Checking out Kiplinger’s 2008 Best Financial Service Picks
Early last month, Kiplinger’s Personal Finance magazine published its annual best list. Among services and products recognized by the magazine, there are a few I am interested in having another look:
- Online Savings Account: FNBO Direct
- Checking Account: Schwab Bank High Yield Investor Checking
- Money-Market Account: Flagstar Bank Express Money Market
I don’t know for sure how the picks were made and what criteria were based on, but I think there are alternatives out there that can better achieve the goal of saving money. Last year, when Kiplinger released its 2007 picks, I also looked at their recommended broker for online mutual fund investors and concluded that their choice didn’t really make too much sense from what I saw.
I want to do the same for this year’s choices.
Online Savings Account
Kiplinger’s choice in this category is FNBO Direct Online Savings Account. In the short summary, Kiplinger gave a glimpse of the account:
Earn 3.5% on your FDIC-insured savings at www.fnbodirect.com. You pay just $1 to open an account with no maintenance fees and no minimum-balance requirements. You can link the account as many as three others, including FNBO’s bill-payment account. Use electronic transfers to move your funds and your ATM card to withdraw cash.
What do you read from this description? Not much, right? Actually, I bet you can find pretty much the same (except the rate of course) on any other bank account’s description page. So what’s so special about FNBO Direct? Was rate a factor, a big one, when Kiplinger made the selection?
Before they dropped their rate from 3.50% to 3.25% at the end of October, I had most of my money with FNBO Direct. I got my account when they ran the 6% promotion last year, for the exact reason of getting the most out of my money. Since then, FNBO Direct’s rate has been quite consistent, though interest rates generally have been declining since last summer, and that’s why I have used them as my primary savings account until recently. I am a rate chaser, though I don’t always go after the highest rate available.
I agree that FNBO Direct is pretty easy to deal with: easy to open an account and simple interface to use. But I don’t always find problems with any other banks I am using or have used before either. I don’t have high expectations on customer service. It actually plays no role when select a bank because there’s only one thing I want from a bank and you know what it is
Kiplinger picked Schwab Bank High Yield Investor Checking as the best checking account:
You don’t have to be a Schwab customer to apply for a checking account at www.schwab.com. The account has no minimums and no ATM or other fees. You get a debit card, standard checks and online bill payment, all free. Best of all, you money earns interest while it sits idle, to the tune of 2.2%.
Again, interest rate has changed a lot since the publication of the magazine because now the rate of the Investor Checking account is only 1.5%. And again, I have to disagree with Kiplinger’s choice. When I looked at the account, the only item that seems to be attractive is that Schwab reimburse ATM fees changed by other banks. Not every bank does that. I know there are banks reimburse ATM fees, but only to a limit ($6 per month is quite common). If you use lot of out-of-network ATMs, then this will be a big plus. Not for me though, because I use credit cards most of the time and only use my bank’s ATM to withdraw cash.
I am also not a fan of interest checking for three reasons:
- Checking account interest rates are generally lower than savings account rates;
- I always pay my purchases with credit cards and I never used a debit card, so I know when my bills are due;
- I usually keep a low balance in checking account (around $3,000 to $5,000);
In my opinion, interest checking is only worth it when I need maintain a large balance. Otherwise, I’d rather put my money in a savings account for better return.
Then, if return is what you are looking for in a checking account, you can find better deals from other banks. For example, IGoChecking, at 2.80% APY, gives you nearly twice as much return as Schwab does, even though there’s no ATM fee reimbursement (IGoChecking uses Allpoint Network which is also is used by ING Electric Orange). Talking about “earns interest while it (your money) sits idle,” why settle for less?
Money Market Account
Flagstar Bank Express Money Market is the choice in the money market account category by Kiplinger:
Open an FDIC-insured account for $1 at www.flagstar.com and earn 3.65%, with easy access via free checks and a Visa debit card. Also, get free, unlimited ATM withdrawals through the Allpoint and Presto networks. Federal law limits you to six pre-authorized transfers or withdrawals per month.
I usually don’t pay much attention on money market accounts alone, because, since they are also liquid accounts, I treat them the same as savings accounts (money market account’s check writing ability is what you won’t get with a savings account). The Flagstar Express Money Market account, however, fits pretty well in the high-yield category. The best part of this account is that, unlike other money market accounts, it requires just $1 to earn the 3.55% APY (This is the current promotional rate. They also have a Money Market account that pays from 2.45% to 2.95%. According to the CSR I talked to, rate is the only difference between the two) , which is quite high even among savings accounts I track. From what I know, EverBank’s Yield Pledge Money Market Account has a higher promotional rate, but you need $1,500 to get it.
So, are you using any of these banks?
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