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FDIC's Summer 2010 Consumer News: Rules on Free Checking, Bank Failures and Mergers


FDIC's Summer 2010 Consumer News: Rules on Free Checking, Bank Failures and Mergers

The FDIC just released its Summer 2010 Consumer News. Some excerpts that I thought would be useful to highlight include:

  • Bank Accounts Are Changing: What You Need to Know - The article reviews what we already know in that banks will be losing revenue from the new overdraft regulation which may cause fees to go up. Some basic strategies to avoid bank fees are reviewed. It mentioned one Fed rule that I wasn't aware of:
    Under Federal Reserve Board rules, an institution can't advertise a "free" checking account if you could be charged a maintenance fee or an activity fee - for example, a penalty for going below a required minimum balance. But your bank can offer a "free" account and still impose charges for certain services, such as check printing, ATM use or overdrafts.
  • $250,000 Federal Deposit Insurance Amount Now Permanent - I think most readers know this by now, but it is a good reminder for those who don't stay on top of this issue. The article did mention another part of the law that's less well known:
    In addition, the law created a new temporary program, similar to the FDIC's temporary program already in effect, that will provide full insurance coverage for deposits in noninterest-bearing transaction accounts at all insured banks, regardless of the dollar amount. The new program is scheduled to run for two years beginning December 31, 2010. While these transaction accounts are primarily used by businesses with large balances in their checking accounts, any depositor can qualify.
    With the way interest rates have been falling, more of our accounts may start to fall into this category.
  • What If Your Bank Fails? First, Stay Calm - We've seen so many failures this year that I think most readers know their insured deposits are safe. The main concern for a bank failure these days is that the acquiring bank will slash rates on existing CDs. The article does have some details on this issue, and it mentions this fact that I wasn't aware of:
    for CDs and other non-transaction accounts, the assuming institution cannot pay a lower interest rate than what it offers to its existing depositors for similar accounts.
    Unfortunately, many banks are currently paying existing depositors very little, so this isn't much help.
  • Having Deposits at Two Banks That Become One - There are two important rules to note:
    Special FDIC insurance rule protects customers with deposits over the $250,000 limit for at least six months after a merger or a closing
    the FDIC allows the separate deposit insurance coverage to continue until the CD matures, so that the depositor doesn't have to take a penalty for an early withdrawal. It's only when the CD matures - perhaps years into the future -that the depositor may need to consider moving the excess above $250,000 to another FDIC-insured bank to continue to be fully insured.
    You don't have to worry about being forced to close your CD if two of your banks merge. Of course if your bank closes, your CD rate may be cut.
  • Starting Out on Your Own: Personal Finance Tips for Young Adults - For those who have been saving for decades, there's not much in this article that you will find informative. One good reminder is how to obtain your free credit report:
    obtain a free credit report once every 12 months from each of the three nationwide credit reporting companies at www.annualcreditreport.com. Review each report, correct any errors and check for suspicious activity that may indicate you are a victim of identity theft.
    One way to maximize the usefulness of this is to check one of the 3 credit bureaus once every 4 months.

Please refer to my May post for highlights of the FDIC's Spring 2010 Consumer News.

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Anonymous   |     |   Comment #1
As a married couple with the same credit, we check one credit agency every two months. I keep a running list of what I've checked so I can stagger it. Have set up a recurring reminder on our computer calendar program. It just takes a few minutes and gives us peace of mind.
Jo   |     |   Comment #2
This just tells me that I need to stick with my main checking account I use for the household budget, USAA. They aren't going to go gung-ho on a largely military clientele with fees ad nauseum. I don't make anything off of USAA's totally free checking except for rewards using my debit card to shop using a link to access online stores. It's cash back, too, without having to sell your soul.

Anyways....I am not worried about ING Direct either. But I'll certainly be checking all my bank statements for posted fees I wasn't made privy to; I presume they still have to notify us within a reasonable amount of time about any impending fees we can expect....Just some thoughts.
Anonymous   |     |   Comment #5
I wonder why there's no FDIC rule about this... Lately, I've had two different small banks that cut the interest rates they were paying on their rewards checking account. And as best as I can tell, they made absolutely no announcement of the change to their account holders. No notification email. No information in the printed monthly statements. Eventually, I noticed the change in the account statement ledger where it lists the interest amount paid each month and the corresponding percentage. And in one case I read about the change here on DA.... And at that point, I saw both banks had changed the rate they list on their web site. But once you have an account, you're not usually looking at the part of the bank web site that advertises their accounts.... just the page to log onto online banking. But you'd think the bank would be required to notify existing customers of such a material change in the terms of the account. They sure sent me enough emails begging me to agree to overdraft fees under the new federal law.
Anonymous   |     |   Comment #6
That's why Chase renamed their Free Checking or Free Chase Checking account (the one advertised witht he $100-125 bonuses) became known as Chase Checking now. It's free only if you have direct deposit or 5 debit card credit purchases.
Anonymous   |     |   Comment #7
 To #5 - Same thing happened to me. A small bank cut their Rewards Checking rate with no notification whatsoever to customers - no email, no notice on the website, etc. (I know they are ALLOWED do this so that's not the issue - I just wish that since emails and/or small website updates would seem to be almost cost-free, they would provide a simple notification.)

Anyway, I think the best place to check on these cuts is right here at DepositAccounts.com, http://www.depositaccounts.com/checking/reward-checking-accounts.html. In the case of this small bank, DepositAccounts.com noted the rate change before at least some of the bank's Customer Service people knew!