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I have recently read a study that demonstrates that the average person is willing to put up with bad fees, horrible customer service, and a bad experience at their bank because it is simply too inconvenient to move.  I am apparently an anomaly, as I am in the process right now and I don’t think it is all that bad.

As I said last week, I am preparing to move my primary banking from ING Direct to Charles Schwab Bank.  I have nothing bad to say about ING, but the benefit of check writing and no ATM fees is a big draw.  I also have my brokerage and credit card accounts at Schwab, so it will be easier to have everything under one roof where I have only had exceptional customer service.

When you are moving banks, the key is to understand your cash flow and slowly bring everything to the new bank.  If you use direct deposit, automatic payments, and online bill pay, you will surely forget about something and pay an overdraft fee or have a payment returned if you try to hit the switch all at once.

To ensure I don’t make a mistake, I am moving slowly.  Step one, which I am on now, is to move my income into the new account.  This is not going to be all at once, as I still plan to pay bills at ING for a couple of months while I move things over.  I have my work direct deposit set to put $100 into the new account on payday.  Assuming it works, I will move 50% the next month so I can start moving my bills to my new bank, but I want money at ING in case an unexpected bill comes in there.

Over the next few pay periods, I will slowly move all of my income and expenses into Schwab, leaving an emergency cushion of about one month’s rent, the highest bill I have, in ING Direct.  I already have the new account on Mint.com, so I am tracking income and expenses from both banks.

I do not plan to keep my ING accounts open indefinitely.  While I feel some emotional attachment to ING as I signed up at a pivotal time in my life where I really began to take control of my financial situation, it is not logical to maintain an account just to keep it open.  Unlike credit cards, closing a bank account has no impact on your credit score.  As long as all of my income and expenses are moved and the account has had no activity for a few months, I will move everything to Schwab.

Charles Schwab Bank, like ING Direct, is primarily an online bank.  Schwab has one branch in Reno, Nevada, but otherwise operates by mail and internet only.  I plan to keep my US Bank account open, as I have for about ten years, as a backup.

Have you ever moved banks?  Please share any tips you have in the comments so we can all learn from each other’s experiences.

I have been a very happy user of a combination of US Bank (since 2000) and ING Direct (since 2007) for a while now.  ING has paid very competitive rates and the online bill pay has become increasingly useful.  However, I am up for a change.

I generally keep a pretty low balance in my US Bank account, as it does not pay interest.  It usually does not matter, but I use that account for both ATMs and writing paper checks.  Occasionally, I want to write a check or make a big withdrawal, and I have to wait for a few days for the ACH to go through from ING.

In hopes of consolidating my accounts, I am planning to switch my primary checking account to Charles Schwab.  I am already a Schwab brokerage customer and I have the Schwab Visa rewards card.  I have been thrilled with the overall customer service and a few extras have tipped me over to signing up for the checking account as well.

The two biggest reasons to change are the problems above.  Schwab offers free ATM use at any ATM worldwide and refunds other banks ATM fees (up to a six transactions or $9 per month for refunds).  They also give you check writing ability.  While I enjoy ING’s online check writing, sometimes you need a real checkbook.

The biggest hesitation I have is interest.  ING pays a better interest rate on checking and savings accounts than Schwab, but the few dollars per month is an opportunity cost I am willing to get over for checking.  I am considering the savings account as well.

I will give you an update a few months in, but I am excited to take a step to consolidate and simplify my finances.  I have nothing bad to say about ING, but I was having trouble resisting the draw of Schwab High Yield Investor Checking.

Wesabe, a previously mentioned Mint.com alternative and member of the personal finance arsenal, has announced it will be closing its doors on July 31st.  At that point, the community feature will remain but all finance tools and records will be purged.

I am deeply unhappy to have to announce that Wesabe will be discontinuing our Accounts tab, and all of the related personal finance tools we offer, as of July 31st, 2010. The Groups tab, which hosts discussions on personal finance topics, will remain online indefinitely. A FAQ about this shutdown is available.

You will be able to download all of your data from now until July 31st by visiting our export page. After that date, we will delete all data and all credentials we hold for security and privacy reasons. If you prefer, you may delete your membership immediately or at any time before July 31st.

