Category Archives: Personal Banking

Main Street vs Wall Street

In 2008, the Federal Deposit Insurance Corporation (FDIC) established the Transaction Account Guarantee (TAG) program to instill public confidence in the banking system.  The program provided unlimited guarantees to non-interest bearing accounts through 2010 and then the program was extended to the end of this year (2012). 

And now in plain English (Sorry about that, too much banking jargon), banks pay into a federal program for insurance that guarantees depositors (anyone holding money in a bank) get their money bank if a bank fails and shuts down.  Deposits have traditionally only been insured up to a certain dollar amount and anything over the cap is uninsured.  In 2008, the TAG program raised the cap from $100,000 to $250,000 for deposit accounts and gave non-interest bearing accounts (like a traditional checking account) an unlimited guarantee.  This was supposed to inspire confidence in a banking system that was floundering due to the financial crisis that was really picking up steam in Fall, 2008.

Now, the Senate is supposed to vote today on whether or not to continue the program past December 31, 2012. 

The prevailing thinking is that this temporary guarantee helps community banks because they typically have less creative ways to structure accounts and keep dollars insured.  The reality may be different.  Earlier this summer, the Chairman of the FDIC, Martin Gruenberg, said most of the extra deposits protected by the temporary program were held in the Country’s 10 largest banks.  That doesn’t mean community banks–and their customers–haven’t benefitted from the program, but they may not have been the “biggest” beneficiaries.  Hopefully, small businesses, wherever they bank, have been able to benefit from the added security and will be able to move forward confidently no matter the outcome of today’s possible Senate vote.

If you’re a small business or have personal deposits at a local bank, visit your banker or go to the FDIC website and find out if your deposits are protected.  Chances are, your community banker will be able to make sure you’re covered one way or the other.

Make Cyber Monday (and every cyber day) Safe

Since the advent of Cyber Monday in 2005, online shopping has exploded. According to John Sileo, a leading expert on identity theft, online shopping can be routine and safe as long as you follow a few simple rules. One rule he doesn’t explicitly mention in the above-mentioned article is using Mastercard SecureCode to protect online purchases. SecureCode is a program created by MasterCard that allows debit and credit card holders to register their cards in order to add another layer of protection to online shopping. Once a card is registered, purchases made at participating merchants automatically produce an online receipt and require cardholders to enter their personal “secure” code. If a code isn’t entered, the purchase can not be made.

Spending a few minutes registering your MasterCard debit or credit card can provide significant peace of mind. Visit First National Bank or MasterCard’s website for more information.

Add this step to other precautions mentioned by Sileo, and you’ll be able to shop online with confidence.

This is Good Karma

Of all the confusing topics in personal finance, credit scores (a number that represents the cumulative health of your credit) and credit reports (the report that compiles your personal credit history) have to be near the top of the list. Not only are there three different credit bureaus (Equifax, Transunion, and Experian) that each report information a little differently, but each bureau also calculates a FICO score that is likely different for each of the bureaus.

Your FICO score is called a FICO score because it is calculated using software from Fair Isaac and Company. This model is the predominant scoring method in the industry at the moment and many banks use a version of FICO to make lending decisions. However, since each bureau may collect a different combination of credit information, and because they each have their own formula for how to calculate the score, the three scores are rarely the same.

In addition, each bureau calls its FICO score something different: Equifax uses the Beacon score, Transunion calls theirs an Empirica score, and Experian simply calls their score the Experian/Fair Isaac Risk Model.

As if that wasn’t bad enough, the three bureaus don’t appreciate the stranglehold Fair Isaac has on the industry so they each have their own proprietary scores and in 2006 they collaborated to create a score called the VantageScore to compete with the FICO.

Finally, the bureaus want you to pay for their scores. These scores can vary significantly, it may be difficult to really gauge the health of one’s credit, and the score you pay for may not even be the score a bank uses to determine creditworthiness.

So, what’s the good news?

One of these bureaus has finally decided to create a FREE tool consumers can use to monitor and track their credit history and score over time. creditkarma.com is a service that tracks your score and credit report changes for free. The site provides daily updates to your TransRisk score (Transunion’s proprietary model), VantageScore, and Auto Insurance Score (score used by insurance companies to gauge one’s insurance risk).

I highly recommend checking out this website. Not only do they provide free score updates, but they also show changes in balances, risk ratings, and other alerts so it becomes much easier to understand how a credit score moves over time. And even though there are a myriad of different scores out there, consistently tracking one score can be useful and can also be very helpful when determining the best time to apply for a new loan. I use their free App on my iPhone and also access their website from my desktop.

