no-brainer for some, there are others who would still go for the bank with the better “personality” regardless of the slight difference in earnings. 

It’s all up to you: HSBC Direct or ING Direct?

The main concept behind CDs is that investors get a fixed return on their investments until it reaches maturity. However, like most other investment instruments in today’s market, there are now various types of CD features. Long-term CDs, Variable rate CDs, and high-yield CDs with “call” features are now available. The “call” feature basically means that the bank can terminate the CD after a certain amount of time. For example, the bank may decide to terminate the high-yield CD if the interest rate falls. The investor has no power to terminate the CD. If interest rates in the market significantly rise, they will be locked with the lower rate on their CD.

A lot of investors traditionally purchased their CDs through banking institutions. However, CDs are now also being offered by brokerage firms and independent sales personnel. These individuals or business entities are sometimes known as “deposit brokers” because they can negotiate a higher rate of interest by promising a specific amount of deposits to the banking institution. In this regard, it is important to look at strategies that can maximize the yield of your CD.

The CD Ladder

CD is similar to a typical savings account in the sense that this instrument accrues a fixed amount of interest over time. The major distinction between CDs and savings account is that the depositor is committed to hold the CD for a specified length of time, ie. 3 months, 6 months, 1 year, 2 years, etc. In exchange, the bank guarantees the rate of interest for this period.

CDs have the unique characteristics of having a fixed rate and lack of liquidity. Basically, if an investor purchases a CD that yields 3%, it will yield the same amount of interest for the duration of the CD. Even if the market rates fluctuate, the accrued interest of the CD will remain unaffected.  Meanwhile, CDs are characterized by lack of liquidity because again, the term of the investment is fixed. The depositor cannot cash out their CD early without incurring penalty. Illiquidity is the main reason why CDs typically pay higher yields compared to savings account and money market funds.

Generally, CDs pay higher interest for longer terms. For example, a 5-year CD will yield more than a 1-year CD. However, financial experts would advice investors not to put all their money on the longest term CD to keep their liquidity.

Instead, investors can use the CD ladder to avoid or at least minimize illiquidity. The CD ladder acts like a hedge against market volatility. Assume that an investor has $4,000 to invest. Instead of putting the entire $4,000 on a 5-year CD, he can break it down to the following:

·         $1,000 in a 2-year CD at 3.25% interest

·         $1,000 in a 3-year CD at 3.50% interest

·         $1,000 in a 4-year CD at 3.75% interest

·         $1,000 in a 5-year CD at 4.00% interest

Once the 2-year CD matures, the investor can reinvest the money in a 5-year CD (it will mature in the 6^th year) in order to benefit from higher interest rates. Investors can follow the process in your other CDs. That way, they will always be 1 year away from accessing 20% of their money without penalty. Though it may seem like a simple matter, having cash-at-hand is important for everyone. In addition, investors also get the chance to take advantage of better interest rates in case it is offered at the time of the CD’s maturity.

Tips in Purchasing CDs

• Determine when the CD matures – this is the first step you need to go through. Though it may seem obvious, there is a surprising number of investors who fail to confirm the maturity date of their investment. They are shocked to find out that they tied their money for five or even ten years when they try to withdraw it from the bank.
• Know the penalty for early withdrawal – before investing in CDs, it is important to determine how much penalty will be charge in case of early withdrawal. In some cases, investors risk losing a portion of their principal if they cash out early especially if they bought brokered CD. 
• Confirm the yield of the CD – the investor needs to receive a disclose document that states how much the amount of interest rate on the CD will be. It should also contain how and how often the bank will pay the yield. For example, some banks pay the interest monthly while some disburse it semi-annually. The payment can be made through electronic transfer of by issuing a check.
• Find out if the CD has call features – as was discussed above, the call feature allows the bank to terminate the CD after a specific period of time but the investors do not have the same right. If interest rates fall, the banks may “call” it and you will be paid the principal plus any accrued interest. However, if the interest rates rise, you can be stuck with a long-term CD that pays below market rates. In addition, the investor wants to cash out before the maturity date, they will lose some of their principal.
• Understand what “Federally Insured One-Year-Non-Callable” means – the term doesn’t imply that the CD will mature in one year. It simply states that the bank cannot terminate the CD during the first year but the institution has the right to terminate it after one year has passed. Ask a representative of the bank if it isn’t clear when the CD will mature.
• Determine if the brokered CD is insured – the Federal Deposit Insurance limits their coverage to $100,000 per depositor in each institution. If an investor bought a brokered CD, it is important for them to find out which institution is the issuer of the investment instrument. The broker may be putting the money in a bank where the investor already has CDs and other deposits. In that case, they risk not being fully insured if their total deposit in the bank exceeds $100,000.
• Ask whether the interest rate can change – some forms of CDs have variable interest rates. These types of investment instruments have “multi-step” structures wherein the rate can increase or decrease based on a pre-set schedule. The varying rate can also be dependent on the performance of a specified index such as the Dow Jones Industrial Average.

