Unauthorized use of a debit card or ATM card is covered by Federal Reserve regulation E and The Electronic Fund Transfer Act of 1978. These banking regulations provide broad protections to consumers regarding fraudulent and unauthorized electronic financial transactions even if the unauthorized transactions were conducted by a family member or if the account holder unknowingly released their bank account information and PIN number.
The primary objective of the act and regulation is the protection of individual consumers engaging in electronic fund transfers and remittance transfers. By providing extensive protection to consumers engaged in these transactions, the Federal Reserve supported consumers in their use of electronic payments, online banking, substitute checks, and a variety of other electronic funds transactions and transfers.
The regulation covers a wide range of electronic financial transactions but it also specifically covers a consumer’s liability for an unauthorized electronic fund transfer at a bank or other financial institution.
Under the regulation, a bank customer has limited liability for unauthorized withdrawals if they notify the bank in a timely manner. The bank customer’s loss from the unauthorized transaction with a debit card or ATM card is limited to $50.00 if the bank is notified within two business days. If the customer notifies the bank after two business days but within 60 days, the loss could be as much as $500.00. Should the customer not report the loss within 60 business days, the customer risks the potential for unlimited loss due to the unauthorized use of the card.
While the Federal banking regulations provide broad protections to consumers for electronic transactions with their bank, there are situations where the regulations will not protect certain unapproved financial transactions by family members.
The regulation defines an unauthorized electronic fund transfer as a transaction from a consumer’s account initiated by a person other than the consumer without actual authority to initiate the transfer and from which the consumer receives no benefit. However, the term, unauthorized, specifically does not include an electronic fund transfer initiated by a person who was furnished the access device to the consumer’s account by the consumer, unless the consumer has notified the financial institution that transfers by that person are no longer authorized.
The current regulations protect consumers even when they make mistakes but, customers can still be liable for unauthorized withdrawals if their card is lost or stolen and they do not follow the rules to notify the bank or if they explicitly gave permission to the user in the past and failed to notify the bank that the user was no longer authorized to make transactions with the card or account.
A revocable trust is a document created by a grantor to manage their assets during their lifetime and distribute the remaining assets for the eventual benefit of a designated beneficiary or beneficiaries. A trust is a separate legal entity that is administered by a trustee. The trust set up by the grantor establishes a trustee who is the legal representative and controller of the trust assets. Often with revocable trust bank accounts, the grantor is also the trustee.
With a revocable trust account, the grantor can change the terms, beneficiaries, trustee or other features at any point during the grantor’s lifetime. The owner of the trust controls the bank deposits in the trust during their lifetime. A revocable trust bank account is eligible for FDIC insurance.
The FDIC provides coverage for several different categories of ownership which allows for insurance coverage well above the standard $250,000.00 limit. The revocable trust is a separate legal entity from the grantor who creates it, even though the grantor may also be the trustee.
Since the revocable trust bank account is recognized as a separate legal entity, FDIC limits consider the trust to be a separate form of account ownership when evaluating the maximum amount of FDIC coverage for the owner. The FDIC defines the term “owner” to mean the grantor, settlor, or trustor of the revocable trust.
Deposit insurance coverage for revocable trust accounts is provided to the owner of the trust. Each owner of a revocable trust bank account is insured up to $250,000 for each unique eligible beneficiary named or identified in the revocable trust, subject to specific limitations and requirements. The amount of coverage is based on the number of beneficiaries named in the trust and, in some cases, the interests allocated to those beneficiaries, up to the insurance limit.
This information is intended to give consumers a basic understanding of revocable trust bank accounts, but it cannot substitute for a thorough review with an estate attorney or tax professional.
The Federal Deposit Insurance Corporation (FDIC) is an independent agency of the federal government headquartered in Washington, D.C. The mission of the FDIC is to preserve and promote public confidence in the U.S. financial system by insuring deposits in banks and thrift institutions. The FDIC protects depositors’ funds in the event of the financial failure of an insured bank or savings institution.
The standard FDIC insurance amount is $250,000.00 per depositor, per insured bank, for each account ownership category. Deposits maintained in different categories of legal ownership at the same bank can be separately insured. Therefore, it is possible to have deposits of more than $250,000 at one insured bank and still be fully insured. Deposits in one insured bank are insured separately from deposits in another insured bank.
In the event of a bank failure, FDIC deposit insurance covers the balance of each depositor’s account, up to the applicable insurance limit, including the account principal and any accrued interest through the date of the bank’s closing.
The FDIC insurance only protects depositors and their deposits at an insured bank. Types of bank deposit products covered include checking accounts, NOW accounts, and savings accounts, money market deposit accounts (MMDA), and time deposits such as certificates of deposit (CDs). The FDIC does not insure other financial products offered by banks including; securities, mutual funds or similar types of investments that banks and thrift institutions may offer.
Any individual or entity can have FDIC insurance on a deposit. A depositor does not have to be a U.S. citizen or a resident of the United States to have accounts covered by the FDIC.
The FDIC web site, fdic.gov, provides resources to help consumers determine if a bank is an FDIC insured institution. In addition, an FDIC official sign is posted at every insured bank and savings association. The agency’s web site also offers an online tool to help consumers calculate the maximum amount of FDIC insurance available with different account ownership categories.
FDIC insurance is backed by the full faith and credit of the United States government however, the deposit insurance fund consists of premiums already paid by insured banks. Since the formation of the FDIC in 1933, no bank customer has ever lost money that was held in an FDIC insured deposit.
There is no law that requires a bank or other financial institution to obtain a customer’s social security number before opening an account. However, the rules are very specific for U.S. residents regarding what identification information is acceptable and there is very few alternatives for customers that do not have a social security number. For non-U.S. residents, the identification information required by banks is quite different.
The USA PATRIOT Act, signed into law in 2001, prescribes regulations establishing minimum standards for financial institutions and their customers regarding the identity of a customer that shall apply with the opening of an account at the financial institution (Section 326 of the USA PATRIOT Act).
Based on the rules and regulations established with the passing of the PATRIOT Act, banks and other financial institutions are required by law to verify the identity of their customer before opening an account. A component of the legally mandated identification process entails an identification number. An identification number for a U.S. resident opening a new bank account is a taxpayer identification number (TIN) or evidence of an application for one.
The term, taxpayer identification number is very specific. The taxpayer identification number referred to by the rules and regulations set forth in the PATRIOT Act is defined using the parameters promulgated by the Internal Revenue Code (Section 6109 of the Internal Revenue Code of 1986). The Internal Revenue Code identifies a taxpayer identification number (TIN) as an individual social security number (SSN) or an IRS individual taxpayer identification number (ITIN).
A taxpayer identification number and an Individual Taxpayer Identification Number are two distinctly different terms. An Individual Taxpayer Identification Number is a tax processing number issued by the Internal Revenue Service. The IRS created the Individual Taxpayer Identification Number so that individuals who are not eligible to obtain Social Security Numbers could obtain an identification number for tax purposes.
The rules and regulations that apply to banks and other financial institutions regarding customer identification programs for U.S. residents are quite clear. A bank cannot open an account for a U.S. person that does not have a taxpayer identification number.
Note, a bank does not need to obtain a taxpayer identification number when opening a new account for a customer that has an existing account, as long as the bank has a reasonable belief that it knows the true identity of the customer.
With a standard joint bank account, each owner of a joint account has full control of the account without regard to whose money was deposited in the account.
Each joint owner on a joint account may withdraw, by any means the bank makes available, any or all of the funds on deposit, close the account, enter into agreements regarding the account, issue stop payments on any check drawn on the account, and engage in related financial activities that involve the joint account and the funds in the account. In general, the joint account owner has the right to spend the entire account, it does not matter if only one account holder had put the money into the account.
Control over the money in a joint bank account is one of the attributes inherent with this type of account ownership that can lead to disputes and disagreements between the account owners, especially when the addition of a joint account holder is only for convenience. There are, of course, situations where joint accounts are sensible but there are risks involved in making someone a joint owner.
Account owners should be aware of the risks with joint accounts before adding a joint owner to their account. Most bank account disclosures will cover the basic rights and responsibilities of the account owners in a joint account.
There are a number benefits available for foreign residents when they open and maintain a bank account in the U.S. Unfortunately, after 9/11 and the subsequent Patriot Act legislation that passed in 2001 it has become increasingly difficult for foreigners to open a U.S. bank account.
