SECTION FOUR : Security and Efficiency in Managing Your Bank Accounts

Being certain that your money is available when you need it is quite important.  This is the utmost concern especially in modern banking when banks we have never heard of are showing up everywhere.  It is actually not very hard to find out more about the banks’ security. 

Banking Security

1. FDIC Insurance

The banking industry is regulated by the federal government.  Before depositing any money, make sure that the bank is FDIC – i.e., insured by the Federal Depository Insurance Corporation.  This means that in the case of the bank going bankrupt, your deposits will be insured up to $100,000 per account holder (i.e., joint account will be $200,000).

Another logical strategy is to spread your money across different bank accounts at under $100,000 each.  All your money will then be covered totally by FDIC. 

Tip: You can check if your bank is FDIC insured via the FDIC: Bank Find Tool.

2. Bank Financial Status

Even if your bank is FDIC insured, you should only take that as a safety net.  Have you ever tried getting money back from the Federal Government or an Insurance Agency in that regard?  It is not too difficult to find out if your bank is in good shape.  The FDIC publishes the bank report cards every year.

You can get the data on the banks from the FDIC: Institution Directory page.  As the rule of thumb, we recommend that you pay special attention to the bank’s total assets and total liabilities.  

Alternatively, you can use the application we have put together here at Money Economics: 1911(TM) BETA.  This application allows you to search for all FDIC banks currently operating in the U.S. along with their key performance indicators (KPI's) with comparison graphs to other banks in the same asset concentration hierarchy.

3. Bank Interest Rate Stability

A bank’s interest rate is guided by the Federal Reserve’s rate.  However, data indicates that not all banks follow this guideline identically.  The actual decisions on when, how often, and how much to change the rate differs across all banks.  It is understandable that banks make these decisions contingent on their business prospects and investments. 

4. Online Banking Security

There is a great deal about internet security in general.  Most web browsers, whether it is Microsoft Explorer, Firefox, Apple Safari, or Opera, all take this into account.  However, it is still very dependent on us, as users, to make decisions at the end.  Here are some online banking security tips that everyone should be aware of:

• The online banking page should be secured;
• Any email from your bank should address you by YOUR NAME;
• Banks should NEVER ask you for your PIN over email;
• Banks NEVER send out emails with links for you to verify your login and password;
• If any email from the bank looks suspicious, CALL them up by phone; and
• The bank’s online banking should look PROFESSIONAL.

Efficiency in Account Management

One of the true marvels of the digital age is not having to run to the bank and write checks! All of our banking business can be conducted online, without waiting in line. These simplifications to our finance routines can easily lower our guards. It is important to stay alert and not get too caught up – like that easy class in college you never studied for but nearly failed.

1. Managing Multiple Accounts

We all have multiple accounts and bills.  They can be savings, checking, money market accounts, and car payment, credit cards, cell phone, utilities, mortgage, and other recurring bills.  This can be hazardous to your financial health (via your credit score) if you fail to pay any of the bills on time, or it can take 10’s of hours each month to keep up.  Thus, it is vital to manage them efficiently.

A clear battle plan is necessary.  Some of the simple things you can do to increase this efficiency include:

• Change payment due dates so they coincide;
• Consolidate your credit cards; and
• Direct payments for your utilities.

For a more detail account on this, read the article on Simplifying Your Finances.

2. Online Banking Software and Services

Software makers have invested heavily into online banking.  Many of the end results are rather remarkable.  They all have features such as budgeting for the month or year, downloading and importing all your banking and credit card activities, breaking down your expenses into categories, and even allow you to schedule your bill pays. 

Some of the most prominent players in this software space include:

• Microsoft Money – usually about $50 but can be much cheaper (or free) with promotional rebates;
• Quicken – very similar to Microsoft Money in terms of product features and price;
• Yodlee – specializes in account aggregation and online financial services.  You can treat this as an online counterpart of Microsoft Money and Quicken.