Money Management

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What happenedEleven top banks today agreed to deposit $30 billion into First Republic Bank. First Republic has been under growing pressure since the collapse of Silicon Valley Bank last week. Both Fitch Ratings and S&P Global Ratings downgraded the bank on the back of reports that First Republic depositors were moving their money elsewhere, fueling speculation it could be the next to fall.Bank of America, Citigroup, JPMorgan Chase, Wells Fargo, Goldman Sachs, Morgan Stanley, BNY-Mellon, PNC Bank, State Street, Truist and U.S. Bank all agreed to make unsecured deposits of between $1 billion and $5 billion in an effort to restore confidence. “The banking system has strong credit, plenty of liquidity, strong capital and strong profitability,” Citi said in a statement. “Recent events did nothing to change this.”
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So whatThe move goes some way to reassure consumers worried their savings or even paychecks could get tied up in the unfolding crisis. The hope is that it will prevent further contagion, which Dick Bove, an analyst from Odeon Capital said it might. “The Federal Reserve does not have the money to stop a bank run, but the banking system itself does have that money, and they’re putting it in place to stop this once and for all,” he told Bloomberg.Now whatIf your bank account is covered by FDIC insurance and you have less than $250,000 per person, per bank, your funds will be protected in the event of bank failure. The issue with SVB and, to a lesser extent, First Republic, is that they have a relatively high percentage of uninsured deposits — money that wouldn’t normally be covered by the FDIC cap.First Republic stressed that it has a focus on safety and a diversified deposit base. This sets it apart from SVB which had a heavy emphasis on start-ups and tech companies. Today the bank released a statement thanking the bigger institutions for their support and confirming that, “Daily deposit outflows have slowed considerably.”Nonetheless, we are not out of the woods yet. If you have more than $250,000 in the bank, now might be a good time to think about moving some to a different institution or looking for other ways to cover any excess.Regardless of how much money you have, here are some factors to consider when looking for the safest bank to park your cash in:FDIC insurance: Almost every U.S. bank has this protection, but it is worth double checking. Call the bank or use the FDIC’s BankFind tool to be sure.Bank size and credit rating: Bigger banks with strong credit ratings are much less likely to fail as they have more liquidity and will be better able to swallow any losses.Percentage of uninsured deposits: Search online to find out if your bank has a large proportion of deposits that aren’t covered by the FDIC. This could be an indication that it’s more at risk of failure.These savings accounts are FDIC insured and could earn you 14x your bankMany people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts can earn you 13x the national average savings account rate. Click here to uncover the best-in-class picks that landed a spot on our shortlist of the best savings accounts for 2023.We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Citigroup is an advertising partner of The Ascent, a Motley Fool company. Wells Fargo is an advertising partner of The Ascent, a Motley Fool company. Bank of America is an advertising partner of The Ascent, a Motley Fool company. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Emma Newbery has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bank of America, Goldman Sachs Group, JPMorgan Chase, and PNC Financial Services. The Motley Fool has a disclosure policy. 

What happened

Eleven top banks today agreed to deposit $30 billion into First Republic Bank. First Republic has been under growing pressure since the collapse of Silicon Valley Bank last week. Both Fitch Ratings and S&P Global Ratings downgraded the bank on the back of reports that First Republic depositors were moving their money elsewhere, fueling speculation it could be the next to fall.

Bank of America, Citigroup, JPMorgan Chase, Wells Fargo, Goldman Sachs, Morgan Stanley, BNY-Mellon, PNC Bank, State Street, Truist and U.S. Bank all agreed to make unsecured deposits of between $1 billion and $5 billion in an effort to restore confidence. “The banking system has strong credit, plenty of liquidity, strong capital and strong profitability,” Citi said in a statement. “Recent events did nothing to change this.”

