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Nerd-Its
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blog (coffee shop)
by I hate Wells Fargo. Not only do I feel cheated out of the money I've paid them in PMI, I feel cheated by using their savings and checking accounts. A few weeks ago, O-Nerd nickfranklin recommended a search tool on bankrate.com to locate a high-interest savings account. I was blown away to see multiple Internet banking savings accounts offering interest rates over ten times what my money was earning at Wells Fargo. Not only that, these accounts had no minimum balances, no fees, unlimited transfers, free bill pay, etc. It was everything I could want in a bank - I just had to make the switch to what I call "unadulterated" Internet banking, i.e., banking purely online with no physical location accessible. Given I performed all of my savings account activities online anyway, and that a call to Wells Fargo found them clueless as to why their interest rates were so much lower, I made the change - to Apple Bank, which had all of the perks I mentioned earlier, one of the top interest rates, and a good security rating. In the first month (which wasn't even a full month), I made more in interest than I had made in years with Wells Fargo.
Only a couple of weeks later, I received a tip about checking out ING Direct. Not only did they have some decent savings accounts (although not as good as Apple Bank), they had checking accounts with interest rates more than ten times what was on my old Wells Fargo savings account. Of course, moving to an unadulterated Internet checking account was a different animal, as I sometimes use the local ATM for deposits and cash. ING Direct's solution is to subscribe to a generic ATM network (which actually had a closer location) and accept deposits electronically and through the mail. Granted, I'd have to pay for a stamp, but that would probably cost less than the gas it would take to drive to the ATM.
Before making the switch, however, I made sure to check out bankrate.com's search tool for interest bearing checking accounts. ING checked out as one of (if not the) top options, so I opened my ING account immediately.
On a closing note, when I called to cancel my savings account with Wells Fargo (which I noticed had already incurred a $3 fee for dropping below the minimum required balance when I moved all of my funds out), the customer service representative asked why I was switching. When I told her I found a better interest rate, she asked if I had talked to someone at Wells Fargo about possibilities to get a higher rate with them. My answer was simply, "Yes," but I had all sorts of good stuff going through my head. Something along the lines of: "Yes, and they informed me your savings account with the highest interest rate (i.e., the one with a 5-digit minimum balance) pales in comparison to what I found online with no strings attached." - followed quickly by - "How can a company be so huge and offer such horrible interest rates and fees?" or "Do you know I would have to park over $7,000 in your savings account for a month in order to make enough in interest to counter the $3 fee you charged me for moving my money out of the account before calling you?"
As they say in Korea, "Wells Fargo pie-ee-dah."
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PMI is hardly a Wells Fargo phenomenon. It's an industry-wide way for borrowers with little cash to be able to purchase their home. Do your research
But..when the purchase price of a new home is increasing 20-30% a year (like it did in the Baltimore Market near where I live from 2002-2005), then borrowers lack the time to save an adequate down payment. I watched a community of townhouses--yes, I said townhouses about 4 blocks from my office in Owings Mills, MD go from starting prices of $320,000 to $475,000 in a period of nine months. That was cheap housing for the area; a single family home community about 3 miles away had starting prices in the $800,000's (the actual costs were closer to $950,000-$1,000,000 when you added in things like kitchens, finished basements).
If you read Brandon's article on PMI, you would find that he's not upset over PMI, but rather at both the lousy customer service he received, and the underhanded way Wells Fargo calculated the LTV ratio (dividing the current principal with the lower of the two prices--original value versus original purchase price) to determine when you reach the magic 80% number. Factor in the fact that they also require you to use only THEIR appraisers and it's enough to at the least make you shake your head in disbelief.
Buying a home for the average person has become such a bureaucratic nightmare that you really need to have a lawyer present when you go after a home. I've seen the mountain of paperwork that gets prepared--just for the mortgage. I'm a fairly intelligent person, but not only would I have a difficult time deciphering all of that legal lingo, I wouldn't remember half of it within six months.
Back to the bank subject, however, it seems that the new era of digital everything (videos, music, etc) are eliminating a lot of jobs. Personally, I prefer a bank where I can walk in to the branch and have a cup of coffee with the manager while we take care of a problem or do some work involving my accounts. I don't really care much about interest in savings--because my savings is either for something I want, or emergency funds. So, it's going to get spent, one way or another.
Earning decent rates on my savings/checking accounts has started a domino effect through my personal finances. Not only am I itching to cancel my escrow and PMI, I now realize participating in Wells Fargo's Equity Enhancement Program was a huge mistake.
(For the uninitiated, an "equity enhancement" program works by effectively scheduling the borrower to make one additional mortgage payment a year. This reduces the loan principle faster and saves interest in the long run.)
Every lender is probably different, but Wells Fargo funds their program by charging a one time $295 fee to enter and then a $2.50 for each withdrawal. I had mine setup to remove money ($X) every two weeks, immediately following the electronic deposit of my paycheck. Wells Fargo would hold this money and then make my mortgage payment for me at the beginning of each month. They also, I must admit, provided me with some decent customer service and occasionally even some basic feel-good numbers on the amount of interest I had saved to date and how much I would save through loan payoff.
