ThaiSA\Resources\Survival Guide\Comments & Opinions\Setting Up Bank Accounts

4.4 Financial Management (Setting Up Bank Accounts)
(By Ball)

Introduction

The writer of this section presumes that reader already has a strong financial support from Thailand (Kor Por, or your Dad) or, perhaps, from sources within the U.S. This writing does not provide information pertaining methods to make money/ seek financial aids or scholarships.

The banking system in the U.S. operates quite similarly to that in our country. You can deposit, withdraw, wire transfer, write checks, stop payments, use ATM's etc. However, fees and interests on bearing assets here are dramatically different from the system in Thailand. Different banks also have different policies and it is necessary that you understand as many policies as you can. Otherwise, your banking accounts may not serve your need and, perhaps, you would lose a lot of money paying for financial charges. In this section, I will provide you with names of banks around the campus that students usually have accounts with, their policies, and recommendations about banks that you should deposit you money into depending on your potential use of your fund. Please keep in mind that the following writing is from my personal experience and bank policies keep changing all the time (this is one among several bad things - you can't keep track of all the changes, and you will only know about it when your account gets charged for a new fee). Therefore, the best thing to do is to read my article, talk to other knowledgeable people, and actually contact the bank or look for further information on the Internet. All information here is as of 4/1/2001.

Wells Fargo (www.wellsfargo.com) - FDIC Insured -

This is a traditional brick-and-mortar bank. They have several branches around the campus and nearby cities where you can go and talk to their tellers. You can also find their ATM machines virtually everywhere, which gives you a comfort of depositing and withdrawing your fund. The bank offers savings, checking, money market rate, CD's, and other accounts (such as mortgage, car loans, and student loans). For savings and MRA accounts, their interest rate is extremely low (maximum about 3.5% if you deposit $10,000). Therefore, you should not expect to get a substantial amount of interest from your fund by opening such accounts with them. Plus, if your balance falls below a threshold (about $2500) at any time during the billing cycle, your account will be charged $10-$15. There are other hidden fees as well that you should look into for more detail and be aware of. Such fees can drain away a substantial amount of money from your account.
Wells Fargo offers several kinds of checking accounts. One is designed for students called "Student Checking account." It comes with a $5 monthly fee (what ?!?). During the first few weeks after school starts, there usually are representatives sitting in front of ASUC (it's a place in UC Berkeley where a lot of students walk by) and convince students to open a savings account and a Student Checking account with them. My experience with them was that they only told me: "The checking is free." They did not tell me that it was free for only three months during summer. I found out about this fact after I got charged for a monthly fee. Plus, they did not tell me that there would be a $1 charge for a "check storing service." Other kind of checking accounts usually require a large amount of initial deposit and some big minimum balance, and have a big fee should your daily balance fall below the minimum.

The bank also offers free online banking. Online banking basically gives you an access to your accounts. You can see your balances, transactions, transfer money from accounts, and use online bill payment (with a fee). This feature gives you a convenience of viewing your almost real time activity (such as if your friend already cashed your check).

Something to keep in mind: I think they still have a fee for excess activities. What it means is that if you transfer balance between your accounts several times or use their ATM to withdraw and deposit and withdraw and deposit (just like what I used to play with!), you may have to pay for those excess transactions. But I never get charged for that, so I don't know how many times you'd have to do in order to be "qualified" for the fee. So try it! J Also, if you set your account here as a destination for your incoming wire transfer, last time (about a year ago) they charged me $10 for each transfer. Therefore, this bank is not the right place for a wire transfer. However, if you will be receiving a direct deposit, this financial institution offers a combination of savings and checking account and they waive the monthly fee for the checking account. Check more with the bank on this.

Washington Mutual (www.washingtonmutual.com) - FDIC Insured -

My impression with this bank is that they offer a free checking account! That's right, the real free checking account without a monthly fee throughout the year. However, fees for other activities are quite high. For example, each overdraw, regardless of whether or not the bank pays the check, will cost you $18. That's about three lunches around the campus or 1-2 good dinners (one person pnly).

Washington Mutual has several branches and ATM machines so, yes, you'll have the convenience of talking to a teller, withdrawing, and depositing your fund. They also offer an online banking for free, just like Wells Fargo. For wire transfers, they do impose charges, so this is still not the right place for receiving wire transfers.

How About Banking With a Financial Institution That Only Exists Online (100% Internet-Based Bank)?