Should You Invest in CDs?

Before deciding to invest in certificate of deposits, you should first determine what type of investor you are. There are basically three types of investors including conservative, moderate, and aggressive. Conservative investors usually invest in cash. They put their money on interest-bearing instruments such as savings accounts, mutual funds, Treasury Bills, and money market accounts. This type of investor prefers low-risk investments that grow over a lengthy timeframe.

Moderate investors usually invest in cash and in bonds. They may also dabble in riskier investments like the stock market. This type of investor has a moderate risk tolerance. Many of them also invest in real estate properties provided that this investment poses low to moderate risks. Last is the aggressive investor; they invest a significant amount of their money on the stock market. The aggressive investor also invests in high-risk business ventures.  

If you are a conservative or moderate investor, the certificate of deposit is a good instrument for you. It provides a stable return on your money and your market exposure to risk is minimal. On the downside, the interest yield you can expect from CDs is also minimal compared to higher-risk investments. Meanwhile, if you are an aggressive investor, it may be better for you to invest your money in other types of investment instruments. That way, you won’t feel that your money is “tied up” when you want to invest in a seemingly good opportunity in the stock market.

However, beyond knowing your tolerance level for risk, it is more important for you to learn and understand the different types of investments instruments. In the end, your decision to invest in CD should depend on whether or not you are comfortable with the yield it gives and the level of risk it presents. Amidst today’s financial crisis, a lot of people are choosing to purchase CDs but only you yourself can decide if purchasing a certificate of deposit is right for you at this point.   

You don’t have to be a CPA in order to practice good money management. All you need is the desire to educate yourself about effective savings and investment strategies, as well as a method of tracking your money. To get started, read the following tips to help you take charge of your financial future:

Track Your Spending, Establish a Budget and Determine Financial Goals

In most cases, becoming a college graduate also means you have to pay your own bills. You may not have had to pay for your expenses while getting an education, but once you graduate you’re considered a full-fledged adult.

In order to get financial control, you need to figure out how much money you make versus how much money you spend. You also need to know where your spent money goes and how much you are spending on each specific item. The good news is that you don’t need to buy a financial software program in order to do this. If you have Microsoft installed on your computer, you can use Excel to create a spreadsheet for tracking your finances. There are also free online money tracking sites you can use – try Wesabe.com, Geezeo.com or Mint.com.

Once you figure out where your money goes, you’ll be able to create a budget so that you can live within your means. Creating a budget allows you to plan ahead, which is especially important when you have monthly bills to pay. Missing payments can extensively damage your credit score, which will negatively impact future financial options such as buying a car or obtaining a mortgage.

You can also spot wasteful spending habits that need to be changed. For example, you might find that your daily coffee habit is eating away at your income. Instead of handing over $5 dollars to your local Starbucks every morning, you can dust off your coffeemaker at home and put the extra money in a savings account. Due to compound interest, you will end up earning even more than you saved. Use these savings for building up your retirement fund or other long-term financial goals.

Do Your Homework: Checking and Savings Accounts

Many incoming college freshmen open a checking and/or savings account prior to their first semester. Other students wait until after they graduate to open an account in their name. Either way, now is a good time to conduct research on the types of checking and savings accounts that are available to you through different banks. What fits your needs as a college freshman may no longer work for you as a young professional, and it might be in your best interest to switch to a new type of account. For those of you looking to open your first account, it’s equally important to shop around. Knowing your options will allow you to choose an account that offers the best incentives for your lifestyle and current financial situation.