Federal and state banking laws do not directly bar non-residents from opening a U.S. bank account. The problem for non-residents is stems from the policies and procedures that banks must adhere to as a result of the Patriot Act. The rules established through the Patriot Act require each bank to have a customer identification program (CIP) that covers procedures for verifying the identity of each customer.
The identification, verification, and record keeping provisions of the Act make it much harder for a bank to obtain the necessary supporting documents from non-residents. At a minimum, the bank must obtain the following identifying information from each customer before opening an account:
Account holders name.
Date of birth (for an individual).
The identification number for a U.S. resident will either be a social security number or an individual taxpayer identification number (ITIN) (or evidence of an application for one). The identification number for a non-U.S. person is one or more of the following:
An ITIN or individual taxpayer identification number.
A passport number and country of issuance.
An alien identification card number.
A number and country of issuance of any other unexpired government-issued document evidencing nationality or residence and bearing a photograph or similar safeguard.
The customer identification program rules required through the Patriot Act establish the minimum identification information and they allow flexibility for each financial institution to adopt procedures appropriate to its size and customer base. This means the identification procedures may vary significantly from one bank to another.
Due to the complications and ambiguity surrounding foreign account verification and funding sources, most banks and other regulated institutions generally choose to adopt policies and procedures that are more comprehensive than those required by law.
Furthermore, given the availability of counterfeit and fraudulently obtained documents, banks are especially vigilant when verifying the document of non-U.S. residents. As a result of the complications associated with verifying foreign documents, applicants will generally be required to open a new account at a bank branch location in person.
Bank checking and savings account holders do not have to be a US citizens or residents but, the requirements needed to satisfy the funding and identification requirements can present an insurmountable burden. Some banks simply do not want to get involved in the overly complex process and refuse to open accounts for foreigners.
The differences between having a joint bank account and an account with a power of attorney (POA) are significant. With a joint bank account, both individuals on the account are equal owners of the account and its contents. Each joint owner can use the money in the account without consent of the other joint account owner. An agent designated by the power of attorney does not have ownership of the account and is prohibited from using the money in the bank account(s) for their own purpose.
An agent or power of attorney is someone that is authorized by the account owner to transact business on their behalf. The account holder does not need to add the name of the agent to the account or otherwise create a joint account to use a power of attorney. The agent is a fiduciary which means they must always act in the principal’s best interest. The agent cannot take ownership of the bank assets, only temporary control as outlined in the power of attorney document.
In general, a power of attorney may be written to grant a wide range of powers to the designated agent or it may be written to grant only limited powers allowing the agent to engage in only select transactions or types of transactions. A joint account has no controls over ether account holder.
While a power of attorney may give the agent broad authority to perform different financial tasks on the account owner’s behalf, the agent must follow the guidelines set out in the written power of attorney. For example, the account owner can could limit the power to only allow the agent to write checks from their bank account to pay bills.
In addition to the account restrictions that can be written into a power of attorney, a power of attorney can have a time limit after which time they expire. Joint account ownership is not easily changed and a bank account generally remains as a joint account until the account is closed. A power of attorney can be changed at any time as long as the account owner is competent. A power of attorney will expire when the account holder granting the power of attorney dies.
Banks offer joint accounts as a regular course of business but they can be a little bit finicky about POAs. Banks are not required to take a power of attorney and when they do, some banks may prefer that the account owner use the bank’s approved power of attorney form.
Most banks in the U.S. do sell money orders to their customers. In fact, many banks that offer money orders to their customers also offer money orders for non-customers. The fees for money orders purchased from a bank vary widely from institution to institution and will often, vary based on the type of account or accounts held with the bank. The money order fees will also increase rather substantially, in most cases, if the money order is purchased by a consumer that is not a customer of the bank.
In contrast the average price for money orders across all banks, among the larger U.S based banks, the fees for money orders are rather consistent from bank to bank. A quick sample of the larger U.S. based banks shows an average cost of $5.00 per money order.
Based on bank fee data obtained in April by SelectCDrates.com, all but one of the larger U.S. based banks charges $5.00 for a money order for clients that have a basic checking account. The one exception is Fifth Third Bank which charges just $1.00 for a money order.
At Chase Bank, customers with a basic checking account can purchase money orders up to $1,000.00 for a $5.00 fee however, Chase does not charge its clients for money orders with some of the bank’s premium checking accounts.
Bank of America has a $5.00 fee for customer money orders.
Wells Fargo charges $5.00 for money orders but waives the fee on Preferred Checking Accounts.
Citibank has a fee of $5.00 for money orders but has no charge on their Citigold Accounts.
The US Bank fee schedule indicates the charge is $5.00 on money orders regardless of the account type as does PNC Bank and BB&T Bank.
TD Bank has a $5.00 fee for their standard checking accounts and has no fee for the premium checking accounts.
SunTrust offers money orders for customers at a cost of $5.00 per item and $10.00 per item for non-clients.
The Fifth Third Bank fee for a money order is $1.00 each and the fee is waived for the Enhanced, Preferred and Private Bank checking accounts.
Regardless of the bank classification type, the vast majority of FDIC insured banks offer money orders. Money orders have been a staple product used in the U.S banking system for years. Even in an age of banking where there are a plethora of checking account options, electronic funds transfers, and debit cards, these payment products continue to be a widely accepted and used method for making financial transactions.
Certificates of deposit (CDs) generally offer higher interest rates than traditional savings accounts. However, savers will find that some banks promote high yield savings accounts with interest rates that surpass those found on traditional certificates of deposit.
Interest rates on bank savings products, including savings accounts and certificates of deposit, vary from bank to bank. Banks offer these products with varying interest rates and account features to attract new customers. The funds on deposit at the bank are used to make loans and manage the bank’s assets and liabilities.
Different banks will have different funding needs which results in a plethora of savings products and rates available to consumers. Some banks have ample deposits and therefore offer more modest rates of return to their new and existing customers. Other banks may be expanding and building their loan portfolio and therefore, they will have a need for additional deposits and promote lucrative incentives to lure in new customers and new money.
CDs and savings account have very different structures that can be attractive for both the bank offering the product and the consumer using the product. Most certificates of deposit have a fixed interest rate and require the account holder to keep their money in the account for a predetermined amount of time. On traditional CDs, early withdrawals will incur a financial penalty. The bank and the account holder know the costs and returns offered on these accounts allowing both to manage their financial position for an extended period of time.
Savings account have no maturity date and the funds can be withdrawn without penalty or advance notice by the account holder. More importantly, savings accounts are variable rate accounts. The rate offered on a savings account today may change at some time in the future. This feature gives the bank flexibility to reduce the rate on their savings accounts should the interest rate market change or their asset and liability structure change. The bank has the option to alter rates over time and the account holder has the option to easily withdraw their funds.
Even when a high yield savings account provides a return above that on a certificates of deposit, these cases are usually only present when comparing short term or mid-term CD accounts. Rarely, will a bank rate shopper find a high yield savings accounts that offers a rate above a long term, high yield CD account.
There have been times when a bank or banks have actively marketed chart busting rates to bring in money while the institution is in financial distress. The FDIC has a specific rule that imposes interest rate restrictions for financial institutions that are less than well capitalized to prevent these banks from attracting new money as a means to shore up their balance sheets and bottom line. Under Part 337.6 of the FDIC Rules and Regulations, a less than well-capitalized insured depository institution may not pay a rate of interest that significantly exceeds the prevailing rate in the institution’s market area or the prevailing rate in the market area from which the deposit is accepted.
A number of banks in the U.S. sell postage stamps direct to their customers. Some banks sell stamps through their network of bank branches while other offer this service through their Automated Teller Machines (ATMs). While there are a number of banks, big and small, that sell postal stamps there are a number of banks that either, do not currently offer stamps as a convenience service for their customers or they have discontinued this service. Among the major U.S. based banks, the majority are not currently selling stamps to new or existing customers.
Included among the larger banks in the country that sell stamps are Wells Fargo Bank, US Bank, Fifth Third Bank, KeyBank, and Associated Bank. Some of the larger banks that do not offer stamps for sale to their customers include Chase Bank, Bank of America, PNC Bank, TD Bank, BBT Bank, SunTrust Bank, Capital One Bank, Citizens Bank, Bank of the West, and Union Bank.
More information about the names and locations of banks that sell stamps can be obtained by contacting your local bank directly or using the USPO’s web site. The online search feature at the USPO site allows users to view locations that sell stamps. By selecting “alternative locations” on the menu options, consumers can find a list of retailers that sell stamps by zip code which includes bank that sell stamps within the selected region.