I liked that Wesabe was the main player in the personal finance aggregator world that did not require you enter your bank’s user-name and password.  However, you were required to manually download your bank data and upload it to Wesabe.  I had an account for a short while, but closed it in favor of Mint due to the time consuming, multi-step process.

It was a great site for many people, and will be missed.  If you have never tried a personal finance aggregator, my favorites are Mint and Thrive.

Mint.com, my favorite tool in the personal finance arsenal, has eliminated the “financial fitness” tool and has replaced it with a new “goals” feature.  It helps Mint in the ongoing battle of the personal finance websites.  I have done an in depth examination of Mint.com vs. Thrive.

The new goal feature allows you to set a specific goal and helps you track your progress to reach that goal.  There are about a dozen pre-defined goals, or you can make your own.  To reach the list, click on the “goals” tab at the top.  Click any image from this post to enlarge.

I decided I need to build a bigger emergency fund, as I am looking forward to a possible layoff.  I clicked on the “save for an emergency” image to bring up the goal detail screen.

Mint already knows my average monthly spending, and it suggested that I save for three months of expenses.  I can easily decrease my spending in the event I am without income, but I decided to round up from three months just to be safe.

I moved on to step 2 where I decided how long I wanted to contribute or how much I wanted to contribute.  I clarified by goal of $4,000 and said I wanted to reach it by the end of the year.  Mint gave me a suggested contribution based on those factors.

On the last step, I was able to tell Mint that I am already saving for emergencies in my ING Savings account.  Mint took that into account and suggested I contribute $314 per month to reach my goal in December.  You can always change the amount later, so I picked the higher amount and saved my goal.

Now, every time I look at the goal’s tab, I can see my progress.  If you are behind, your bar will show up in red.  If you are on track, it will show up in green.  I went into the “View Details” tab to adjust my contribution to $400 per month ($200 per paycheck) and $4,000 total.

This is a very useful and user friendly feature.  It is the first major interface change since Mint was acquired by Intuit.  I hope they keep improving the product over time.  My biggest annoyance today is the sporadic connection to my 401k and the non-working connection to my student loan servicer.

Overall, I still love Mint.  You should seriously consider Mint or Thrive, or a similar service, to keep track of your finances.

The final round of changes from the Credit CARD Act is going into effect, and consumer advocates expect mixed results for the average customer.  The changes are great for credit card customers, but the banks will be looking for other ways to increase revenue to make up for the losses.

The good parts of the act for consumers are going to help many people.  Credit card late charges are now capped at $25, which is significantly better than the typical $39 fee before.  However, if you are constantly late, you may be charged $35.  Optimally, you are never late anyway.

Consumers are also protected from high fees for going slightly over their credit limit.  For example, if you go $3 over your limit, the fee cannot be higher than $3.  Inactivity fees are also banned.  If you want to read a great post on the new changes, check out explanations of the CARD Act at Free From Broke.

I am worried, however, about the ways banks are going to make up for the costs.  I have had cards start charging an annual fee.  While it was free before and only the “bad customers” had to pay high fees, they are now being given to everyone.  This is mostly impacting cards with good rewards programs.

The banks are also looking into traditional banking and checking accounts for revenue.  The Wall Street Journal thinks that free checking might be coming to an end.  My main brick and mortar checking account at US Bank is a free checking for life account.  You might consider finding something like that before it is too late.

Over all, I think we are moving in the right direction.  With any legislative intervention into the financial industry, there will always be some sort of workaround and fallout.  Time will tell how this new law will impact the industry and consumers.

I have a file cabinet at home with bank statements dating back to when I opened my first checking account when I was sixteen years old.  Nine years later, I wondered if I still need those bank statements.  I also have every tax return I have filed, ever.  Do I need those?  I did some digging, and I found a great resource.  Here is the synopsis:

Tax Returns – You need to keep all documentation around your taxes for at minimum seven years.  The statute of limitations for the Internal Revenue Service (IRS) to come after you for back taxes is three years, so that is where the minimum comes from.  However, if you have failed to report income, the statute of limitations is six years.  To cover yourself, it is best to have a seven year record of taxes.  Just to be safe, it is probably a good idea to keep your form 1040 and record of payment to the government for life, but you do not need the backup documents for more than seven years.

