Deposit a Check With Your iPhone

I saw this article today and my inner tech geek went "WOW! I have to try that!"
I just happened to have a check in my wallet that I needed to deposit (for a miserable $141 reimbursement of a $2,000 root canal, but that's another story), so I went right to it!

First of all, not all banks offer this, as the Consumerism Commentary article notes. I do my local banking with Chase, and had already downloaded the iPhone app, but I'd never noticed that at the bottom of the screen, there's an icon for "Deposit." The first time you click it, you'll be asked to sign up for online depositing, which is free. The sign up took no time at all, just a few clicks.
When you're ready to actually deposit a check, you have to select which account (i.e. savings or checking) you want the deposit to go to, and enter the amount. Then you have to photograph the front and back of the check. They say it's best to do it in good light, against a dark background. I had had the check folded in my wallet, so I had to flatten it out. The camera frames the check and reminds you to hold still. You take a photo of the front and then the back-- you can zoom in to make sure your photo isn't blurry before you finalize the deposit. Some kind of processing then takes place, and you get a confirmation back, which includes the routing and account numbers from the check-- I assume that if the camera hasn't read the info properly, you'd get some kind of rejection at this point, but they do caution you to hang onto the check until the deposit has cleared, just in case.
I just did this 5 minutes ago, and immediately got an email from Chase confirming the deposit (though it still notes that it's "pending" and not "cleared.") We'll see if it all goes through properly in a day or two, I guess, but it looks like it will save me a trip to the bank. I have to say, I'm kind of amazed that this is possible!

Whaaa?? The Gift that Does NOT Keep on Giving

Hey, I've got a deal for you! You will lend me $50. In order to do this, you will have to pay me a service charge of $3-7. If I keep the money for longer than a year, I'll owe you $2 less every month. If I don't pay you back in 3 years, I'll owe you nothing at all! Great deal, huh?

You'd think no one would be crazy enough to lend that money, but it's actually incredibly popular to do exactly that: millions of American Express gift cards are sold every year. You give American Express money up front that they don't have to repay to a merchant until later-- essentially you are giving them a loan, but they will charge you for the privilege.

I noticed this story in today's business section-- fortunately, American Express is eliminating the most obnoxious of those fees, the monthly charge for not using your card for over a year. But they still charge a purchase fee of $2.95-6.95. (More info on gift card fees.)

I think I've only been given an American Express gift card once, but I thought $50 was $50-- I had no idea how much of that could be eaten up in fees. If you want to give someone a gift, just buy them an actual present, or give cash.

Banks in Poor Neighborhoods

An interesting story from yesterday's New York Times:

City’s Poor Still Distrust Banks

In 1986, when the Lower East Side had just one bank in a 100-square-block area, the high numbers of residents without bank accounts alarmed the city but did not surprise anyone.

In the years since, the number of bank branches has skyrocketed, with the big names compelled to open in underserved areas. Community credit unions have sprung up from Washington Heights to Bedford-Stuyvesant. Outreach workers have taken to the streets to draw the “unbanked” — many of them the city’s poorest, living check to check — into the system and away from the high-fee world of check-cashing and money orders.

But none of it has worked. In Manhattan, long the world’s banking capital, 12 percent of households still do not have a bank account, compared with the national average, 8 percent, according to recently released data by the Pew Charitable Trusts.

You'd think the reason might often be that banks charge high fees for low balances, but many of the people quoted in the article aren't even thinking about that: they hardly ever have any spare money. If they do, they send it to relatives in another country. And sometimes they just don't trust banks not to rip them off. So instead they go to check-cashers who really do rip them off!

Property Tax Escrow Windfall

It's happened again: I got a nice fat check refunding escrow overpayments for property taxes paid by my mortgage lender. How nice and fat? Over $5,000!

In a way, this is incredibly annoying. I tried last year to have my escrow amount reduced, since it was still based on an un-abated property tax estimate. After a couple of phone calls and faxes, I got a nice letter from the bank, basically saying "We have reviewed your escrow amount and made adjustments based on your tax bill. Your new escrow amount is [insert OLD escrow amount]." I got frustrated and decided to ignore it for a while, as I knew the escrow balance had to be reviewed annually anyway, which is what just happened.

But back to whether or not this is annoying, in a way I don't mind. It's kind of how I feel about getting a tax refund: they may have just held onto $5,000 of my money without paying me interest, but the money ends up being forced savings. It's a nice lump sum that was hidden from me so I couldn't spend it. Each month, I budgeted for housing expenses that included that higher tax amount, so to get the money back now is like icing on the cake: extra savings I didn't plan for and a nice bump in my net worth. And given interest rates lately, I really didn't lose out on much-- $75 at most, if I'd had that entire lump sum in my highest-earning bank account for a full year. (Yes, it would have been nice to have it in the stock market for the past few months, but that's just bad timing and there would always be the risk of things going the other way.)