So what

The move goes some way to reassure consumers worried their savings or even paychecks could get tied up in the unfolding crisis. The hope is that it will prevent further contagion, which Dick Bove, an analyst from Odeon Capital said it might. “The Federal Reserve does not have the money to stop a bank run, but the banking system itself does have that money, and they’re putting it in place to stop this once and for all,” he told Bloomberg.

Now what

If your bank account is covered by FDIC insurance and you have less than $250,000 per person, per bank, your funds will be protected in the event of bank failure. The issue with SVB and, to a lesser extent, First Republic, is that they have a relatively high percentage of uninsured deposits — money that wouldn’t normally be covered by the FDIC cap.

First Republic stressed that it has a focus on safety and a diversified deposit base. This sets it apart from SVB which had a heavy emphasis on start-ups and tech companies. Today the bank released a statement thanking the bigger institutions for their support and confirming that, “Daily deposit outflows have slowed considerably.”

Nonetheless, we are not out of the woods yet. If you have more than $250,000 in the bank, now might be a good time to think about moving some to a different institution or looking for other ways to cover any excess.

Regardless of how much money you have, here are some factors to consider when looking for the safest bank to park your cash in:

FDIC insurance: Almost every U.S. bank has this protection, but it is worth double checking. Call the bank or use the FDIC’s BankFind tool to be sure.Bank size and credit rating: Bigger banks with strong credit ratings are much less likely to fail as they have more liquidity and will be better able to swallow any losses.Percentage of uninsured deposits: Search online to find out if your bank has a large proportion of deposits that aren’t covered by the FDIC. This could be an indication that it’s more at risk of failure.

These savings accounts are FDIC insured and could earn you 14x your bank

Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts can earn you 13x the national average savings account rate. Click here to uncover the best-in-class picks that landed a spot on our shortlist of the best savings accounts for 2023.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Citigroup is an advertising partner of The Ascent, a Motley Fool company. Wells Fargo is an advertising partner of The Ascent, a Motley Fool company. Bank of America is an advertising partner of The Ascent, a Motley Fool company. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Emma Newbery has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bank of America, Goldman Sachs Group, JPMorgan Chase, and PNC Financial Services. The Motley Fool has a disclosure policy.

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The next front of the AI revolution might just be your finances. 

Artificial intelligence (AI) has been transforming various industries, and the financial services sector is no exception. With the rise of robo-advisors and other AI-powered financial tools, many are wondering if human financial advisors will soon become obsolete. Let’s explore the pros and cons of AI-driven financial advice and assess whether AI is likely to replace your financial advisor anytime soon.

The case for machines

Did that introduction sound a little off to you? If not, the AI revolution may be closer to your doorstep than you think. That paragraph was generated by ChatGPT, a powerful artificial intelligence engine that you can communicate with in plain English. And after exchanging dozens of messages back and forth with the bot, one thing is clear to me: many industries are about to change.

The financial services industry was long believed to be impenetrable to the clunky AI of years passed. What bot could balance the nuances of the many facets of personal finances? Today, however, artificial intelligence can gain 40 years of experience in a few seconds, presenting IRS rulings and fund prospectuses alike better than even the most book-wormish CPA or CFA. When it comes to AI, the question is not whether it can outcompete a human, but whether it can replace every function today’s advisor can perform.

As a financial planner, I pride myself in my ability to communicate about complex topics in layman’s terms. But that skill is no longer in short supply. ChatGPT and many other artificial intelligence programs can do just as well as I can, if not better. I spent half an hour asking the bot a variety of highly technical questions. In addition to providing a correct answer almost every time, it generally provided a response written at a high-school reading level.

The case for men and women

So, is my job toast? Not yet. Human advisors still hold the upper hand against the current generation of machine learning bots.

For one thing, humans generally prefer to work with other humans. A 2020 study found that 84% of Americans would rather work with a human advisor than a so-called robo-advisor. There is a concept known as the “uncanny valley,” which argues that as robots get closer to emulating human characteristics, like speech, humans become more distrustful of them. And while robots are getting better at disguising themselves as humans, as represented by the introductory paragraph, they are not yet there. That’s why many people and some search engines are able to identify AI-generated writing.