You can use this site to research available account types by clicking on either of the following links:

Compare Checking Accounts

Compare Savings Accounts

Save At Least 10 Percent of Your Monthly Income

Once you have a checking and savings account that suits your needs, make sure to set up a consistent savings schedule. Along with other investments, you should regularly set aside a certain portion of your income in a savings account for emergency funds and retirement. The amount of money in your emergency fund should equal at least three to six months of your income. Building up an emergency fund is especially important during these tough economic times and can help you stay afloat after an unexpected job loss or other financial crisis. As for your retirement fund: save as much as possible. Financial planners recommend putting at least 10 percent of your income in a retirement account when you’re in your 20s and 30s, and more as you get older. Findings from a recent T. Rowe Price study determined that the average person needs to save at least 15 percent of their salary – before taxes – in order to build up retirement funds that equal 50 percent or more of their current salary. This percentage increases if you take away Social Security and pension payments.

When it comes to making your money work for you, time is your biggest ally. You may not be able to set aside much if you’re just making ends meet, but it’s important to begin saving as soon as possible. The sooner you start, the more money you will make in the long run. This is due to the miracle of compound interest, which basically works like this:

The money you put in a savings account generates interest. This interest increases the total amount of money in your account. Because the total amount of money in your account has increased, the amount you earn from interest payments also increases. Due to the compounding effect of time, the earlier you begin saving the less money you’ll need to save overall in order to reach your financial goals.

Pay Off Debts Quickly: Why Compound Interest is a Two-Way Street

Compound interest can work against you as well, which is why it’s better to pay off all debts that charge you interest ASAP. Especially avoid racking up credit card debt; if at all possible, pay off your monthly balance in full. Credit cards should be used to build up good credit, not as a crutch to buy things you can’t afford. The credit card companies make money when people fall into the trap of thinking that credit is the same thing as free money. It isn’t, and it will cost you a pretty penny if you treat it this way. It’s also to your benefit to pay off student loans as quickly as possible. Increase the amount of your monthly payments if you can afford to do so, because paying off your student loan ahead of schedule will reduce its overall cost. By keeping debt to a bare minimum, you’ll be able to increase your bottom line rather than someone else’s.

Take Advantage of Investment Opportunities

Many upcoming college graduates and 20-something professionals have limited funds. As a result, your investment options may be somewhat limited during this phase of your life. Current economic conditions don’t make things any easier. Even if you’re strapped for cash, however, there is one investment option you can easily take advantage of – your employer’s investment plan. Whether it’s a 401k, IRA or profit sharing plan, almost every employer offers one that you can participate in. This is an easy way to start investing for the long-term. To make sure you get the most benefit possible out of your employer’s plan, contribute the maximum amount under the terms of the plan. For example, if your employer offers a 401k plan that will match 50 cents on every dollar when you invest up to 6 percent of your salary, make sure to invest all 6 percent to get more bang for your buck. If you only invest 3 percent, you’re essentially rejecting free money from your employer. Most employers also subtract your investment contributions from your paycheck, meaning it’s already taken out by the time you receive it. The result is that you don’t have to give up money that’s already in your pocket in order to invest, and it won’t be missed if you don’t include it in your budget.

Once you are more settled in your career and start to make more money, you might want to look into other investment options as well. With the current stock market in such poor shape, it’s easy to assume that it’s not worth the trouble or risk to invest. It’s true that investing is riskier than simply putting money in a typical savings account, but higher risk also means higher reward.
According to the United States Automobile Association (USAA), an insurance agency that offers financial planning services, the average bank savings account pays 3-4 percent interest per year. The average stock, on the other hand, has earned an average yearly interest rate of 10.7 percent since 1930. USAA also points out that while savings are safe and guaranteed, investments have the ability to dramatically increase your wealth.

You shouldn’t put all of your extra money in investments, and most investments are meant to be long-term commitments. If you currently live on a shoestring budget, you should probably stick to your savings account and an employer-based investment plan. It’s better to embark on riskier investment options once your finances have some wiggle room. If you’ve already gained solid financial ground, however, the National Endowment for Financial Education provides a basic roadmap of investment types.  (You can also view this site’s list of available CDs by clicking HERE.)

Now that you’ve looked over these money management tips, you’re ready to make your way toward a fiscally sound future. With any luck, you’ll manage to ace every monetary test you encounter.

