Chapter 16

Banking, Bill Paying, and Investing Online

In This Chapter

Managing your checking and savings accounts online

Looking at your credit card statements online

Emailing payments with PayPal

Managing your investments online

Keeping track of your home budget

Once upon a time, money was substantial stuff that glinted in the sun and clinked when you dropped it on the table. Investments were engraved certificates that you kept in your safe-deposit box if they worked out, or used as bathroom wallpaper if they didn’t. Well, that was then. Now, money and investments are mere electronic blips scampering from computer to computer, and if you do any banking or investing, one of the computers they scamper through might as well be yours.

You can do just about any banking online that doesn’t require physically handling pieces of paper, which means everything except withdrawing cash and, at some banks, depositing checks. For these tasks, you have to use an ATM or, if you’re truly retro, physically visit a bank branch and talk to a human being. But we help you avoid the last option as much as possible.

Going to the Bank Without Ever Leaving Home

Nearly every bank in the United States now offers online banking. They don’t do it to be cool; they do it because online banking is vastly cheaper for them than ATMs or tellers. Because both you and your bank have a strong interest in making sure that the person messing around online with your accounts is you, the sign-up process is usually a bit complicated — the bank either calls you to verify that you signed up or mails you a paper letter specifying your password. After you’re signed up, you visit the bank’s website and log in with your new username or number and password. Every bank’s website is different, but they all show you an account statement along the lines of the one from John’s bank, shown in Figure 16-1.

As you can see, deposits and withdrawals look like they do on printed statements you receive in the mail. If you click the View Image link next to a check number, it shows you a picture of the canceled check. The Automated Clearing House, or ACH, lines are described in the nearby sidebar “ACH! It’s better than a check!” You can also download a PDF of your bank statements.

If you use an accounting program such as Quicken or Microsoft Money, banks invariably offer a way to download your account info into your program. Look for a link labeled Download or Export. In Figure 16-1, it’s the small Export History button, near the upper-left corner.

Details differ, but beyond the capability to check your statement, all banks offer roughly the same services, including transfers and bill-paying and sometimes check deposit by taking a picture of the check.

Transferring money between bank accounts

If you have more than one account at a bank, a checking and savings account, some CDs, or a mortgage, you can usually move money from one account to another. In the account shown in Figure 16-1, the line that says Internet Banking Transfer indicates that money has been transferred from the checking account to a mortgage account, to make the monthly mortgage payment. To get a better idea of how this transaction works, here are the steps for transferring money from a checking account to a mortgage account (again, specific steps vary among banks):

1. Click the Transfer button (or whatever your bank’s website calls it).
2. Enter the amount you want to transfer in the box labeled Amount (or similar wording).
3. Select the account that the transferred money is coming from, generally from a list of possible From accounts.
4. Select the account number the transferred money is going to, generally from a list of possible To accounts.
5. Click the button labeled Transfer or Do It (or similar wording) — it’s done.

It’s that easy. Most banks handle transfers within the bank the same day; at John’s bank, you can enter a transfer as late as 7 p.m., which is handy when you remember at dinnertime that the mortgage is due today.

Many banks also let you make transfers to and from accounts at other banks, using ACH. To set up transfers, you provide the other bank’s routing code and account number. Depending on the bank, you may be required to provide a voided check from that account, verify that the account name is the same as your account name, or make a couple of tiny deposits into the account and answer correctly when they ask you for the amounts. After you set up a transfer, it resembles a transfer within your own bank: You specify the accounts and the amount and then click. You can also transfer money between your bank and your mutual fund or brokerage account. In Figure 16-1, for example, the ACH deposits from ING Direct are from another bank, and the ACH deposit from VGI-ST TRSY is from a Vanguard mutual fund.

Transfers to other banks have two important differences: time and price. Even though the transfer is handled entirely electronically, the money takes anywhere from two days to a week to show up at the other end, depending on the other bank. The time it takes for any particular bank is consistent, so if the transaction took three days the last time, expect it to take three days the next time. If you must have the money available so that you can write checks on it, allow a week and keep an eye on your balances until you’ve made enough transfers to know how long they take.

The price for transfers varies from zero to two bucks, with no consistency among banks. A transfer can be started from either the sending (push) or receiving (pull) end; often, Bank A charges you a dollar if you tell it to send money to Bank B, but if (instead) you tell Bank B to receive exactly the same amount of money from Bank A, it’s free. All else being equal, pushing gets the money there faster.

