HCSB in Texas is now offering its reward checking account nationwide. I first mentioned this account in this February review. At that time, I was told they required a branch visit to open the account. However, I was just informed by one of their banking reps that they now have the application at CheckingFinder.com and it shows up for any zip code. I have more details in my February review.
At 3.51% APY for balances up to $25K (as of 3/09/2010), HCSB's reward checking rate isn't the best. However, the rate for balances over $25K is above average at 1.51% APY. If you look at the interest that would be earned on a $100K balance, it comes out to be about $2,000 which would be equal to a blended APY of around 2%.
It's important to note that HCSB is a relatively small bank with $321 million in deposits (based on 12/31/09 FDIC data). Like many small banks in the past, HCSB may decide to restrict availability. If you see that the account no longer shows up for your zip code at CheckingFinder.com, please leave a comment.
Also note, don't confuse HCSB in Texas with the banking giant HSBC.
High-Yield Reward Checking Account Resources
Center National Bank is offering a high-interest reward checking account called Centers Rewards Checking. The account has the following rates and features as of 3/09/2010 if certain monthly requirements are met:
Monthly requirements include:
Other features of the account include:
According to the banking representative, Center National Bank has been offering this account since May 2009, and the 4.11% APY has remained the same since then. Of course the rate is subject to change at anytime.
There is an online application, but they do require a branch visit for ID and signature verification. Branches are located in the Minnesota cities of Litchfield and Plymouth. Plymouth is just west of Minneapolis.
The bank's ratings for safety and soundness are strong: 5 stars (superior) at BauerFinancial (based on 12/31/09 data) and 4 stars (sound) at Bankrate.com (based on 9/30/09 data). The bank has been a FDIC member since 1934 (FDIC Certificate # 10976).
Other Reward Checking Accounts
It's not easy these days to find a reward checking account with a yield over 4.00%. The best reward checking accounts that are available nationwide are just over 4% APY.
To find nationally available reward checking accounts and reward checking accounts in your local area, please refer to the reward checking section of DepositAccounts.com.
I first reviewed Ally Bank's 2-year Raise Your Rate CD in this January post. The rate has gone down a bit, but the rate remains competitive even without the bump-up feature (it's 2.04% APY as of 3/09/2010). Ally's 5-year CD currently pays more than a percentage point above this (3.09% APY as of 3/09/2010). So which is the better option?
Both CDs have an early withdrawal penalty of only 60 days of interest. As I described in my survey of penalties, this is much better than what other banks offer. As I showed in my review of Ally's 60-day penalty, the effective 2-year yield if you do the early withdrawal from the 5-year CD at year 2 would be over 2.80%. Once the funds are withdrawn, you can then reinvest the money into a savings account or CD with higher rates if interest rates have gone up.
With the 2-year Raise Your Rate CD, you have the option to bump-up the rate one time during the 2-year term to Ally's current 2-year CD rate. It's quite possible that we'll see higher rates in 2011, so this can provide a little protection, and you don't have to depend on the 60-day early withdrawal penalty.
This Raise Your Rate feature does depend on Ally keeping the 2-year CD rate competitive. Ally Bank has a history of keeping their rates competitive although I'm a little disappointed by Ally lowering its 9-month no-penalty CD to under 1.00%.
Some readers have pointed out that it's possible that Ally Bank could increase the early withdrawal penalty during the term of your CD. I can't say how much of a possibility this is. Based on my reading of Ally's disclosure and my conversations with the CSRs, I have felt confident enough that I've put some of my own money into these 5-year CDs.
My experience opening Ally Bank's CDs has been very positive. I was able to choose to have the CD funded with money from my Ally savings account. Since I was already a customer, I didn't have to enter my personal info. You can also have the CD funded from an external account.
One thing to note if you're going to open an Ally CD is that they can't do partial withdrawals. An early withdrawal of any amount of the principal will cause the closure of the CD. So it makes sense to open multiple small CDs instead of one big one. Since the CDs don't have a minimum requirement, you don't have to worry about not being able to afford it. However, keep in mind that if you use your Ally savings or money market account to fund the CDs, each withdrawal counts toward the 6-per-month withdrawal limit. That may be one more reason to open an Ally Bank interest checking account which doesn't have these withdrawal limitations.