This concept sounds very scary to me the first time I hear it. How am I going to deposit and withdraw my money? How am I going to talk to a teller? Etc…etc… Well, let me first convince you why many people (and I) choose this option: Their interest rates are ultra high! This means that you'll get a lot of return each month from the money you deposit. Here are some good and bad things about virtual banking:

Pros:

- Interest Rate
Please check here for the most up-to-date interest rate on an MRA (please make sure that all the characters on the three lines are in the address box in your browser, or just go to www.quicken.com, click on "Bills&Banking" on the top panel, and click on "Money Market Accts." in "Today's Rate" box). Last time I saw the highest APY rate was 5.78%. This means that if you're very rich and, say, you put $100,000 in the account, assuming you could avoid all the fees, after one year, you would get about $5700 in interest, or about $480 each month! This is why many people are attracted to the virtual banks.

Most web-based financial institutions have similar banking policies and fees to those of brick-and-mortar banks. As you can see, most banks require an initial deposit of $5000-$10,000. However, detailed policies on minimum balance, fees, available services, and other things really depend upon each specific institution. I am currently, among two conventional banks, having an account with a web-based bank named NetBank (www.netbank.com) - FDIC insured -. I researched the web for other online banks' policies and I found that other banks have very similar policies and available services with NetBank. Therefore, I feel that describing NetBank should provide you with a rough idea of how 100% online banking look and feel like. (Again, please keep in mind that this information is as of 4/1/2001, and that different banks will have different policies and their policies keep changing all the time, so please contact the institution itself for the most current detail.)

In addition to a convenience of online banking just like regular land-based banks, Netbank also gives me an ultra high interest rate. It used to give me a rate on a Money Market Rate account of about 5.75%, but now it is reduced to 4.75%, so you should be aware of the volatility of the interest rate. (I think the big fluctuation here is a direct result of the Fed Chairman, Greenspan, who lowered the interest rate in order to boost the economy). The bank allows you to withdraw your fund from the MMR account for 6 times for free (three of which can be by checks). After that, they will charge you $10 for every additional withdrawal you make. That's why I have a checking account with them so that I can write checks without constraints. A good thing about their checking account is that your first box of check is free (which can cost you $10-$15 if you open the account with a land-and-building-based bank).

- Wire Transfers and Online Bill Payment
At Netbank, all incoming wire transfers are free, so this can be a very good destination for your wire transfers. Plus, they offer online bill payment for free of charge. What online bill payment does is that it allows you to pay your credit card bills, telephone bills, and energy bills, for example, directly from your checking account at your convenience! (you can also set an automatic payment from your checking account). So, basically, you will rarely need to write any check. You just log into your bank account and type in the amount you want to pay for the bill and the payee and you're done. The payment will be sent electronically to your designated payees. But please do it at least 7 days in advance before the due date to avoid problem with delays. By doing this way, you can also save stamps (currently 34 cents for a first class mail)!

Cons:

- No Branches
The main reason why this type of bank offers such a high interest rate depends on the fact that they don't have to pay for the tellers and building rental. The reduction in those costs is passed on to consumers in terms of higher interest rates. And, yes, this makes people (including me at the first place) afraid of online banking since the bank doesn't really exist - only a headquarter somewhere in the U.S. and perhaps several Internet servers. However, since I have been living in the U.S. for several years and since I put my money into several banks (just for fun and for some seriously intended purposes), I do not feel a need to go to the branch and talk to a teller at all. Every problem can be solved over the phone or by e-mailing. And all transactions can be done via the Internet. In fact, having to go to the bank and having to wait in a long line, I find that online banking at home is the most convenient after all.

- Inconvenience in Depositing Funds
When you have to deposit some funds, say, in check or cash, you just have to mail it to the bank using a US mail (the bank provides envelopes and pre-paid return stamps). It takes more time and the payment could get lost in the mail (an unlikely event - but please keep in mine that it could certainly happen. But it never happened to me, though). You should never mail cash to them since if it's lost, it's gone forever! And they do not allow cash deposit anyway.

- They Don't Have Their Own ATM Machine!
Not only don't they have a branch, but also the ATM machines. You cannot deposit checks or cash into, say Wells Fargo's ATM, and set your account on the web-based bank as a destination. There is no option on any ATM (yet) to do this. However, you can still withdraw cash from any ATM's and there are some ATM's that you can use for free of service charge. Please check their websites for more detail. But please be aware that there are certain ATM machines that do impose charges on non-customers for accessing their ATM network. Some internet-based banks offer some refunds on this charge.

Need an Even Higher Interest Rates?

