How to earn the most on your cash when rates are low

By Sabrina Karl

While low interest rates are welcome for those borrowing money, they are dismal news for cash savers. And you can certainly count savings account rates among the economic casualties of Covid-19.

What banks and credit unions pay on deposit accounts is directly related to the federal funds rate, which the Federal Reserve sliced to zero when the pandemic took hold. Even worse, it recently projected rates will remain at zero into 2022.

Savers have suffered this territory before. The Great Recession sent the fed funds rate to zero in December 2008 and it anchored there for seven long years. Not until December 2015 did the Fed begin raising rates, and only in December 2018 did it reach 2%.

With the coronavirus crisis sending rates back to the cellar, what’s a cash saver to do? While there’s no way to earn the rates available last year, here’s how to earn — and keep — as much as you can.

First, do your homework. Chances are very high that you can substantially outearn the savings rate at your primary bank. By opening an online savings account, you can easily earn 15, 20, or even 25 times the national average rate.

Second, consider rewards checking accounts. These accounts pay a high interest rate on your checking balance if you conduct certain activities like using the debit card a minimum times per month.

Third, if you can hold some of your cash untouched for a while, consider a CD. While CD rates are also depressed right now, they typically pay more than savings accounts. Again, do your homework.

Lastly, avoid fees. Though a $5 or $10 monthly bank fee might not seem too onerous, it erases some of your earnings. Choosing an account with no fees or waivable fees will maximize your return.

Fed has waived savings withdrawal limits, but has your bank?

By Sabrina Karl

The COVID-19 pandemic has altered our world in countless ways, including many changes surrounding savings, investing, and borrowing. If you hold a savings or money market account at a bank or credit union, you may have noticed a significant rule change there.

Prior to the coronavirus, the Federal Reserve’s Regulation D limited how many times consumers could move money out of a savings or money market account each month, capping it at six per monthly statement cycle. This applies to both banks and credit unions.

As a result, most financial institutions charge a fee when withdrawals exceed the limit, to help discourage customers from breaking the Fed rule. If a consumer violates the limit repeatedly, some banks will close the account.

But in a move to help make access to cash easier for Americans who might be struggling financially during the pandemic, the Fed in April completely removed the maximum withdrawals limit.

That’s not to say, however, that your bank or credit union is necessarily erasing the requirement from its own rules. The Fed change only indicates that financial institutions are no longer required to enforce a withdrawal limit. Whether they still do is up to them.

Fortunately, with many institutions taking multiple measures to support their customers during COVID-19, many are indeed following the Fed change and waiving excessive withdrawal fees.

But if wanting to take money out of your savings more than six times per month is something you need or want right now, it’s wise to check specifically whether your financial institution is following the new Fed leniency. If not, it’s worth asking for an exception.

No one knows whether this Fed change will be permanent, including the Fed. But at the current time, they’ve indicated there are no specific plans for bringing the limit back.

How to avoid buying what COVID-19 scammers are selling

By Sabrina Karl

As if the coronavirus pandemic weren’t wreaking enough havoc on Americans’ finances, scammers are busy capitalizing on the crisis as a new way to con us out of our money.

Most of their tactics come from the same playbook they’ve been relying on for a long time, because those techniques work. COVID-19 has simply given scammers a fresh opportunity to take advantage of new fears.

According to the Federal Trade Commission and the Consumer Financial Protection Bureau, many of the scams involve COVID-19 cures, vaccines, and preventative treatments. But all offers of this type are illegitimate, as there are no available vaccines yet and no known cures or preventative “silver bullets”. Stick to information from trusted healthcare sources.

Other fraudulent products are home test kits and air filters. But legitimate COVID-19 testing is only available through healthcare providers and public health systems, not via in-home DIY kits. Also, filters purporting to clean your home’s air of virus particles are ineffective.

Fraudsters are also hawking in-demand products like disinfectant sprays and wipes, hand sanitizer, and toilet paper. But after you buy, the products never show up. As with all online purchases, beware of who you’re buying from. Avoid sites you’ve never heard of or whose links were sent to you by email or text, instead opting for sites you visit directly and can verify as reputable sellers.

Coronavirus scammers are also preying on Americans’ desire to help by peddling fake COVID-19 charities. If approached for a donation to any charity, always check the organization out on BBB’s Wise Giving Alliance or Charity Navigator. And if you donate, use a credit card — never donate via gift cards or wire transfers.

As always, if you are a target or victim of any consumer scam, report it to the FTC at ftc.gov/complaint.

Some banks waiving CD early withdrawal penalties during Covid-19

By Sabrina Karl

If you own a certificate of deposit at a bank or credit union, you likely know the drill for maximizing your earnings: Don’t touch the CD balance until the day of maturity arrives.

That’s because penalties apply whenever you cash a CD out early, and the existence of that penalty policy is the reason you can earn more with a certificate of deposit than with a standard savings or money market account.

The agreement goes like this: If you agree to keep your money parked for a set period of time, and to pay a penalty if you break the commitment, the bank in turn agrees to pay you a higher interest rate than they offer on their more flexible savings accounts.

But with Covid-19 causing millions of Americans job and income losses, some banks and credit unions are considering their CD penalty policy as a way they can help their financially hard-hit customers.

If you find yourself cash-strapped as the coronavirus crisis wears on, and have one or more CDs on deposit, you may be able to access that cash sooner than you thought, or without the financial ding you might have expected.

The decision to waive a CD early withdrawal penalty is completely up to each institution. It is not an edict from the Fed or from the CARES Act. However, a handful of institutions have advertised this option to their customers.

But don’t assume that if your bank or credit union hasn’t explicitly mentioned this escape clause that it isn’t willing to grant it. If you want to cash out a CD early right now, simply ask. Even if your institution isn’t offering penalty-free withdrawals across the board, they may very well allow it for struggling customers who simply make the request.

CD, time deposit, share certificate… What’s the difference?

By Sabrina Karl

If you shop for certificates of deposit in the newspaper or online, venturing beyond just your local bank, you’ll likely encounter some names for CDs that leave you wondering if you’re considering apples to apples.

CDs are what the banking industry calls “time deposits”, or sometimes “term deposits”. Those names signify that your deposit is made with an agreement that you will keep it at the bank for an established time period or term. This is different than checking, savings or money market accounts, where you can generally deposit and withdraw funds at any time of your choosing.

But while “certificate of deposit” and “CD” are fairly ubiquitous terms, not every U.S. financial institution uses those names, and shopping for the best CDs in the country will occasionally put a product in front of you that certainly looks like a CD but goes by some other name.

This most often happens at credit unions or community banks. Instead of CDs on their product menu, you might simply see “time deposits” or “term deposits”, such as “3-Year Time Deposit”. And at credit unions, where customers are members who hold a share in the credit union, you might see “share certificates” instead of CDs.

Does this matter? Essentially no. While some wonky banking rules specify minor differences in these products, they do not come into play for the vast majority of consumers. Whether it’s called a CD or a time deposit or a share certificate, it’s the same product: Deposit X dollars for a period of Y months or years and we’ll pay you Z percent interest.

So when you see X, Y, and Z in a deposit product’s description, rest easy that you are looking at that institution’s version of a CD, no matter the marketing name they’ve given it.