Anyway, I'm glad I have my money back, and glad my monthly payments have been reduced going forward-- I'll still probably get a refund next year, but it won't be anywhere near as large. And in the meantime, I won't be spending my windfall.

Links I Liked

A few recent fun and useful links:

Get Rich Slowly has a nice roundup of online bank interest rates

My Money Blog on how to build a balance portfolio using ETFs

Moneyapolis shows off the crazy colors of her not-yet-renovated mansion.

Advice for making the switch to self-employment from The Simple Dollar.

The Wealth Report on "The Rise of the Poorgeosie"

And just had to update this to add Single Ma's post Father's Day Without a Father, which will bring a smile to every face and a lump to every throat.

Feeling Flush

I'm not sure why, but I've built up quite a cushion in my Chase savings account-- just over $12,000 as I'm writing this. This is despite having made an extra mortgage payment of $2,000 just recently, and some transfers to other accounts. I use this Chase account to receive my direct deposit pay, and transfer money into my checking account to pay bills. I wondered if I'd made a mistake and forgotten to pay a bill, but apparently I'm all caught up!
The problem is that this cash is barely earning any interest. I think it's time to start shopping for some mutual funds again, and also transfer some money to my other savings account at FNBO, which earns more interest. I suppose I could also make another additional principal payment on my mortgage. In any case, not being able to decide what to do with over $10,000 is a nice problem to have!

CD Maturity

I just had a 5-year CD mature. Often I'm pretty lazy about doing anything when this happens-- if you don't act, the bank just automatically rolls it over for the same term at whatever the current rate is. But given how things have been going lately, and how low interest rates are, I wanted to make sure I took a more careful look this time before the grace period for making changes expires.

And what a depressing look it was! The current CD rates at Chase suck, to be quite frank. For anything under 18 months, I'd only earn 0.25%. 18 months to 59 months is 1.0%. 60 to 120 months is 1.49%. I don't want to tie up money for too long at those rates.

I may just roll over the CD for 18 months, but I'll also be shopping around for better CD rates at other banks. The CD is a Roth IRA, but hopefully it won't be too complicated to roll it over into cash and then redeposit it-- I plan to call Chase today to find out! I tried to call the other day, actually, but perhaps because of the snow, their phone lines seemed to be tied up and I got sick of holding!

Nix Agonistes

Maybe those payday loan providers just want to help?

Take a look at this New York Times Magazine article: Check Cashers, Redeemed

Twenty or thirty years ago, traditional financial institutions fled neighborhoods like Watts, and guys like Tom Nix, co-founder of the biggest chain of check cashers and payday lenders in Southern California, rushed into the vacuum. They built a whole new financial subculture, which now includes regional giants like Nix, national brands like Ace Cash Express, Advance America and Check ’n Go and thousands of local chains and anonymous corner stores — more outlets, in total, than all the McDonald’s restaurants in the United States plus all the Starbucks coffee shops. Inside, it’s like banking turned upside down. Poor customers are commodities, deposits are irrelevant, bad credit makes for a good loan candidate and recessions can be boom times. Add up all those small transactions and throw in businesses like pawnshops and auto-title lenders, and you’ve got a big industry — $100 billion annually and growing. Nix alone pulled in $28 million in fees last year.

...

There are two big problems with businesses like Nix Check Cashing. One is that the fees are high. Most cashers pocket between 2 and 4 percent of each check’s value, which a recent Brookings Institution study calculated could add up to $40,000 in fees over a customer’s working life. And their version of credit, a two- or four-week cash advance against a postdated check, known as a payday loan, is even pricier — about 30 times the annualized interest rate of a typical credit card.

The second problem is that cashing your paycheck, instead of depositing it, encourages you to spend all your money rather than saving whatever is left over at the end of the month.

It's fascinating how many people distrust banks so much that they turn to check cashing outlets that charge exhorbitant fees. But I can't blame them-- I remember what it was like to have a low enough cushion of savings that I'd get hit with bank fees for dipping below a minimum balance, and it still pisses me off how much banks charge for international ATM transactions even though I now have enough money that I haven't had to worry about other fees for years. Banks have an amazing way of acting like they're doing you a favor by taking your money. And the less money you have, the more banks screw you.
This article does a great job illustrating how check cashers have gained their customers' trust, and it's somewhat encouraging that some, like the Nix company mentioned above, are now trying to offer a broader range of financial services and encourage savings. Of course you have to take that with a grain of salt:

Not everyone is ready to trust Nix’s motives just yet, or to embrace him as a champion of the poor, especially consumer advocates who have spent years lobbying to cap check-cashing and payday-loan rates and remember when Nix charged even more than he does today. “It behooves predatory companies like Nix to be seen positively by their communities,” says Roberto Barragan, president of the Valley Economic Development Center and a critic of Nix from way back. “But at the end of the day, it’s not about the financial well-being of his customers.”

