Finance

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4% Interest Savings Account: Deal or No Deal?

A Massachusetts credit union is advertising what appears to be a great rate on savings accounts — 4% interest. On top of that, they promise rewards for every debit card purchase, and to reimburse you for other banks’ ATM fees.

Metro

How can this little credit union beat the big online banks?  The simple answer is they can’t.

*MOUSE PRINT:

Metro disclaimer

Only 0.25% interest on amounts over $3000? Thanks for nothing. If you make any sizeable deposit over $3000, your effective rate of interest will be far below the big online banks. (HSBC, for example, is paying 3.50% interest on up to $2,000,000 in deposits, until August 15.)

We won’t even get into the other fine print that requires that you also open a checking account, and only get back three cents per purchase as a reward.

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Pay Your Taxes with Plastic — and Get Rewarded?

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With tax day less than a month away, cash-strapped consumers may be tempted to charge the balance they owe to a credit card, such as through the offer above (or via the electronic payment services approved by the IRS that accept credit cards).

The promotion says you could earn rewards for every dollar you charge. The fine print, however, says:

*MOUSE PRINT: “Tax payments made with your credit card will be subject to a service fee…”  How much of a service fee?  It is 2.49 percent, or about $25 per $1000 charged.

But what about the rewards they promised?  Most reward credit cards only offer 1% back, so that would reduce your service fee to 1.49 percent or about $15 per $1000 charged. The good news is that most credit card companies will treat this tax payment as a purchase rather than a cash advance (thus giving you a 20-25 days grace period with no finance charges or cash advance charges if you pay in full every month). If you don’t pay it in full, regular finances charges will accrue on top of the 2.49 percent fee.

Some credit cards like Citi’s CashReturns card offer 5% back on everything for the first three months. Were you to use this card, you would actually make 2.5% on your tax payment.

A little known alternative to charging your taxes to your credit card is to put that charge on your debit card through a company called Link2Gov.

*MOUSE PRINT:  The fee is only $2.95, but your card must be a member of the NYCE, Star or Pulse networks.

Don’t charge more than is your bank account, or that will trigger overdraft fees, and/or finance charges from your bank.

Most experts, however, suggest paying your taxes the old fashioned way — by check. You will enjoy a week or two of float, and not pay a penny extra in fees or finance charges.

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LifeLock: Just Say You’re a Victim

LifeLock is a service that aims to protect your personal information from ID theft for $120 a year and they back up their claim with a $1 million guarantee (discussed last week here).

What are some of the things they do to protect you? They order a copy of your credit report annually from the major credit bureaus. They opt you out of pre-screened offers of credit. And they put a fraud alert on your credit reports.

Of course, these are all things you could do yourself for free. And to their credit, after they mention each of these things on their website, they indicate you could do these things too for free but why bother with the hassle. (It frankly is so surprising to see this level of candor, that it makes MrConsumer suspicious that some Attorney General somewhere didn’t require this of them in the past for this company or a prior company.)

Now, as to their putting a fraud alert on your credit report, depending on the circumstances, this may or may not be kosher. Under federal law, only victims of ID theft or those who believe they are about to become a victim of fraud may place such an alert into their credit report:

“Upon the direct request of a consumer, or an individual acting on behalf of or as a personal representative of a consumer, who asserts in good faith a suspicion that the consumer has been or is about to become a victim of fraud or related crime, including identity theft, a consumer reporting agency described in section 1681a (p) of this title that maintains a file on the consumer and has received appropriate proof of the identity of the requester shall— (A) include a fraud alert in the file of that consumer …”

So how in the world can this company represent to the credit bureaus that you have been victim or are about to be?

*MOUSE PRINT: Buried in LifeLock’s terms and conditions is this provision:

“18. … You additionally agree that you have a good faith suspicion that you have been or are about to become a victim of fraud or related crime, including identity theft, that you want to obtain fraud alerts under 15 U.S.C. § 1681c-1, and that you will notify LifeLock immediately if and when you no longer have such a good faith suspicion.”

Unless you read the fine print, you probably would not have known that you were being asked to attest to something that may not be true — that you are a current or imminent future victim of ID theft.

This bit of duplicity has not gone unnoticed. Just a few days ago, Experian, one of the big three credit reporting agencies filed suit against LifeLock for this very practice.