A new survey of more than 900 American Express Travel agents suggests that travelers this holiday season are savvier than ever before, fulfilling their vacation plans in the midst of the current economic downturn by finding smart ways to save. Consumers are stretching their vacation budgets, seeking value in every aspect of their travel plans and cutting costs wherever they can through measures such as redeeming reward points to offset costs, taking shorter trips, visiting alternative destinations, staying closer to home and choosing less expensive hotels.

Seventy-seven percent of agents said vacationers are looking for more value or bargains than in the past, while 86% of agents reported that their customers are looking for “smart luxury” options, defined as unique travel experiences and special treatment for less.

“With travel budgets tighter, we’re seeing our Cardmembers and travel customers work with our knowledgeable travel agents to find savvy ways to keep holiday travel plans while saving costs,” said Audrey Hendley, vice president of marketing, American Express Travel. “Many look forward to their end-of-year vacations and feel it’s too important to give up completely. Instead they’re working with our agents to find ways to get the best deals and tapping the travel benefits on their cards like never before.”

For example, 86.5% of travel agents polled (up from 70% in 2007) said that customers are using rewards points to offset travel costs this holiday season. More specifically, 83% of travel agents responded that eligible, enrolled American Express ® Cardmembers are taking advantage of the Membership Rewards® program , including the Pay with Points feature that allows Cardmembers to use points to pay for part or all of their trip and avoid holiday blackout dates or seat restrictions.

Similarly, 61% of agents responded that American Express Cardmembers who are eligible for the Fine Hotels & Resorts program are taking advantage of complimentary amenities and special treatment and access at hotels in the program. Fifty-eight percent of agents said customers are also purchasing travel delay protection/travel assurance for delayed and cancelled reservations.*

Almost half (47%) of travel agents said their customers are booking more value-priced hotels this holiday season compared to last year, and 40% are booking more domestic and/or closer-to-home flights this year. More than half (53%) of the American Express Travel agents polled said that cruising offered the best deals, followed by 38% who said that tour packages provide value by combining airfare and hotel accommodations.

To continue reading this article click here.

In response to White House’s growing concern that the bailout money might be used to finance more acquisitions or fund employees’ compensations, executives of top US banks immediately gave their assurance that the bailout money will go where the government wants: to get credit moving again and assist in restructuring home mortgages rather than push for more foreclosures.

Bob Hatley, CEO of Paragon Bank definitely hit the mark right on when he said of the government’s capital infusion, “This program isn’t intended to prop up bad banks but to allow good performers to make additional loans.”

The mounting apprehension of bigger banks going “acquisition-happy” is not entirely without basis. Earlier last week, some top bank executives have been quoted as saying that with the $25 billion bailout money, there would be “great opportunities (for them) to grow”.
They are now humming a different tune, however. Appearing before the Senate Committee on Banking, Housing and Urban Affairs Thursday, Barry L. Zubrow, chief risk officer of JPMorgan Chase & Co. said that a significant portion of the $25 billion infusion from the Treasury is being channeled to “expand the flow of credit” and aid in the rewriting of more than 400,000 residential loans. 

Along with Zubrow, senior officers of Wells Fargo & Co., Goldman Sachs Group Inc., and Bank of America Corp. likewise gave their word that they are using the funds to boost lending and not to subsidize employees’ salaries or bonus packages.

“Since mid-September when capital markets froze, Wells Fargo has led the industry in lending to existing and new creditworthy customers,” said Jon Campbell, regional vice president for Wells Fargo, in a prepared statement before the Senate panel. “Wells Fargo doesn’t need the government investment to pay for bonuses or compensation”, he added.

As a matter of fact, bank executives revealed that employees will receive lower bonuses this year because of the obvious dismal state of the economy, reducing by as much as 50% or more in the case of Bank of America as disclosed by Anne Finucane, a marketing and corporate affairs executive of the bank, to the committee.

To emphasize their willingness to work on the government’s terms, Finucane pointed out that Bank of America has already initiated some $50 billion in real estate loans for the third quarter of 2008 alone, although acknowledging that this figure is less than what the bank lent out for the same time last year. On the other hand, Wells Fargo’s Campbell said that the bank’s mortgage loans are up by 37% as compared to last year.