Banks that do sell stamps offer them for sale as a convenience service for their customers and generally offer the stamps at the same price as the USPO.
Not all fixed income investment options have the same level of risk or degree of safety. A safe investment, whether it is a fixed income investment or any another investment type, is regarded as one that does not expose the account holder to significant levels of risk. Risk, unfortunately, can come in many forms.
All investments will have some degree of risk. Risk can be measured by the potential for loss of the principal investment, or risk that the investment cannot be readily converted to cash or cash equivalents in the future, or risk that the rate of return will be altered or diminished overtime. Most investors that are looking for a high yield via a fixed income investment are trying to avoid market risk or the risk that the investment will lose its value.
The main categories of fixed income investments for investors to consider as safe or having low market risk are individual bonds, bond funds or exchange-traded funds (ETFs), and certificates of deposit. Accounts such as savings accounts and money market accounts are variable rate accounts and do not have fixed rates and are not categorized as fixed income investments.
When comparing the returns and risk associated with individual bonds, bond funds, and bank CDs, the best balance of risk and return can be found with bank CDs.
Bond funds, both mutual funds and ETFs, are highly susceptible to market risk. The market risk is based on the possible fluctuation in price of the fund. Bond funds can drop in value based on the value of the individual bonds held in the fund. The value of bond fund shares will decline if interest rates increase.
Holding a bond fund or ETF is not the same as holding an individual bond. The bond funds rollover their assets and buy and sell bonds as needed. These changes impact the future net asset value of the fund and hence, the fund can fluctuate in price over time.
Individual bonds that are held until maturity are not exposed to market price risk. Unless the issuer of the bond defaults the holder will receive their principal investment back with accrued interest. There is no risk of price fluctuation unless the bond holder wants to sell the bond prior to maturity.
Individual bonds are still vulnerable to default risk. Investors in high yield bonds and bond funds have experienced this many times in the past with some very high profile cases occurring during the recent housing bust. The risk of default can be reduced by investing in government bonds, making a reasonable assumption that the U.S. government will never default on its bond obligations.
Bank CDs and individual government bonds are therefore two of the least risky, high rate of return, fixed income investments. Both types of investments offer fixed interest payments and both are backed by the full faith of the U.S government. FDIC insurance representing the full faith backing of the U.S government for certificates of desists as long the account holder maintains accounts insured within the FDIC threshold.
In the current interest rate environment, bank CDs win the war over the best rates of return when compared to U.S. Treasury securities. Throughout 2015 and into the first quarter of 2016 Treasury securities offered a rate of return between 0.05% and 2.50%, depending on the term of the Treasury bill, note, or bond being evaluated. The six month Treasuries peaked at 0.58%, one year Treasury rates topped out at 0.76%, and five year Treasuries reached its highest yield at 1.81%.
In contrast to the returns on Treasury securities, certificate of deposit holders could earn measurably higher returns. The best six month CD rates available in 2015 and through the first quarter of 2016 hovered around 0.88%, the best one year CD rates were at 1.30%, and the best five year CD rates hit 2.25% and above. All of the highest yielding CD maturities available during this time period eclipsed the yields offered on comparable term U.S. Treasury securities.
Pure vanilla, fixed income investments such as bank certificates of deposit can be a wise choice when either the markets are in turmoil or there is a baseline need for diversification.
Banks often sell automatic renewal policies on their CDs as an added value for their customers. But, for the astute saver or investor, automatically renewal CDs are anything but a value added feature. The main drawback with a CD that automatically renews is the element of surprise regarding the CD interest rate that will be earned on the account once it mature and renews.
The main drawback to auto renewing CDs is the element of surprise regarding the new CD interest rate earned the account will roll into. When a CD account automatically renews, it renews into a new CD with the same or similar term but at the prevailing interest rate offered by the bank or financial institution.
Regardless of what interest rates were available when the account holder first opens the account, the renewal rate will be set at the bank’s discretion. The prevailing interest rate offered by the bank at the time of renewal could be a competitive rate or it could be a rate that is less than ideal.
Sure, with an automatic renewal feature it’s nice not having to worry about contacting the financial institution that holds a CD account in order to rollover the maturing account into a new one but, what if the current rate on that account is well below the top yielding CD rates are even below the average rate. Who wants to earn below market returns in exchange for the simple convenience of not having to monitor their maturing accounts.
And when an account that automatically renews does so with an interest rate that is not competitive, the account holder will have sit and wait for the new CD to mature to get their funds back without paying the standard and often onerous, early withdrawal penalty.
Interest income derived from bank certificates of deposit (CDs) is taxed as ordinary income. Interest earnings from a bank CD or other traditional interest bearing account are generally added to any additional earned income and other income as the tax payer figures their adjusted gross income and tax obligation. The tax rate or percentage of interest that an individual account holder will be obligated to pay for taxes will depend on the individual’s taxable income and marginal tax rate.
The rate of taxation is applied only to taxable income. Taxable income is not the individual or households gross income. Taxable income generally reflects the gross income minus any deductions, credits and exemptions that are allowed and claimed.
The federal income tax bracket for the tax payers is used to determine at what rate any taxable income will be taxed including any interest income earned from a bank certificate of deposit. The applicable tax rate will often vary by tax year and may be different based on the filing status of the tax payer.
The tax payers filing status determines their filing requirements, the standard deduction amount they are allowed, their eligibility for certain tax credits and tax deductions, and their income tax due. Because of the various parameters that can impact the CD account holders’ tax liability; it is not possible to determine the amount of interest earned on a CD that the account holder will be obligated to pay for taxes without all of the relevant information.
The tax obligation can be calculated by the account holder with the information they have or can readily obtain. The amount of interest earned on a certificate should be reported to the account holder by the bank or financial institution where the account is held. For a standard CD account, the amount of interest earned will be reported on form 1099-INT. This is the amount of interest the account holder must report to the IRS.
Taxable interest tax return is normally reported on line 8a for the IRS form 1040; line 8a for the form 1040A; line 2 for form 1040EZ. If interest income earned is more than $1,500.00, form 1040EZ cannot be used and the tax payer must use form 1040 or 1040A. Some tax payers may also be required to file Schedule B with their form 1040A or 1040 if their combined taxable interest income is more than $1,500.00 or under certain other conditions are met (see the form instructions).
The main exception regarding income tax on CD interest earnings is, the IRA CD. Traditional IRA accounts are tax-deferred accounts and interest earned on Roth IRA CDs is generally not taxable. Tax fliers generally do not include interest income from IRAs in their taxable income until they make withdrawals from the IRA.
These are the most common circumstances surrounding interest earned and taxes due on CD accounts, consult a tax advisor for more details and specific situations.
A high yield certificate of deposit (CD) account is just like a standard CD account, except the rate of return or annual percentage yield (APY) is typically higher than the rate found on standard CD accounts. High yield CDs are available at banks and credit unions and are frequently marketed by online banks or online banking division of standard banks.
Certificates of deposit are common savings account that earns interest at a higher rate than regular savings account. Generally, CD accounts that offer the highest interest rates or, high yield CD accounts, have no greater demands or requirements than standard accounts.
While CDs are a popular way of saving money, earning a consistent income stream and diversifying savings with principal protection and a guaranteed rate of return there are some drawbacks with these accounts. With a CD account, the account holder must deposit the money with a bank or credit union and leave it there until the account reaches its maturity date. The main drawback of any CD is that the bank or credit union offering the CD will impose substantial penalties for early withdrawals from the account.
Along with the early withdrawal penalty, the interest earned on a long term CD may not keep pace with inflation, and if interest rates move higher, CD accounts held before rates move up may no longer be as high as current CD rates. To avoid or reduce any drawbacks from rising interest rates, CD shoppers should compare the best rates available and secure a high yield CD with a term that best matches their needs.
High yield CDs can have several different features. CD shoppers will find most accounts have fixed rates but variable rate accounts are also available. These accounts can be opened with low minimum deposits or with large deposits, known as jumbo CDs. Additional special features may include step up CDs, rising rate CDs, liquid CDs and other exotic add-on features. High yield CDs can be obtained with short term maturities such as three and six month terms or long term maturities which can range from one to several years.
When choosing a high yield CD account, investors should make sure they fully understand the CD interest rate, the term or maturity of the account, any special account features, the minimum opening balance and balance required to earn the advertised yield, and the early withdrawal penalty imposed by the financial institution just in case the funds are needed prior to maturity.
Debit card authorization holds are a type of financial hold that is placed on a customer’s available funds in a bank or credit union account do to a pending debit card transaction.