Considering how difficult credit can be to manage, it is refreshing to see Transunion create a service that makes the whole process easier.

Does your iPhone do your Banking?

Right now I’m reading a book about banking called Bank 2.0 by Brett King that feels completely out of date. It was written in 2010.

Banking is changing so fast because of technology that many banks–and consumers–may be having a difficult time keeping up. A few short years ago mobile banking (banking on a mobile phone) was a novelty. Now almost every Top 100 bank (biggest banks by size in the United States) and many community banks like First National offer mobile banking.

At FNB (and many community banks) the branch has traditionally been where all business is transacted. With the introduction of various technologies (online banking, mobile banking, direct deposit, etc) now only about 15% of First National Bank’s client transactions happen physically in the branch. The rest happen electronically or online.

I’m curious to know what your experience has been with banking and technology. Do you use mobile banking? If so, what do you like? And if not, is there a specific reason?

There are still only a few of the largest banks that offer check deposit with a mobile phone. Do you use this service at Chase, PayPal, or another institution? Does the service work as promised?

What’s my Credit Score?

According to a recent report by Smartcredit.com, only 4% of people access their free credit each year. The government originally started requiring the three major credit bureaus—Equifax, Transunion, and Experian—to provide a free annual report every year to encourage credit education, reduce fraud and identity theft among consumers. Given the 4% utilization rate, it appears the effort may not be working according to plan. However, credit monitoring is big business as more and more players are entering the market for your financial management dollars. Here are five things to consider regarding personal credit management and your free report:

1. Annualcreditreport.com is the ONLY government sponsored site that offers a free annual report from each of the three credit bureaus. There are countless copycats and plenty of other legitimate providers, but make sure you know what kind of site you’re visiting before you invest money with a credit monitoring service.

2. This site (annualcreditreport.com) allows users to choose the method and timing of report orders. The reports can be ordered at the same time or staggered over the course of the year: user option. Also, the credit history report is free, BUT it does cost to get a FICO score as part of the order.

3. Once you order a report from one of the bureaus, it’s not free again for a full year.

4. Since the report is designed to promote awareness, it makes sense to use the report to familiarize yourself with the content of your report. If there are errors or fraudulent information on your history, there are ways to dispute the information and get the report corrected. It’s important to dispute the information immediately so when good credit matters—loan, insurance, and job application to name a few—your record will be correct and accurately reflect your history.

5. As identity theft and security breaches of personal information become more common, it is essential to protect identity and monitor fraudulent activity. All three of the main bureaus, and many other quality credit monitoring providers, offer ongoing protection in various forms. It would be very wise to use annualcreditreport.com as an introduction to your credit, and then find a service to help you monitor your credit and personal information moving forward. It is much easier to plan ahead and purchase protection than it is to try to pick up the pieces after you’ve been victimized by identity theft.

Member FDIC Equal Housing Lender

Back to Kasasa…Where does this fit into reality?

Since we launched Kasasa at First National Bank on May 9, 2011, we’ve had a great response from the community. Many of our existing clients are giving it a try and finding out this product is fantastic. We’re also seeing a good number of new faces coming through the doors at all of our branches to see what the buzz is all about.

I’ve also had a good number of friends, colleagues, and acquaintances say something like this in response to Kasasa: “Kasasa, yes, I’m still trying to figure that one out…”
Kasasa (i.e. rewards deposit accounts) does seem to fly in the face of everything a bank normally holds dear: we pay a modest rate of interest, don’t get too crazy with promotions and gimmicks, and don’t do anything that will make people wonder whether or not we really know how to take care of their money. In contrast, Kasasa pays a rate of interest most people would jump to have right now on a certificate of deposit, and we’re willing to pay it on a checking account. Kasasa is a word that sounds crazy and maybe a little gimmicky. And with the rates and the name, people may be wondering if we really know what we’re doing at First National.

The reality of the situation is that banking is changing. We are a small business, and we have to adapt to challenges just like any organization; lately it seems like we see a new challenge every time we turn around. For example, we are VERY heavily regulated, and the rules aren’t going to be loosening any time soon. Competition is also fierce as non-banks are starting to offer products we’ve offered for years. And, technology is changing the way everyone conducts business—including banking. We have more accounts and customers than we’ve ever had before at First National, but we have fewer and fewer people coming into our branches on a regular basis. As online banking, direct deposit, and smartphones become more and more prevalent, we are realizing we have to adapt in order to be successful and provide a relevant service you value.

