Everybody has a relationship with a bank, but few people take time to understand how their bank works. Here are four things you should know about banking in the USA.

Know the cut-off time for each location – Each banking location, including ATMs where you can deposit money, have cut-off times after which your deposits will take effect the next day.

For example: the local branch has a cut-off time of 4pm. Your rent payment of $800 is going to be taken out tonight. You only have $700 in your account. You just received your check from work and you want to deposit it so your account will not be overdrawn. If you make the deposit before the 4pm cut-off, it will be posted today and you will not be overdrawn, but if you make the deposit five minutes after 4pm, the deposit will be posted on the next business day. Knowing your bank’s cut-off time will help prevent you from being overdrawn on your account and will help you avoid other unpleasant situations.

Most banks pay the largest items first – If you have five transactions being processed at night, the bank will most likely cover them from the largest to the smallest. This seems very unfair when the $3 coffee costs an extra $35 in overdraft fees. The reasoning that banks give for this is that larger items being paid are probably more important, such as the rent or car payment. There is usually no way to reverse or change this order.

Bank fees are one of the biggest sources of income for banks – According to USA Today, banks collected $37.8 billion in fees in 2004, ($126 for every one of the 300 million people in the USA). Fees can vary with the type of account that you have at the bank.

For example: it may be possible to change your account to a lower-fee account simply by keeping a minimum balance at the bank. Be sure to talk with your banker about differences in fees for different account types.

Bank managers – In most banks, the top manager from the branch where you opened up your account has the most options in reversing fees or being flexible with regard to any aspects of your relationship with the bank. Tellers and customer service managers don’t have as much discretion as the branch bank manager.

For most Americans who have a mortgage, interest paid on their mortgage will likely be one of their largest tax deductions. Misunderstanding this deduction is common and often leads to poor decisions.

The mortgage interest deduction will reduce your taxable income. This means that the taxes you pay will be based on a smaller amount. It does not mean that your taxes will be reduced by the amount of mortgage interest that you pay. This is a huge difference and one that you must understand.

Let’s assume that you’re in the 25% tax bracket, which means that your joint income for your household is between $63,701 and $128,501 for 2007. If you paid $15,000 in mortgage interest for the year, you could deduct that full amount from your taxable income for the year. That would lower your income taxes by $3,750 ($15,000 x 25%). Thinking about this another way, for every dollar you spend in mortgage interest, your tax bill will be reduced by 25 cents (for those in the 25% tax bracket).

I have a friend who was boasting about how much he had paid in mortgage interest for the year. He was excited to have such a large deduction at tax time. While you should certainly take full advantage of deducting all of your mortgage interest, realize that you would be much better off financially if you didn’t have to pay the interest at all. Paying a dollar to save 25 cents is a losing proposition.

For most homeowners, having a mortgage is a necessary reality which allows them to achieve the American Dream. A house is generally a person’s largest asset as well, definitions from Rich Dad, Poor Dad aside, and a responsible means to grow your wealth. We here at Lending Club want you to keep in mind that paying off your mortgage as quickly as possible can generally help your situation. Being content to make a regular mortgage payment even if the means to overpay exist, for the sake of the perceived tax break, is not a smart way to go.

There seem to be some monthly expenses that are unavoidable because they are related to basic household needs. As a result, these expenses often get overlooked when people try to cut back on their spending. However, it is possible to reduce these types of expenditures, as you’ll see in the following examples on energy conservation.

There are two main ways to conserve energy in your home: making your current home as efficient as possible and purchasing new equipment that is more energy efficient.

To realize major reductions in your energy bills, you might need to make some up-front investments. It may seem odd to think of spending money on your home as an investment, but you will reap returns in the form of possible rebates, savings on monthly energy bills, potential tax write-offs, as well as increased value in your home. Of course, the fringe benefit of these improvements is that by reducing your energy needs, you are taking a proactive step to help protect the environment.

The Energy Star program is a joint effort between the US Environment Protection Agency and the US Department of Energy. What started as a program to identify energy-efficient computer monitors has grown into a major effort that now includes nearly all types of home electronics, appliances, and construction materials. Energy Star products typically pay for themselves, in the form of reduced energy bills, over their lifetime. Savings will depend on the type of product as well as what you are currently using. Information on products, their potential energy savings, and recent tax incentives can be found on the Energy Star website.