When a bank or credit union customer uses their debit card to conduct a credit transaction, a transaction that does not use a PIN, the amount of the transaction is electronically transmitted by the merchant to the financial institution for the total purchase amount in order to obtain the payment authorization. The amount of the purchase is then placed on hold at the bank or credit union and this amount is immediately deducted from the available balance. The debit card hold is released as soon as the transaction clears or after a predetermined amount of time has passed.
In some situations, the debit card authorization amount may be higher than the final settlement number or actual purchase amount. Some merchants, such as hotels, restaurants, rental agencies and gas stations, will preauthorize an amount that is higher or lower than the actual purchase amount. These merchants may preauthorize transactions for an amount that is higher than the final purchase amount because they do not know how much the purchase will be in advance of the completed transaction. In some of these circumstances the debit card authorization can result in significant holds against the customer’s account, reducing their available balance for other uses.
A credit union share certificate is a special type of deposit account offered exclusively by credit unions that typically offers a higher rate of interest than a regular savings account. Share certificates are similar to certificates of deposit issued by banks. In fact, a credit union share certificate is identical in its function compared to a bank CD.
Like bank CDs, these certificates require the account holder to invest funds for a specific period of time, called the term. In the same way a bank customer can with a CD, credit union members can deposit money to a share certificates account for a fixed term of their choice and earn a higher interest rate.
In general, the longer the term the higher the rate of return on the account. Share certificates are commonly fixed rate investment accounts but they may also have variable rates or rates that can be bumped up by the account holder or have other payment options that are similar to bank certificates.
Account holders that want to withdraw before the end of the term, may have to pay a penalty referred to as an early withdrawal penalty. The penalty amounts, like the interest rates that are offered on these accounts, will vary by institution.
Credit unions are not-for-profit organization owned and controlled by its members. The term “share” refers to funds the account holder has on deposit, and is a figure that is used in computing dividends or interest earned on the account. Federal credit union members and account holders are provided with a safety via a federal insurance program similar to a bank, with savings insured up to $250,000 by the National Credit Union Share Insurance Fund (NCUSIF).
Interest earned on a savings account has to be reported as income on the account holder’s personal tax return. Most interest paid out from a bank savings account, or interest that is credited to a savings account, and can be withdrawn without penalty is taxable income in the year it becomes available to the account holder.
As a general rule, any interest earned on a bank savings account is considered taxable income even if the earned interest remains in the account and the account holder does not withdraw the funds. Some interest earned from a bank savings account that is held in a tax exempt account may be free of income taxes. Interest received from a tax-exempt still must be recorded but the account holder on their individual tax returns.
Bank savings account holders should receive either form 1099-INT or form 1099-OID at the beginning of each year for any interest payments made by the bank. 1099-INT is for reporting taxable interest income and 1099 OID is for reporting tax-exempt interest income or payments. These forms should provide a listing of the total amount of interest payments from the bank that the account holder has to report on their individual tax returns.
The account holder must include all interest income reported on their federal income tax return. Note, the bank will also send a copy of the forms reporting the interest earned to the Internal Revenue Service.
Interest earned in a tax-deferred account is generally not taxable until it is withdrawn. While the bank will still send the applicable form disclosing the amount of interest earned by the account holder, the money held in a tax-advantaged retirement account such as an individual retirement account (IRA) grows tax-deferred until withdrawal.
Lockbox services are provided by banks to business customers to help businesses receive and deposit payments. With a lockbox service, the payments a business would collect from their customers are made directly to a designated post office box. The bank then collects the deposits or payments that have been sent to the box, processes them and deposits the funds directly into the company bank account.
Lockbox services are set up to assist businesses with their payment processing to simplify payment collections and make it more efficient. The service can save businesses on the man power that is normally needed to collect, process, and deposit remittances. The service also expedites payment collections and posting payments to an account and therefor reduces the float time and the time when funds are available. Timely payment information and data that the banks make available can also facilitate accounting functions, such as account reconciliation, for businesses.
Many banks that provide lockbox services will customize their banking services for their business customers. Services can include online banking functions and data transmission with real-time financial data availability, multiple box locations for faster payment collections and processing, and processing for both electronic payments and paper transfer of funds.
Bank lockbox services may also be referred to as cash management services, remittance services or remittance processing.
Bank money market accounts are subject to the rules restrictions established under the Federal Reserve Board Regulation D. This regulation specifies how banks must classify different types of deposit accounts for reserve requirement purposes. The regulation covers transaction accounts such as checking accounts, savings accounts, and related bank accounts
Under regulation D, bank money market accounts have the same features and characteristics as savings deposit accounts. These accounts are subject to the transfer and withdrawal limits that banks must impose based on Regulation D.
For an account to be classified as a savings deposit (which includes money market accounts) the account holder or depositor may make no more than six convenient transfers or withdrawals per month from the account.
The Federal Reserve defines convenient transfers and withdrawals to include preauthorized, automatic transfers (including but not limited to transfers from the savings account or money market account for overdraft protection or for direct bill payments) and transfers and withdrawals initiated by telephone, facsimile, or computer, and transfers made by check, debit card, or other similar order made by the depositor and payable to third parties.
Other, less-convenient types of account transfers made with the money market account, such as withdrawals or transfers made in person at the bank, by mail, or by using an ATM, do not count toward the six-per-month limit and do not affect the account’s status as a savings account. Also, a withdrawal request initiated by telephone does not count toward the transfer limit when the withdrawal is disbursed via check mailed to the depositor.
Bank customers that exceed these limitations may be charged a fee, have the account closed, or have the account converted to another account type. The bank account agreement will specify the actions the bank will take should a customer exceed the transaction limitations on a bank money market account.
The Federal Reserve’s Consumer Compliance Handbook identifies Regulation D and the limitation set for savings and money market accounts.
Banks and credit unions offer a variety of certificate of deposit terms which can include standard terms and non-standard terms or odd term CDs. Common CD terms or maturities include 3 month CDs, 6 month CDs, 1 year CDs and on up to 5 year term CDs with the terms frequently divided into 6 month periods.
An odd term CD is one that has an unusual term to maturity. An example of an odd term CD may include a 4 month CD, 11 month CD, 25 month term CD, and so on. Odd term CDs can have a variety of maturities, depending on the issuing banks preference.
Banks generally use odd term CD as a marketing tool. When banks are formulating new CD rate promotions they often pick an odd term which will not interfere with the current rates offered by that financial institution on their standard term CD accounts.
Depending on the various products and promotions that are available, odd term certificates can have advantages that include above average yields and targeted terms that may better match an individual’s savings and investment needs. Consumers comparing CD rates should consider odd term certificates along with standard term CDs in order to find the best CD rate on the market.
Of course, not all odd term CDs are great buys. Consumers should never underestimate the talent found in a bank’s marketing department. Some financials pundits go so far as to accuse banks of using odd term CDs to confuse consumers about the rate of return offered. While, it is always recommended that banking customers review the fine print and comparison shop, the accusation that odd term CDs are designed to confuse CD shoppers is just plain nonsense.
Along with standard term bank accounts, prospective CD investors should review the odd term CD account terms carefully and even compare those terms against the closest comparable product with a keen eye on the Annual Percentage Yield (APY) to ensure they are obtaining the best option for their needs.
Overdrafts crop up when any debit transaction in a checking account, money that is taken out of the account, exceeds the available balance and the bank still approves the transaction. An overdrawn account can result from a number of different types of financial transactions initiated by the accountholder including ATM transactions and debit card transactions along with checks and other electronic funds transfers. When the bank covers the payment or authorizes the debit transaction that results in an overdrawn account, the account holder will generally incur an overdraft fee.
Federal banking regulations that became effective on August 15, 2010 requires all banks to obtain the checking account holder’s permission before they can apply their standard overdraft practices to ATM transaction and everyday debit card transactions. The regulations were passed to stop banks from charging high overdraft fees when a checking accountholder is using an ATM or debit card for relatively small transaction amounts. (see, http://www.federalreserve.gov/consumerinfo/wyntk_overdraft.htm)
Bank customers that do not enroll in their bank’s overdraft protection services, will have any ATM withdrawals and debit card transactions declined that would have resulted in an overdrawn account. While the bank will not charge overdraft fees on declined ATM and debit card transactions, these transactions will not be honored and the payments are not processed or covered by the bank. Overdraft coverage for ATM and debit card use must be selected by the accountholder if they want the bank to cover an overdraft when they are trying to get cash or make a purchase with their debit card.
