Don’t Feed the Alligators

A Personal Finance Blog from a Small-Scale Landlord’s Perspective

Archive for the 'Bank Fees' Category

Flip Flops

Creative Commons License photo figure credit: rockstarassi

A couple of posts back I wrote about how my bank was implementing a fee for online bill payments.  Imagine my surprise when just a few days later I received this email:

You may have read in our recent Terms and Conditions update that on June 1, we will change the terms and conditions on our FreeNet® Checking and Yield PledgeSM Money Market Accounts. Because of your current relationship with EverBank®, the monthly account fee changes will not affect you at this time.1

1. We reserve the right to impose our most current terms and conditions without notice at any point in the account relationship.

Well, this certainly made my life easier and restored my faith in EverBank.  Although, I reserve the right to change my mind on this without notice.

ING Bus Advert

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This week I received a letter from EverBank, which is where our checking, money market, and some CD accounts are held.  We’ve banked with EverBank for a while now and have been happy with its services.  Until now.  The letter that I received indicated that EverBank will now start charging $8.95 for BillPay, which used to be free.  The catch is that it’s free if our account balance (daily average) stays above $5,000 for the month.  The letter also indicated that an account maintenance fee of $8.95 will also apply to any money market accounts with daily average balances below $5,000.

I wrote previously about how bank fees are for poor people.  It seems that the definition of poor just broadened, at least according to my previous assessment.

We generally keep an average balance in our money market account of over $10,000, and previously we had been keeping a $1,500 balance or more in our checking account.  What this new fee means is that in order to keep BillPay free, we’ve got to forgo some increased interest rate on an additional $3,500 monthly.  Because of dismally low interest rates, the lost interest on that $3,500 amounts to just $1.87 per month.  But if when interest rates go back to where they were 2 years ago, this difference rises past $10 per month.

It looks to me like we have two options here: we can increase our balance in our checking account to meet the new minimum requirement — effectively costing us $1.87 per month at this point, or we can find a new bank to take care of our BillPay services.  I did some investigating for the latter option.  Rather than having to open a new bank account somewhere, I looked at banks where we are already customers.  The most appealing of these was our ING Electric Checking account.  By simply cancelling our BillPay service with EverBank, we will avoid the fee and be left with the ability to write checks on the account.  Our Electric Orange account will take care of paying all of our bills.  Since our EverBank accounts are already linked to our ING accounts, it will be trivial to switch our BillPay services over to ING.  All that will be required will be to replicate our Payee list and set up some automatic monthly transfers.

While $1.87 is not that much money, just over $22 per year, to me it represents a gradual erosion of my wallet.  We already pay so much money monthly for everything that we have.  If we simply accept EVERY $1.87 increase in cost for things, eventually it’s going to add up to a lot of money.  I’m inclined to stand on principle here and close our checking account with EverBank.  On the flip side, if I closed every account at a bank that irritated me somehow, all my money would be under my mattress (it’s not, by the way, so don’t look there…).

What do you think?  How far would you go to avoid a small fee?  What size fee is too big of a fee for you?

Rushing to get it all done

Creative Commons License photo figure credit: booleansplit

In the original post on this subject, I outlined the almost comical amount of difficulties I faced in trying to move approximately $44,000 out of our Money Market fund at Vanguard and into our checking account so that we could pay the balance on our Chase Freedom card.  You may also recall that the reason why our balance was so high is that we were exploiting a 0% interest rate on purchases for one year — otherwise known as a form of arbitrage.

Picking up where I left off, the plot gets thicker before finally thinning out for good:

The good news is that the payment from the Vanguard check arrived at EverBank on September 8th.  The bad news is that I didn’t even consider the fact that it could take days before the check cleared.  Because of the very large amount of the check, the bank cleared it in increments: I got a $100 credit on day 1, a $5000 credit on day 4, and the total was credited on day 7.  Each day, starting on September 10th, I had to move my online bill payment from that day to the day after the final schedule payment in hopes that the check would clear the next day.

