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Higher Interest = Earn More Money Now
With no brick-and-mortar infrastructure to pay for, online-only banks can offer about 5% interest and APY (annual percentage yield) on savings accounts (compared with less than 1 percent at conventional banks). And in January, schwab.com was paying 4% on checking accounts.Let’s say you have $10,000 in a savings account at Citibank, earning a paltry 0.7% APY. Open an online savings account at citibank.com (which pays a whopping 4.5% APY), then transfer your money electronically. You’ve just increased your yearly savings by $380.
| TRADITIONAL BANKS | ||
| Bank of America | 0.2% 0.2 | 0-.05% 0-.05 |
| Chase | 0.2-2.25 0.2-2.25 | 0.05-0.65 0.05-0.65 |
| Citibank | 0.7 4.5 | 0.25 0.25 |
| HSBC | 0.15 4.25 | 0.05-0.1 2.5 |
| Washington Mutual | 0.25 4.75 | 0.1 0.1 |
| ONLINE ONLY | ||
| 2% | 3.4% | |
| 4.55 | N/A | |
| 5.05 | 3.60 | |
| 4.1 | 3.15 | |
| N/A | 4 | |
| 4.25 | 3.4 | |
*Annual percentage yieldsas of January 2008 for accounts under $10,000.
All accounts are FDIC insured.
Banks make $17.5 billion a year on overdraft fees -- a major source of revenue for financial institutions. By banking online, you'll see at a glance where your money is going, making it easier to avoid pricey fees.
Watch your cash flow: Monitor your account balances and track your spending and savings regularly. Move money between accounts when you're running low. Categorize what you spent on, say, food, shoes and toys as you go. The "I'm in denial" game is over. But once you see your money growing, you'll be motivated to keep at it.
Get the big picture: Not all banks offer online money management tools, so check out these new third-party providers:
Once you grant access to your accounts, mint.com monitors your transactions and balances nightly. It's free and fast. Within seconds, the site brazenly informed me: "In the past 30 days, you spent $644 on Shopping. Usually you only spend $442." Gulp. Mint can set up budgets, notify you when account balances are low and send you savings tips based on your spending habits -- automatically.
Quickenonline.com: costs $2.99 a month and includes a cash-flow calendar that tracks your pending checks and debits as well as current balances.
Free Savings Advice
Who knew that Facebook and personal finance could be friends? It's called financial social networking, and it's free. Once you upload your data to a site, that information is shared (anonymously) with thousands of regular folks who have similar interests and spending habits. Everyone passes along tips on saving, investing and spending.
One big player is wesabe.com. After I inputted my data, the service figured out I have a Netflix account. In no time, I saw a tip from a user who told me I could put my account on hold for up to three months. We don't use Netflix during the summer anyway, so that's a savings of $41.97. David Knight of Greenville, South Carolina, shared his tip for eating out on the cheap: Go to restaurant.com and buy a $25 certificate for just $10. Knight presents this at one of the 102 participating restaurants in his area, for a savings of $15.
When I tried cakefinancial.com, I got an instant snapshot of my investment portfolio:
I was down 2.39% and the year was only a week old. Of the investors who shared my sensibilities, all were down except one, and his holdings were in skyrocketing international and developing- nation funds. I was tempted to switch my investments, but it's too risky for me. Still, I could have played around on that site all day.
Bank of America's "Keep the Change" program is just like found money. Say you charge a $3.50 coffee. BOA rounds up to $4 and deposits the 50-cent difference to your savings. You'll need BOA accounts: checking (with check card) and savings. It's a simple way to save up to $250 a year by shopping at your favorite spots.
Pay Your Taxes Online
If your adjusted gross income was less than $54,000 in 2007, you can use the IRS Free File program. Last year, 97 million taxpayers qualified; only 3.9 million used it. The e-file benefits: faster refunds (as few as ten days with direct deposit) and fewer errors (no illegible handwriting; the software checks your math). If you earned more than $54,000 last year, you can file online through third-party providers like H&R Block, Intuit's TurboTax online software, and tax preparers (go to irs.gov/efile for a list).
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