JP Morgan Chase, Wells Fargo, Goldman Sachs, and Bank of America are among the nine financial institutions which were tapped by the government and apportioned $25 billion each by the US Treasury earlier last month as part of the $700 billion bailout plan, to intensify lending efforts towards businesses and consumers. 

Capital One Bank announced the opening of a new bank branch at West Side High School in Newark. The West Side High School branch will be Capital One Bank’s second student-run banking center in the Tri-State area.

Nine West Side High students will operate the in-school branch three days a week under the supervision of Capital One Bank management. The new in-school branch provides an opportunity for select students to work with Capital One Bank to develop practical financial knowledge and skills through a structured work environment and share what they have learned with their peers. The bank will offer tools to help students save for future financial responsibilities such as the cost of attending college, and banking services will also be available to school administrators and teachers.

“Capital One Bank developed this student-run bank branch at West Side High School as a part of our commitment to providing innovative financial education programs for the citizens of New Jersey,” said Jon Trombley, New Jersey and Virginia State Executive Vice President of Branch Banking at Capital One Bank. “Given recent economic pressures, financial literacy is more important than ever. Our goal is to help give students a solid foundation of money management knowledge and skills so that they can make wise financial choices in the future.”

Read the rest of press Release here.

Just about everyone needs a checking account when they reach adulthood. And free checking accounts seem to be everyone’s preference because of its perceived “no strings attached” feature. There are no monthly charges and no minimum maintaining balance required. You can keep your balance as low as you like without incurring penalty fees. However, is the free checking account really free? Many people seem to think it is but if when you analyze it deeper, it would appear that “free” checking accounts are not so free after all.   

The Truth in Savings Act requires that for an account to be considered “free”, it should not require any minimum balance, maintenance fees, and activity fees. The maintenance fee may come in the form of monthly service charges if your outstanding balance dips below a certain level. The activity fee is the charge for writing more checks that what is specified for certain month. Free checking accounts do meet these requirements. Sounds perfect, right? It does come at a price.

Despite the benefits of free checking accounts, it isn’t for everyone. Most free checking accounts don’t pay interest and almost every bank imposes stipulations. Try to open a free checking account in certain banks and you’ll discover that you have a withdrawal limit of $300 a day on an ATM. Meanwhile, other banks may require regular deposits before they allow you to open an account. For example, banks may ask that paychecks or government checks be direct-deposited to the free checking account.

It is also important for you to be aware that “free” doesn’t necessary mean that no other fees can be charged. Some fees that the banks can legally charge you include nonsufficient funds (NSF), check printing, stopping payment, dormancy, and closing fees. Some charges may surprise you. A lot of banks provide a debit card together with the free checking account. If you decide to swipe this card for payment, you’ll discover that you can be charged a fee for every transaction.  

Advantages of Free Checking Accounts Over Regular Accounts

Regular Checking Accounts

It’s great to earn interest for the money in a checking account, but there is a trade-off. Interest-bearing accounts traditionally require account holders to have hefty minimum balances in order to acquire interest. And banks require an even higher minimum balance for consumers to avoid monthly service fees. Paying off just a single monthly service fee in that year can possibly wipe out all the interest accrued for that year. This is because the interest rates offered in checking accounts can be considered minuscule.

It has been estimated that the average balance required to open a regular checking account and earn interest is $376.75. But consumers will to need have an average of $3,461.84 on these accounts in order to avoid monthly maintenance fees. If you maintain the $3,461.84 balance or the required minimum in your bank, you’re basically allowing the bank to get a line of credit at your expense.

Interest for these accounts merely amount to 0.24% or even less. In fact, interest rates of between 0.05% and 0.10% are quite common if you open a free checking account on big national banks. Wachovia, for example, requires account holders to have a minimum of $4,000 in their balance just to avoid fees and they pay a mere .05% for interest. Remember that 0.05 is only one-twentieth of a percent and you need to pay a maintenance fee of $20 if you go below the minimum of $4,000.

Free Checking Accounts

For some individuals, free checking accounts are the best option. This type of account typically requires no minimum deposit and it has no monthly service fees. The average minimum required to open the free checking account is $82.71. The monthly average balance that helps consumers avoid fees is pegged a $109.26.