You can use PayPal to move money from just about any bank account to any other bank account for free. It’s a handy way to make online transfers (and we describe it later in this chapter).

Paying bills online

Writing checks is so 20th century; our young-adult kids have never written a check. Now you can pay most of your bills online. In many cases, you can arrange for automatic payments from your bank account for routine monthly bills. (In Figure 16-1, Bank America refers to the MasterCard bill.) We’ve arranged automatic payments for credit card, electric and gas, and mobile phone bills — a typical mix. Most banks offer a bill-pay service, using one of a handful of specialized companies in this field. Some banks provide bill-pay for free, some charge, and some provide it for free as part of a package. Even if your bank doesn’t offer bill-pay, utility and credit card companies often can arrange for you to pay their bills automatically from your checking account.

When the bank pays the bill, it sends an ACH transfer if it recognizes the payee (generally larger companies); otherwise, it mails a paper check. If the bank pays by ACH, the payment is usually received the next day; otherwise it’s mailed the next day — and the mail takes however long it takes.

Each of these companies has its own procedure. We use a credit card example to show how this process usually works. Figure 16-2 shows the online payment page at American Express. When logged in to its website, you set up payments by entering your bank account’s routing code and account number, which ACH needs. (See the preceding sidebar, “ACH! It’s better than a check!”) After the payment info is set up, you visit the website and specify how much you want to pay and when, and the bill is then paid from your bank account. Usually, you get credit the same day, which is a big help to avoid paying credit card interest when you remember at the last minute that the bill is due. Some cards, including American Express, also offer the option to pay every month automatically on the due date — just the thing for thrifty card users who pay off their bills every month.

Figure 16-3 shows the bill payment service from John’s bank. To set it up, you pick the companies to pay and then enter your account number and the name and address of the company to pay, if the bank doesn’t already have it on file. Some bill-pay systems offer the option of electronic presentment, in which you see your bill on the web rather than receive it by paper mail. You also tell the system which bank account you want to pay the bills from. Then, to pay your bills each month, you just visit the bank’s website and enter the amounts to pay and the date. The bank automatically moves the money out of your account on the date for each payment. Some banks offer recurring payments so that you can tell them to pay the same amounts every month.

Taking advantage of other online bank services

Because doing business over the web is much cheaper than doing it in person, banks are putting all sorts of other services online. Visit your bank’s website to see what it offers. Among some of the services we’ve seen offered are

• Loan applications
• New accounts
• Retirement accounts
• Checkbook-balancing calculators

Checking out a few recommended banks

These days, any bank you pass while driving down the street offers online banking, but some specialist banks do everything online. Although it’s possible to do all your banking online, we prefer to have our main account at a local bank, where we can drop by and argue with the staff, and to use an online bank for a high-interest savings account that you can’t get at a local bank.

To give you a flavor of what’s available, here are some banks we use and recommend:

• Simple (www.simple.com): A new online-only bank.
• Gobank (www.gobank.com) Another new online-only bank,
• Capital One 360 (http://home.capitalone360.com): A large regional bank.

All three offer free online checking accounts; Capital One also offers savings accounts that pay relatively high interest. Capital One has branches mostly in the northeast and Texas, but their best deals are online.

To open an account at any of these banks, you fill out a form on its website, usually including the ACH info about your existing checking account to link to your new account. After it’s set up, you can move money back and forth between the accounts as needed. Each will send you a MasterCard or Visa debit card you can use to pay for stuff, and also to take cash out of ATMs. Each has a network of ATMs you can use for free, mostly at stores and gas stations. To get money into your account, each has a mobile phone app that lets you deposit checks by taking pictures of them, or you can use ACH or payroll direct deposit. Gobank also has arrangements with Walmart and 7-11 to accept cash deposits.

Money you put into your savings account has to stay there for a week before you can get it back, and you can only make six online withdrawals per month. (Accounts at other banks have similar rules.) Capital One also offers certificates of deposit, mortgages, home equity loans, and retirement accounts. These are full-service banks, and offer everything else a bank offers, all available online if you want it.

We’ve used all of these banks quite happily, but we give the nod to Capital One because it offers a wider range of services and has been around longer.