If you are considering making these improvements, a P2P loan from Lending Club is a great way to finance your purchases. Taking the low interest rate into account, the savings in energy bills will likely cover the cost of the loan as well.

If you are not ready to make a major improvement in the energy efficiency of your home, try these simple steps, which will also have an impact:

• Replace incandescent light bulbs with halogen bulbs
• Plug air leaks by sealing around windows and doors
• Turn off, or unplug, appliances and electronics when not in use
• Turn down your refrigerator. Keeping it too cold is an unnecessary waste of energy.
• Use cold water to wash your clothes and air dry them

On Thursday July 26, the Facebook community passed the mark of half a million dollars lent and borrowed! This milestone was passed 7 weeks after we announced the first loan on June 6, which is certainly faster than we anticipated.

We continue to be impressed with the rapid adoption. The Facebook F8 launch has helped spread the word about our company. The community members have generated a tremendous amount of feedback to help improve our product. These improvements are preparing us well for our expansion beyond Facebook.

To date, there has not been any default or late payments, though it is still very early. The close ratio on the site went up to 84%: this statistic means that more than 4 out of every 5 loans obtain funding. A borrower always has the ability to relist a loan if the individual didn’t receive funding the first time.

Lending Club was recently reported by Netbanker as the top “Money” application on Facebook.

The average interest rate continued to go up to 10.71% partially due to larger loans, which usually carry higher interest rates. For more details on interest rates calculations, please visit https://secure.lendingclub.com/info/how-we-set-interest-rates.action. The average loan size went up from $4,700 to $5,250 in the last 4 weeks.

All this information and more will soon be available directly from the secure site https://secure.lendingclub.com.

Renaud from Lending Club

[ RWW coverage ]

For someone my age, I’m really lucky – I have a lot of extra cash because of the jobs that I’ve had. However, one thing that I haven’t been using is a budget. With no budget, it’s really easy to go out and spend money…but what do you say when the credit card bill comes at the end of the month? I think you know: “Where did I spend my money?!”

As many Lending Club members may know, creating a budget is no easy task. However, with help from my brother, I’m on my way to having a solid one. Here are the tips that have helped me the most.

1. Know how you spend your money – As was mentioned in an earlier post, you need to know how you are spending your money before you can create a decent budget. The most obvious way to do this is to track your spending for a month. Wells Fargo has a cool “Spending Reports” widget that tracks all of my credit and debit card purchases, so this work is already done for me.

You can dump receipts into a spreadsheet, a text document or Quicken--it doesn’t matter, as long as you are keeping notes on your spending. Note: cash withdrawals are very easy to forget about when you are making a budget. That $10 pizza you bought counts!

2. Know your savings goals – Write down your goals so that you will remember why you are saving. For me, my major saving goals were (in order):

1) Save money for school
2) Max out my Roth IRA
3) Save an extra couple thousand dollars for my quarter abroad in Italy

I wrote down the dollar amounts I wanted to save for each of these areas.

3. Make spending goals – Look at your spending categories. First, make a list of all your living expenses: rent, groceries, gas, etc. You absolutely MUST have this amount of money. (I recommend you make this amount 10% more than you actually need, just to have a safety buffer.)

Now, make a list of other categories. I’m making a category for eating out, one for entertainment, and one for extra guilt-free do-whatever money.

4. Follow the budget! – Now you’ve basically created a budget! When you get your paycheck, make sure that you follow your system. I do something like this:

1) Pay for my living expenses
2) Put in my savings (including investments and meeting my savings goals)
3) Make individual accounts for each of my spending goals.

My brother taught me an ingenious way to follow a budget—the envelope system. Put all of your money for each category into an envelope specifically marked for that purpose (I’m marking the envelopes with this cool Brother PT-80 labeler -- worth its weight in gold).

Then, when you go out to a movie, grab the cash from your entertainment envelope. When the envelope is empty, you are done with entertainment purchases for the month. You can also decide to take money out of one envelope if another becomes empty, depending on your ability to resist temptation.