8In our continuing coverage of CDs, this article we’ll talk about callable CDs, which as with all investments, offers pros and cons if you decide to invest in one.

The first thing to understand with a callable CD is it can be returned by a financial institution before the term ends, along with whatever interest has built up during that time. Along with that, there is included what is named a call-protection provision, which guarantees you will own the CD during that period at the interest rate offered. For example, if you acquired a 3-year CD, it may be callable after you hold it for six months. At that time the bank can end the deal and pay you the principle and interest for that period, without continuing on with the contract.

I want to interject here concerning the reason in talking about CDs in all the various ways you can invest in them; it’s so you can not only discover what’s available out there, but more importantly, to understand what each one has to offer and why. This helps you become a better investor, even if you decide to go outside the relative safety of CDs into another type of more risky investment.

With that in mind, what value would it be for someone to invest in a callable CD, and why would a bank or financial institution offer one?  From the point of view of the bank or financial institution, it shifts the risk concerning interest rates away from the bank to the one buying the CD. Banks are managing their loan portfolio as it applies to interest rates of their deposits, the reason a callable CD is offered.

Why would we want to do something like that? It’s all about return on investment or interest rate yields; you get a higher interest rate for bearing the risk. This isn’t risk to your money invested, but risk as to returns.

During the period of time you own the CD, if interest rates fall, you then will have the bank “call” the CD if the call-protection period is over, causing to lose the higher interest rate you originally had.

How do you determine whether to invest in a callable CD or not? It’s all related to the interest rate environment and if your research shows it’ll fall, plateau, or go up.

The downside for the investor is if the callable CD is in fact called by the bank, it would force the investor to invest at lower interest rates, receiving less on their money.

With the economic crisis not going to abate any time soon, and all of us working on paying down our debt, saving more and cutting back on spending, a growing number of banks are wisely implementing new credit card services built for customers to help pay down, avoid interest fees and better manage their personal finances.

There are a wide range of services, and it would be good for you to check if your bank has implemented one for their customers as part of their service package to you.

What most of these will usually entail, is some way to put a automatic payment plan in place for the credit cards of choice for you, where you can have them paid off on a monthly basis in a way that will keep you from incurring interest fees; an important step toward managing your personal finances. Here’s one from JP Chase Morgan called Chase Blueprints you can look at if you do business with them, or as an example of what a plan like this would look like in general.

With the types of busy lives we live, and listening to a lot of people complain about interest fees and other late fees related to their banking, getting into these types of financial management services are a great way to take the onus off of your memory and busy life you live. Why get socked with late fees and interest fees when you can sign up for programs like this and take all the pressure off yourself and just leave it in the hands of those running the program?

If your bank doesn’t have this type of service yet, ask them if there are plans in the works for one, and if so, how long will it take to get it going. If your bank doens’t have one, and has no plans to put one in place, it could be well worth you time and energy to look for a bank that does offer this type of service.

There is just too much money to safe and peace of mind that comes with a program of this type to ignore it and go on doing business as usual. Now that banks are offering this opportunity, why pass on it and continue to pay far more money than you need to for your various accounts?

Savings accounts can be used for both short term and long term savings goals, although you may need to have more than one account in order to benefit most from interest rates and account features. Before shopping for a savings account, it’s important that you consider how often you’ll need to access the money in the account.

Certificate of Deposit: If you can commit to saving the money for a long period of time, you should choose a high interest certificate of deposit. CDs offer higher interest rates the longer you commit to saving, but most will charge you a penalty if you withdraw the money before the savings term has been reached. If you think you will need some or all of your money before the CD reaches maturity, you should not tie up all of your money into a certificate of deposit.

Money Market Account: Money markets offer higher interest savings than a traditional savings account and allow you to write a few checks each month or quarter. If you write more checks, there are fees associated with using the money. A money market is a good idea for savings that you only plan to access once in awhile, rather than a savings account that simply holds your money until you need it for every other purchase or expense.

