In the many years since BestCashCow was founded, we have received a fair number of emails from readers asking various technical questions about how their online savings accounts operate. Perhaps the most common question relates to the difference between a wire transfer and an Automated Clearing House (ACH) transfer.

I have hesitated to write an article on this topic because the issue has become less and less important to those using online banks for their savings and CD products, and ACHs have generally become more transparent and faster. The largest online banks (Goldman Sachs Bank, Purepoint Bank, Ally Bank and others) now process all inbound and outbound transfers instantaneously (and free). As a result, transfer speeds and times have become less burdensome for those banking online and occasionally transferring cash to a separate savings or checking account at a branch where they do most of their daily financial transactions. But, we nonetheless seek to clarify this matter further here.

Wire transfers are a direct bank-to-bank process that technically moves money instantaneously between two financial institutions and can only be initiated by the institution holding the account from which cash is being transferred. Since the process may not be completely automated and a bank employee at the receiving institution may review all transactions before an account is credited for an inbound transfer, it may take several hours to a day for the money to move from one account to another. Otherwise, however, a wire transfer is basically an electronic cashiers’ check - payment received in an account is treated as cleared money and may be withdrawn immediately (and for this reason there is obviously also risk in this process). Likewise, the funds must be available in the outbound account before the payment is issued, and will be immediately debited from the sender’s account as the request is processed. Banks may charge to send or to receive wire transfers, but the fee on either side is ordinarily not greater than $35 for a domestic wire transfer (international transfers may be a little higher).

ACH transfers are similar to a wire transfer, except that they use a clearinghouse and a batch process and may be initiated by the outbound or the inbound account. Since a clearinghouse and a batch process are used, transactions are stored and reviewed and the money may not actually be transferred for a day or even several days (as pointed out above, the largest online banks process these transactions through the clearinghouse immediately, but the smaller ones may take several days – look to the comments in BestCashCow’s tables to see what types of speeds users experience). Even if the money is received immediately, the recipient bank may not allow the account holder to withdraw the money right away, especially when the transfer is initiated through that bank’s interface, as they need to protect themselves from fraud liability laws that ordinarily apply to ACH transfers. When initiating an ACH transfer from an incoming account at an online bank, there is a risk of overdrawing from the account from which you are pulling cash (and being charged an overdraft fee).

BestCashCow believes that smaller banks that offer slower outbound or inbound ACH transfers can still make sense for the consumer. Assuming that you can prepare for transactions where there may be a day or two delay in moving your cash, the extra yield in a higher savings or CD rate may more than offset your loss of interest over that day or two. Often, this delay can be avoided by initiating the transfer at the recipient bank (although you will ordinarily be subject to a hold there too).

In the 21st Century, the ACH process is ordinarily completely free to the user for both outbound and incoming transfers. We strong encourage all consumers to avoid the few financial institutions, such as Salem Five Direct, that still charge for ACH transfers initiated through their websites.

ATM fees hit a record high for the 11th year in a row, according to a recent Bankrate.com study. According to the study, the average total cost of an out-of-network ATM withdrawal is now $4.69, up 2.6 percent from $4.57 last year. In New York City the average ATM fee stands at $5.14, and in Pittsburgh it is still 5 cents higher. ATM fees have now risen over 55% over the past decade. It seems like an extraordinary burden to have placed against you for the convenience of accessing your own money.

The obvious first line of defense for avoiding ATM fees is to maintain an account with a bank or credit union that has a branch and/or ATM network that is convenient to you. You can see a map showing all banks near you here, and all nearby credit unions here. BestCashCow recommends keeping only the minimum amount in these accounts necessary to access the bank or credit union’s ATM and transactional network, and to put your remaining cash balances in the highest yielding accounts you can find so that your money works for you. Often, but not always, the highest yielding accounts will be online savings accounts, and you can find a list of the highest yielding accounts here.

The obvious second line of defense for avoiding ATM fees is to use credit cards whenever possible. Having the right card enables you to be earn reward points or cash back for your spend.

However, sometimes, it simply is impossible to find an ATM network easily when you need cash. That’s when a strategy like going into a grocery or drug store and making a small purchase on your bank’s debit card can enable you to get cash back. For those times when that strategy doesn’t work, you should also check out the Venmo app which enables you to quickly transfer cash to anyone. Finally, if you really find yourself paying out-of-network ATM fees too often, you might want to consider the tried and true strategy of carrying a checkbook.

Many investors, commentators and financial managers have perpetuated and subscribed to the fiction that those who want to protect themselves from an overvalued stock market should be moving to bonds. In fact, a recent New York Times piece, described here, even mistakenly assumed described investors’ choices as being binary – stocks versus bonds.

The idea that bonds are somehow a safe investment comes from the fact that long-term bonds have appreciated dramatically over the last several years as interest rates have come down and expectations of their rising have diminished.

With the 10-year Treasury yielding 2.10% and with the Federal Reserve guiding towards a Fed Funds rate of 3% in 2019, I would argue that the only way long-term interest rates do not rise, and rise dramatically, is if we fall into an economic depression and the yield curve becomes inverted. Also, oil and commodity prices are currently tremendously suppressed because the monarchy’s policy of opening up reserves is causing too much supply to reach markets. An impeachment trial will change this, causing commodity prices and inflationary pressure to rise, and driving 10-year Treasury rates to levels that those in their 20s and 30s have never seen.

The impact of a turn in interest rates on bond prices will be dramatic. You can ask anyone who tried to sell a long-term bond in 1970’s how many pennies on the dollar they received for it. Alternatively, you can speak to anyone who bought a long-term bond in July 2012 when the 10-year Treasury was at 1.52% how much their brokerage account valued it in August 2013 when the 10-year Treasury was at 2.90%. Bond investors can quickly lose 30% to 50% of their principal should they need liquidity during a period of rising interest rates.

My view that another dramatic move up in 10-year Treasury yields – and dramatic fall in bond prices – is likely upon us is not unique. It is shared by Leon Cooperman and Alan Greenspan.

Your safety is found in savings accounts and short-term CDs.