The Real Costs of “Free” Checking Accounts

While free checking accounts offer some benefits, there is an opportunity cost associated with opening a free checking account. By accruing less interest on money than what is possible, consumers are actually paying the real cost of using free checking accounts. You should ask yourself why banks aren’t going broke from providing this free service.

Some of the country’s biggest banks are making plenty of profits by offering these “free” services. Between the missed interest and NSF fees, dormancy fees, stopping payment fees, check printing fees, and other types of fees, free checking accounts are actually costing customers a lot of money.

Individuals who maintain an average monthly balance of even $1,500 on their free checking accounts should consider investing this money instead. This is because maintaining $1,500 in free checking every month simply isn’t practical. If you invested $1,500 in the money market for example, you could have earned as much as 20% interest on the same amount. However, as investing isn’t suited for every checking account holder, it is important to be aware of the risks involved in interest-bearing accounts.

Who Should Open Free Checking Accounts

If consumers had been satisfied with the rates and conditions associated with regular checking accounts, other types of services such as the free checking accounts would not have been available in banking establishments. Free checking accounts had been invented for a reason. It offers low-income individuals or businessmen who want to keep their costs low, an opportunity to experience the benefits of a checking account with fees at a minimum.

If individuals who have high balances on their checking accounts enjoy the advantages of high-interest payments on regular checking account, then those with low balances should go the opposite direction for the same reason. They should open free checking accounts instead of regular checking accounts. They won’t be losing any money from the “opportunity cost” of putting significant amounts of cash in a non-interest earning account. Instead, they can avoid fees associated with having regular checking accounts. In addition, they won’t be required to maintain a minimum balance on these accounts so there is less pressure to keep up the cash flow.

Where to Open Free Checking Accounts

Most individuals open their free checking accounts based on considerations such as proximity, number of ATMs, and national prominence. But if you want to get the best deal on your free checking account, none of these should matter.

Big national banks such as Bank of America, Wells Fargo, and Wachovia may have branches on all corners of the country but they are also the banks that “get” the most money from their clients. These national financial institutions know that a lot of clients will still opt for their services because of their perceived stability and reputation. To get the best terms and conditions for your money, you should look elsewhere.

Try looking into alternatives such as credit unions, internet-based banks, and local banks. You’ll be surprised by some benefits these establishments offer. Consider their free checking account. Credit unions offer higher interest rates and lower monthly maintenance fees if you fall below minimum because of their non-profit status. These establishments also have a friendlier atmosphere and more accommodating personnel. Credit unions usually require a minimum balance of $2,500 in order to waive the monthly fee (usually between $7 and $9) but it will pay 0.25% interest.

You might be wondering, ‘What is so great about 0.25% interest’? While it does appear low and unappealing, if you compare it to the terms of opening a Wachovia free checking account, you’ll begin to see the difference. 0.25% is around five times more than what Wachovia and other big national banks are offering. Credit unions and local banks also have lower monthly minimum requirements and lower monthly maintenance fees. Aside from the monetary benefit, it is also easier to get into contact with “alternative” establishments. You won’t need to wait to be redirected to qualified contact center staff to get answers.

You can also look into internet-based banks. A lot of banks and credit unions already offer online banking services but there are also purely internet-based banks. Theoretically, these establishments offer high interest rates, low maintenance fees, and a wide range of services. A lot of people are still hesitant to take this route but if you decide to go for it, you can check out the MyBankTracker.com’s listing of internet-based banks.

When it comes to banking, there is definitely no free lunch even if the advertisements say otherwise. But by knowing the strings attached to these “free” packages, it becomes possible for you to shop for the best deal possible. Other tips that will help you save money from using free checking services include ordering your checks direct from the printer. Banks will typically charge you $25 for an order of 200 checks but you can get rid of this additional expense by going direct. You should also consider paying your bills online instead of using your check. You will not only be able to conserve more of your checks, you can also save on posting fees if you need to mail it.  

Aside from having equally received a huge chunk of the $700 billion government bailout plan, $25 billion each to be exact, the two banks have also been rather busy lately expanding their respective financial empires with a series of takeovers and mergers involving no less than once-mighty names in the banking and investments industry: Bear Stearns and Washington Mutual, Countrywide Financial and Merrill Lynch.

