Posts From January, 2013

The Rise of Alterna Banks 

Credit Unions Aren't the Only Option for Leaving Your Traditional Bank
January 30, 2013 Categories: bank alternatives

According to the FDIC, 821,000 households ditched their banks between 2009 and 2011. The financial crisis, the foreclosure robosigning scandal, and the huge amounts of money banks were raking in from fees turned many consumers against big banks. Bank Transfer Day during November 2011 was founded on some of these bad bank practices and had many consumers switching to credit unions.

Even as new regulations have forced banks to change some of their ways, more consumers are expected to close their accounts. A recent survey by Javelin Strategy & Research found that 11% of Americans plan to switch banking institutions in the next year.

While credit unions or community banks may be the best alternative to you—much like a traditional bank, but with none of the big fees or devious practices—others might find some of the “alterna-banks” a better fit.

An article in Time magazine, “The Rise of the Alterna-Banks: 4 Options Beyond Traditional Banking”, lays out four alternatives that might be of interest to consumers fed up with traditional banks.

1. Full-feature prepaid debit cards. Maybe you have been scared off from banks by overdraft fees and other zingers that zap your balance. You don’t mind paying a little bit, but you want to know what fees you’re paying upfront. You don’t really use paper checks, but you’d still like to get the other perks that come with a regular bank account. If these descriptions apply to you, look into prepaid cards.

What’s good: The prepaid landscape has expanded greatly over the past couple of years, prompting providers to lower fees and add features.

What’s not: Prepaid cards are still mostly unregulated. Most providers comply with rules for regular debit cards, so that customers are protected if a card is lost or stolen, but they are not required to comply. The lack of rules also means there is something of a free-for-all when it comes to fees. If choosing a prepaid option, be sure to examine the fine print so you know where all the fees stack up.

Standouts: Chase’s Liquid and Bluebird (offered jointly by American Express and Wal-Mart)

2. Web banking and budgeting accounts. New web-based platforms deliver a combination of banking and budgeting tools. They aren’t banks. But they do partner with financial institutions (like community banks and credit unions) that provide many of the services included in typical bank accounts. These platforms are loaded with money management tools that help users manage their spending.

What’s good: If you’re a fan of personal finance platforms like Mint.com and wish you could keep your money in the same place you manage it, this option gives you one-stop-shopping on your computer or smartphone without the fees that weigh down most regular checking accounts. Heavy-weight analytics tools give in-depth insight into your spending and saving habits.

What’s not: If you want a brick and mortar banking experience like seeing a teller or visiting a branch, this probably isn’t for you. Also, standard account features like paper checks also might not be available.

Standouts: Kasasa (used by many credit unions) and Simple

3. Prepaid debit with high-interest savings. This category combines the functions of a prepaid debit account with the high-APR (relatively speaking) savings feature of online banks like ING Direct and Ally.

What’s good: Interest rates in the 5% ballpark—much, much higher than the average bank account rate, which is barely above 0%—are not unusual. Some providers offer budgeting and personal finance tools as well.

What’s not: In a word, fees. The eye-popping interest rate is the eye-catching figure these providers want you to see, not the fee schedule which will show you really aren’t making any money on your savings. Some cards even charge a fee with every transaction.

Standout: Mango

4. Mobile bank account. Green Dot, one of the granddaddies of prepaid debit, rolled out a mobile bank account last week, following its acquisition of a bank in 2011 and mobile-location service provider Loopt last year.

Called GoBank, it’s designed to appeal to consumers who grew up with smartphones and social networks. The entire experience takes place via the bank’s app for iOS and Android or through a user’s mobile web browser.

What’s good: It doesn’t hit users over the head with fees. The monthly fee is set up on a sort of honor system: there’s a “pay what you want” feature that lets customers choose an amount varying from nothing to $9 per month. There are no overdraft fees and few other fees (like $2.50 to use an out-of-network ATM). Direct deposit and mobile check deposit using the phone’s camera are free. Users don’t get checkbooks, but the bank will mail a paper check to anyone on request, or they can send money to people via text message or through Facebook.

What’s not: To deposit cash, users can buy a Green Dot MoneyPak for around $5, or deposit cash fee-free at Walmart cash registers with a swipe of your debit card. Green Dot plans to make this feature available at more retailers in the future. For people who aren’t used to conducting transactions via their phone—or who don’t have a smartphone—GoBank won’t be a viable option. But GreenDot is betting that younger customers would rather have their bank at their fingertips than down the block.

It's About Trust 

Credit Unions Beat National Average in Benefits Survey
January 21, 2013 Categories: bank alternatives

surveydataCredit unions pride themselves on being local, trustworthy financial institutions, unlike some of their counterparts, and employees agreed according to a national survey.

In the survey titled “Sharpening the Focus on Benefits Strategy”, the first in a series of research briefs stemming from Prudential’s “The Seventh Annual Study of Employee Benefits: Today & Beyond”, employees ranked credit unions as the most trusted source to help them grow and protect their money. Eighty-one percent said credit unions were a trustworthy source to help them safeguard their funds. Comparatively, 79% of employees saw their employers as a trustworthy source for growing and protecting their money.

Fourteen percent of both employers and employees cited severe negative economic effects, a decrease from 2010 results of 27% for employers and 22% for employees. Employers who said their financial position will be better or improving in one year dropped to 54% this year from 70% in 2010; employees report a drop to 38% from 44%.

Employers reported a 17% increase over 2010 results in making benefits strategies a main focus. With shifting ownership and cost of benefits to employees, employers’ top strategies included:

  • Expanding wellness, preventive, and work/life balance initiatives;
  • Improving the effectiveness of benefits communications;
  • Cost-sharing with employees;
  • Giving more financial responsibility to employees; and
  • Increasing employee benefits, education and financial advice.

New Year, New You 

Why Not Include Getting Financially Fit on Your List of Resolutions
January 16, 2013 Categories: tips

Dieting and exercising top the list of New Year's resolutions for many, but in 2013, why not add being financially fit to that list as well. Getting your finances into shape won't require major lifestyles changes, according to an article published by Fox Business, the same diet rule of moderation also applies to getting a fit budget.

The article lists a set of steps that will help to get your finances in shape.

  1. Evaluate past mistakes. Whether you got hit with finance charges because of overdue bills or held on to a stock longer than you should have, the article, recommends identifying all the 2012 money mishaps and commit to not making the same mistakes in 2013.
  2. Review your investments to ensure you have the appropriate risk portfolio. Make sure you are investing appropriately for your age and goals. For instance, if you have 20 years to retirement, it's common to have more of your portfolio invested in stocks compared to being on the cusp of retirement where you might be considering bond investments.
  3. Reign in credit card use and overspending. Only use a maximum of two credit unions. To help limit unnecessary spending, the article advises rating everything you consider purchasing on a scale from one to five. If the item rates a one, two or three, don't buy it!
  4. Pay down debt. Learn ways to create more income and use those funds to pay down any debt.

Many credit unions have financial advisors on staff they may be able to advise you on ways you can become more financially fit or offer products or services they may help you complete some of you 2013 financial goals.

Good luck creating a new you in 2013!

 
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