To squeeze the last bit of interest out of your money, visit www.bankrate.com where you can find a listing of banks paying the highest rates on online savings accounts or certificates of deposit. Search for MMA (money market account) for an online savings account.

Trying out combo banking

If you have an account with a stockbroker, such as the ones we list later in this chapter, it generally offers a check-writing option, which makes it act like a checking account, usually at low cost. If you don’t have a local bank you like, this option can be a good one.

Dealing with Credit Cards

Just about every credit card in the country offers online access for the same reason that bank accounts do — online transactions are a lot cheaper for them than calls to the toll-free number.

Online credit card services start with applying for the card. Search your fave search engine for credit cards and you find a phantasmagoria of offers. They change daily, but you can look for various goodies — no annual fee, bonuses and rebates, and low interest rates. Most sites that appear to compare cards are in fact selling one bank’s cards, so treat their claims of unique and superior features with skepticism.

After you have your card, typical online conveniences include these:

• Check your balance and recent transactions.
• Pay your bill from your checking account.
• Apply for a credit line increase.
• Ask for copies of sales slips for charges you don’t recognize, or challenge ones you think are bogus.
• Download account information into Quicken and other personal finance programs.
• Manage rebate and bonus programs related to the cards.

Different credit-card-issuing banks have somewhat different versions of these services, but comparing them without getting the credit card first is difficult. For example, some banks let you set up automatic payments to pay each bill in full on the due date, getting the maximum use of your money without paying interest. At others, you have to visit their website every month to schedule the month’s payment. We would make a list of features, but it would be out of date before it was printed, so visit some bank websites to see what they’re offering. (We compared two different banks in the tenth edition of this book, but then they merged, keeping the worst features of each one. Sigh.)

Pay for Your Stuff with PayPal

Credit cards are easy to use — if you’re spending money. Until recently, it has been all but impossible for individuals (rather than companies) to receive payments by credit card. Even small businesses found it expensive and time consuming to accept credit card payments. PayPal (www.paypal.com) has changed all that, and it also provides an easy way to move money among accounts at different banks.

PayPal is a boon to individuals who buy and sell at auction sites such as eBay (which owns PayPal), but it has many other uses, too. PayPal helps you start a small business on the web: Small organizations can use PayPal to collect payments for events such as dinners and amateur theater, nonprofits can accept donations, and it’s just about the only way to make payments to individuals in other countries without paying a service charge larger than the amount you’re paying.

If you plan to accept PayPal for your business, be sure to heed PayPal’s warnings regarding shipping only to verified buyer addresses. Be sure to comply carefully with all the fine print to protect yourself against fraud. Most first-time sellers learn the hard way that it’s they who pay the cost of fraud — and even the cost of their customers’ innocent errors. The PayPal fraud rate is lower than that of most credit card fraud, but it’s a case of merchant beware — know your customer and take appropriate steps to safeguard your transactions.

To use PayPal, you set up an account, which is quite easy. It wants your name, mailing address, phone number, and email address. The basic personal account is all you need unless you plan to sell a whole lot of stuff on eBay. (If your plans change, you can upgrade your account.) PayPal encourages you to provide it with your bank account number so that when you pay somebody, PayPal can take the money directly. That way, they don’t have to pay the credit card companies, and you can move any money you receive into your account with minimum hassle. You should also link a credit card if you have one.

When you first tell PayPal to link your account to a bank account, PayPal verifies your bank account number by making two random deposits of less than a dollar. You then have to tell it the amount of the deposits to complete your registration. You can link several bank accounts to your PayPal account and then move money out of one account and into PayPal, wait a few days for the transaction to be complete, and then move the money out of PayPal and into a different account — all for free. If you live in the United States, you can link only U.S. bank accounts; if you live anywhere else, you can link both U.S. accounts and accounts in your own country.

After you open an account, you can send money to anyone who can receive email. If that person doesn’t already have a PayPal account, she opens one when “cashing” your email. The money you send can come from the balance in your PayPal account or from a bank account or credit card that you link to your PayPal account. After you have money in your account, you can use it to pay other people, move it to your linked bank account, or spend it with a debit card linked to your PayPal account. Check the list of fees carefully. Payments marked Personal and made without using a credit card are generally free. Everything else has about a 3 percent fee. Every time you set up a payment, PayPal deducts it from your balance, if any, and then from your linked bank account. If you want to pay with your credit card instead, usually a good idea for eBay and other commercial payments, you have to click a little Change link and change it before completing the payment.