Bank of the Sierra (BotS) is one of the few banks offering a nationwide reward checking account with a yield over 4.00% (4.09% APY for up to $25K as of 3/09/2010). However, the yield doesn't mean much if you don't qualify. Readers have reported a few issues that have caused them to miss a month of interest. I thought a review of these issues would be useful not only for those thinking about a Bank of the Sierra account, but also for those new to any reward checking account.
The first issue relates to the e-statements. Like all reward checking accounts, BotS requires you to enroll and receive e-statements. You might assume the enrollment is automatic. It is not. You have to activate after you apply. Here's a comment from a reader about this:
Be careful of their E-statement signup. In addition to check it during application, you need to sign up on the bank's website. The link is at the bottom of front page. Many people have been hit by this shady tactic.
Another issue concerns bill pay. One of BotS's monthly reward checking requirements is the use of its bill pay. This is not typical. Other banks often have bill pay usage as an option if you don't want to do a direct deposit or an ACH transaction. But it's a requirement at BotS that can't be substituted with direct deposit. Here's how they describe the requirement:
Make at least one payment using Sierra BillPay per statement cycle (must be posted, not pending)
Note, it states that it must be posted and not pending. A reader reported an issue with this that caused him to lose a month of interest. If the payee can't take payment electronically and requires an actual check, it may take a long time before the check clears. This is what happened to the reader, and Bank of the Sierra didn't offer any leeway and was unwilling to pay the reward interest rate for that month.
This BotS issue with bill pay may also be an issue at other banks if they require bill payment checks to clear. So if you're using bill pay to qualify for the rewards, it's better to have a payee that takes payment electronically. And make sure you give yourself plenty of time before the end of the cycle.
And this brings up another potential issue with meeting BotS's reward checking requirements. The cycles can vary each month. Here's how the bank explains it:
Statement period ends the first Thursday of every month with the qualifying period ending the business day prior, meaning that the qualifying number of days will vary from month to month
I've seen other banks have a similar policy with the end of the statement cycle. So it's something to keep in mind for anyone with a reward checking account.
I described other reward checking gotchas in December. Have you been denied the top rate on your reward checking account? Please leave a comment about your experience.
High-Yield Reward Checking Account Resources
Wells Fargo is offering a $50 cash bonus for opening any of its checking accounts. Here's the link to the offer. According to the small print, it's "available only at participating Wells Fargo stores in Indiana, Iowa, Michigan, Minnesota, North Dakota and Wisconsin." The list of participating branches is available here. You're required to print the coupon and take it to the Wells Fargo branch and open the checking account by 5/31/2010. Here are some additional important small print details with my highlighting of things to note:
To qualify for your $50 bonus, you must open and fund a new personal Wells Fargo checking account with a minimum opening deposit of $100 (not including the $50 bonus) by 5/31/2010. The $50 bonus is available with all Wells Fargo checking accounts, including non-interest earning checking accounts except the Wells Fargo Teen Checking and Wells Fargo Opportunity Checking accounts. You will receive the $50 bonus within 30–45 days of account opening.
Credit for this find goes to markber at iBankDesign.
Wells Fargo Checking Review
The $50 bonus isn't much for a checking account these days, but at least this doesn't require direct deposit or debit card usage. One thing to note is that there may be a hard credit inquiry. This is based on my conversation with a Wells Fargo CSR in 2008.
Even though Wells Fargo's Free Checking has no monthly service fees, the online bill pay is not free with this checking account. Also, there are no free checks, not even the first order. You can get free online bill pay and free checks with other Wells Fargo checking accounts, but you'll have to watch out for monthly fees.
Wells Fargo's New Way2Save Program
Wells Fargo has a new Way2Save program. I don't think it's available nationwide yet. It's going to be introduced on a state-by-state basis as Wells Fargo converts the Wachovia branches. I reviewed this new program in depth in this October post. I did an update post in January reviewing the progress Wells Fargo is making in the conversions. For those who have Wachovia's Way2Save accounts, you may be disappointed if you've been maxing out the bonus. However, the new program should make it easier to receive a small bonus for the first year.
