Q: Why is the APYE on my yearly statement lower than the APY that was on my certificate?

A: APYE stands for Annual Percentage Yield Earned, and can vary from the account's stated APY (Annual Percentage Yield). In an ideal situation (the funds are here from January 1 and there are no additions or subtractions to the account during the calendar year) an account's APYE calculation is just:

[(Initial Deposit + Interest Accrued) / Initial Deposit] - 1

So, for instance, a $100,000 CD opened on January 1, 2009 with a 4% APY:

$100,000 + $4,000 = $104,000 / $100,000 = 1.04 - 1 = .04 (or 4% APYE)

However, the APY doesn't match the APYE when one of two things happens:

1. The account wasn't opened on the first day of the year;
2. Deposits are later added to (or withdrawals subtracted from) the account (which wouldn't have been there on the first day of the year)

1. $100,912.03 was here on 1/1/09; it received an interest rate of 4.066% and the full yield of 4.15% because it was here 365 full days (hence the annual part of APY)
2. $100,000.00 came on 2/18/09, which is the 49th day of the year. It received the interest rate of 4.066%, but didn't maximize the full yield accrual (it only got about 86.6% of the accrual, or about 4.139%)
3. $50,000.00 came on 9/9/09, which is the 252nd day of the year. It received the interest rate of 4.066%, but didn't maximize the full yield accrual (it only got about 30.9% of the accrual, or about 4.094%)

Q: Why does a bank place a hold on my payroll check when I deposit it?

A: A business, much like an individual, can write checks that could potentially overdraw their account. The paying bank (where the business has its account) has the option not to pay these items, and can return them to the bank where they were deposited. In addition, businesses have the same right as individuals to stop payment on individual check numbers (or a series of check numbers).

Thus, the bank where you deposited your payroll check holds the availability on those funds because these funds are not guaranteed to be paid based on the instrument presented (in this case, your payroll check). The hold is generally based upon the clearing time for the item and the dollar amount of the item. A payroll check from a local business that is less than $5,000.00 will generally be made available within 2 business days of the deposit.

If you want immediate access to your payroll deposit, you should ask your employer if they have a direct deposit option which generally has immediate availability once it has been posted to your account.

Q: What is the difference between simple interest and compounded interest?

A: Simple interest is just a basic interest rate on the account. Compounded interest is best defined as "interest on your interest". Most Certificates of Deposit (CD) accounts are based on the compounded interest method, which produces an Annual Percentage Yield (APY) calculation.

The difference can best be described through the example of a $100,000.00 CD at 3.92% Interest (4.00% Annual Percentage Yield or APY), where interest accrues daily and posts monthly to your account.

In the first case, let's say that you elect to take an interest check every 30 days. You would get 12 checks for $322.88 each (the last check would be for a little more, because of the additional 5 days), totaling $3,874.56.

In the second case, let's say that you decide to let your interest roll each month (or accrue), and want to see how much interest you earn. Because the interest itself earns interest each successive period, after 360 days you would have $3,944.14.

Over the course of 360 days, the compounding interest leads to an increased return of about $70.00 in the example. Because interest compounds daily on your credit card, this is also why earlier (and larger) payments will lead to lower payments of interest!

Q: How many custodians are allowed on a Kids Club account?

A: The answer to this question varies by State - in the State of Maryland, if the funds are gifted to the minor (under the Universal Gift to Minors Act, or UGTMA) only one custodian is allowed to be on a specific minor's accounts. A successor custodian may also be declared, but the successor custodian may not act until the primary custodian passes away or is otherwise unable or unwilling to act on behalf of the minor.

Also, most banks will recommend (or require) that only one parent/guardian have signing authority on a minor's account where the funds were not gifted to them (i.e. funds from a paper route, mowing lawns, etc.).

Q: Why does my bank ask me to verify my change in address when I have been going to the same branch of the same bank for 20 years?

A: In addition to a bank's requirement to comply with federal statutes requiring a Customer Information Program (CIP), Identity theft has been a growing concern for many years. Prior to the address verification requirements that are in place today, a person could potentially commit identity theft by obtaining a consumer's account number and attempting to re-direct the statements back to an address of their choosing (i.e. by calling the branch with an account number and other personal information that they were able to obtain). Identity theft can be seriously damaging to a consumer's deposit and credit accounts, and might also affect their credit report if the identity theft was not quickly detected.

To mitigate this risk, a bank will generally require verifying documentation of an address change, which can take a wide range of forms. This verification could be a change of address from the DMV / MVA to a signed HUD-1 Settlement Statement indicating the purchase of a new primary residence. A bank will certainly take their personal relationship with you into consideration when determining what type of documentation is appropriate, but not every employee at the bank will know who you are, and so the bank will require some form of documentation to complete the address change.

Q: I want to make sure that I'm working with a financially strong bank - how can I get a copy of a bank's financial report?

A: Most banks are required to post in each deposit branch lobby how a consumer can request a copy of the bank's most recent financial report. In the case of American Bank, a consumer can direct a signed, written request to the Bank's Greenbelt operation center, located at 9001 Edmonston Road, Suite 100 - Greenbelt, MD 20770

Q: How can I tell if a bank has received TARP money?

A: The Federal Government, as part of the Troubled Asset Relief Program (TARP), is required to maintain a public listing of all institutions that received this assistance. A useful search engine can be found at: http://www.mgwashington.com/index.php/news/article/database-banks-receiving-tarp-funds/2482/. American Bank did not take part in this government assistance program, and has not taken any TARP funds.

Q: How much FDIC coverage do I have and for how long?

A: (From www.fdic.gov) The basic insurance amount is currently $250,000 per depositor, per insured bank. This includes principal and accrued interest up to a total of $250,000.

Deposits in separate branches of an insured bank are not separately insured. Deposits in one insured bank are insured separately from deposits in another insured bank.

Deposits maintained in different categories of legal ownership at the same bank can be separately insured. These categories are: single ownership, joint ownership, and trust accounts. Therefore, it is possible to have deposits of more than $250,000 at one insured bank and still be fully insured. For more information on deposit insurance coverage, see the FDIC's brochure "Your Insured Deposits" which can be accessed at www.fdic.gov/deposit/deposits/insured

The standard insurance amount of $250,000 per depositor is in effect through December 31, 2013. On January 1, 2014, the standard insurance amount will return to $100,000 per depositor for all account categories except IRAs and other certain retirement accounts, which will remain at $250,000 per depositor.