I have no recollection of the $295 initial fee (perhaps I suppressed the memory?), but even the $2.50 fee every two weeks makes the program not worth using - at least not when I have a nice interest-bearing checking account. Instead of letting Wells Fargo charge me to hold (and lend) my money, I can simply set up a recurring payment from my ING Direct account to pay the full amount ($X * 26 / 12)each month. This way my money is earning interest from the moment I get it to the moment it needs to be paid.
Until Sept. 28, FNBO Direct is giving 6.0% APR. After then it looks like it will revert to 5.25%, still more than most online banks. I am going to transfer all my savings over there at least until 9/28. I have been making 5.08% with USAA.
Check it out:
FNBODirect.com
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USAA if you have $10k or more to save by jmarkdavison :: NR6 :: on 24 May 2007
I am surprised, but I guess a lot of people still don't know about the online savings accounts. Local banks and big banks make a killing off of people paying crummy yields that don't even beat inflation.
The online banks realized they can still make good money by paying you prime minue 1/4 or 1/2, because they don't have to pay a lisping effeminate man $50k a year to work in a bank branch.
For all you military or ex-military types, USAA has good rates with their Performance First Index (see below).
If you have less than $10k, go with EmigrantDriect or INGDirect or something similar. I had INGDirect for about a year, and it was really easy to use, and to transfer money in and out, but I get a better rate at USAA.
I tried to open an account with HSBC Direct and it was such a hassle that I quit.
USAA's Performance First Index
Daily Balance APY
$0 - $9,999 2.22%
$10,000 - $24,999 4.81%
$25,000 - $49,999 5.07%
over $50,000 5.18%
Back to banks: I only bank with USAA, but sometimes it is a hassle not being able to go into a branch (like when you sell a car for cash and have to get $13,000 worth of money orders at the Wal-Mart customer service counter).
Commerce Bank looks like a great alternative. They are open nights and weekends and they don't charge fees at their ATMs to non-customers. Anyone have an account with Commerce?
Commerce Bank by jmarkdavison :: NR6 :: on 24 May 2007
Looks like they are only in the NYC/NJ/Philly area, DC/Northern Va, and Southeast Florida.
RE: Commerce Bank by ldsudduth :: NR7 :: on 24 May 2007
Their mapping system is poor because you can also find them here. But, I think they are a Central-South East PA, NY, NJ, DC and some FL bank.
Apple Bank still takes the cake by Brandon :: NR9 :: on 24 May 2007
If it's comparing apples to apples, the savings account I started with Apple Bank (mentioned in the article) beats all of those. My APY is 5.27% - and there's no minimum balance, no fees, etc. It was easy to setup and it's really easy to transfer money in and out.
I'm done with banks altogether! by Anonymous :: NR0 :: on 25 May 2007
The internet banks do have some good interest rates, but you still need to check around. I looked at their CDs rates and they did not beat my Credit Union, Navy Federal.
I have been a loyal credit union member for over 10 years now and I love it. I checked out ING and USAA, but it only encourages me to stay with Navy Federal. ING and USAA are still just banks. But credit union, the rates are great and the philosophy behind credit unions is amazing!!! I just looked at ING's rates.
I just got a 6% CD rate at Navy Federal, why would I want a 5% CD rate at ING. My credit union tries to serve and give back to me all the time like this. I have everything with them, mortgage, car loan, checking, savings and investments.
I live in the DC area and their are several branches and tons of FREE ATMs that I can use. I mostly use the internet to access my accounts, but I can call them anytime of day or go into a branch if I want to and I don't get penalized for it.
Banks waste too much money, especially with the CEO and Board of Director's salaries and bonuses. I just read an article about Countrywide's CEO being limited next year in salary and bonuses to $12 million dollars. That is insane! With credit unions, there is a volunteer Board of Directors who care more about me then about the bottom line.
If you can become a member of a Navy Federal http://www.navyfcu.org or any credit union, do it! Then you will see what I am talking about.
RE: I'm done with banks altogether! by Brandon :: NR9 :: on 25 May 2007
I looked up the rates (click on "Savings and Checking Rates" in the top right) of the credit union you referenced and they are lower than those I received at Apple Bank (savings) and ING Direct (checking).
I can see you liking the concept of a Credit Union, but if it doesn't transfer into better interest rates or some other benefit for me (living in Houston), why would I'd choose it over what I described in the post?
RE: USAA if you have $10k or more to save by Liz_Miracle :: NR5 :: on 01 June 2007
I bank with USAA and they have great customer service. I may not be able to have a cup of coffee with the manager, but a financial advisor will spend an hour on the phone with a me, a medical professional who has never had a finance or business class in my life, to explain everything I need to know so that I could make an educated decision regarding purchasing a home - for free. Consumer Reports and my Home Buying for Dummies book rates them in the top 10 for customer service.
In addition, at the end of their fiscal year they deposited money in all savings accounts, a percentage of the amount you had in your account. They did so well financially they wanted to give some back to the customers - no strings attached.
USAA rocks.