Bank Statements – Did you give a charitable contribution or make a business expense payment on your credit card or bank account statement?  If you ever have to show proof of a deduction to the IRS, you need that statement.  Like tax returns, keep them for about seven years.

Brokerage – The best advice I can find here is to keep your year end statements and trade confirmations indefinitely, but you don’t need to keep your monthly statements more than two or three months in case you find any errors.  When you sell a security, you have to be able to prove the original cost for capital gains taxes.  That is why you need your year end statements so long.

Retirement – To make sure you are safe if you ever have to withdraw principle (not interest earned) from a Roth or other retirement account, you have to able to prove what you put in and when you put it there.  That means you need to keep retirement statements until you are at a point when you can withdraw tax free.  For many of us, that means 40 years or so of records.

Utility Bills – If you have a long record of cell phone, power, or other utility bills lying around, you can free up that space today.  You don’t need more than two or three months of history that can demonstrate that your payment was send and received.  Once your account is correct, toss it in the shredder.

Insurance – If you have any records of claims and policy details, keep them as long as you have the policy.  If you do not have proof and you ever have to challenge your insurance company, you need to have records or it never happened.  For health insurance, make sure you have evidence of coverageso you are never hit by a pre-existing condition clause (while that is still legal).

Paper or Electronic Records?

I have a hybrid system.  For my bank accounts, I have paper records because I never took the initiative to change to paperless and scan in my old files.  For accounts that I have opened in the last five years, I have just started with electronic statements and keep them saved on my computer hard drive and an external hard drive.  I also plan to buy an encrypted USB to have a third backup for only financial documents.

It is important to make sure electronic copies are safe from hackers and hard drive crashes.  I would suggest that you do not keep financial data in online storage, because there is a chance that it could be hacked.

I am planning to scan in all of my old paper files and shred them someday, but that takes a lot of effort and I am much to lazy to break the status quo.

So, what do you use for record keeping?  What are you policies and strategies?  Please share with all of us in the comments!

Just a note: This is my own personal advice based on what I found through my own research.  I am not liable if you throw something away that you need and the IRS shows up at your door.

“]If you live in the UK, your paper checkbook is going to die a slow and lonely death.  The check clearing system, similar to the Federal Reserve Clearing House in the United States, is going be phased out over the next decade and will close for business in October, 2018.

Ultimately, this seems like a good step for the international banking system. There is no use to waste the time and cost for companies and banks to process paper checks. The recent laws in the United States that require digital check images be treated as a paper check was the first step here, in my humble opinion.

I work in the payment processing side of a very large company, and it would save us a lot of money, which could mean lower rates for our customers, if we only had to deal with .03 ACH transactions or cheaper EDI (electronic data interchange) rather than the much more expensive paper checks.

I am check free (no relation to the payment processor) for everything except my rent, and I am switching that over to bill pay this month. I will not have to write a paper check on a regular basis ever again.

So, would the United States follow suit in the near future?  I am not sure if we can expect a ten year turn around period, but I bet we go paperless in the next twenty.  It could save lots of trees and lots of hassle.

What do you think?  Are paper checks as dead as Vanilla Ice’s career, or will they stage a comeback?  Please give your thoughts and opinions in the comments.

Hat tip to the Mint.com blog for this topic.

[SPONSORED POST]

According to recent data from the Federal Deposit Insurance Corp., millions of Americans today do not have a bank account, and they like it that way. In fact, they choose to do business with other types of financial institutions, such as check cashing stores, to meet their banking needs. While the FDIC would like to encourage the general public to utilize traditional banking services, many feel that doing so is not in their best interest.

Ginger R., a mother of two and hard-working American citizen, conducts all of her banking business at an area check cashing store. Driving a recent model Toyota Camry, which contains numerous children’s items, she uses non-traditional banking services for many reasons.

