M&T Bank's New Internet Bank - OnBank

Banking Guy is working hard this Sunday.

Thanks for all of the Sunday posts today.

Hope you are also finding time to squeeze in some enjoyment in between all the very informative and often quite helpful postings.

Thank you.

I.too, appreciate this site. M&T has local branches in my area with consistently high money market rates for the area. If you call they will tell you that the rate is OK for 90 days and "maybe" if you make deposits or have activity, they might extend it 30 days at a time further. Iffy policy if you are makeing transfers for rates. They publish their high money mkt rate in the local paper which attracts inquiries. You might want ask for the rate/time policy here.

just to mention that I saw "up to $100 bonus" in M&T's window. I'm not interested, so I haven't "called for details"

I have a dumb question. Why is number of withdrawals limited by "law"?

I see this with Money Market accounts all the time. Why is the "law" involved with my banking account?

It's not a dumb question at all.

(And remember, the only dumb questions are the ones that are not asked.)

The Federal Rule concerning the 6 monthly electronic withdrawals limit on savings and money market accounts is part of "Regulation D."

"Bank savings and money market accounts are regulated by the Federal Reserve Board’s Regulation D, which governs deposit accounts and their reserve requirements."

Transactions That Count Towards the 6 ACH Transaction Limit Include:

Online transfers from savings to a linked account (such as checking)
Outgoing online transfers made to another bank through ACH or via online wire transfers
Transfers made via phone banking
Pre-authorized deductions by a third party
Checks written from a money market account

However, Transactions That DO NOT Affect Your Limit Include:

Transfers and deposits into a savings or money market account
Withdrawals and transfers made at an ATM machine
Withdrawals and transfers made in a bank branch via a teller

The reason this part of the regulation was enacted is because with the ease of being able to electronically transfer money, the easier it is for illegal money laundering or terrorism funding. They think it also makes it easier to hide money from the IRS.

As further confirmation of FDIC coverage for OnBank, the Bank FAQ reads,


M& T Bank, N.A. is a member of the Federal Deposit Insurance Corporation (FDIC). All deposit accounts offered by M&T Bank, N.A. are covered by FDIC insurance up to the maximum applicable limits. OnBank is a division of M&T Bank, N.A. and is not a separate entity for purposes of FDIC insurance. Deposit accounts opened through the OnBank division are aggregated with all other deposit accounts at M&T Bank, N.A. for purposes of determining the level of FDIC insurance available to each depositor. You can learn more about FDIC coverage at www.fdic.gov.

The CSR may have said that there was no dollar limit on transfers, but the Web Banking Disclosure (PDF) reads, in part,

[6] b. Dollar Limits on Transactions. The maximum dollar limit of any Internal Transfer is equal to the available balance in the OnBank Account from which the Transfer is to be made. The maximum dollar limit of any single External Transfer from an OnBank Account is equal to the lesser of $20,000 or the available balance in the OnBank Account from which the External Transfer is to be made. There is also a $20,000 limit on the amount of any single External Transfer made into an OnBank Account, except in the case of an OnBank Certificate of Deposit Account.

Perhaps I'm misunderstanding the meaning of this regulation?

I can't link to the agreement since it is hidden behind a javascript, but it can be found by clicking "Apply" from the OnBank home page and then clicking on the "Terms and Conditions" link at the center bottom of the resulting page.

Thanks Michael for providing the info on Reg D. I probably need a post on this so I can just link to it when I mention this limitation in the future.

Thanks Bill for pointing out that $20K limit. I wouldn't be surprised if the CSR is wrong about this. I'm also wondering if the 2-day hold is correct. I've updated the post with this info and added a link to the disclosure.

Banking Guy, yes, I was quite disappointed to read about the transfer limit. I'm actively seeking a good ACH bank at the moment. Have been using GMAC Bank for that purpose, but now with GMAC Bank's future in some doubt, I feel I need to find a replacement. Thanks for all your great work.

Another seeming "gotcha", this time in the Money Market Savings Disclosure, (PDF) under FEES:

1. $10.00 excess withdrawal fee for each withdrawal (including any transfer), except for the first 4 withdrawals, charged against the accout during any statement period. The $10.00 excess withdrawal fee is in addition to any fee for an electronic fund transfer made by using a service we make available, including any Internet service.

So although it is stated elsewhere that 6 withdrawals are permitted, apparently only the first four are without a fee being charged.

Thanks, Bill, for the info. I would guess that if one had a very high balance, the bank could be convinced to drop the $10 fee for transaction numbers 5 and 6, if one got the right person on the phone.

I recommend that one always calls and asks for fee reversals, especially if the fee is not the standard or appears unfair.

