Fed to Keep Rates Near Zero

The Federal Reserve kept its key interest rate near zero once again Wednesday. It released a statement saying that although the economy continues to improve, it intends to stay the current course.

The Fed's decision came just one week after the government reported that the economy grew in the third quarter, the first gain after declines over the previous four quarters.

While it was generally assumed that the central bank would leave its federal funds rate in a range of 0% to 0.25%, economists and investors were eager to see how the Fed described the economy in its statement.

Information courtesy of CNN

$1 Trillion in Bank Losses

Yes, one trillion dollars.

What does this mean for banking stocks and the economy? Money's Paul R. La Monica breaks it down.

What do you think?

CD Rates Continue to Trend Downward

The banking world continues to be plagued by anemic CD Rates, as this article over on Mainstreet attests:

You can’t really blame CD investors for seeing red this week. After all, a big reason why the Federal Reserve is sitting on interest rates is to boost the balance sheets of many of the same banks whose free-wheeling lending helped push the economy off a cliff. Rubbing more salt in the wound, bank investors have to abide by an economic policy created by the same Washington pols that encouraged banks to make those dubious loans in the first place.

Your best bet? Find the best deals out there, because only the top CD Rates are going to get you any kind of return if you're a CD investor. Current CD Rate trends can be bucked through methods like MoneyAisle's live reverse auctions. Many financial institutions bid against each other to give you great rates. Check it out here: http://www.moneyaisle.com/Verticals/CdC2b

Overdraft Fees vs. The Government: New Developments

On Monday, Sen. Chris Dodd unveiled legislation to rein in overdraft fees. On Thursday Reps. Carolyn Maloney and Barney Frank did the same. Here's how the bills are similar:

• Both bills would require banks to receive consent from customers before enrolling them in the overdraft protection program.
• Both bills would limit the number of overdraft fees to six per year.
• Both bills would require banks to notify customers beforehand when a purchase or ATM withdrawal would trigger an overdraft fee.
  
• Both bills would stop banks from re-ordering transactions for the purpose of maximizing the number of fees.

What about differences?

• The House proposal would also apply to written checks that overdraw an account.
• The Senate bill excludes checks as it applies to the opt-in provision.

It will be interesting to see how this plays out.

Is the Government Killing Your Savings with Low Interest Rates?

Very interesting article posted over at CNN Money about the federal government's suppression of interest rates in an effort to stimulate the economy and how that is punishing those of us who have been frugal, particularly retirees.

But until rates go up, Wall Street will be chowing down on essentially free money, while fixed-income people living off their investments will have to eat into their capital, take more risk, or reduce their standard of living. A nice reward from their government for a lifetime of saving. Thanks for nothing, guys.

There have been some encouraging signs lately that interest rates may go up, but until they do it's more important than ever to find the highest rates on your CDs and savings accounts. Tools like the interest rate auctions on our own MoneyAisle.com are more important than ever to ensure you get the most out of your savings.

National Save for Retirement Week

In honor of the upcoming National Save for Retirement Week (October 18-24), we thought it was a good time to inspire people to take a second look - a re-evaluation, if you will - at their current savings habits.

Too often we'll just tick a percentage on our 401k (if we're even doing that) and expect everything to work out. Recent economic news has proven this method of thinking wrong.

The best way to guard against losing your shirt in another stock market collapse (particularly if you're over 40) is to diversify your portfolio - on top of that 401k contribution, set aside a percentage of your paycheck (anything over a certain amount) to be shuttled directly into a high-yield savings account. For those of you who are still receiving cost-of-living raises (I know there aren't that many of you, but this trend could change once we emerge from current economic woes), you'll be putting more and more money away as time passes. This increased savings amount, coupled with compounding interest rates (that's when you start to earn interest on the interest you've already earned), in addition to 401k savings, can help ensure that you won't be caught too unawares as retirement approaches.

Another benefit is this account can double as an emergency savings account. Financial experts suggest keeping a cushion of 3-6 months of expenses in an easily accessible fund for emergency purposes. If you keep on this savings plan, eventually you'll have this recommended savings cushion and beyond.

It's been said that you should hope for the best in life and prepare for the worst. Increasing your savings rate allows you to do both simultaneously.

Overdraft Fees Gaining Attention in Washington

According to Money Magazine, political momentum in Washington is gaining behind a proposed crack down on overdraft fees -- the penalties banks charge when customers spend more than they have in their accounts.

"They clearly know something is coming," said Melissa Koide of the New America Foundation, a left-leaning Washington policy group. "It's a very big populist issue so these big banks and the regional ones are reacting in anticipation, and that isn't a bad thing."

FDIC Deposit Insurance: An Introduction

The FDIC created the video below as a guide to their deposit insurance. We thought it was pretty informative so we thought we'd share.

Interview with FDIC Head Sheila Bair

CNN Money spoke with FDIC head Sheila Bair. Video embedded below:

Savings in the News: Overdraft Fees and New Money Mindset

Two great news articles appeared recently about Americans and saving:

Philly.com:

Americans learning their lessons on overdraft fees


In a recent survey by economic researcher Moebs Services Inc. some 45 percent of banks, savings institutions and credit unions acknowledged that their overdraft fee income was greater than net income.

This year alone, Moebs said, banks are looking at cashing in a record $38.5 billion in overdraft fees.

The Associated Press:

Meltdown gives consumers a new money mindset

While personal income is down slightly since the recession officially began in late 2007, the personal savings rate is rising. In 2007 the savings rate stood at 1.7 percent of after-tax income. That climbed to 2.7 percent in 2008, and in July — the most recent data available — hit 4.2 percent. As people fear losing their jobs, they will save more: Economists expect the savings rate to top 6 percent in coming months if unemployment — which was 9.7 percent in August — continues to rise.