“I don’t like the banks,” she said. “They kept charging me fees on top of fees. If my account was just one penny overdrawn, they would charge me thirty dollars. They were rude when I asked questions.”

Ginger also mentioned that, due to the current economy, she has been unable to pay a few of her bills, who had attempted to automatically remove payments from her previous checking account. “I can’t risk that. I need to know that I have money. I closed my account after that.”

Other consumers choose to thumb their noses at the banking system for other reasons. Worry about the removal of unauthorized funds is at the top of the list, followed by identity theft, unexpected fees, funds availability policies, and overdraft charges. Overdraft protection, which is often offered for a fee through the banks, is not necessary through check cashing stores.

While some banks are beginning to offer banking incentives, such as free checks, free ATM transactions, and online bill pay, check cashing stores ultimately remain in the lead. Customers know that worries such as fees, terms, conditions, or changes in policy never occur. They can come to the location, cash their checks, and receive cash.

An increase in check store patronage can be attributed to the recent rise in unemployment, as numerous unemployed individuals choose to cash their checks at places other than their banks. “They would take it all from me anyway,” says George L., a long-time former employee of a local company. “I have bills outstanding with automatic withdrawal. This way, I pay the bills when I can, not when they want me to.”

Unless the banks are willing to change their policies, it can be expected that consumers will continue to utilize alternative financial institutions.

[Disclosure: This post was provided and sponsored by ACE Cash Express]

If you have ever been stuck with a fee at an ATM or while using a debit card for a lack of funds, but would not have made the charge had you realized there was not enough cash in the bank, today is a good news day for you.  The Fed has made a rule that banks have to require customers to choose to participate in NSF programs, rather than just be included automatically.

From the Fed website:

Release Date: November 12, 2009

For immediate release

The Federal Reserve Board on Thursday announced final rules that prohibit financial institutions from charging consumers fees for paying overdrafts on automated teller machine (ATM) and one-time debit card transactions, unless a consumer consents, or opts in, to the overdraft service for those types of transactions.

Before opting in, the consumer must be provided a notice that explains the financial institution’s overdraft services, including the fees associated with the service, and the consumer’s choices. The final rules, along with a model opt-in notice, are issued under Regulation E, which implements the Electronic Fund Transfer Act.

“The final overdraft rules represent an important step forward in consumer protection,” said Federal Reserve Chairman Ben S. Bernanke. “Both new and existing account holders will be able to make informed decisions about whether to sign up for an overdraft service.”

The Board’s consumer testing shows that most consumers prefer not to be enrolled in overdraft services for ATM and one-time debit card transactions unless they affirmatively consent, or opt in. At the same time, testing shows that most consumers want overdraft services to cover important bills, such as checks they use to pay rent, utilities, and telephone bills.

To ensure that consumers have a meaningful choice, the final rules prohibit financial institutions from discriminating against consumers who do not opt in. The final rules require institutions to provide consumers who do not opt in with the same account terms, conditions, and features (including pricing) that they provide to consumers who do opt in. For consumers who do not opt in, the institution would be prohibited from charging overdraft fees for any overdrafts it pays on ATM and one-time debit card transactions.

“Overdraft fees can be costly,” said Governor Elizabeth A. Duke, the chair of the Board’s Committee on Consumer and Community Affairs. “Our rule will help consumers better understand the terms and conditions of overdraft services and will give them an opportunity to avoid fees when these services do not meet their needs.”

The Federal Register notice is attached. The final rules are effective July 1, 2010.
 

Lending Club gave me $50 when I signed up.  It turns out I got the bad end of the bargain.  Lending Club is giving out $64.62, because the banks made $6.462 billion in fees last year, they are giving $64.62 to anyone who signs up for a new Lending Club account through a referral link.  As a current member, I can happily send you an invite, but you have to let me know you want one through the contact form.

Once you sign up, you can take your $64 and run or invest it into Lending Club loans.  I have written about Lending Club a handful of times in the past.  My loans are paying me every month.  I am getting somewhere in the 9-10% range.  Pretty good ROI for a 3 year loan.  There are risks though.  Fortunately, it is not hard to risk free money!

Anyway, contact me for an invite.  You can make money like a bank!