PayPal is usually the easiest and cheapest way to send moderate (less than $1,000) amounts of money to people in other countries. It charges a few percent to change money from one currency to another, but compared to the alternatives, such as bank wires, foreign currency checks, or Western Union, it’s a bargain.

Criminals send out spam claiming to be from PayPal and claiming that you “must” provide them with your account number and password right away to clear up an account problem. Don’t fall for it. PayPal will never ask you for your password or account information in an email message — or anywhere other than on its website. If you receive a message that seems to be from PayPal and are unsure whether it’s real, don’t click on any links in the message — instead, manually type www.paypal.com into your web browser and log in. If anything’s wrong, the website tells you. If you get a suspicious email from PayPal, forward the entire email to [email protected].

Send Money to Your Pals

Although you can use PayPal to send money to your friends, if you do it very often, it’s more convenient and usually cheaper to use peer payment systems such as Venmo and Dwolla. The good news is that they are really cheap, often free, but the bad news is that they don’t offer the buyer protection that credit cards and PayPal do. They warn you to pay only people you know, so in practice this isn’t a problem if you use them that way.

To use any of them, you first set up an account, which they usually call a wallet, and link it to some combination of bank accounts, debit cards, or credit cards. Then you can send money to other people, or ask them to send you money. When you send money, it comes out of your wallet, or if there isn’t enough, out of a linked bank account or card. When you receive money, it goes into your wallet where you can pay other people, or move it to a linked bank account.

All of these systems have web sites, listed below, which are the easiest places to set up an account. They also all have apps for mobile devices, which is the easiest way to use them. If you’re out with friends, and someone else has just paid for the pizza, you can use the app right there to pay for your share, or she can send you a payment request, as in Figure 16-4. They all provide a wide range of ways to identify your payees, including email address, mobile phone number, and often Facebook or Twitter account names.

The three systems we describe here are more similar than different, so the one to use is the one your friends use. They’re all free to sign up, so if your friends use different ones, you can join them all.

• Dwolla: (www.dwolla.com) Accounts can link only to bank accounts, not cards. Payments under $10 are free, above cost 25¢. Payments only to other Dwolla members. Can also be used for some business payments.
• Venmo: (www.venmo.com) Accounts can link to bank accounts, credit and debit cards. Payments from your wallet or bank account are free, while credit cards may be free or may cost about 3%. Can pay anyone; nonmembers get email encouraging them to join and collect their payment, which is returned if they don’t do so.
• Google Wallet: (wallet.google.com) Google’s wallet is a peer payment system as well as being the way to pay for downloads on Android devices and a payment system that competes with PayPal. You need a Google account to use Google Wallet. Anyone with an Android device has a Google wallet as part of their Google account, although they often don’t realize it can be used for more than downloads. Gmail users already have Google accounts, too. Accounts can link to bank accounts, credit, or debit cards. Peer payments are free unless the money comes from a credit card.

Investing Your Money Online

If you invest in mutual funds or the stock market (something that’s difficult to avoid these days unless you anticipate dying at an early age), you can find a remarkable range of resources online. An enormous amount of stock information is also available, providing Net users with research resources as good as professional analysts had before the advent of online investing.

The most important thing to remember about all online financial resources is that everyone has an ax to grind — and wants to get paid somehow. In most cases, the situation is straightforward; for example, a mutual fund manager wants you to invest in her funds, and a stockbroker wants you to buy and sell stocks with him. Some other sites are less obvious: Some are supported by advertising, and others push certain special kinds of investments. Just consider the source (and any vested interests they may have in mind) when you’re considering that source’s advice.

Mutual funds

Mutual funds are definitely the investment of the baby boomer generation. The world now has more mutual funds than it has stocks for the funds to buy. (Kind of makes you wonder, doesn’t it?) Most fund managers have at least descriptions of the funds and prospectuses online, and many now provide online access so that you can check your account, move money from one fund to another within a fund group, and buy and sell funds — all with the money coming from and going to your bank account by way of ACH.

Well-known fund groups include

• American Century: A broad group of funds at www.americancentury.com
• Fidelity Investments: The 500-pound gorilla of mutual funds; specializes in actively managed funds at www.fidelity.com
• Vanguard Group: The other 500-pound gorilla; specializes in low-cost and index funds at www.vanguard.com

The online brokers listed in the following section also let you buy and sell mutual funds, although it almost always costs less if you deal directly with the fund manager.