While apparently both B of A and JPMorgan smell a good deal a mile coming, this still begs the question: Who got the better deals? And more importantly, which bank is better poised to face the seemingly worsening economic situation?

Banking Facts and Figures

Bank of America (NYSE: BAC)

Bank of America’s company profile is impressive, to say the least. Along with Citigroup and JPMorgan Chase, it ranks as one of the largest banks in the US by assets, and has over 6,100 branches spread out in 30 states from coast to coast.

The bank also boasts of an extensive range of services starting from its Global Consumer and Small Business Banking (GC&SBB) division, which is the company’s largest division, dealing mainly with consumer banking and credit card services. Bank of America’s GC&SBB organization comprises over 5,700 branches and 17,000 ATM’s across the country, and accounts for more than 50% of the bank’s total revenue.

Its corporate business, the Global Corporate and Investment Banking (GC&IB) group, offers mergers and acquisitions advisory, underwriting services, capital markets, and sales and trading in fixed income and equities markets.

Similarly, with its investment banking division, Global Wealth and Investment Management (GWIM), B of A offers asset management for both individuals and institutions. Its client portfolio includes 98% of the Fortune 500 companies in the US and 79% of the Global Fortune 500. As a matter of fact, it was ranked among the 10 largest US wealth managers in 2005.

Its recent acquisition of investment institution Merrill Lynch which is known for its extensive retail brokerage network should strengthen Bank of America’s investment banking and brokerage business outside the US and help realize its goal of being one of the top investment banks worldwide.

JPMorgan Chase & Co. (NYSE: JPM)

Far from being outdone, JPMorgan Chase currently holds the distinction of being the largest banking institution in the United States by deposits and market capitalization with almost $2.0 trillion in assets, and is also one of the oldest financial services companies operating in the US today.

Just like Bank of America, JPMorgan Chase’s history is dotted with mergers and acquisitions, before it achieved its current name from the year 2000 merger of two huge financial institutions, Chase Manhattan Bank and JP Morgan & Co.

The company now serves millions of consumers in its US retail banking division and credit card services, which continue to use the Chase brand. On the other hand, the JPMorgan brand is used by the Investment Bank as well as the Asset Management, Private Banking, and Private Wealth Management divisions, catering to prominent corporate, institutional and governmental clients.

JPMorgan’s highly-publicized takeover of once the largest savings and loan bank in the United States, Washington Mutual Savings Bank in Sept. 2008, served to further beef up its consumer business, with WaMu’s more than 2,200 branches which are located in areas where JPMorgan was virtually non-existent: California and Florida.

Recent Developments

Despite general worries of the US economy’s dire state, both Bank of America and JPMorgan Chase found perfect opportunities to further establish themselves as the country’s premier banks by taking over financial institutions that have been hit hardest by the credit crunch.

Bank of America set the wheels in motion with its acquisition in January 2008 of Countrywide Financial, one of the country’s largest mortgage lenders but one of the first to succumb to the subprime mortgage crisis. The deal was closed at $7.16 per share or $4.1 billion, just one third of Countrywide’s tangible book value at that time.

JPMorgan Chase followed shortly in March 2008 by acquiring financially besieged Bear Stearns, the fifth-largest investment bank on Wall Street, for a song. While the initial $2 price per share was later revised to $10 per share, considering that Bear shares were valued at $70 per share just a few days earlier, JPMorgan still closed the deal at a basement-bargain price.

JP Morgan also made history in late Sept 2008 by taking over Washington Mutual in a $1.9 billion deal – a huge discount from the initial $8 per share it offered to WaMu earlier in March, which the latter refused at that time.

Just days earlier, on Sept. 15, news of Merrill Lynch’s selling itself off to Bank of America in a $50 billion all-stock transaction also generated much buzz in the financial industry, especially so soon after Lehman Brothers’ filing for bankruptcy.

On hindsight however, what appears to be as much of a surprise as Merrill Lynch’s failure, is the fact that despite the investment house’s obvious financial distress, Bank of America actually paid a premium to Merrill’s book value – a move that many view as totally unnecessary (they could have waited a day or two to make a killing), and without the Fed’s backing at that.

