Square Cash allows you to send money more or less by sending an email.
To make a payment, you simply email your payee (with the dollar amount in the subject line) and include Square Cash in the "Cc:" field. Money comes from your checking account via your debit card, and the recipient sees the cash show up in their checking account in about two days. There's no need for usernames, apps, or bank routing numbers.
How does Square Cash pull this off? JonBWhite explains the logistics. It's easy enough to understand how the funds get pulled from your bank account - that happens every time you make a purchase. But what about adding the funds to the recipient's account? As JonBWhite notes:
"The genius of Square Cash is that someone realized you can process a refund without having an initial charge in the first place."
For better or worse, it's now even easier to send money. To learn more about the service, read our review of Square Cash.
Pentagon Federal Credit Union is making waves by offering CDs that pay more than we've seen in a long time. When was the last time you saw a "3" to the left of the decimal when looking at CD rates?
The only catch is that you (understandably) have to use a long term CD to earn the best rate. PenFed's 5 and 7 year CDs pay 3.04% APY, while shorter-term CDs pay a bit less.
Is it worth it to lock your money up for so long? It depends, of course, on a lot of things. If you value safety, these NCUA insured CDs are fairly attractive. But if interest rates rise quickly and banks offer better rates in the near future, you might miss out. It's impossible to time things perfectly, so I always think it's a good idea to take good deals when you find them and they fit your needs, but do everything in moderation.
Ken Tumin at Deposit Accounts discusses the conundrum of using these long-term CDs, and notes that the 5 year CD is probably your best bet. You don't earn any more for locking your money up for an extra two years, and it would only work in your favor if rates stay stagnant for a long time. Hopefully that won't happen, but if you think it's likely you can always go with the 7 year CD. Deposit Accounts also provides a calculator that you can use to determine whether or not it's worth cashing out of a CD early and paying the penalty.
There may come a time when money is so tight that you can't make your mortgage payments. What happens then? Are you evicted immediately, or do you have some time to get current and save your home?
Nothing happens quickly when it comes to mortgages - that includes the approval process as well as the foreclosure process. Foreclosure is expensive and time-consuming (when done properly, without rob0-signers), so you'll typically have a few months to get caught up on any missed payments and late fees. Of course, the best thing to do when you fall on hard times is to communicate with your lender. If you simply skip payments, they might not know that you intend to get caught up (and you might be able to get your loan modified or use a program that allows you to skip payments without damaging your credit).
Casey Bond at GoBankingRates.com explains that you'll generally have to miss 3 or 4 monthly payments before banks get serious about foreclosure. The first one is practically a freebie - banks know that mistakes happen and bills may slip your mind. If your payment arrives within 30 days of the due date, it might not ever appear on your credit reports. After that, you'll be on the road to foreclosure, and your credit scores may suffer - even if you get caught up quickly enough to prevent foreclosure.
Do you know how much you pay to borrow money? You probably know your interest rate, but what does that really mean - can you translate it into dollars and cents?
To best manage your finances, it's helpful to know how much you spend each month. That includes how much you spend on interest when you make payments on home and auto loans. You might not be able to to make drastic changes to those amounts (it's easier to just stop eating out or cancel the cable), but you can certainly get a good understanding of where your money goes.
It's also nice to evaluate loans before you get into them. Knowing how much you'll spend on interest can help you make an informed decision and compare loans that might otherwise be hard to compare. You might even decide not to borrow for something you don't need (once you see what it really costs).
So how do you get a handle on interest costs? Do some calculations. Don't worry, it's fairly easy if you let a computer do the heavy lifting for you. The pages below will help you see exactly what it costs to borrow, and exactly what happens each time you make a monthly payment:
When a hacker steals money from your bank account, do you have to eat the loss?
It depends whether your account is a personal account (for you, as an individual or joint account holder) or a business account. You'd better hope it's a personal account.
Personal bank accounts get plenty of protection. Consumers are generally not responsible for losses as long as they didn't "help" cause the loss (although you may still be protected even if you made a mistake and gave information to the wrong person), but you have to act fast - you are most protected when you notify your bank quickly. Depending on the type of fraud involved, "quickly" might mean 2 to 60 days after the transaction.
Business accounts are another story. Consumer protection laws don't apply to those accounts, so businesses are typically on the hook for anything that happens in their accounts. Perhaps there's an assumption that businesses are more sophisticated than consumers, or perhaps the concern is that businesses keep more cash on hand than consumers. Either way, fraud in a business account is very bad news.
If you own a business, remember that you have to be even more cautious than you are as a consumer. Be extra careful to protect your account information and use strong passwords. It's a good idea to check your accounts regularly to spot problems early - the bank might not catch on to any scams before your account is drained.
When business accounts are drained, you have little recourse - even if the bank was at fault. Marketplace reports that the odds of recuperating your cash are slim, and getting an attorney to help is no small feat (especially after you've been robbed).