First Jackson Bank is offering some competitive CD and IRA CD rates. The best ones include:
The above rates are listed in the bank's CD rates page as of 3/09/2010. Similar rates are listed in the bank's IRA rates page. Minimum deposit is $1,000.
A reader mentioned that a bank representative was going to let him to open a CD by mail. As with any small bank, these policies can often change. So your miles may vary. Branches are located in the Alabama cities of Stevenson, Bridgeport, Scottsboro, Owens Crossroads and in the Tennessee city of South Pittsburg.
The bank's ratings for safety and soundness are a little weak: 3 stars (adequate) at BauerFinancial (based on 12/31/09 data) and 1 star (lowest) at Bankrate.com (based on 9/30/09 data). The bank has been a FDIC member since 1981 (FDIC Certificate # 23376).
As I mentioned on Friday after the FDIC announced the closure of Waterfield Bank, both UFB Direct and AARP Financial Savings Center had used Waterfield Bank to hold their customers' deposits. It appears that both are shutting down. I sent an email to the AARP Financial Savings Center asking about how this will affect them and their customers. Here is the reply I received:
Dear Customer,
Waterfield Bank was closed Friday March 5, 2010, by the Office of Thrift Supervision. Subsequently, the Federal Deposit Insurance Corporation (FDIC) was appointed Receiver. The FDIC will fulfill its obligations to Waterfield Bank depositors.
Depositors of the former Waterfield Bank will be able to conduct most of their banking business as usual until they transfer their deposits to another financial institution.
Certificate of Deposits accounts that were placed at Waterfield Bank, insurance checks for their certificates of deposits will be mailed on Monday, March 8, 2010, to addresses on record with Waterfield Bank.
Checking & Savings Accounts will have continued access to their accounts until April 5, 2010. Customers are encouraged to open new accounts with another institution as soon as possible. Any automatic transactions, including social security checks and automated payments, should be transferred to the new institution. Customers who do not move their accounts by Monday, April 5, 2010, will be mailed checks for any remaining insured deposit balances to the mailing address on record with Waterfield Bank and all automatic transactions will stop.
Regards, Customer Care
I also sent an email to UFB Direct, but I haven't received a reply. However, Fatwallet member sfchris reported a very similar memo posted at UFB Direct's website. It appears that it must only be viewable for customers who log in. A FDIC closure page was posted at UFB Direct's website over the weekend. The website appeared back to normal this morning. However, there was a change this afternoon. You can tell there's a problem by the look of UFB Direct's front page:
0.00% APY One of the Highest Rates in the Country!
Interest rates may be low, but fortunately they're not that low! I guess since the bank is temporarily operating under the FDIC, no interest will be paid. If you're an UFB Direct customer, this is another reason not to delay in moving your money.
I'm sorry to see the loss of UFB Direct and AARP Financial Savings Center. I've been reporting on UFB Direct since I started the blog back in 2005. UFB Direct's new US Savings Account rate had been holding up well. AARP's rate had fallen to near 1% many months ago so this isn't quite as disappointing.
Quorum Federal Credit Union is offering a special 2.00% APY 11-month CD. Minimum deposit is $1,000. The yield is 2.10% APY for a $100,000 minimum deposit. This is a limited time offer that is listed on the credit union's promotions page as of 3/08/2010.
Membership is open those associated with a long list of companies and groups at the credit union's membership requirements page. One group listed is the Select Savers Club. In the eligibility section of the Andera online application, one of the options is to join this club. This is what the option says.
I would like to join the Select Savers Club Inc, and become a Quorum FCU member
When you check this option, the following is shown:
The Select Savers Club Inc. provides its members with information on spending, saving, borrowing and managing debt wisely. Membership is open to anyone who has an interest in achieving his or her financial goals. Members pay a $5 lifetime membership fee. Quorum will cover this fee for any new member wishing to join the credit union concurrently.