ATM use with a bank account will generally not impact an individual’s credit or credit score. Regular banking activities such as withdrawals and deposits through an ATM will have no affect on the credit standing of the account holder. On the other hand, if the ATM actions are conducted using a credit card, which would then be considered a cash advance; there could be some effect on the individual’s credit and credit score. However, even the impact on a user’s credit profile resulting from a credit card used through an ATM has very little influence on their overall credit rating.
If the ATM activity involves a bank account such as a checking account or savings account with a check card or ATM card, there is no effect on an individual’s credit score or credit history unless the banking transaction leads to an overdrawn account. Overdrawn bank accounts can lead to data getting stored in a credit report. The data will often not show up in a traditional credit report, compiled by the big three credit report agencies, but rather in one of the specialty credit reporting agencies used in the banking industry.
Credit reports are just that, credit reports. They contain information about the individual and their credit history not their banking history unless it involves credit advanced by the bank. Taking money out of a bank account that belongs to the ATM user is a debit activity not a creation of credit. Regular bank activity via check use, ATM use, or other electronic means does not normally involve credit. A credit report can show banking activity when an account holder overdraws their account and bounces checks. Using an ATM will generally not cause such action and therefore will not impact an individual’s credit.
Tiered interest rates on a bank account are ones in which the interest rate earned will vary depending on the amount of money held in the account. In general, the bigger the balance invested in an account, the higher the interest rate will be on that account.
The rate of returned by the account holder will be dependent on the amount deposited as well as the average balance held in the account. When deposits or other activity in the account push the balance beyond the next identifiable tier, the entire balance automatically earns interest at the higher rate. Alternatively, if a withdrawal takes the account balance below a certain level, the entire balance earns interest at the lower rate.
Banks and other financial institutions promote their own terms regarding the accounts that will have tiered interest rates as well as the deposit levels or tiers that will earn specific interest rates and the interest rate they will pay for each tier. For example, a bank may offer a savings accounts with a tiered interest rate schedule that has three different tiers with the first tier paying an interest rate of 1% for balances of $1,000 to $10,000; a second tier that pays 1.25% interest rate for balances of $10,001 to $25,000; and a third tier that pays a 1.50% interest rate for balances greater than $25,000.00.
Tiered interest rates are frequently found on money market accounts and savings accounts but can also be found on interest earning checking accounts and certificates of deposit. The tiered interest rates on checking accounts, savings accounts, and money market accounts are variable rates that can change over time.
An IRS bank levy is a legal seizure of a bank account holder’s funds to satisfy a tax debt. When the IRS levies a bank account, the levy is only for the particular day the notice is received by the bank. A levy by the IRS on a bank account is a singular or one-time event. The bank levy is not continuous; the levy is only for the specific day the levy is received by the bank. The notice of levy will only affect the funds on deposit when the levy is received.
In order for the IRS to collect additional funds in a bank account after the day the levy is initiated, another levy must be served to reach any additional deposited money. It is uncommon for the IRS to send out consecutive levies to seize a bank account holder’s funds. It is possible, but not likely. Other IRS levies, such as a levy on wages and salary, can be continuous and put in force until the debt is settled.
Once a bank receives the levy notification, the bank is required to remove whatever amount is available in the account holder’s account that day, up to the amount of the IRS levy, and send it to the IRS in 21 days unless notified otherwise by the IRS. The bank levy does not affect any future deposits made into the bank account unless the IRS issues another bank account levy. Money deposited later is not surrendered, including deposits during the 21 day holding period. Also, the levy only reaches deposits that have cleared and are available for the taxpayer to withdraw.
More information about the IRS bank levy process can be found within the IRS Collecting Process manual under Section 4, Bank Levies.
An on-us check is a check that is presented at the bank where it is drawn. When an on-us check is cashed or deposited at a bank, the funds are drawn and paid from the same bank. To clear or process an on-us check, the bank has to simply debit the payor’s account and credit the depositor’s account.
Banks will generally make check deposits that are drawn “on-us” available on the day of deposit. The processing time for these types of transactions is quick and the depositor can usually receive payment immediately, providing that there are sufficient funds.
The collection of interbank checks, checks that are deposited at and drawn on different banking institutions unlike an on-us check, involves more processing and can take longer for the bank to clear. In most cases, interbank check settlements take place through the Federal Reserve though the transaction may be conducted via electronic delivery. Depending on the account and type of check, interbank checks can take one day to several days to clear.
According to data from the Federal Reserve Bank of New York, approximately 25 percent of all checks processed in 2009 in the United States were on-us checks. The remaining 75 percent of checks cleared were interbank checks.
A wire transfer is an electronic payment service that can be one of the fastest means for sending and receiving funds into a bank account. Receiving a wire transfer does actually require work by the recipient other than to ensure that the sender has accurate information regarding the bank and bank account holder.
To receive the wire transfer, you need to provide the individual or business that is sending the wire transfer your bank account number and the wire transfer routing number for the bank where your account is held. Also make sure the sender has the correct full name or names on the bank account where the funds are being sent and the address of the bank.
If the funds being sent are from an overseas location, the sender will also need the SWIFT code for your bank. A SWIFT code is a unique identification code f used by financial institutions for international wire payments and transactions. The SWIFT code is used in conjunction with the bank routing number.
Most banks will charge a fee for conducting wire transfers including a fee for receiving a wire transfer. For details regarding the cost for receiving a wire transfer, refer to the banks account fee schedule or call your local bank branch.
There are no hard and fast rules established by banking regulators regarding the activation or reactivation of a dormant bank account. A number of states have clear bank regulations requiring banks to escheat or transfer funds to the state if an account is declared dormant but are often ambiguous about the requirements needed to get can account out of dormant status.
Since, banks would prefer to keep their clients money as well as avoid the paperwork involved with the escheatment process, most banks make the process to activate a dormant account relatively trouble free.
An account is inactive and then considered dormant if there has not been a debit or credit to the account because of an act by the depositor and the depositor has not communicated with the bank. Once the bank has made contact with the account owner or the account holder completes a transaction with the account, then the dormant account gets reclassified as normal.
One of the easiest ways to activate a dormant account is to contact the bank’s customer service center or visit one of the local bank branches. In some cases and some states, verifying the account owner’s identity will be important for the bank to reactivate the account and this can be performed best in person or via phone.
Bank customers that are not monitoring their accounts should be mindful that their bank will most likely charge a fee each month for having a dormant or inactive account, see inactive account fees for more information.
A check needs to be signed to be valid negotiable instrument. Checks are negotiable instruments that permit the transfer of money from a remitter to a payee. The remitter is the person who writes and signs the check. The signature of the remitter must be on the face of the check in order for the check to be a negotiable instrument.
A bank should not accept an unsigned check for deposit. If a bank accepts an unsigned check there is a strong likelihood it will returned by the other bank where the account is held by the remitter. If the check deposit is subsequently returned for lack of a signature, the bank may charge the depositor a fee for the reversal.
Although a check needs a signature for the item to be properly payable, the required signature of the remitter may take a variety of different forms. A signature may be made manually or by means of a device or machine, and by the use of any name, including a trade or assumed name, or by a word, mark, or symbol executed or adopted by a person with present intention to authenticate a writing.
Without a signature, the check is simply no good.
A funds availability policy is a banking policy that governs the time between when a customer makes a deposit and when they may use the funds from that deposit. Regulation CC requires that financial institutions provide customers who have a transaction account with disclosures stating when their funds will be available for withdrawal.
Each bank or credit union will establish their own policies as to when it will let a customer access money after they deposit a check, but federal law under the Expedited Funds Availability Act establishes the maximum length of time a bank or credit union can hold the funds.
Congress passed the Expedited Funds Availability Act (EFAA) in 1987 to address concerns about the lengths of holds banks were placing on checks deposited by their customers. The EFAA establishes maximum permissible hold periods for checks and other deposits. Some banks or credit unions may make funds available quicker than the law requires.
The Federal Reserve Board’s Regulation CC implements the funds-availability and disclosure provisions of the EFAA. Part of the disclosure provisions in the law state that before an account is opened at a depository institution or upon the request of any person, the depository institution shall provide written notice to the potential customer of the specific policy of such depository institution with respect to when a customer may withdraw funds deposited into the customer’s account – the Funds Availability Policy.
A bank certificate of deposit that matures and has no subsequent activity between the account holder and the bank may very well become classified as a dormant account. A dormant account is one that has had no explicit contact from the account holder for specified period of time. The CD account must have been inactive for a set period of time before it is classified as dormant, usually between one and three years.