After doing this for 3 days straight, I discovered that the Chase website has an option for making payments online.  This option requires you to enter your bank’s routing number and the account number from a check.  “Great!”, I thought.  But there must be a catch to this also.  I emailed customer service and asked what the fee was for this, what the maximum amount I could pay at any time was, and how long it took to post to my account.  I was told that there was no fee, the only limit to the amount I could pay was the total of my credit card balance (in other words, I could not overpay my account), and that the payment posted on the same day as long as it was made before 4pm.

At this point, I canceled all of the scheduled billpay payments and went about setting up the payment on the Chase website.  Wouldn’t you know that I discovered another catch?  The website, contrary to the information from customer service, limited me to a payment of $25,000.  Additionally, I could not set up another payment until 3 days after the first payment.  Luckily, I still had time.  The first payment was set up for the 13th of September and the second payment was set up for the 16th.  Both payments executed properly, and I met the September 17th deadline to get the entire balance paid off by the due date.

Whew!  In total, I paid a lot for this in stress, as well as the $20.71 FedEx overnight fee to get the check from Vanguard as soon as possible.

Lessons learned and next actions:

  • We are going to fill out the form that would have allowed us to transfer the money directly from Vanguard to EverBank.
  • Never trust what a customer service person tells you — even if you get it in writing.
  • Plan ahead!
Bill Payment Box

Creative Commons License photo figure credit: brendaj

I have written before about our experiment with credit card arbitrage.  This is where you borrow money at a very low rate (preferably 0%) and stash it in a high interest savings account.  Since we have come to the end of the 1 year period on our Chase Freedom card, I got set up to make a large payment to pay off the card — $44,061.30 to be exact.

I know that the payment is due on September 17, so I decided to play it safe and get all my ducks in a row in plenty of time.  Last Friday, August 29th, I logged into my money market fund account at Vanguard to make the transfer to my checking and billpay account at Everbank.  I got the Sell order all set up only to find that “electronic transfer” to my checking account was not one of the options for cashing out our money.  The next day, I called Vanguard to find out why.  It turns out that since this is a joint account, Vanguard needs to have a signature card on file for ScrapperMom before it can let me transfer money from a joint account.  It didn’t matter that the checking account is also a joint account.

The only option available to me was a check.  I started doing the math in my head — the market doesn’t reopen until Tuesday, September 2, they can’t sell the money market funds on my behalf until the end of trading, the earliest they could cut a check would be the 3rd.  First class mail would likely get the check to me by September 7, then I have to turn that around and mail it to Everbank, which is another 3-5 days until it hits our account.  Now we’re up to Sept. 12.  A payment sent on that day should arrive at Chase on time.

After explaining the situation to Vanguard, and not wanting to cut it too close, they offered to overnight the check to us.  This will incur some fee, of course, and I don’t know what that is yet.  I’m assuming that it will be in the $20 to $30 range, but the representative could not tell me when I set up the order.

Fast forward to last night: I logged into Everbank to set up the bill payment.  I entered the full amount in the payment box, set the payment date for Sept. 10, and clicked PAY.  The bank came back with an error saying that I could only pay $15,000 in a single payment.  Okay, I thought, I’ll just set up 3 payments to take care of it — no problem.  So I reduced payment number one to $15,000.  Then I set up payment 2.  The bank thought it was smarter than me, and decided that this was a mistake — a duplicate of a payment that I already set up.  So I tried $14,999 instead.  Then the bank told me that the daily limit on bill payments in total is $15,000.

This was starting to get frustrating!  Eventually I ended up setting up 2nd and 3rd payments for the total amount due on the 11th and 12th.  According to the bank, a payment made on the 12th will arrive by the 16th.  How’s that for calling it close?  Usually the payment gets sent on the 10th, and usually gets credited to my account on the 13th.  So this should still work out.

