The other day, an astute (but anonymous) reader pointed out a bit of troubling fine print in the Emigrant Direct withdrawal policy (see here for to read it for yourself). In short, the passage in question states that Emigrant Direct has the legal right to require 60 days written notice of any intended withdrawal. In other words, they are (apparently) free to sit on your money for 60 days if they choose to do so. I’m not sure if that’s standard fare for most banks, but it certainly doesn’t sound like a very customer-friendly policy, and ING Direct ($25 account opening bonus) doesn’t seem to have a similar policy in place. This is certainly something to consider if you’re planning on depositing funds that you absolutely need to remain liquid.
Click here for further details on, and a possible explanation for, this policy.
12 Responses to “Emigrant’s Dirty Little Secret”
01/07/06 – i have been trying to transfer a mere $630 since 01/01/06… no luck… i called and got a lot of blah blah blah, not once, but two days in a row… the second time i was handed off to an alleged supervisor……… all have been less than helpful……
The concern here is that they could conceivably withhold funds for 60 days, not that they will do so routinely. So the fact that recent withdrawals have gone smoothly doesn’t necessarily ease worries that problems could arise in the future. I’m not actually too worried about this, but I can see why some people are.
It’s really no problem. I withdrew 10K from my account two weeks ago and everything went quickly and smoothly.
The money I live off of is kept in other accounts than Emigrant anyway, so I am not too worried about it.
The way banks work is that they have checking accounts (called demand deposit accounts) that must release funds on demand. Savings and NOW accounts (stands for negotiated order of withdrawal) are used by banks to fund loans, so in order to protect the bank from a â€œrunâ€ that would put them out of business (they could not call the loans fast enough to pay the deposits) they put in the withdrawal terms. I donâ€™t think Emigrant has ever exercised this and I am sure they donâ€™t ever want to as it would erode trust and cause the very â€œrunâ€ they are trying to protect.
I had a problem with ING. I had an arrangement with a third party to debit my ING account. We had a little problem getting in sync and they bounced 3 ach debits. We finally got it together and all was going fine. I just got an email that ING closed my accounts and sent the money to my linked checking account. Never once did they contact me to either warn me or find out what was going on. They donâ€™t care that I now have to stop the â€œnow running rightâ€ ACH debits before they try to hit the account. My call to customer service resulted in a snotty attitude from the guy. All-in-all I am really unhappy with the human service. The system worked fine but donâ€™t make a mistake or your kicked to the curb.
On the bright side it made me look for something else and now I am going to be paid more for my money at Emigrant, 4% is not bad and the risk of them exercising the 60 day rule.
I believe that this is indeed an ‘antirun’ provision. You might want to look into the history of what happened in 1929. Given that no bank just piles up money and sits on it, especially one that is paying a pretty good return, they need some way to cool off a hot situation should one occur. They do tend to snowball. I would remind you that banks tend to have a low liquidity ratio. They have to keep their money invested in order to be able to pay interest and many of those investments can’t be rapidly converted to cash. I mean, where do you think your mortgage money come from?
I suspect that most banks have some sort of fine print along those lines, and I’d worry about keeping my money in a bank that doesn’t.
I would suggest that this is nothing to worry about. If they routinely started preventing withdrawals in this Internet and Blogged Age, everyone would rapidly find out about it and the bank would indeed fail (after 60 days 🙂 This, IMHO, is a wise provision that would only be invoked in extreme circumstances and I’d consider it evidence of a well run bank.
I’ve poured over ING’s agreement and I don’t see anything about a 60 day limit on withdrawls even with a run on the bank.
It is clearly tied to New York Banks. ING is a worldwide banking operation.
I’ve opted to not open an emigrant direct account. I may reconsider if they do offer some fabulous cash back credit card I’ve been hearing rumours of but even then I’ll only keep a small amount like $500 in there.
I’m nearly certain that ING has the same clause in their fine print, as does Capital One. But, I’ve read so many of these disclosure agreements lately that I could be mixing them up. I believe it is a protection for them if there ever was a run for money (as Paul mentioned, above), but this safety net is rarely enforced (in my experience and knowledge). And, according to my research, all savings accounts (savings, money market accounts, etc) have a limit of 6 withdrawals a month (check with your local bank, I bet they have the same limits). I believe this is federal policy.
i read about it awhile back in the fatwallet discussion thread, and most of us just dismiss it as ED’s safety net (as mentioned)
i duno, maybe we should care more.
my ED account is finally setup and im transferring loads of money into it. about 3-4k will need to be taken out in about 2 months so if for whatever reason that 60 day deal hits me while I transfer out, I’ll be in trouble. lol.
Yeah, I saw that too — a safety policy for them if they drop their rate and there’s an old fashion run on the funds.
ING does not have any similar restriction. However, most savings accounts of this type are now restricted under Federal law to a maximum of 6 withdrawls a month. Something else to consider when deciding how to utilize these accounts.
I send them an email about it but no response so far.