All banks will have established rules regarding the length of time that needs to go by without activity and/or contact before a CD account or other bank account is deemed dormant. The specific period is based on the laws or rules of each state. Once the account, whether it is a CD account or other account, is identified as a dormant, the bank will have to follow the state laws that apply regarding escheatment.
Escheatment is the process of identifying the customer’s deposit accounts, such as checking, savings, and certificates of deposit that are considered abandoned and remitting the funds to the appropriate state agency if the customer cannot be contacted to re-activate the account. The most common types of dormant and unclaimed accounts at banks are savings and checking accounts, checks that have not been cashed, certificates of deposit, and items abandoned in safe deposit boxes.
All states have laws regarding unclaimed bank accounts that include the rules and requirements that a bank or other financial institution must follow concerning unclaimed property and the process for escheating the bank funds or surrendering the funds to the appropriate state department of revenue or similar state agency. For more information on dormant bank accounts and the escheatment process for bank accounts that are subsequently turned over to a state agency please see, what does it mean when a bank account is escheated to the state or what happens to the money in a dormant bank account?
Direct deposit can help a bank reduce costs, attract new customers, and help retain their base of account holders. Direct deposits are simply much cheaper for banks to process compare to paper checks and transactions.
There are a number of efficiencies found in processing direct deposit payments that include no banking personnel needed to physically handle a check since the direct deposit is processed via electronic delivery, reduced error rate that often occurs with manual actions by both the banking customer and bank employee, and reduced costs associated with bounced checks.
Along with reduced costs for the bank with direct deposit, which of course means higher margins for their checking accounts and greater profits, banks frequently use direct deposit services in conjunction with other checking account promotions to market their bank and attract new customers. Direct deposit is frequently packaged by banks with other perks to attract new customers by marketing the add on services such as direct deposit and online banking or by providing financial incentives with these services to entice customer to switch banks.
Banks have also experienced some benefit with direct deposit services in retaining a higher percentage of their checking account customers over time. Direct deposit, along with a number of other added benefits banks will tie in with their checking accounts, often leads to stronger banking relationships between the client and the bank. A more durable relationship results in less customer turnover and ultimately, a more profitable banking relationship for the bank.
Whether or not account features that require action by the customer such as breaking and then reestablishing a new direct deposit banking relationship at another bank will lead to a longer banking relationship because the customer finds switching banks a hassle, is a hotly contested issue.
Direct deposit, and most all electronic banking features, are money saving tools for the banking industry. The money saved can be a two way street for the customer and the bank leading to increased profits for the bank and improved or less costly bank fees and services for the customer.
There is nothing illegal, against Treasury regulations, or against banking regulations, that prevents someone from endorsing a Treasury check or IRS refund check and transferring the check to another party. Once a check has been endorsed by the payee it becomes a bearer instrument and can be negotiated or cashed by anyone in possession of the check. However, and this is a big however, most banks will not cash third party checks regardless of where the check originates. For more information on these types of checks see, what is a third party check.
The banking industry has been cracking down on third party checks over a concern for fraud and fraudulent signatures since the bank cannot identify the original payee of the check and verify their intention to transfer the check to the third party. If the endorsement turns out to be fraudulent, the bank will be responsible for the loss after they cash the check. IRS is also well aware of this issue and states that tax refund checks and direct deposits should only be deposited directly into accounts that are in the tax payers own name; their spouse’s name or both if it’s a joint account.
Most banks will not cash a third party check even if the check comes from the IRS or US Treasury. It may be possible to find a bank that will accept the check if both parties are present and can prove their identities to the bank’s satisfaction
A mini statement is an abbreviated statement that provides details on a select number of banking transactions. A mini statement usually shows the last ten transactions, debits and credits, made on an account. The mini statement is generally requested and produced at a bank ATM but is also frequently used or accessed through online banking or mobile banking at some banks and financial institutions.
The mini statement provides brief descriptions of each transaction, giving the account holder an indication of what the transaction was for with the full description available to the account holders through their regular bank statement. By providing a short term review of banking transactions, the mini statement allows bank customers to get a quick recap of their activities between monthly statements and avoid having to visit a branch.
ATM mini statements may have a small fee associated with their production depending on the bank and at which electronic terminal was used to produce the mini statement, such as an ATM where the bank account is held, an ATM not or owned or operated by the bank where the account is held, or via online banking or mobile banking.
Cashier’s checks do not have an expiration date. A cashier’s check is valid and will remain an obligation of the bank that issued it until it is either paid or the state laws governing escheatment where the check was issued require the funds be turned over to the state. Cashier’s checks are drawn on the issuing bank’s funds and not those of the remitter, the bank, rather than the purchaser is responsible for paying the amount identified on the check. A cashier’s check is issued only after the bank issuing it has received or approved the funds to back the amount of the check and the bank becomes the responsible party for payment not the remitter.
While standard checks are good for a period of six months, after which a bank is not required to honor the check, a cashier’s check is not subject to the same rule. With a cashier’s check, the bank has to honor the payment for the check unless the check has been reported stolen, lost, replaced, or the check funds have been turned over to the sate due to escheatment laws.
The escheatment laws are state laws that direct financial institutions to turn over unclaimed or abandoned property to the state after a specific period of time has expired and the bank cannot locate the owner of the funds. The time period varies by state but usually requires two or more years to pass by before the property or funds are considered abandoned and unclaimed. The cashier’s check itself is not sent to the state, it is the funds the bank has held on behalf of the remitter to guarantee or fund the check.
Even after the funds used to pay for the cashier’s check have been turned over to the state after the escheatment period has been met, claims can be made to the state agency that acts as caretaker for the abandoned funds to recover the money.
Checks made payable to cash can be endorsed by anyone. Because a check payable to cash can be endorsed by anyone, making a check payable to cash is a practice that should be used infrequently due to the significantly higher risk of loss. In fact, a check payable to cash is considered a bearer instrument. Bearer instruments do not, legally, need an endorsement. A bearer instrument, including a check payable to cash, is payable to whoever holds it.
Even though the law governing contracts and negotiable instruments does not require a signature on a check made payable to cash, the bank will generally require an endorsement signature. The bank where the check is being cashed will usually request that the person negotiating the check at the bank branch sign or endorse the back of the check. Furthermore, many banks are reluctant to negotiate a check made out to cash if it is presented by someone other than the account holder.
The banks concern is that the check may be in the possession of someone that the account holder did intend to receive it. When the bank does negotiate a check payable to cash, the bank will often require the endorsement as well as proper identification of the individual cashing the check. Of course, the holder of the check can always deposit the check and the bank should not require any additional documentation other than the deposit endorsement.
It is legal and not uncommon for a bank to freeze a customer’s account without first notifying the account holder. The bank may freeze an account due to suspicious activity, because the account has been frequently overdrawn, or the bank has received legal orders from a third party. A bank account freeze means the banks has restricted activity with the account. The account holder will generally no longer be able to withdraw money, pay checks, make financial transfers, or otherwise use the funds held in the account.
Third party orders or instructions that require a bank to freeze an account may include court judgments from a creditor with a levy or garnishment order or orders presented by state or federal agency such as the IRS. In all of these situations, the bank is not required to notify the account holder when the account will be frozen. Accounts that are frozen due to legal action cannot be delayed by the bank so they can inform their customer when the legal levy or garnishment order is delivered.
Actions a bank may take to freeze an account on its own are usually put in place to protect the customer or the bank and therefore, taking time to time to notify the customer in advance may defeat the purpose in trying to protect the account funds. The bank may freeze the account to protect the customers in cases where there is suspicious account activity in which the bank believes transfers or payments are being made that are not authorized by the account holder, or the freeze may be to protect the bank in cases where the account is frequently overdrawn that may lead ultimately to an uncollected balance that results in losses for the bank.
Once the bank does place a freeze or holds funds in an account, the account holder should be able to get a complete explanation regarding the reason and any paper work related to the actions from the financial institution.
Creditors can, with some restrictions, use a judgment to collect money owed by an individual held in their bank account. A creditor or other debt collector can use a judgment awarded through a court to garnish funds held in a bank account. The creditor can request an order to garnish the debtor’s bank account only after obtaining a judgment against that debtor. The bank will freeze the funds held in a customer’s account to satisfy a court order only after they receive the garnishment order.
The bank account freeze will prevent the customer or account holder from accessing the funds in the account until a specified time period expires after which any applicable funds or non-restricted funds held will be turned over to the creditor.