If you do need an even higher interest rate, consider CD (Certificate of Deposit) accounts. But you just have to make sure that you will never want to withdraw your "frozen" fund for the specified amount of time because if you do so, the penalty for premature withdrawal is quite high (about 2 months worth of interest). If you really need an ultra-high "interest rate," perhaps you might want to consider playing the stock market. Please check www.etrade.com for more detail about how to trade stocks (perhaps your mom or dad know more than I do!). Or, maybe, buy stuff from ubid.com and sell them at eBay. This topic is just beyond the scope of this writing.

Other Fees for All Banks

Of course, there are a lot more of fees out there beyond my ability to gather and write them all here (and of course beyond my ability to know and understand all of them). Basically one of them is a stop-payment fee. When you write a check and already mail it or give it to your payee but you later change your mind, you can request the bank to put a stop on that check (as long as it's not yet paid). I don't know about the service fee here, but I used to see the figure which is around $12 per check at some bank.

You should also keep in mind that every time a withdrawal from your checking account exceeds your available balance, the bank can either pay the withdrawal (and put a negative balance in your account) or return the check to your payee as bounced. If it is paid, you have to pay the overdraft fee (and maybe some other charges too). If it's not paid, you still have to pay a fee for writing a bounced check. And it would definitely cause more trouble if your check written for someone or some company bounces, right? The reason is that you still need to write another check to your payee and it could be very close to the payment deadline. You could eventually be late, having to pay a late-payment fee to your payee (if they have that policy) even more! To make sure that the bank will always pay an overdrawn check, you should have a savings account and link an overdrawn protection between your checking and savings accounts. A checking and Money Market account, linked an overdrawn protection together, at NetBank will satisfactorily do this job. Finally, please also keep in mind that if your check written for your friend is bounced, it is most likely that your friend will get charged for cashing a bounced check too (it happened to me once at Wells Fargo).

My current Choice

With a lot of writing above, here is how I'm managing my money. I open a Money Market Rate and checking accounts at NetBank. I use the MRA solely to dump my excess money in and pump out high interest each month. I use my checking account there to pay all kinds of bills (via online bill payment for most of them). I never use their ATM card because I am too lazy to find their free ATM machines (and none of them may not be within my proximity when I need instant cash). However, I may open another web-based bank account because the interest rate at NetBank seems to decrease more and more. I also have a regular savings account with Wells Fargo. I have to keep at least $300 in balance every time during the billing cycle to avoid the monthly fee. I have the savings account because, as discussed earlier, Wells Fargo has lots of branches and tons of ATM machines in Berkeley, nearby counties, and all around the country. So it's kind of convenient for me to get instant cash whenever I wish. Plus, I can make a cash deposit when I have excess cash in my hand. I also have another checking account with Washington Mutual because, in addition to the convenience in making cash deposit, I can write a check to my NetBank account when I have excess funds in my land-based banks

Some of My Experiences With the Tellers at the Brick-and-Mortar Banks

If you do expect that all the tellers be nice and be care-taking to you all the time you visit the bank (any bank here), I would recommend you to change your attitude (at least a bit). Once in Washington Mutual, I did not write my account number in the deposit slip, so the teller did not service me and skipped to help another person behind me first. That was truly rude! L L L She could just have told me to finish the slip next time, but not absolutely deny servicing me. Moreover, the teller is American and the person behind he happened to be American also, so I sort of further relate this incident to discrimination. Thus, I never use their tellers after this unpleasant incident. My experience with Wells Fargo tellers is mostly impressive. They are usually in a good mood and ready to help me. But the drawback is that for most of the time, I have to stay in a long line before having a chance to talk to a teller. I could have used those wasted time finishing up my homework!

Conclusion

The conclusion is that there are lots of services available in the market. You just have to choose ones that match your need the most. You should decide by yourself what you want to use. Don't let those banks dictate what service you can have. All services are available for minimized costs if you take some time to hunt around. Yes, it takes me quite a while and causes some headache to shop around and to learn all about this. But once you're settled, everything will go as smooth as silk - you will never need to worry about it again. But if you don't care about fees or anything at all (as many people do), then you're lucky because you won't have to get a headache (like me) from finding the best banks that match your need!

Well, anyway, I do not know how much this will help you. If not at all, I do apologize -- just think of it as reading some article for fun. If it helps you even a bit or a lot, I am pleased with it. Please feel free to contact me at any time should you have any questions/ comments/ suggestions at N/A . All kinds of comments (+, -, or neutral) are very welcome. In fact, I believe that the worst work in the world is the one without any comments. So I am open to them all. And I will surely reply your e-mail if I have to. Have fun and…