Today I received the check from Vanguard and we immediately turned it around and mailed it off to Everbank.  There is the off chance that the check will arrive at Everbank and be credited to our account earlier than the 10th.  That will give us a little more breathing room if true.  Another option we now have through the billpay service with Everbank is to expedite a payment by sending it electronically or by overnight check.  As you might expect, these options are not without cost: $4.95 for the expedited payment, and $14.95 for the overnight check.

What are the consequences of a late payment?  I’m not really sure, but my expectation is that since the interest rate for purchases is 14.99%, the interest for one month at that balance would likely be about $500.  So it certainly behooves us to do everything possible to make sure the payment gets made on time.  It’s not as bad as it seems, since I estimate that we made over $700 on the arbitrage over the last year.

Lessons learned:  If you have to move large sums of money from one bank to another, make sure you know in advance what the limitations of the system are.  It’s also a good idea to understand what the limits of your bank’s billpay system is also.  We’re not sure yet what this means for future credit card arbitrage… but we’ll be sure to let you know soon how the whole thing turns out!

Have you ever experienced a close call with a payment or a problem moving money from bank to bank?

Late Fees

Creative Commons License photo figure credit: josh.ev9

The other day I got an email from our cell phone provider indicating that our latest bill was available for viewing online. I logged into our account and found that we were actually a month behind on our payment and now owed two months’ worth. Not a big deal, I thought — until I saw the late fee. My lack of attention to this bill cost us $5. Not a big deal in the grand scheme of things, but $5 here and $5 there can start to add up pretty quickly, especially when you consider what we might otherwise be doing with that money.

How did this happen? Every month I get an email from the cell phone provider reminding me that our bill is due soon. This is a great first step in making sure that bills get paid on time, and I applaud the cell phone provider for offering this service — especially when the upside of a late payment is an additional fee for them. I get similar reminders from a number of our other creditors, such as our mortgage company. Somehow, though, last month’s cell phone bill slipped through the cracks. And it’s not the first time that this has happened.

Most of our bills are paid via automatic billpay through our bank. This works great for bills that have the same payment due every month. However, for the last year we have been paying for everything that we can (that’s in our spending plan of course) on our Chase Freedom cash rewards card. This card offers 1% cash back on all purchases as well as 3% cash back on things like groceries, fast food, and fuel purchases. We can’t use this card for most of our big bills like our mortgage, car, and student loans, unfortunately, but we can use it on a lot of the small stuff like cell phones, satellite TV, Netflix, periodic insurance payments, etc.

Make it Automatic. David Bach’s book The Automatic Millionaire outlines the case for automating your finances as much as possible. We generally subscribe to this philosophy, but there are a few loose ends. While paying this overdue bill, I noticed an option to set up an automatic payment. For bills that have irregular payments due each month, I generally don’t like to have them get paid automatically because I like to review the bill to make sure that all the charges are correct. However, if the choice is between reviewing something that is correct the vast majority of the time for the cost of a $5 late fee, or paying on time, I’ll choose the on time option. Besides, I still have the option of reviewing the bill and clearing things up after the fact. So I went ahead and set up an automatic payment for this bill. I have done the same for many of my other accounts, such as satellite TV and Netflix.

The great part about all of this is that I also have an e-bill for my Freedom card through my bank’s billpay function. With the e-bill, I also have three options for automatically paying my credit card bill each month:

  1. A fixed monthly payment — useful for paying down a large balance to get out of debt
  2. A minimum monthly payment — useful when you are paying down other, higher interest credit cards while getting out of debt, or for exploiting a 0% interest on purchases offer (more on that in a future article…)
  3. A payment in full — useful for most people, most of the time

With these options, I can be sure that no matter what our cell phone bill is next month, the bill will get paid on time by our Freedom card, and the Freedom card bill will get paid on time via my bank’s e-bill feature in billpay. Voila! No more late fees.

Have you automated your finances yet? What techniques do you use to be sure that your bills are paid on time?

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