Quorum FCU is located in Purchase, NY 10577. Its ratings for safety and soundness are mixed: 5 stars (superior) at BauerFinancial (based on 12/31/09 data) and 2 stars (below peer group) at Bankrate.com (based on 9/30/09 data). The credit union is federally insured by the NCUA (Charter # 22769).
Credit for this find goes to FW member RichTJ99 who mentioned it in the FW CD thread.
First Citizens Bank is offering a special 2.15% APY 18-month CD. Minimum deposit is $1,000, and a checking account is required. There's also a 6-month CD special, but the rate is much less competitive at 1.15% APY. These specials are not listed at the bank's website. A reader mentioned them, and I just called this morning (3/08/2010) for additional details. According to the CSR, these specials could end at any time.
First Citizens Bank has branches in several states. However, not all are operating under the name First Citizens Bank. According to the CSR, these specials may not be available at these other branches. An example are some branches in California that are operating under the name IronStone Bank. Those branches have different promotions. The best one is much less competitive (2.25% APY 36-month CD).
A branch visit is required to open an account. Make sure to contact your local branch to ensure they are offering this promotion. Branches are located throughout North Carolina. It also has branches in Florida, Arizona, Maryland, Tennessee, Washington, California, Virginia and West Virginia.
First Citizens Bank has been expanding in the last few years with much of the expansion coming from the acquisition of failed banks. The latest acquisition was on Friday when it acquired Sun American Bank in South Florida.
First Citizens Bank's ratings for safety and soundness are strong: 5 stars (superior) at BauerFinancial (based on 12/31/09 data) and 4 stars (sound) at Bankrate.com (based on 9/30/09 data). The bank has been a FDIC member since 1934 (FDIC Certificate # 11063).
Yesterday I reviewed First Citizen Bank's FreeMoney debit card reward program.
Locking into a long-term CD may be questionable now since there's the possibility of much higher interest rates sometime in the future. However, there's also the possibility that interest rates will stay low for several years. CD ladders can help take the guess work out of choosing terms. Even with CD ladders, it's a good idea to compare CDs not only based on rates, but also early withdrawal penalties. If rates shoot up or if you just need the money, you typically can break the CD with a penalty.
To help you compare early withdrawal penalties, I've put to together a short list of penalties from internet banks and popular credit unions. I chose the institutions based on their history of competitive long-term CD rates. I tried to summarize the penalties to make it easier to read. So it may not be exact compared to what is in the disclosures. I included links when possible to the disclosures so you can view the official details. I've also included links to my recent account review posts for additional CD details.
The most common early withdrawal penalty for CD terms over 1 year to 5 years is 6 months of interest. For terms over 5 years, the penalty is usually over 6 months of interest.
Ally Bank has the smallest penalty by far. At the other end is EverBank which has one of the highest penalties. There are a couple institutions with odd penalties which are confusing and could cause the penalty to be much higher. These two are Melrose Credit Union and Capital One Direct Banking.
There is one risk when planning on an early withdrawals. Some banks have small print that gives them the right to refuse an early withdrawal request. Banks rarely make use of this right, but there have been cases where this has happened. I described some examples in this post on long-term CDs. When I found this right-to-refuse in the disclosures, I noted it in the list.
Clinton Savings Bank has a few competitive CDs that can be opened online if you're a MA resident. The two best are a 2.40% APY 24-month CD and a 2.01% APY 18-month CD. Minimum deposit is $500. These are also available in an IRA. These rates are listed in the bank's rates page as of 3/07/2010.
According to the bank's truth in savings disclosure, the early withdrawal penalty is 6 months of interest on the amount of principal withdrawn for all CD maturities of one year or more. The grace period is 10 calendar days after the maturity date.
The bank also offers a reward checking account that currently pays 2.76% APY on balances up to $50K (see account review). When I first reviewed this account over two years ago, the rate was 6.01% APY.
There's an online application provided by Andera that allows ACH funding. However, the application only allows residents of Massachusetts to apply.
Branches are located in the Massachusetts cities of Berlin, Bolton, Boylston, Clinton, Sterling and West Boylston.