Another challenge that artificial intelligence faces in the financial planning world is that of asking good questions. While a human advisor can ask a tactically pointed question to choose the best of many options, artificial intelligence, at least as of now, tends not to talk back. Most financial planning conversations include back and forth, establishing both qualitative and quantitative guidelines before offering recommendations. Talking with artificial intelligence is, at least for now, a one-sided conversation.

The future of financial planning

The financial services industry is one of the more tech-forward professional industries. This allows a unique opportunity for human advisors and AI to team up in order to best serve clients.

An advisor and her artificial intelligence engine may work best in tandem. The human can build context, and ask the AI engine the right questions, all while adding that human touch. With the right questions, the AI engine can offer more pointed solutions and provide the data to back them up.

“In conclusion, while AI is advancing quickly and has many applications in the financial world, it is unlikely to completely replace the human element of financial advising anytime soon. Instead, the future of financial advising will likely involve a complementary partnership between humans and machines.” — ChatGPT

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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Parting is such sweet — ooh, shiny! 

There are a ton of credit cards out there. Every major bank seems to offer at least a few — some have far more than that — and even your local credit union probably has one or two.

With so many options, it’s hard to know when you’ve found the right ones. However, it’s much easier to tell when you have the wrong cards.

Since both your money and your wallet space are limited, it’s best to get rid of cards when they no longer work for you. Here are a few telltale signs it’s time for a wallet refresh.

1. You aren’t using them

The most obvious sign that your credit cards aren’t the right fit is that you aren’t using them. If you have a few different rewards cards, for instance, but you only really carry one — think about why. Do you simply prefer a one-card lifestyle? Or is it that your other cards don’t offer enough rewards or perks to make them stand out?

2. You aren’t earning competitive rewards

I get that not everyone is as dedicated to maximizing rewards as I am, but you don’t need to be a pro rewards churner to want to make the most of your spend. Having at least one or two cards with bonus rewards in your biggest spending categories can be well worth the wallet space.

3. You haven’t opened a new card in years

Some folks may be stuck in a rewards rut without even realizing it. Credit cards change and evolve all the time, both for good and for ill. Not only could your go-to card have been devalued at some point, but you could be missing out on new (or newly revamped) cards that are much better fits. Browse our credit card reviews to get a look at what’s out there.

4. Your lifestyle has changed recently

Of course, not only do cards change over time — so do we. If you’ve had major lifestyle changes recently, you may want to give your wallet a good audit. Are you shopping online instead of in stores? Have you switched from buying groceries at the supermarket to the warehouse club? Maybe you just had a baby. Any of these can mean it’s time for a new card.

5. You’re struggling to use your rewards

The best rewards card in the world isn’t so great if you can’t use your rewards. Do you have a pile of points gathering dust because you don’t know how to redeem them? Has your travel rewards card given you a ton of miles, but you don’t have the time to travel? If you’re finding it hard to make the most of your rewards, it might be time to try a different type. (Cash back cards are a great alternative for people tired of messing with rewards points.)

What to do with your defunct cards

If you’ve done some introspection and found that your cards aren’t making sense, it’s time to make space for new ones. But that doesn’t necessarily mean you should cancel your old cards.

Cards with no annual fees can be beneficial even if they’re unused. That’s because the extra credit lines can help your credit score (through your utilization and credit diversity). What’s more, while the card may not be a good fit as your go-to card anymore, it may still offer perks or benefits worth keeping.

On the other hand, if those cards have annual fees, your options are to cancel or to downgrade. Both options have pros and cons, so consider the best options for your scenario. Whatever you choose, make sure to keep your renewal dates in mind so you aren’t stuck paying an annual fee for a card you’re planning to axe.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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