Savings Accounts: Typically a savings account allows unlimited, fee-free access to the money deposited, and you earn interest based on how much you have saved.

There are 5 questions you should ask before opening a savings account to ensure you are selecting the right account:

1. How much interest is paid and how is it compounded? Find out what the annual percentage yield (APY) is. You want to find an account with the highest possible APY so you can compare accounts accurately between different banks.

2. Can I withdraw money whenever I want or is there a penalty for withdrawing money before a certain period?

3. Am I limited to making a certain number of withdrawals per month? How many can I make and what are the fees if I need to make more withdrawals than allowed?

4. Where are the local bank branches located? This is important to know if you plan on using your ATM card to withdraw money from your bank account. Find out what fees are associated with using your ATM card at other bank ATMs.

5. Are their any special deals or offers for opening an account right now? Banks regularly offer bonuses or rewards or incentives to encourage people to open accounts with their institution. Find out if the bank is offering anything at the moment and compare to what other banks are offering to determine which is the better deal.

E-Trade Bank has been around for quite a while in the terms of being an online brokerage and savings firm. Helping them out is that cute baby ad that started last Superbowl. Etrade Bank received accolades from Money Magazine in August 2007 “Etrade Bank – A really complete menu of bank features-and at the best rates.”

Currently, their savings account offers 3.30% APY. There are no minimums and no account fees to keep the savings account. They also allow free online bill pay in your online bank and alerts to your phone. Etrade banking also offers one click transfers to and from your Etrade accounts. Like all online accounts – 24 hour access. You can move money to your investment account, if you invest with Etrade. You can move money between your online savings and checking account.

Etrade offers an Automatic Savings Plan for either a one-time deposit or recurring transfers. Be aware however, that this does not limit your loss in during a down economy…it’s just a way to invest. Transfers also need to be before 4 p.m. ET on a normal business day to be processed that day. Which is the way my brick-and-mortar bank works as well.

To sign up, you will need a minimum of one dollar, 18 years or older, driver’s license, and a U.S. resident with a valid social security number to apply online. Etrade can be funded by mailing a check, wiring funds, direct deposit, ACH transfer, or a transfer from another Etrade account.

Be aware of closing your account too early. You need to keep your money in the online savings account for the first 120 days of opening. For new customers, funds from electronic direct deposits will be available on the day they receive the deposit. Cash, wire transfers, and the first $5,000 of the day’s total deposits will be available on the first business day after you deposit it. Excess over $5,000 will be avaiable on the fifth business day. After your thirty day probation period is over, it will be next day posting. You will be charged $25 for each stop payment and insufficient funds transaction. Cheaper than my bank!

Etrade will offer you an ATM card and you can withdraw funds from anywhere and Etrade will not charge you. However, the owner/operator of that particular ATM may. You are limited to six withdrawals or transfers per calendar month. You can also deposit to Etrade ATMs.

Now, let’s look at some of the complaints regarding Etrade. Almost all in this case were from people who were trading not saving their money. If any of you read or listen to Dave Ramsey, you know what he would say…”stupid tax”. Too many people are investing without researching. Margin calls, not knowing that trades do not always happen on the day you request them and do take a few days to clear, and just not being aware of what they can and cannot do. This is a topic for a different day.

After reading over everything, looking at their website and online banking demo, their rates, and their business practices, I think this is a fairly good company to use as your bank.

Beverly National Bank Online is the e-banking for Beverly National Bank located out of Beverly, Massachusetts. To say this bank has been around for awhile is an understatement. It first open its brick-and-mortar door in 1802. Beverly National Bank online currently offers 3.10% APY.

This is not a bad yield to get; however, it states point blank that you need $5000 to open an account. Too many people are currently scrapping together to get money together to make the mortgage and groceries so this is a little high for the average joe. It also states that if you let it fall below $5000 anytime during the month, you will get a $15 fee charged. Ouch!

On the plus side, they do use VeriSign to secure the accounts. It also uses Secure Sockets Layer technology (SSL) .