The bank's ratings for safety and soundness are a little weak: 3 stars (adequate) at BauerFinancial (based on 12/31/09 data) and 2 stars (below peer group) at Bankrate.com (based on 9/30/09 data). The bank was established in 1851 and has been a FDIC member since 1985 (FDIC Certificate # 90181).
Firsts Citizens Bank has a check card reward program called FreeMoney in which you can earn close to 4% cash back on your debit card purchases with a maximum of $500 per year. Unlike other debit card and credit card cash back reward programs, this requires some work if you want to maximize the cash back reward.
First, you're required to open the First Citizens personal checking account and FreeMoney Bonus Savings Account. To earn cash back, the following debit card usage is required:
According to the terms and conditions, the maximum bonus per checking account is $500 per calendar year.
As you can see, it won't be easy to get close to 4% cash back from this program. Your first 10 check card purchases would have to be small since there's no cash back associated with them. The additional check card purchases during the month would have to be $25 or just a little bit higher. Then you could get close to earning 4% cash back. Of course if it were too easy, everybody would earn the 4%, and the bank wouldn't be able to afford it.
A branch visit is required to open an account. Branches are located throughout North Carolina. It also has branches in Arizona, Maryland, Tennessee, Washington, California, Virginia and West Virginia.
You might be wondering why the branches are so scattered across the country. First Citizens Bank has been expanding in the last several months with much of the expansion coming from the acquisition of failed banks. The latest acquisition was on Friday when it acquired Sun American Bank in South Florida.
First Citizens Bank's ratings for safety and soundness are strong: 5 stars (superior) at BauerFinancial (based on 12/31/09 data) and 4 stars (sound) at Bankrate.com (based on 9/30/09 data). The bank has been a FDIC member since 1934 (FDIC Certificate # 11063)
Other debit card and credit card reward programs
As I've mentioned in previous posts, banks make sizable profits from non-PIN debit card usage. This is one new type of program that encourages debit card use. PerkStreet Financial is one that's available nationwide which offers 1% cash back without any hoops to jump through. It also has a special 2% cash back promo (see review). For those with large savings, you'll probably do better with high-yield reward checking accounts (refer to the reward checking section of DepositAccounts.com).
If you prefer using credit cards, some of the best cash back programs are from PenFed, Charles Schwab and Fidelity.
Hot Deals, Quick Link for Rates, Recap of this week's posts
There was a bit of good news this week with the release of February's unemployment numbers. According to CNNMoney.com, "the Labor Department said the economy lost 36,000 jobs in the month, fewer than the 68,000 jobs economists were expecting". However, the unemployment rate remains very high at 9.70%. As has been shown, it's unlikely we'll see rate hikes until there are several months of declining unemployment.
Another issue affecting depositors is the bank failures. Four banks failed yesterday with two of the bank closures affecting many internet rate chasers. The bank that UFB Direct had used to hold its deposits was one of the failed banks. This was Waterfield Bank, and the FDIC wasn't able to find a buyer, so it's being completely shut down. The front page of UFB Direct's website has been replaced with the FDIC page. UFB Direct was one of 38 affinity groups that took deposits for Waterfield Bank. The AARP Financial Savings Center was one. Their site is still up, but the online application is down. I'm not sure if these affiliate groups will be forced to close along with Waterfield or if they'll be able to find other banks to take the place of Waterfield. If you have accounts at any of these groups, please keep us posted on what happens to your accounts.
The other bank closure that's affecting internet rate chasers is the closure of Cenntenial Bank which had operated the internet bank, CBDirect.com. Like Waterfield, the FDIC wasn't able to find a buyer. It's even worse than Waterfield's closure in that the FDIC isn't creating a temporary bank to allow depositors to transfer their liquid accounts. All accounts are closed, and the FDIC will be mailing the checks. CBDirect.com had been offering a reward checking account with a 3.00% APY on all balances. Hopefully, none of this blog's readers pushed this "all balance" feature too far and exceeded the FDIC limit. According to the FDIC, there were $1.8 million in potentially uninsured deposits (see my review).
Savings Account Rates
UFB Direct had been doing a good job at keeping its US Savings account competitive. The latest rate was 1.45% APY. I'm sorry to see the bank failure, and the loss of this account.