This move by B of A makes the Merrill transaction an obvious exception from the other three mergers. On a positive note however, the deal is still to be concluded sometime in 2009. Since this is an all share deal, and with stocks continuing to plummet, the actual transaction value could go much lower than the original $50 billion price by that time.

To the Victor Goes the Spoils

With the recent mammoth acquisitions of the two banking giants and the Treasury’s not-so-subtle backing, Bank of America and JPMorgan Chase are definitely geared up for the long haul. By building up on areas where they can do better, both have managed to make priceless moves to entrench themselves as forerunners in the financial industry.

While there emerges no obvious victor as of the moment, JPMorgan appears to have gotten the greater advantage in its recent acquisitions.

But don’t count Bank of America out just yet. Bank executives are confident that in time, the hefty price tag that came with the Merrill Lynch deal will pay itself off.

Well, we would all find that out too…in time.

The number of wealthy Americans who feel pessimistic about the stock market and real estate has nearly doubled in the past year, according to a survey by PNC Wealth Management, a member of The PNC Financial Services Group, Inc.

More than half — 53 percent — have a gloomy outlook about stock market performance in 2009, the fifth annual Wealth and Values Survey found. Only one in four (25 percent) are optimistic about the market next year.

Despite this prevailing pessimism, however, two-thirds remain confident of the long-term as 67 percent responded, “I feel I have control over my financial future.” Exactly half, 50 percent, said, “I am confident I’m on the right track” for retirement and only 15 percent said they will not meet their retirement goals.

“Markets never bottom when investors are optimistic,” said Thomas P. Melcher, executive vice president and managing director of Hawthorn, the division of PNC Wealth Management that serves clients with $20 million or more in investable assets. “These findings represent a bottoming process. The number of sellers declines as pessimism rises and it appears that many investors are sitting on the sidelines waiting for a recovery. From a contrarian viewpoint, this is a positive development.”

The Waiting Game

The survey of 1,263 wealthy Americans, all of whom had at least $500,000 in investable assets, also revealed that despite a dreary outlook on the stock market, almost two-thirds (65 percent) of the wealthy still like stocks as an investment compared to 18 percent who dislike that asset class.

“Sophisticated investors know that in the long run, valuation drives future returns and the market is cheap on virtually every measure,” Melcher said. “Investors may not be happy at the current time, but they realize the market will eventually turn and when it does they are likely to be handsomely rewarded for their perseverance.”

White House; My House; Best Bets

The fifth annual Wealth and Values Survey by PNC, which is among the nation’s top 20 wealth management firms, also revealed insights about the following issues:

Economic Concerns High

Almost two-thirds, 61 percent, of wealthy Americans are concerned about a recession and 59 percent are concerned that inflation will exceed the returns of their investment portfolios. About the same number, 62 percent, are more pessimistic in the outlook for the U.S. economy in 2009. Only one in four (24 percent), meanwhile, are optimistic about their ability to get credit at reasonable rates.

Change Is Good

Among the wealthy there was an appetite for change in the White House. The survey, taken in September, revealed that 40 percent are optimistic about the election of a new U.S. president while 26 percent were neutral and 34 percent were pessimistic.

Real Estate Worries

Fifty-seven percent are pessimistic about the outlook on the real estate market, about the same as last year (56 percent). In addition, half of those surveyed (50 percent) expect a continued decline in the value of their primary residence, almost double those (27 percent) who believe they will see an increase. One in three (33 percent) expect a drop of 5 percent or more. This outlook is the opposite of last year when 23 percent expected a decrease and 51 percent foresaw an increase in value.

Top Sectors

Asked which sectors have the best chance for gains in 2009, the wealthy are bullish on energy/utilities (66 percent compared to 61 percent last year). Technology remains second but at 51 percent (down from 59 percent). Health care is third (46 percent versus 53 percent) then financial (down to 19 percent from 29 percent).

Stocks and Mutual Funds Still Have Favor

Stock and mutual funds still comprise half of the wealthy’s investment portfolios, combining for 49.8 percent. Other assets classes include: cash, 15.4 percent; bonds, 11.9 percent; international stocks, 8.0 percent and investment real estate, 7.0 percent. Private equity (1.5 percent), Exchange traded funds (1.3 percent) and hedge funds (0.6 percent) all play significantly smaller roles in the wealthy’s portfolios.

Full press release please read here.