For now, most banks remain reluctant to fight with check cashers and payday lenders for low-income customers; they don’t believe there’s enough in it for them. Just a few years ago, though, wire-transfer companies like Western Union were the only option for immigrants who wanted to send money abroad. Banks thought it was a sketchy business. The transfer companies charged about the same as a payday loan, $15 to send $100 to Latin America. But then a few banks decided to compete with them, even accepting foreign ID cards. And then banks started to compete with one another. And pretty soon, just about every bank wired money overseas. Businesses like Western Union had to slash their fees by nearly two-thirds.

“These communities spend about $11 billion a year on ghettoized financial services, about the same as what Wall Street spends on mergers-and-acquisitions fees,” says John Hope Bryant, founder of the nonprofit Operation Hope. “We’re not talking about small change. But there’s no competition for these dollars.” That’s the idea behind plans like Bank on California: to convince banks that marketing themselves to poor customers isn’t just a charitable act; it’s a benefit to the bottom line.

Nix says he hopes his model will do the same thing. “We’re going to be a tough competitor,” he told me. “We’re going to get a lot of business, and that’s going to force the rest of the industry to take a look at their prices, to be able to compete.” It’s not how you expect a banker to the poor to talk. But he might be onto something.

Managing My CDs

I've been very lazy about my various CDs for the past couple of years. When they mature, I just let them automatically renew at the same term without making sure that's the highest rate. I always mean to be more proactive about it, but I always procrastinate. And as the saying goes, the only difference between proactive and procrastinate is that you have to move the c, substitute a v for an n, and...

Well, anyway, in these trying times, I'm attempting to be a little better about this! I just had my two-year E*Trade CD mature, and I managed to change it to a one-year term before the grace period was over. The one-year rate was the best deal right now, at 3.10% APY. Weirdly, you get that same rate for a 5-year CD:

Term Length		APY*	Rate
3 Month		2.80%	2.76%
6 Month		3.00%	2.96%
1 Year		3.10%	3.05%
15 Month		2.90%	2.86%
1.5 Year		2.50%	2.47%
2 Year		2.40%	2.37%
2.5 Year		2.55%	2.52%
3 Year		2.65%	2.62%
4 Year		2.90%	2.86%
5 Year		3.10%	3.05%

Is this the best rate I could have gotten right now? No. BostonGal just got a 4.25% rate at ING. This looks like one of the best 12-month CD rates available out there right now, according to Jonathan's comparison, unless you have $10,000 to invest. You can see more up to date CD rates here. I didn't feel like moving the E*Trade CD to another bank, but I may look at some of these other banks to open a new CD. I have some cash savings that have accumulated in my Chase savings account-- it's earning a pittance there, so I will probably transfer some of that money to a CD. I'd still have enough cash for an emergency in my FNBO savings account, which is earning 3.25% APY.

I wish these rates were all higher, but it's comforting to have some money that is safely and conservatively invested during all this craziness in our economy!

Going Without A Slip: New ATMs

I love the new Chase ATMs where you don't need to use an envelope or a deposit slip-- they make depositing checks, and even cash so easy and fast!

The first time I used one, I was a bit confused. I'd spent several minutes hunting around the bank lobby for envelopes and was really annoyed that they seemed to have run out. Finally someone from the bank told me the machines had been switched over and that I didn't need one!

All you need to do to make a deposit is endorse the back of your check and feed it into a slot when instructed. Sometimes the ATM uses OCR to recognize the amount of the check and says "The amount you have deposited is $40. Is this correct?" If not, it asks you to enter the deposit amount. You have the option to have your ATM receipt include a miniature scanned image of the deposited check, which I thought was really cool!

Last week, I took these ATMs one step further-- remember how I was talking about having all that money in my wallet? The wad of cash included a $100 bill and a $50 bill. I spend cash very rarely, and only on tiny purchases like buying coffee or lunch. I was inwardly groaning in anticipation of being given a hard time by a cashier when trying to break such a large bill.

(As an aside, why is that? It still seems like no one wants to change anything larger than a $20, but you'd think we'd had enough inflation over the years for $50s and $100s to be more commonly in use. And you'd think they'd get rid of pennies, and perhaps even nickels too, but we Americans seem to just love our small denominations.)

Anyway, while depositing another check at the ATM I decided it might be a good idea to just dump my $100 and $50 bills, since I didn't really need to be carrying so much cash. I stuck the $100 in the slot, and bingo, the machine recognized it as $100. But then I tried to stick the $50 in, and after several attempts, it was not being accepted. It was one of the old $50 bills, and I guess the machines are programmed to accept only the new design. At least I hope that is the case-- I'll be really pissed if I ended up with a counterfeit $50 after putting the dinner bill on my credit card!

And that would be the subject for a whole other post: what do you do if your friend unknowingly pays you with counterfeit money!