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How Not to Get Hit with Overdraft Fees

We’ve all been there before – facing an unexpected bill and the stress of worrying if there is enough in the checking account to cover it. How can you avoid getting in this situation in the first place?

Be Aware and Spend Wisely

The best way to avoid overdraft fees is to always know what is in your checking account. This takes discipline and wise spending habits. The simple fact is that there is only so much money to go around so you have to apportion it accordingly. Reviewing your bank statements every month and keeping your register up-to-date can give you the most accurate snapshot of your account’s health. Make sure to take automatic payments and electronic purchases into account.

Overdraft Options Through Your Bank

Many banks offer courtesy overdraft protection, which means they will cover the overdraft for you, avoiding the merchant’s returned check fee. The bank will, however, charge roughly $20-$30 to cover the overdraft and may charge an additional amount for each day that your account is overdrawn. This is still costly, but avoids the embarrassment and inconvenience of bouncing a check to a store or someone you know. Make sure to replace the overdrawn money and fees as soon as possible.

An even better option is to link your savings account to your checking account. The bank can then transfer funds from your savings to your checking account to cover the overage. There might be transfer fees involved, but at least the money is coming out of your own account and does not have to be repaid to the bank. Another good option is to link your checking account to a credit card that you already have. The overdraft is treated as a cash advance on the credit card, incurring fees, and interest starts accruing right away. However, these fees are still lower than bank fees as discussed above.

The Solution?

Spend wisely and always be aware of your balance. Overdraft protection can be a lifesaver in a true emergency and is a good thing to have as a backup.

Why a Savings Account for Kids Is Important

One of the best life lessons a parent can impart on a child is the benefit of saving money. Providing the child with their own bank account can be an important first step in the process. Children don’t generally need to write checks or pay bills so a checking account is not a realistic option but most banks offer savings accounts that are tailored to children. They can be opened by the parent or guardian on behalf of the child and will generally come with added benefits like no maximum on monthly withdrawals, no minimum daily balance requirement, and in some cases slightly higher or fixed interest rates.

Young adults who were not taught the fundamentals of money management as children are more likely to fail when they embark out on their own for the first time. They tend to lack budgeting skills and mismanage funds leaving nothing available when the rent is due or using student loans and tuition funds to pay their living expenses. Parents can reduce this risk of failure by teaching financial planning at an early age.

It is best to start a savings account when a child is old enough to understand the concepts of basic math even if they still require assistance with the calculations. This is the time to break open the piggy bank and use that money to open an account. Regular deposits can be made by depositing birthday and holiday money. Children who receive a weekly allowance can learn valuable budgeting lessons each week by sitting down with a parent to determine how much to save and how much to spend each week. If the child has a long term goal to buy an expensive game or toy they can see how much they have, how much they need, and how long it will take them to reach their goal.

As the child grows, their needs and ambitions will change. They may begin working. They may want to save for a car or a Spring break vacation. This is an excellent time to review their savings account balance and revise their goals. Savings accounts are even more advantageous at this stage. With funds ability more limited than with a checking account the child is less likely to make impulse purchases.

Why Open A Certificate of Deposit

There are many benefits to opening a Certificate of Deposit account. The accounts are not generally like other investment accounts. When you open a Certificate of Deposit account you are in reality loaning the bank a flat out fee. The bank in turn pays you interest on the amount of the money you loaned the bank when you opened the Certificate of Deposit account. The interest on a Certificate of Deposit account is not usually very high; however, a Certificate of Deposit account is considered a guaranteed investment.

A guaranteed investment is an account that guarantees you will receive a return on your investment. This means that if you invest $500 in a Certificate of Deposit account you will automatically be getting more than $500 at the time you close the Certificate of Deposit account. The Certificate of Deposit account can usually be opened for as little as $500. However, some financial institutions require a larger deposit than $500. Sometimes a financial institution will require as much as $10,000 to invest in a Certificate of Deposit account.

