February 22, 2010

CitiGroup Warns It May Not Allow Withdrawals -- Do You Need a Stash of Cash?

This is shocking -- Citigroup has formally issued a notice that it may use its contract right (part of your bank account agreement) and not honor any request for a withdrawal. 
  • This only applies to checking accounts.
  • This only applies to Texas.
  • This only applies for 7 days -- they're warning that they might not let you take cash out of your Citi account on demand -- you might have to wait seven days.
  • It's effective beginning April 1, 2010
I'd think this was some sort of April Fools joke -- gotcha! -- except it's coming in mid-February and it's appearing on Citi bank statements across the country.  The error?  That everyone in the country got it, but by law they can't do it anywhere but Texas.  (Lucky us.)

According to the Motley Fool, here's the language of the notice:

Effective April 1, 2010, we reserve the right to require (7) days advance notice before permitting a withdrawal from all checking accounts. While we do not currently exercise this right and have not exercised it in the past, we are required by law to notify you of this change.
According to Ira Stoll at the blog Future of Capitalism, Citi has now issued an explanation:

Yadda yadda yadda.  With warstories of the Great Depression still family lore to many of us, coupled with the possibility of crippling natural disasters (tornado, hurricane, earthquake), this little warning brings home the question: should you have a stash of cash in the event of an emergency
When Citibank moved to unlimited FDIC coverage in 2009, we had to reclassify many checking accounts to allow for immediate withdrawals in order to ensure all customers qualified for the additional coverage. When we moved back to standard FDIC coverage with most major banks in 2010, Citibank decided to reclassify those accounts back to make them eligible again for promotional incentives. To do so, Federal Reserve Reg D requires these accounts, called NOW accounts, to reserve the right to require a 7-day notice of withdrawal. We recently communicated this technical requirement to our customers. However, we have never exercised this right and have no plans to do so in the future."

The answer is YES.  The real issue is HOW MUCH and WHERE TO KEEP IT. 

1.  The National Endowment for Financial Education, writing for those hard hit in California by the sudden fires and mudslides, points out that ATMs and bank buildings may not be operational in a disaster.  They then give information on how you can get emergency cash from the Red Cross and FEMA. 

2.  Equipped to Survive is a great source for emergency preparation and while they don't say anything more than "$100, more is better" they do have a great suggestion -- have some of this cash as rolled quarters.

3. At EHow.Com, they suggest different ways to build up that emergency cash supply, and then estimate that in the event of a major disaster (Katrina was an example), you should have at the ready enough cash to cover 3-6 mths of monthly expenses

4.  HRCCNC suggests a 6 month expenses reserve.

And, then, for the big question -- since you put your cash in a bank to keep it safe from theft, fire, or other dangers -- what are you to do with the cash stash, if you're worried about being able to get the cash out of the bank (because the ATM is underwater or whatever, or the bank itself is telling you no for 7 days)? 

5.  PracticalHacks gives you tips on where to hide that emergency cash stash
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