To open an account, they will need your name, address, social security number, date of birth They will also mail statements monthly or you can grab it from your Free Internet Banking production on line twith them.

Like many savings account both on and offline, you are limited to six withdrawals each calednar month thosugh you can make as many deposits as you want. Deposits are pretty simply made by mail or ACH direct deposit. They currently cannot transfer bank to bank as of October 6, 2008. Access is very hard to get as you can only transfer funds between the online account and other accounts at Beverly National Bank.

Deposits are made only by mailing in a check or direct deposits via ACH. Doesn’t help if you need money in a hurry for an emergency, especially one that is so tied down.

After looking this over, the e-Success online account with Beverly National Bank is not the best bank out there for someone who lives outside of the area. Though the money is secure, it is difficult to get the money back out unless you live in the North Boston area and can get to the bank. Given that this review is for the people out there looking to begin savings, $5000 is a hefty amount to put down. In addition to the other limitations, I would suggest going to another online bank.

At first view, the HSBC Direct Online Savings site is both attractive and functional.  As you begin to look at what HSBC has to offer it becomes even more attractive on a savings front. 

HSBC offers one of the best rates for interest in any of the current online savings through September 15, 2008 of 3.5% as compared to ING at 3.0% and then it become variable. 

When opening account it allows three choices – savings, payment, or CD account.  The site is very open regarding personal information and the fact they will need many forms of identification to ensure a customer’s privacy and security.  They also inform first time customers this will apply to businesses as well as individuals.

When you open an account, it currently lists six steps needed in order to open an account.  Reading other reviews from people who have accounts say this is the longest application process out of all of the online banking systems taking approximately two weeks to take care of all the paperwork.  The application must be completed within thirty days or the process begins again.

On the plus side there is no minimum balance or monthly maintenance fees and interest is accrued monthly.  It also only takes one dollar to open the account.  However, a customer cannot close an account within six months or a fee will be incurred.  However, charges for NSF fees, chargebacks, and stop payments are significantly less than my current brick-and-mortar bank.

Once a customer has signed up at HSBC Direct, the account which is funding HSBC will receive two trial deposits under one dollar.  These will need to be confirmed on the HSBC Direct Account.   Please be careful when doing this.  A customer will only have three chances to correctly enter the deposit amounts and then if not done correctly, your HSBC Direct account will need to be funded by a snail mail check. 

With an HSBC account, a customer can set up a recurring transfer from the account funded from and the amount you want to transfer and how often – from every week to quarterly.  There is no fee to set this up. 

Help is easy to come by either via the Internet or by phone, both in the U.S. and outside the U.S.

Security issues are always suspect when someone is dealing with their money online.  However, HSBC does a good job of using Firewalls to block virus and worms from their sites and has SSL encryption to keep you safe.  Because they use 128-bit encryption, access to a browser which can do that is necessary or upgrade so this is possible. 

HSBC has a new Security Key which is required for their Personal Internet Banking Bill Pay Service.  This helps to keep the password from being hacked by keylogging software.  This type of software used by hackers actually monitors keystrokes to get password information. 

However, if it takes too many log-in attempts to log on, HSBC will immediate disable online access and the only way to re-establish it is to contact them.  They will then send a password via snail mail.  However, with an ATM card associated with this account, the password can be changed electronically.

This may seem excessive to some people but to me, I want more security to keep the money I make from winding up in someone else’s hands. 

Withdrawing money is simple.  It can be done via ATM (if the customer has opted for a card), transferred to any linked account, or by snail mail check.

An added plus to the ATM card is though there are no charges to use the ATM card through a HSBC ATM, there will be fees if money comes from a non-HSBC ATM.  However, HSBC will fully reimburse the customer for up to three U.S. non-HSBC ATM charges per month which will post on the first business day of the following calendar month.

All-in-all, HSBC has many good things to offer a customer who is looking for online savings – good rates, easy transfer capabilities to linked-in accounts, and security.  Good reasons to bank with anyone I believe.