Further elaboration on parts of the "why" of limiting electronic transactions:

Some people do not know that the government is cracking down hard on banks to watch every transaction and every bank customer.

Tellers go through training to recognize suspicious activity. Banks are required to file Suspicious Activity Reports (aka SARs).

In general, the SAR is to be filed on suspicious transactions over $5,000 (and not just cash transactions), but they can be filed on any amount if something negative is suspected.

Since the definition of "suspicious" is not clearly defined, many banks are filing SARs on many transactions even if they're not really suspicious, rather than taking heat from the government for not filing enough SARs.

The ability to do electronic transactions takes away the bank teller's involvement, and is one less factor in the government learning of suspicious activities.

Banking software is in place to try and catch suspicious activities without the need for a teller noticing, but this software usually looks for transactions over $5,000. So, as one basic example, if there was not 6 transaction limit, one could theoretically move lots of smaller than $5,000 transactions electronically to stay under the radar. (The government is losing a ton of tax revenue due to money laundering or people under reporting their income, etc.)

The government is desperate to try and catch illegal activities, like drug money funneling through banks, as one example.

The news reported that ex-governor Spitzer got caught because one or more banks filed a SAR on his banking activities.

The website looks good. Let me know who signup and how they like the online management and the transfer speeds. Thanks

Another observation from the Web banking disclosure (PDF), under Enrollment of External Deposit Accounts (p.5), notice that the trial deposit verification method for establishing a link to an external bank is different from other banks:

[T]he Bank will initiate two small dollar deposits, and matching withdrawals, to the External Deposit Account.

This is the first bank I've seen that actually withdraws the trial deposits (neither GMAC not WTDirect do so). This could be an issue if the bank/account to which you're establishing the link limits the number of withdrawal transactions it permits each month. Assuming M&T does two separate withdrawals, and the target bank permits only three per month, you've only one left for the month after this process has been completed.

Caveat emptor.

I think Washington Mutual does the same thing (2 deposits/2 withdrawals) for the ACH verification. And yes, the 2 withdrawals from your Regulation D controlled account would get dinged 2 withdrawals.

The government should pass a stipulation that withdrawal amounts under $1.00 not count towards the 6 monthly limit.

I already got a warning letter from my bank about going over the six, with me going over since I didn't realize the ACH test amounts counted.

Thanks Bill for the additioinal details. I've updated the post with this info.

About the debits following the trial deposits, that is an issue when you want to link this account to savings accounts due to Reg D. E-LOAN Savings used to do this, but ended the practice. You would think they could at least combine the 2 debits into one debit of the total amount of the 2 trial deposits.

Banking Guy said, You would think they could at least combine the 2 debits into one debit of the total amount of the 2 trial deposits.

Agreed, Ken. And to be fair, M&T may well make only one combined deletion. Since I didn't open an account, I can't say for sure. But, frankly I've seen too many little "gotchas" embedded deep in the bowels of their disclosures for my taste.

Michael, thanks for the WaMu data point.

After reading all the PDF terms and agreements three times and looking up the rating of M&T Bank on Bankrate which has a four star rating i decided to open an account at OnBank. Sunday 13th i filled out the online application which took about ten minutes. When you are done with the application you can sign into your account. I setup for external transfer from my checking account at my local bank. I signed out then signed back in and you do the picture, phrase and security answers thing. Monday 14th i received e-mail telling me my account was open and they will send deposit and withdrawals from my checking account. You do not have to send an initial deposit to open an account. Tuesday 15th i received an e-mail from them saying i can verify the linked external account. I signed in and did the verify thing and could transfer from external account. I do not have to balance the checkbook because deposits and withdrawals are the same amounts. Below the tranfer menu there is a note telling you there is a maximum limit of $20,000 per transfer. I did not see anything that shows you the amount that you can transfer per day or month or what amount you have remaining that can be transfered like HSBC and SavingsSquare has. They have a very nice interface and also easy to use. I did a small amount to tranfer into OnBank from their transfer menu Wednesday 16th and will have to see how that goes.

Update for OnBank transfer. I did a transfer from OnBank on Wendsday 16th. Transfer was done from OnBank. Thursday 17th debit from linked external checking to OnBank when i checked in the morning. Deposit to OnBank in account balance and in available balance when i checked in the evening.

I like it, but as a 'liquidity buster' it makes sense for M&T... This really only helps the customer who knows what they want, some savings tools wouldn't go astray... or perhaps integrate with the leaders - smart money customer = smart balances!

I've had onBank for about 2 months. I did get a $5 charge from my regular bank Savings as onBank both adds and then REMOVES the trial amounts.

Once that happens, you go to the link in the email and type in the amounts of the deposits. This verifies your account.