Circling back to the original question, the reasons we offer Kasasa center around the ways we’re trying to adapt to our environment. If a customer meets three behavioral criteria on a regular basis he or she is rewarded with the high rate of interest and/or other rewards. These criteria are:

1) Debit cards – We earn money—interchange—whenever someone swipes a debit or check card. In addition, it costs us more money to process a paper check than it does to handle electronic transactions. If a client swipes her card a certain number of times (10) in a qualification cycle, then she meets this criterion.

2) estatements – It costs us money every time we generate and mail paper statements. It costs a LOT of money over time. Some estimates are that it costs more than $2/Statement mailed. In order to qualify for the account rewards, a client has to agree to receive statements electronically. The great thing is that this not only cuts costs, but also provides a couple significant benefits to our clients. First, estatements are environmentally friendly because they can be viewed online without having to be printed. Second, instead of having to wait on your statement in the mail, our estatements are accessible immediately after being generated through our online banking. In addition, the online banking site provides instant access to old statements so in essence you have an archive of statements at your fingertips.

3) The final qualification is to have one direct deposit or one automatic ACH (electronic) debit in a qualification period. One of our main goals in offering these new accounts is to develop clients who use us as their primary bank. We’d love to be the primary bank for all of our clients. Clients who have direct deposit or set up automatic ACH debits are more likely to use the account as their primary account. We’re trying to encourage that relationship.

Ultimately, in order for us to be a successful bank we need to adapt. Adapting in this case means embracing technology (debit cards/estatements/electronic transactions), cutting costs (estatements/debit cards), and growing relationships with clients so they use us as their primary bank (Direct deposit/ACH debits). This is a mutually beneficial development because we’re accomplishing our goals by offering superior products and meeting the financial needs of our local communities.
Hopefully, this helps a few of our Kasasa skeptics understand both the benefits and the reasoning behind the products we’ve introduced. It is possible for both sides to benefit in a situation like this.

I’d welcome your comments and feedback on any of this, and if you have questions about Kasasa and rewards accounts, feel free to respond.

Member FDIC Equal Housing Lender

Picking a Bank isn’t as Easy as it Used to Be

I was at Barret Graduate School of Banking in Memphis, TN, last week. It was a great week and I met some fantastic people and instructors from around the country. I was also reminded of something over and over again as I interacted in classrooms throughout the week: picking a bank isn’t as easy at is used to be.
I started working in the banking industry in 2002 as a front-line teller. My initial trainer–and many banking associates after that–drilled into me that banks were all the same in terms of products and services, and the only variable we could control was superior customer service. An individual could visit any bank and expect to have the same options regardless of a bank’s size and sophistication. Sure, size mattered at times because rates were typically more competitive at larger banks, but any community bank could attract customers with the occasional CD special or loan offer. And I have always been told that community banks could use size to their advantage by emphasizing local service from local people who have a vested interest in their community.
I think we’re starting to see a seismic shift in the way people do banking. And that shift is starting to–and will continue to–give community banks more substantial ways to differentiate themselves. Years ago, banks offered checking, savings, and time deposit accounts. They offered home loans, car loans, and small business loans. More recently they started offering ancillary services like insurance, investments, and trust services. But that’s nothing compared to how technology has contributed to the products a traditional bank can offer today: online banking, bill pay, and now mobile banking for smart phones. Person to Person payment (think PayPal) is available at many banks, and bigger banks (Chase, most prominently) are starting to scan checks with smart phones. By this time next year, the biggest banks–and companies like AT&T and Google–will offer consumers the capability to use their phone to make payments instead of the now traditional credit or debit card. Some of this technology will become standard at every bank (i.e. online banking). Other products will probably fade as they are replaced by other, better options (the paper check??). And it matters because banks, especially community banks, will have to determine what fits their vision and their community. Limited budgets and unique markets will force banks to prioritize what they offer and how they offer it. And that will mean you the consumer will have choices to make. You may not be able to walk into a bank and get the product you’ve seen advertised at a different bank. The bank you choose may be the optimal combination of service, product mix, and technology. And, scary as it sounds, you may come to rely on your banker as an expert on technology, at least as it relates to banking.
I’m curious to hear your thoughts. Have you seen any products or services in the marketplace that interest you? That may be coming soon to a bank near you?? Thanks for the feedback.