Returned Check

Checking my online bank accounts today, saw a charge that immediately looked odd. There were two charges in my checking account, actually: "Returned Check" and "Returned Check Fee." My initial reaction was that someone had tried to cash a check I wrote, and I had insufficient funds in my account. However, I also knew I had overdraft protection on the account and my account balance was not near $0. After thinking about it for a minute and calling my bank, I realized that a personal check someone had written to me for $14 was "bad" (the check writer had insufficient funds in his account), and so the two charges to my account were a debit of $14 (which had initially been credited to my account) and a $5 returned check fee. This made me unhappy for a few reasons. First, I hate to lose $5 (and this fee was clearly outlined among the credit union's fees, so I knew it was no bogus). Second, I hate to lose money and get punished for someone else's mistake. Lastly, I only accepted this check because I was out at lunch with this guy and a group of others, and the guy didn't have any cash on him. I agreed to cover his tab in cash and he wrote me the check.

Ultimately, after I thought through the situation, I determined that the banks themselves have little to do with the situation except handling the details of the transaction. Ultimately, all that matters is that one guy owes me money and that he hasn't paid me. I guess if the amount were $14,000 instead of $14, I could take the guy to court and sue him, but obviously this won't come to that. I suppose I've learned the value of getting a certified check or money order or some other guaranteed source of money when dealing when larger transactions (and not relying on a personal check being "good").

And the Rates go Down...

The Federal Reserve cut a key short term interest rate again yesterday by 1/4 point, marking the seventh cut in the last 8 months or so. The decision dropped the federal funds rate to 2.0% from 5.25% last September, and interest rates in most people's checking, savings and money market accounts have plummeted with the key rate. Two popular options for finding a decent savings rate include the ING Direct Orange Savings Account and E*Trade Complete Savings Account, both currently paying around 3%. This rate is several times larger than the average savings rate from a "brick and mortar" bank, which may currently pay .5-1%. I've tried both the ING and E*Trade accounts, and both seem to offer a good alternative to low rates at local banks. It is usually easy (and free) to transfer money between these accounts and your regular checking or savings account, making this a great option for an emergency savings fund.

However, I'd like to recommend another option I think people often overlook- credit unions. Credit unions are basically member-owned, non-profit banks. Because of this, they don't pay taxes and pay higher interest rates to their member-owners. Credit unions are generally set up to serve a specific group of people, so there are some requirements (such as being a government employee, living in a certain area, working in a certain field, etc.) to join one. However, most people would find they are eligible to join one near them if they did a little looking.

I’ve been a member of a credit union for about 5 years and have always been happy with it. While others are currently earning .5-1% interest or less, my money market account with the credit union is currently paying 3.25%, down from about 4.5% before the Fed started cutting rates. In other words, I get a better rate from my convenient “brick and mortar” bank, with access to ATMs, than I could get from many of the highest-yielding online banks.

To find a credit union near you, check out Credit Union National Association .