A Certificate of Deposit account is a separate banking account than an ordinary savings account. The return on your investment into a Certificate of Deposit account may not be as large as some other investments; however, the interest rate on a Certificate of Deposit account is generally higher than the interest rate on a regular savings account. When you open a Certificate of Deposit account you can have the investment mature in as little as 6 months. However, some Certificates of Deposit can be opened and active for as long as 10 years.

Hackers Access Information on 200,000 Citibank Customers in One of the Largest Cyber-Attacks on the Banking Industry

On Thursday, June 9, banking and finance conglomerate Citigroup announced that it had been the target of what has been the latest in a string of hacker offensives against major global companies. Specifically, according to Citigroup, the account information of over 200,000 of their Citibank customers was exposed by hackers, allowing them to access sensitive information on these customers. This latest attack on personal data held by large corporations is raising questions both among the public and government officials about how safe this data really is.

This latest attack affected a full 1% of Citibank customers in North America. Although Citigroup has attempted to portray this 1% of their customer base as a negligible amount, a single cyber-attack that successfully accesses the data of 1 out of every 100 customer records at major corporation can justly be considered alarming by any means. In fact, some observers are calling this Citibank hack the single largest cyber-attack ever to strike the financial industry.

While the information accessed in the Citibank attack did not include credit card numbers or the related security codes, or birth dates and social security numbers that would be considered hot commodities by identity thieves, hackers did have access to names, addresses, and contact information for these customers that might be used for unknown purposes. Furthermore, even though Citibank is purporting to contact each of its affected customers to inform them of remedial steps they can take to protect themselves after the data breach, the fact that Citigroup waited almost a month before making the full extent of the breach known suggests strongly that the Citibank attack was more serious than its corporate officials would like to admit.

Additionally, this is not the first time that Citigroup has been compromised by hackers. In April, a huge data breach at an email marketing company led to the inadvertent disclosure of the contact information of thousands of Citigroup customers. More seriously, in 2008, a group of hackers was able to steal over $750,000 from Citibank ATMs by breaking into the company’s servers. One consulting firm also found in its research that Citibank’s methods of helping customers deal with data breaches are significantly less adequate than those of its competitors. Citigroup’s history of being subject to successful cyber-attacks is leading some commentators to argue that independent action might be needed on the part of customers and regulators to fully counteract the effects of the latest Citigroup attack.

These concerns appear to have been heard by government officials. The head of the Federal Deposit Insurance Corporation, the government agency that regulates much of the U.S.’s banking activity, has reported that the agency is preparing new initiatives to ensure that banking institutions have adequate cybersecurity. While the latest federal standards for protection against the unwanted disclosure of electronic banking and financial data date from 2005, updated standards were proposed in December 2010 that may now presumably be put on a fast-track process to approval.

However, some government officials believe that even stronger steps need to be taken in the wake of this latest Citigroup data breach. In particular, one member of the U.S. House of Representatives is reportedly preparing legislation which would mandate that companies inform customers of data breaches within a certain time period. This Congressional representative, at least, does not seem to be buying Citigroup’s argument that a month-long wait to inform customers of this latest data breach was necessary in order to further safeguard customers’ account security. Additionally, Federal Bureau of Investigation director Robert Mueller recently announced that his law enforcement agency would be devoting significant new resources to combating cyber-attacks. While banks may have resisted increased security measures in the past, saying that they would put an unnecessary burden on customers, public and government pressure for higher security standards may now be insurmountable.

The fact that such a large, successful hack has occurred in the banking sector, as opposed to the retail sector where many of the most notorious past cyber-attacks have hit, has also led some observers to caution that the Citigroup attack, as well as any subsequent attacks on this industry, may have significant secondary consequences for the U.S. economy. Specifically, if consumers begin to perceive that electronic banking and credit card data cannot be kept secure by the companies entrusted to protect it, they may be less willing to participate in the e-commerce activities which account for a significant portion of economic growth in the U.S.

Even though cyber-attacks on banks and financial institutions have been rare in the past, this Citibank attack may presage a new era in Internet security. The actions taken by the banking industry and government officials in the next few weeks will likely have significant future implications for the health of the financial industry as well as the fragile U.S. economy overall.