Many government agencies such as the IRS can freeze a bank account without a judgment but most other creditors or debt collectors cannot freeze the funds held in a bank account until they first receive a judgment from a court against the bank account holder.
Once a creditor or debt collector does receive a judgment they will use that judgment to collect the amount called for by within the judgment order. With the judgment, the creditor can try a number of means to collect the money from the debtor including an agreement with the debtor to make payments or making payment in full, obtaining a garnishment against the debtor wages, or by sending a garnishment order to the debtor’s bank.
If the judgment is used to garnish money in the defendant’s bank account it will be given to the creditor by the bank to help satisfy the judgment with some limitations regarding protected funds, escrow funds, joint funds, retirement and other protected income streams and federal benefits.
Foreign ATM fees are fees charged by a bank or credit union to their customers for using ATMs outside of their network. Banking customers are charged this fee when they use an ATM that is not owned or operated by their financial institution.
Almost all banks and credit unions offer unlimited withdrawals from their own ATMs with no fee to their account holders. But, once a customer uses an ATM that is not owned or affiliated with the bank where the ATM card is issued, the bank will tack on fee to their customer for using that ATM. This fee, the foreign ATM fee, generally ranges from $2.00 to $3.00 per transaction..
The foreign ATM fee is separate from the charges that will are assessed by the owner of the ATM that is being used. A surcharge fee is frequently imposed by the ATM owner; separate from the foreign ATM fee imposed by the account holder’s bank. The surcharge fee is assessed by the ATM owner to users of the machine that do not have account or an affiliation with the institution operating the ATM. Some banks and/or specific bank accounts reimburse or offer limited reimbursements on the ATM fees or surcharge fees that other banks charge.
The term foreign ATM fees is generally not used in reference to international ATM transactions or overseas transactions, these fees are usually identified by financial institutions as international ATM fees but may, in some cases, be referred to as a foreign ATM fees – adding some confusion to banking nomenclature.
For most checking accounts, any account holder can close the account as well as the bank where the account is held. Section 4-403 of the Uniform Commercial Code establishes standard provisions that are adopted by most states regarding account control and access. Per section 4-403 of the Uniform Commercial Code, any person authorized to draw on an account can close the account.
Individual checking account holders can close their checking account as long as they follow the instructions provided by the bank. Joint checking accounts can be closed in the same manner by either of the signatory parties on the account, either working together or acting alone. Even an authorized signer or person acting under a pertinent power of attorney can close a checking account.
Occasionally, banks will restrict the rights of authorized signers who are not account holders. In these particular cases, the bank’s deposit contract may prevent an authorized signer from closing an account as a means of protection for the account holder or holders.
The bank itself can also close a customer’s checking account without notice. Most bank checking account agreements give the bank the right to close a customer’s account at any time for any reason. Checking account holders who frequently write bad checks or overdraw their account may find that their bank will close their account without warning. A 2008 Harvard Business School report titled, Bouncing Out of the Banking System: An Empirical Analysis of Involuntary Bank Account Closures reported that about 6.4 million bank accounts were involuntarily closed in 2005 by banks and other financial institutions.
Bank customers should read their account agreement to verify the procedures for closing out an account to avoid any delays or other complications with pending payments or financial transfers.
In most cases, a retuned deposit item will not affect an individual’s credit score or credit rating. A check from someone else that has been deposited and then bounces is referred to as returned deposit item. Once a deposit is returned or bounces, the funds are taken out of your account. For account holders that have a surplus of money in their checking account, the only inconvenience will be the bank fee charged for the returned item and the costs associated with collecting from the person or party that sent the check that was returned
If the returned deposit item results in your checking account becoming overdrawn, the bank will expect you, the account holder, to cover the overdraft amount. It is also possible that the subsequent negative balance may result in checks that you sent from your account to bounce or be returned.
If the checks sent from your account no longer have sufficient funds to cover them due to the returned deposit and bounce, the recipient of these checks may report any delinquent account activity to a credit reporting company. This will generally only happen if the payment being made is not covered by a new payment in a timely fashion and the payment makes the account delinquent. An example may be a credit card payment that bounces because your account is overdrawn after a check you deposited from someone else is returned and the monthly is now delinquent because of your bounced check.
In addition, if the bank is not made whole in a timely fashion because your account is overdrawn due to the retuned check you deposited from someone else, they may report the incident to the specialty credit reporting companies used in the banking industry.
The domino effect that can result from a retuned deposit item can also be ameliorated if the account holder making the deposit has overdraft protection through their bank. While this does not stop the bank from charging fees or help collect the money on the returned deposit, it does lessen the costs that can result from checks written that would have bounced due to insufficient funds caused by the returned deposit but are now covered by the overdraft coverage provided by the bank.
Whether or not a torn or ripped check can be cashed or deposited generally depends on the damage or the condition the check is in when it is presented the bank. In most cases, a ripped check does not present a problem and can be processed like any other check deposited or delivered to a bank. If the damage to the check is minor and it appears that there were no alterations done to the check, the bank should accept it as is.
Situations that may require the check holder to obtain a replacement check include checks that are missing key information such as the date, signature, payee field, dollar amount of the check, and the information found on the MICR line of the check which includes the bank routing number and the check writer’s account number.
A bank may reject the check if the condition of the check makes either reading the data difficult or establishing the check writer’s intention is questionable. If a check writer had ripped up a check with the intent to invalidate it, the check is void. If someone taped it back together, the bank would in a tough position to determine the writer’s intent and it would be reasonable for the bank to refuse to honor the check or place a longer hold on it.
Joint checking accounts offer account holders a number of benefits but, they also come with some potential risks. A joint account subjects the account holders to risks involving loss of funds, credit exposure, and survivorship rights issues.
The risk of loss due to account mishandling by the other account holders is one of the biggest risks with this type of account ownership. Each joint checking account owner has full control of the account without regard to whose money was deposited in the account or whether the other owner agrees with the purpose of a withdrawal. Either joint account owner may withdraw the entire balance and wrongfully refuse to repay the other what is rightfully due.
One account holder with a joint checking account has the potential to become liable for repaying the other person’s debt. If the account becomes overdrawn, each joint account holder is responsible for the whole payment along with any bank fees and third party charges that may be incurred. If one of the account holders has credit accounts at the same bank that fall in arrears, the bank can also use the money in the joint account to offset the past due debt.
Risk of financial loss can also be the result of actions that take place outside of the joint checking account. The money held in a joint checking account can be subject to both people’s creditors. Court orders and legal orders against one account holder can freeze the funds in the entire account and the bank account balance may be seized to recover any money owed.
Questions and complications also may arise regarding survivorship after the death of one of the account holders. If there is a right of survivorship with the joint account, the assets in the account will go entirely to one account holder when one person dies. The money in a joint checking account will go directly to the other joint owner of the account and not to the people named in your will or heirs
Signing up for a joint bank account is often convenient and necessary, but all individuals involved should be aware the potential costs as well as the benefits before opening a new account.
There is nothing illegal about writing a postdated check. Writing and sending postdated checks is a fairly common practice however, it is a practice that should be avoided in order to steer clear of any potential for liability. Liability with a postdated check will generally not arise simply due to the date on the check but may surface should the check not clear the bank as scheduled by the check writer.
Problems with writing a postdated check generally surface if the check is deposited or cashed prior to the date of the check and there are insufficient funds in the account at that time to cover the check. The check writer will then be responsible to make good on the payment, pay the fees charged by their bank for having either an overdrawn account or a returned item fee and may also be responsible for any fees incurred by the payee if their deposit is retuned by their bank.
The reason why the postdated check may clear before the future date placed on the check is the Uniform Commercial Code adopted by most states allows a bank to process and honor a check regardless of the date. If an account holder postdates a check, and the payee cashes the check prior to that date, this is the date the funds will be taken from their account regardless of the date on the check. Unless the bank is notified in advance about a specific check, the bank will process the check without being obligated to verify its date.
State laws regarding passing bad checks generally makes it a crime to intentionally write a worthless check with the intent to defraud a person or business of goods or services. Since the writer of a postdated check is usually not doing this to intentionally defraud the recipient of the check, postdating a check is not a crime.
An individual that writes checks with insufficient funds in their account will certainly incur bank fees and transactions costs but may not have their check returned or bounced. If a check is written and presented with insufficient funds in the account, a bank can either return the check unpaid or they can pay the check.