I made $2.17 on $1000 last month - compare that to the $.85 I was making on $10,000 - and its a clear winner.

No fees, no minimums, some maximums (but 20k I can live with), and fast next day transfers.

The account agreement also says "You can make up to a total of 6 of these transfers and withdrawals during any calendar month but no more than 3 of these 6 transfers and withdrawals can be by ACH debits to your account that you authorize a third party to make".

This confuses me. I know that I can make 4 transfer from Onbank to my checking account at Chase free of charge. But only 3 of them can be ACH transfers? How about the fourth free one? Does it have to be with a method other than ACH? What is that method? In one month, I made 2 deposits and 3 withdrawals, a total of 5 ACH transactions. Why did they allow that?

Chad said...
The account agreement also says "You can make up to a total of 6 of these transfers and withdrawals during any calendar month but no more than 3 of these 6 transfers and withdrawals can be by ACH debits to your account that you authorize a third party to make".

The way i read this is that they mean transfers initiated from a bank other than their own. If you make a tranfer from your account at OnBank initiated from your linked account to OnBank.

Fast ACH

In--initiated transfer from B of A on Monday morning. Money deducted from B of A on Tuesday morning. Money in OnBank Tuesday night.

Out--initiated transfer to B of A on Monday morning. Money deducted from OnBank Monday night. Money in B of A on Tuesday morning.

Great rate, quick ACH--what could be better...

Thanks for the info.

There's also some good news in the ACH transfer limit. I was told by an OnBank rep that they've increased the limit from $20K to $50K. Please leave a comment if someone can confirm this.

I checked their website yesterday. In the FAQ section it now says you can transfer 50K per transfer (up from 20k). Transfers are processed same day if received by 4:30pm ET.

M&T customer service is not very consumer friendly at all and I will never bank there again. They will lie in your face and refuse to refund any fees they charge.

They changed my checking account from free to one with $15 monthly fee and when I tried to change it online to free one, they refused to unless I go to the branch. I went to the branch to close the account twice and they never closed it because their system charged some fee the next day(!) after I requested the closure so they kept the account opened and charged me the monthly fee and overdraft fee, they did this twice to me, costing me over $100. I will never bank with them again!

As a clarification, the M&T Bank Corporation has two sister organizations, the M&T Bank, N.A. and M&T Bank. M&T Bank, N.A. has office solely in the Buffalo, NY area and Onbank.Com is affiliated with it. M&T Bank has offices outside New York (in PA, MD, VA, WV and DC) and has their own "e-Money Market account" that offers a competitive rate. They allow ACH transfer limits of $20,000 inbound and $10,000 outbound. They will mail you statements and allow checkwriting according to an answer that I got from a rep. If you open account with the two banks, your accounts are insured separately.
From their website:

Simply put, they are two separate banks, both of which are subsidiaries of M&T Bank Corporation. M&T Bank Corporation is the parent company of both banks and is one of the 20 largest independent bank holding companies in the U.S. M&T Bank, N.A. and M&T Bank are two separate entities, both of which are members of the FDIC, and whose deposits are separately insured. Therefore, the amount of FDIC insurance coverage that is available for your deposit accounts at M&T Bank, N.A. is determined separately from the FDIC insurance coverage of your deposit accounts at M&T Bank.

OnBank may be workable for small accounts of less than say $50,000, but for larger sums I found it to be wholly impractical. OnBank rep advised they do not have the ability to set up a POD (payable on death) accounts. This is a critical issue if, among other things, you want to qualify for increased FDIC coverage by adding beneficiaries.

Also, the online documentation at their external transfer page states the limit is $20,000 per transfer. The reps and the Q & A section of the webpage says the limit is $50,000 and to ignore the webpage which “has not yet been updated.” Would not trust such disorganization with say $600,000 of my money.

Also, cannot get clear or consistent answer as to whether the transfer limits are actual limits, meaning your money is locked into OnBank - or if the “limits” are merely the limits for free ACH transfers. Also, was unable to print my application and some other pages at the OnBank site.

After numerous calls/emails to the reps and inconsistent, unclear and in my opinion erroneous answers, I regrettably had to chicken out and cancel pending fund transfers into the account. Perhaps they are just too new and do not yet have their online business fully organized yet.

OnBank MM yield down to 2.60% from 3.15%.

I also have no confidence in this bank. I called up once and they asked virtually NO security questions. Just my name. Also you cannot print out transfer confirmations.

I just noticed my Money Market Savings dropped down to just 1.30%

I just tried to transfer my savings into my checking account at WAMU and OnBank says they are doing nightly updates.... as soon as they are up and running I'm going to transfer the money and close the account down.