The FDIC proposed limits on the interest rate banks that are classified as less than “well capitalized” can pay to depositors, according to a press release issued by the agency today.

The restrictions would stop floundering banks from trying to attract new depositors by paying interest rates that are well above the national average. This would apparently limit the FDIC’s liability should a poorly capitalized bank go under after attracting large volumes of new deposits.

The good news is the measure will only apply to a handful of banks. There are about 154 banks classified as less than well capitalized out of more than 8,300 banks across the country.

It seems convenient enough: Instead of mailing a check for the same amount to your insurance company every month, they can set up an auto debit system so that your monthly premium is automatically deducted from your checking account on the same day every month. It’s one less bill to worry about, right?

Not so fast.  Billers love auto debiting consumer bank accounts because it ensures they get their payments on-time, every time without the costs of processing a paper payment, but auto debits can create headaches for consumers. Before you sign up to pay anybody by recurring automatic debit, consider the following:

Auto debits can trigger overdraft fees. If you don’t have enough money in your bank account on the day an auto debit payment is scheduled, you’ll likely be hit with an overdraft fee of $30 or more. And if you forget about the auto debited payment and try to use your debit card that same day, you could be hit with another fee.

Mistakes are rare, but troublesome. The probablity of your biller or bank making a mistake with a recurring automatic electronic funds transfer (EFT) is rare, but it does happen. And if it does happen—and say, take $650 out of your account instead of $65—it could take days or weeks to get your money back.

Stopping recurring ETFs can be difficult. Once companies get you onto an automatic debit payment plan, they won’t want to let you off—the system works too well in their favor. Although most reputable companies will stop auto debiting your bank account when you ask, you could have trouble if they don’t honor your request. Some banks may charge a stop payment fee of $30 for every time you want to disallow recurring transfers. What’s more, some banks will allow preauthorized debits to go through even if you close the bank account. That means you’ll be on the hook to repay the bank for the debit and fees.

Have you had problems with an automatic debit/recurring electronics fund transfer? What happened? How did you solve the problem? Let us know in a comment!

Citizens Bank is offering customers a new way to earn banking rewards. GreenSense pays customers 10 cents for every time they pay without a check—up to $120 per year. That means you can earn 10 cents every time you swipe your debit card or pay your bills online—things most of us already do.

It’s free to join the GreenSense program. Members are automatically enrolled in online banking and receive a debit card made from recylced plastic.

Learn more at Citizens Bank.

Citi is offering a $100 checking account bonus through January 31, 2009. Here’s how to claim the $100 Citi checking bonus:

• Open a Citibank checking account and deposit at least $1,000 before Jan. 31, 2009.
• Make at least one direct deposit or make at least two electronic bill payments with your new Citi checking account for three consecutive months.
• At the end of the three months, Citi will deposit $100 into your new account.

The promotion code you will need to claim the $100 Citi checking account bonus is CY73.

The British government announced plans to offer additional financial aide to the nation’s faltering banks on Monday. Like the United States, Britain provided a rescue package to its nation’s banks in October 2008, but banks have not used the money they received to extend more credit to businesses and consumers.

Britain’s new bank-rescue package is designed to encourage banks to lend money despite increasing losses while providing government-backed insurance for bad loans the banks already hold. Critics worry the governments actions bring certain banks, particularly the Royal Bank of Scotland (RBS), perilously close to nationalization.

Prime Minister Gordon Brown announced Monday that the government now owns almost 70 percent of RBS, although he declined to say whether the government was keen on nationalizing the bank completely.

Britain’s troubled banks—and the government’s efforts to help them—closely mirror the banking problems and government rescue plans here in the United States. What remains to be see is whether either nation will be successful in quickly resuscitating their banks by providing billions in financial assistance.

What one thing do you like most about your bank? Please share your thoughts in a comment!

For me, it’s my credit union’s generous funds availability policy—something I would’ve never thought about it until I began enjoying it. I can access up to $1,000 of any deposit as soon as the check goes in—no questions asked. And, regular direct deposits are available two days early. (The credit union puts the money into my account as soon as the funds are on the way, not when the credit union actually receives the deposit). That means if my pay stub comes on Thursday, the money actually goes into my account on Tuesday. Pretty cool.

Other features I like about my credit union are refunds of other banks’ ATM fees and the super-low rates they offer on loan products (although I’m going on a credit diet and hope never to take new credit again unless it’s for a mortgage).

What about you? Do you love your banks high savings or CD rates? Free checking features? Interest-bearing checking? Personal customer service? Nationally available ATMs?

Let me know!

In a move that nearly echos BankAround’s editorial yesterday, Citigroup announced today it would split up its business into two units after posting a fourth-quarter net loss of $8.29 billion—the bank’s fifth quarterly loss in a row.

Under the new organization, one unit, Citicorp, will run traditional banking around the world; the other unit, Citi Holdings, will deal with the company’s riskier assets and may attempt to sell off some of the bank’s toxic assets.

Like a few of the world’s other largest banks, Citi has tried to become a “financial supermarket”, offering businesses and consumers every possible financial product or service—a model many critics say is unsustainable. Citicorp will attempt to return to the core of retail banking—taking deposits and lending money. The challenge the company will face, especially in the U.S., will be maintaining and growing its consumer banking business in the shadow of its recent public struggles.

The stocks of Citigroup and Bank of America are bleeding out on Wall Street today. Some experts think the two banking giants’ troubles will spill over into hundreds of other banks. Although Washington is undoubtedly already scheming about how to inject more Troubled Asset Recovery Program (TARP) money into the banks, some wonder: Why not just nationalize the banks? I’m not sure nationalization is the answer any more than letting the banks fail is the answer. But perhaps one lesson that will come from the recession and banking crisis of 2008 (and now, it would seem, 2009), is that, when it comes to banks, bigger isn’t better. Read more…

Congress plans to debate legislation later this week that would give the Federal Deposit Insurance Corp. (FDIC) increased powers to protect consumers from failing banks.

The bill would utilize the remaining funds—approximately $350 billion—from the bailout package passed in October 2008 to permanently increase the FDIC’s deposit-insurance limit to $250,000. October’s bailout package raised FDIC deposit-insurance limits to $250,000 per customer, per bank, through December 2009.

The bill would also increase to $100 billion from $30 billion how much the FDIC can borrow from the U.S. Treasury to support the insurance fund, and extend the amount of time the FDIC would have to replenish the fund in the event of widespread distributions.

If passed, the measures could be especially helpful to small community banks who can use the increased levels of insurance to assure potential customers their deposits are safe.

Since BankAround is the place to compare bank interest rates nationwide, every month the BankAround blog will bring you a roundup of the best interest rates nationally. Here are the top CD rates and savings account interest rates for January 2009. Do you know of a higher rate that we have missed? Let us know!

Top CD Rates

• 4.75% APY CD (36-60 month) at PenFed Credit Union. $1,000 minimum.
• 4.16% APY CD (12 month) at Nexity Bank. $1,000 minimum.
• 4.01% APY CD (6 month) at Ascencia Bank. $500 minimum.
• 4.07% APY CD (12 month) at Energy Credit Union. $1,000 minimum.
• 4.80% APY CD (72 month) at Huntington Bank. $50,000 minimum.

Top Savings Rates

• 4.00% APY at Dollar Direct. $1,000 minimum.
• 3.06% APY at WTDirect. $10,000 min. balance required after 90 days.
• 3.01% APY at E*Trade. No minimum.
• 2.80% APY at FNBO Direct. No minimum.

Looking for a great rate in your area? Search all banks and compare interest rates now.