A bounced check is a check which is returned by a bank because the checking account holder that issued the check does not have sufficient funds on deposit. An overdraft occurs when the account holder has insufficient funds in the account but the check is still processed by the bank and paid. Whether the check bounces or not will depend on the overdraft services offered by the bank and how the account is established.
Banks will generally offer two forms of overdraft coverage in order to honor a check on account that has insufficient funds, courtesy overdraft coverage sometimes referred to as standard overdraft practices and overdraft protection. With courtesy overdraft coverage through a bank, checks processed by the bank that do not have sufficient funds will be paid at the sole discretion of the bank. If an account has insufficient funds but the checking account has overdraft protection, the bank will automatically pay the check.
In either case, bank fees will usually be assessed to the account holder. Returned item fees apply to the accounts in which the check is not honored and bounces. Overdraft fees will apply to accounts that have overdraft protection and the check is paid by the bank.
Joint checking accounts can be opened with any individuals, there is no requirement that the account holders have to be married or even be related to one another. Joint checking accounts are usually established to help manage household bills with individuals that live together, with a wife, with a husband, civil partner, or a family relation. But there is no banking regulation that would require there be an existing relationship between the account holders on a joint account. Joint account holders on checking accounts, savings accounts, or other deposit accounts are free to open the account with anyone they choose to.
A joint account has offers a number of advantages for married couples, partners and family members. The advantages range from easier money management to facilitated access to finances. Joint account holders can all add funds into the account, pay bills from the account, or withdraw cash. Joint accounts are also often established with rights of survivorship. With rights of survivorship on the joint account, the money in the account will become the sole property of the surviving account holder in the event that one of the account holders dies.
Joint bank accounts can have their drawbacks as well. Whoever shares a joint bank account has full access to that checking or savings account. Because all individuals on the account have access to the joint account funds, one person can spend some or all of the funds in the checking account without needing permission from the other account holder or account holders. Each account holder will be held responsible if the other joint holder overdraws the account, incurs bank fees, and run into other financial misdeeds through use of the account.
Obtaining a certificate of deposit (CD) secured loan from a bank where a CD is held is usually a relatively easy process. However, obtaining a CD loan from one bank when the CD is issued by another bank is going to be a difficult endeavor. It is highly unlikely that a bank will make a CD secured loan with a CD that has been issued and is held at another bank.
There a number of advantages to obtaining a CD secured loan, some of which include a low interest rate, quick loan approval, and limited documentation. The primary reason for these positive attributes found in a CD loan is based on the security of the loan. The bank has complete control over the collateral for the loan, the certificate of deposit. Unlike most all other secured loans, the collateral (the CD) never loses its value and is never outside the control of the bank. These features make this a virtually risk free loan that can be approved quickly and managed effortlessly by the bank.
If the bank making the CD loan did not issue the CD and is not in control of the certificate, the bank loses some of the risk free advantages when granting such a loan. Obtaining a valid lien on the account held at another bank to secure the loan could be problematic for the bank. The borrower could redeem the CD early at the bank where is held or use the CD for other purposes while it is supposed to be collateral for the loan.
In addition, the bank may have greater difficulty getting hold of the funds in the certificate if the borrower defaults on the loan, further reducing the value of the collateral. Most account agreements with a bank will grant the bank the right of offset, which gives the bank the authority to use any other assets of a customer at the bank to pay a loan that is delinquent or in default. The right of offset is commonly found in debt and deposit agreements with financial institutions. Since the CD is issued by another bank, the right of offset does not apply which further devalues the collateral for the loan.
A number of consumer privacy laws protect individuals from having to reveal their social security number to businesses and various organizations, unfortunately banks are not one of those businesses. Banks require customers to provide their social security number for identification purposes to comply with tax and national security laws.
Consumers are generally required to provide their social security number to businesses that are engaging in a transaction that requires notification to the Internal Revenue Service or initiating a financial transaction subject to federal Customer Identification Program rules.
Federal regulations that were established in May 2003 specifically require banks, savings associations, credit unions, and other financial services providers establish a Customer Identification Program (CIP). Information required with CIPs includes the customer’s name, date of birth, address, and a social security or federal tax identification number.
Under the USA Patriot Act, financial institutions are required to establish minimum standards for properly identifying their customers. Banks and other financial institutions are required to obtain an identification number for several different kinds of transactions including reporting the interest earned on deposit accounts to the IRS, making monetary transactions, and when opening a new account such as a new checking account, savings account, loan account, and/or other investment accounts and related financial products.
These requirements also make it easy for the bank to verify the account holder’s identity when they contact the bank through various communication channels as well as help ensure that any funds are distributed to the correct designated individual when any financial disbursements are made.
There is no required time limit for depositing a check however; a bank may not honor a check that is more than six months old. A check is payable any time unless the bank has knowledge that it should not be paid such as a stop payment order that may have been issued on the check. There is a provision in most state laws, that after six months the bank is not obligated to pay on the check but may still honor it without liability.
The term, stale date, refers to the six month time frame after which a bank is not required to cash or make payment on a check. UCC section 4-404 covers the obligations for banks regarding check dates. The standard UCC (Uniform Commercial Code) states that a bank is under no obligation to a customer having a checking account to pay a check, other than a certified check, which is presented more than six months after its date, but it may charge its customer’s account for a payment made thereafter in good faith.
Since check processing is done almost entirely by automated sorting and handling and the check date is not encoded in the check, it is not uncommon for the bank processing the payment to not be aware of the date on the check. If the check being deposited is more than six months old, the bank may therefor pay on the check and be protected or it may refuse to pay the check and still be protected.
The wiggle room in the laws is primarily protecting the bank and the recipient of a check would be wise to present the check for payment as soon as possible to avoid reaching a date when the bank may not be obligated to honor the check any longer.
Money deposited in Barclays Bank certificate of deposit and savings accounts are FDIC insured. Barclays Bank is an FDIC insured bank and the certificate of deposit accounts offered by the bank are insured up to the maximum amount per depositor, per deposit category. Barclays Bank is based in Wilmington. DE and has been FDIC insured since 2001. The FDIC certificate number for Barclays is 57203. The bank is state chartered commercial bank. The primary federal regulator for the bank is the Federal Deposit Insurance Corporation.
The bank holding company that operates Barclays Bank is London based Barclays PLC. Barclays is a major global financial services provider engaged in retail banking, credit cards, corporate and investment banking and wealth management with an extensive international presence in Europe the Americas and Africa and Asia. Non-deposit investment products that may be offered by the bank are not FDIC insured. Examples of products offered by some banks in the U.S. that are not FDIC insured include mutual funds, stocks, bonds, annuities, and other investments. In the US, Barclays engages primarily in online banking as well as issuing and managing consumer and business credit cards.
Consumers that have a question regarding FDIC deposit insurance coverage, or an inquiry or a complaint regarding a financial institution can contact the FDIC for more information at 1-877-275-3342. New or existing customers of Barclays Bank that are interest in the bank products and services, including the bank CDs, should contact the banking institution for more details.
Filing bankruptcy does not prevent an individual from maintaining a checking account either before they file bankruptcy, during the bankruptcy process, or after the bankruptcy is discharged.
All bank accounts including checking accounts, along with all other assets held by the bankruptcy petitioner, must be identified to the court appointed trustee during the bankruptcy process. Some banks have been known to freeze their customers checking and savings accounts upon filing for bankruptcy. These policies are usually designed to protect the customer but can be inconvenient while the account holder has to wait until authorization is given to release the funds.
Bankruptcy filers that owe money to the bank or banks where they checking and savings accounts are held at the time of filing may have a potential problem regarding the funds in those accounts. A bank can exercise its right of offset if there are delinquent accounts held at that same bank. The right of offset gives the bank the ability to use the funds in the checking and/or savings account to make payments on the credit accounts (credit cards, auto loans, personal loans, etc…) held at the bank that are in default. The bank may exercise the right to offset at any time there are delinquent credit accounts at the bank and is not based on the account holder’s bankruptcy filing. The banks’ legal right to seize funds that a guarantor or debtor may have on deposit to cover a loan in default is also commonly referred to as the right of set off.
The bankruptcy process can be complex and the bankruptcy laws have aspects that protect creditors, but bankruptcy protection is designed to specifically protect the individual. One of the primary purposes of the Bankruptcy Act is to ‘relieve the honest debtor from the weight of oppressive indebtedness, and permit him to start afresh free from the obligations and responsibilities consequent upon business misfortunes.’ In summary, the bankruptcy code does not prevent someone from keeping or opening a bank account.