Marketplace Money, the weekly business show from NPR, covers a variety of personal finance topics. Last week's show was full of interesting banking topics. Carmen Wong Ulrich is doing a great job as the new Marketplace Money host, with good coverage of the following topics:
- The future of online banking, with thoughts from Simple's Josh Reich
- Some differences between traditional bank accounts and check cashing shops
- How ATMs are evolving to look and feel more like in-person banking
I found the part on check cashing shops and unbanked consumers especially interesting. I'm still a fan of "real" bank accounts, but it's clear that living without a bank account isn't all bad - and that it's a reasonable choice for some people.
To get your booster shot of banking information, check out the latest episode of the Marketplace Money podcast. You can listen to the show or skim through transcripts.
Reverse mortgages have come a long way from their early days as overpriced loans. But they're still expensive, and it's still essential to take a very close look at any loan product and the alternatives before signing up for one.
These loans are popular with seniors who have a lot of equity in their homes, but who do not have any source of income. They can turn home equity into income, but what else do you need to know about them? Consumers Union offers a few ideas to help any prospective borrower make sure that a reverse mortgage is truly the right choice. Their advice starts with considering alternatives to reverse mortgages - options that cost less and are easier to unwind. They also note that you still need to spend money after getting one of these loans: keeping your home maintained is part of the contract.
If you're considering a reverse mortgage for yourself or a parent, slow down and take your time. Make sure you look at the deal from every different angle, and get an understanding of what you give up by tapping home equity for income.
There are plenty of places to get short-term loans known as payday loans. If you're looking for one of these loans (which are notoriously expensive, and can easily lead to debt costs spiraling out of control), you can walk into a payday loan shop, or search for loans online.
When you get a payday loan in-person, you know who you're dealing with: the company name is on a sign outside, and you'll either walk out with cash in your pocket or (if you're not approved) you won't. But things are different online. Applying for a payday loan over the internet is more risky. Online "lenders" just need to set up a website - they don't need to sign a lease and furnish a storefront for customers to visit.
You might wonder if online payday loan sites are legitimate. NPR reporter Pam Fessler recently applied for a loan to find out how those sites work. After entering fake information (they wanted Social Security Numbers and bank account numbers, which you should never provide unless you know who you're dealing with), she received "dozens of calls" from eager lenders over the course of several months.
If she already applied for a loan, why were lenders calling her? It turns out that her "application" was submitted on a site that merely collects names of prospective borrowers. Borrower information is then sold to lenders, who eventually try to close the loan. A singe application can result in your personal information being sold to numerous companies around the world, and these aren't businesses known for being especially consumer-friendly.
What's more, Fessler was unable to contact some of the companies that contacted her. They wouldn't answer calls, or their phone lines were disconnected by the time she called back.
So, if you're applying for a payday loan online, be especially careful. Payday loans are almost never a great idea in the first place, and providing your personal information to a website you're not familiar with only makes the process riskier.
When somebody steals your debit or credit card number, you're not responsible for the charges as long as you notify your bank promptly.
Does it matter whether or not the card was a debit card or a credit card? Certainly. Credit cards are more consumer-friendly when it comes to fraud protection (although they're less friendly if you carry a balance and pay interest). Just notify your credit card issuer of unauthorized use, and you're not responsible for more than $50 - you might not even have to cover that much depending on the circumstances.
With a debit card, time is of the essence. You need to notify the bank within two days of a bad transaction to limit your losses to $50, and after 60 days you might be out of luck completely. What's more, that money is missing from your checking account, and that might cause some inconveniences (unless you keep a lot more in checking than you'll ever need). Your bank will replace the funds, but as Claes Bell explains, the process is probably slower than you'd like, and "banks aren't exactly falling all over themselves to make sure you get your money in time."
Given all of that, think twice before using your debit card. If the card information is stolen and money disappears from your account, how easy is it for you to cover your bills? If the answer is "not very," then use a credit card for everyday purchases and online shopping. Just be sure to pay off the entire balance every month.
If you've got ideas on how to improve the way we make payments in the US, you've got an opportunity to improve things. The Federal Reserve Banks are asking for your input on what's most important to everybody who depends on the payment system, including:
- Financial institutions
- Payment processors and facilitators
- Technology providers
- Security experts
- And anybody else who makes, sends, or receives payments
The payment system has, for the most part, been developed by regulators and banks. New technologies and companies occasionally come in and stir things up, but they have to work with an existing framework (and an existing set of consumer habits). Some of you are creative people, and you can see the benefits of alternative approaches better than the rest of us - but you're probably frustrated because you can't actually do what you see as feasible. For example, electronic person-to-person payments are a great idea and they've been around for a while, but how many of your friends and family actually use them?
If you want to share your ideas, head over to the Federal Reserve Financial Services site to read about the project and submit your comments. Be aware that your comments will be public record, and might be easily viewed by other visitors to the site.