Sunday, November 4, 2007

Bank of America

Bank of America:

The Bank of America Balance Rewards Money Market
is a way for Bank of
America customers to earn a higher yield on their accounts. Also they offer no
monthly service charge if the accounts are liked to a prima checking account.
First of all, most other us banks do not charge monthly service fees on money
market accounts and have no requirements about linking checking accounts. Also
this account mentions a bonus depending on the lowest average monthly balance
over 12 months. This bonus is hardly worth opening an account because the
dollar value of the bonus is extremely low.

The money market rates at Bank of America are extremely low.

Balances below $2500 earn APY of .35%

Balances between $10,000 and $25,000 earn a whopping 2% APY!!! Might as well put money under the mattress.

And here is the kicker, balances over two and a half million earn up to 3,8% APY.

I don’t know anyone who would put two million dollars in a taxable money market account
to earn 3.8% APY unless you want to hand the Bank free money.Yes, Bank of
America is basically taking in free money by paying basically 0% interest on its
deposits and loaning out the money at let’s say 6% Investors take note, Bank of
America earns an amazing spread on consumer deposits.

Well so farI have briefly mentioned the money market rates at the Bank of America, but what

about the normal savings rates?

No matter what your balance you earn 0.20% APY. On top of this you need to maintain at
least $300 each day to avoid a monthly service charge. I can’t believe people
actually sign up for Bank of America accounts.

Current Banking Trends

The current trend in the banking industry is to offer great rates because money is much more
liquid than ever as consumers can easily use the internet to find the best money
market rates. Bank of America is really going against the trend! Also, another
trend is to move to more fee based banking. Its seems as if Bank of America is
taking the fee concept to the extreme.

So why does Bank of America have such low money market rates? As usual we can blame the
government . There is a federal law prohibiting any bank in the United States
from having more than 10% of the United States saving deposits and BofA
currently has about 9.8% of these deposits!

Bank of America offers one of the lowest savings rates in the country. In order to
compensate for low rates they have other programs devised as a way to entice
consumers into signing up with Bank of America.

  1. The company has made a bunch of innovations to stop less educated consumers from leaving the bank in pursuit of a better return on capital. One program is the Keep
    the Change program that encourages consumers to use their checking account
    (perhaps so more money is stored in the checking rather than the savings

  2. A
    nother program is the My Expressions account that lets you get branded Bank cards
    from the company. Are you willing to flaunt your Harvard Alumni status to
    the gas station attendant or would you rather earn more money? You be the

Will Bank of America still be The Bank of America?

From this short analysis it appears as if they do not have any competitive advantages, but
this is not ture.

Being the largest consumer bank in the United States has a lot of benefits. Many people
use the bank because they are located all over. Everyone loves convenience,
(give me convenience of give me death) but now the internet is just as good and
things may start to change for the mammoth banks. Where else can I transfer
money to a friend at 2 am on a Sunday night?

Bank of America does have an innovative program that makes it easy to transfer money to
other Bank of America holders. I can’t tell you how many times my friends
(debtors) were angry when I told them they actually had to write me a physical
check instead of do a online BofA money transfer.

Bank of America has recently expanded into Investment Bank and has suffered a huge
loss. This was done by the Bank to have an opportunity to become a big player
in the corporate banking market and also lower its risk profile by making the
company more diverse. So far the plans have not worked as the investment
banking division has lost millions in the previous quarter.

conclusion: its your money do want you want with it

Tuesday, October 30, 2007

PayPal As A High Yield Money Market Alternative?

Getting in the habit of maximizing the return of the money in your
savings account is great. There are tons of alternatives out there
so I recommend looking at different websites for suggestions.

1. PayPal offers very competitive rates and requires a small minimum
investment. For some reason the returns do not seem to match what
the websites claims. For example in September the average 7 day
yield on a PayPal account was never below 5.05% but it looks as if money
in a PayPal account earned 4.66%. In August the opposite happened
as the interest earned was much higher (above 5.5%). Has anyone
else noticed this? Current Rate for PayPal can be found at: PayPal Rate.

I noticed another suspicious action by PayPal towards the end of
September/start of October. For a period of almost two weeks PayPal did not post
a rate. One guess is that the money market rate fell drastically low and
PayPal decided it would not be in its best interest to post a low 7 day average
yield. I contacted PayPal by phone to inquire about this issue and the
representative simply told me that he "could not give me a rate." They
must have know something that I don't know...

Anyways, I have tried to contact PayPal numerous times via email, but they always
provide this silly example:

My Email To PayPal


I was just wondering what is your money market rate? I see that the
rate has not been updated in a few weeks. I’m interested in using Pay
Pal as a high yield money market account, but first I want to make sure
it is high yield!

-PayPal's Friendly Email Back .. and I quote "The dividend
received on a monthly basis through the Money Market Fund
is based on both the U.S. Dollar balance left in a PayPal Account and
the yield of the Fund.

If payments are sent or received, the amount of money that is in the
account will change, therefore changing the return.

· The yield of the fund varies over time
· The rate shown on the site reflects a 7-day average annual yield
as of a certain date

Dividend Rate(Annual Rate=1.50%/365)=0.000041096
Calculation for one day of dividends:
$1,000 * 0.000041096=$0.041096
· The dividends are then totaled at the end of the month and the
amount is distributedIt is my pleasure to assist you. Thank you for choosing



Job Offer Time:

Ann must have an easy job sending the same email out to everyone!
Does anyone know how I can apply for this job at PayPal?

I would not recommend using PayPal if you ever need help with Banking. They have the truly awful customer service and seem to be rather deceptive despite the higher floating rate.

Anyways, you need to be careful about putting your money in a uninsured money
market account these days. Of course I don't know anyone who has heard of a money marketing losing money, but I am growing alarmed at the SIV (special investment vehicles, and not cars by the way) risks that are freezing up the commercial paper market. Citigroup is in great stress and this could easily spillover. Investors & Savers, I urge you to look at the allocation the money managers in your uninsured money market accounts have and proceed with caution.

To Conclude: PayPal is not your Pal for savings.