Stockbrokers

Most well-known, full-service brokerage firms have jumped onto the web, along with a new generation of low-cost online brokers that offer remarkably cheap stock trading. A trade that may cost $100 with a full-service firm can cost as little as $8 with a low-cost broker. The main difference is that the cheap firms don’t offer investment advice and don’t assign you to a specific broker. For people who do their own research and don’t want advice from a broker, the low-cost firms work well. For people who need some advice, the partial- or full-service firms often offer lower-cost trades online, and they let you get a complete view of your account whenever you want. The number of extra services the brokerages offer (such as retirement accounts, dividend reinvestment, and automatic transfers to and from your checking account) varies widely.

Online brokers include

• Charles Schwab: The original discount broker (www.schwab.com) offers somewhat more investment help than E-Trade and TD Ameritrade, but at a slightly higher price. Kathleen Sindell, the author of Investing Online For Dummies, 5th Edition (John Wiley & Sons, Inc.), recommended this site to us.
• E-Trade: This low-cost, no-advice broker (www.etrade.com) also offers bank accounts, credit cards, boat loans, and just about every other financial service known to humankind.
• Scottrade: Another low-cost, no-advice broker, Scottrade (www.scottrade.com) also has offices with live brokers, for people who want extra help at extra cost.
• TD Ameritrade: The low-cost, limited-advice broker (www.tdameritrade.com) is affiliated with Toronto-Dominion Bank, one of the largest Canadian banks that also has extensive US operations. It has good online research tools.

Most fund groups, including the ones in the preceding list, have brokerage departments — which can be a good choice if you want to hold both individual stocks and funds.

Portfolio tracking

Several services let you track your portfolio online. You enter the number of shares of every fund and stock you own, and the service can tell you — at any time — exactly how much they’re worth and how much money you lost today. Some of them send, by email, a daily portfolio report, if requested. These reports are handy if you have mutual funds from more than one group or both funds and stocks. All tracking services are either supported by advertising or run by a brokerage that hopes to gain your trading business:

• Google Finance: This tracking service (www.google.com/finance) offers multiple portfolios with a minimalist Google style. Google is, at the moment, the only site that offers real-time, as opposed to 20-minute delayed, stock quotes for people who think they can beat the market. You need a Google account to use Google Finance.
• MSN Money: This service (money.msn.com) also has portfolios and lots of information, although we find it cumbersome to set up and more of a pain to use than My Yahoo!. To use all its features, you have to use Internet Explorer.
• Yahoo! Finance: Enter multiple portfolios and customize your screens with related company and general news reports at finance. yahoo.com. You can also see lots of company and industry news, including some access to sites that otherwise require paid subscriptions. It’s advertiser supported, comprehensive, and easy to use.
• Marketwatch: This online part (www.marketwatch.com) of the Wall Street Journal lets you track portfolios, automatically linking accounts at many online stockbrokers, and read news stories. Although the site wants you to subscribe to the magazines, the free portfolio tracker isn’t bad. Click the Portfolio link at the top to get started, and remember that you don’t have to sign up for its email newsletters if you don’t want to.

Budgeting Tools

Sites to help spend, pay, and invest your money are useful, assuming that you have money to spend, pay, and invest. Toward that end, some websites help you make and follow a budget. They link to your bank and credit card accounts so that they can track the money coming in and out and let you know how reality compares to your budget. We’ve found some significant bugs in the ones we’ve tried that made them misreport our financial situation, so if your finances are complex, check their numbers before you trust them. However, if your finances are simple (and all in one currency), these sites can be useful for categorizing your spending and comparing it to your budget.

Mint (www.mint.com), the site that many people use, tracks your budget against your bank accounts, with frequent offers from their sponsors. It’s strong in budgeting tools, suggestions about how your budget compares with its other million users, warnings of upcoming bills, and lots of pretty charts and graphs. They’re a subsidiary of Intuit, makers of popular finance package Quicken, but you don’t need Quicken in order to use the Mint site. John finds that the features that are supposed to collect information from your other online banks and investment accounts don’t work very well, and it totally botches accounts in anything but US dollars. (He has an account in Canada.) But if your financial life happens to consist of things that Mint is good at, it may work well for you.