Rate cuts were widespread this week. Savings account rates over 1.50% are becoming rare. American Express Bank had held its rate at 1.50% APY for a while, but it didn't last. The rate fell this week to 1.30% APY. Other major online banks that cut rates this week include Ally, ING Direct, Discover and Dollar Savings Direct.
Rate Hikes:
Rate Cuts:
Certificate of Deposit Rates
In addition to rate cuts, banks have also been reducing availability of their CDs. The latest example is at EBSB Direct which has been offering a 1.77% APY 10-month CD. This used to be available nationwide, but according to the bank's CSR, it's now only available to residents of New England and New York State.
For 1-year CDs, it's getting tough to find rates at or above 2.00% APY. Most of the institutions at this level are credit unions which include Alliant, Southeast Financial and Melrose.
You still can get rates over 3% APY for terms of at least 3 years. It can be worrisome to lock in these low rates for several years when there's a chance of big rate hikes within the next two years. If you do choose a long-term CD, make sure it doesn't have a harsh early withdrawal penalty. The internet bank with the best early withdrawal penalty is Ally Bank. The penalty is only 60 days of interest for all terms.
There was a slight rate reduction on Ally's 5-year CD. The rate fell 5 basis points to 3.10% APY. Thanks to Ally's Ten Day Best Rate Guarantee, you'll get the 3.15% APY if you applied before this change was made. Ally's description of this policy was a little confusing, and there were questions of whether the 10-day rate guarantee may extend before you apply. I just did a chat session with a CSR, and unfortunately, the 10 day rate guarantee only covers the 10 calendar days after the application is entered and accepted.
Below are some of the best nationwide and local CD deals that are still active.
Best Nationwide CD Deals as of 3/06/10: Also listed are savings account promos with rate guarantee periods. The full list of nationwide CD rates is farther down.
Best Local CD Deals as of 3/06/10: Some of the best CD deals are from banks and credit unions that don't offer accounts nationwide. Refer to the recap section and the state index section to find all the recent local deals. Here are some of the best deals to note.
Reward Checking Accounts
I reported on two new reward checking accounts this week with yields of 3.51% and 4.25% APY. With the loss of CBDirect.com and its 3% no-cap reward checking account and the rate reduction at City National Bank (no-cap reward checking rate is now 1.68% APY), it's getting harder to earn high rates on large balances. One new account that may help a little is a new type of savings account that is paired with the reward checking account. This savings account can be useful for those with large balances. You won't get the top reward checking rates for large balances, but you may be able to get better rates than what you can get at Alliant Credit Union. I listed some of these reward checking/savings accounts in this post on the Best Reward Checking/Savings Combo Accounts.
To see all of the high yield reward checking accounts available throughout the nation, please refer to the reward checking section of DepositAccounts.com.
Don't Forget to Check the Notices Section
As I mentioned before, lots of my posts are now in the Notices Section. Notices are very short posts that are intended to alert you to rate changes or point you to some interesting banking news or deals on the web. This allows me to post more often on news and deals. I'll continue the blog posts in the same format that you're used to. You can get to the Notices Section from the top menu. You can also see the recent Notices on the front page. Just select the Notices tab which is next to the Blog Posts tab. If you want to subscribe to both blog posts and Notices, just click on the RSS icon at the top of either the Blog or Notices section.
Recap for the Week - Links to This Week's Posts
Banking News
CD Deals - National
Savings/Checking Accounts - Nationwide
CD and Money Market Deals - Local
The rates listed below are based on Annual Percentage Yield (APY). No minimum balances are required unless noted. MMA next to the rates indicate a money market account. Most MMAs have check writing and ATM cards. Online savings accounts usually lack both of these. The top lists include banks and credit unions with broad availability and with minimums under $100,000. Previous weekly summaries are available at this page. Quick Links: Refer to the following links for the savings accounts and CDs that interest you: Liquid Account Rates: Savings Accounts, Reward Checking, Bank alternatives CD Rates: 3 Mo CDs, 6 Mo CDs, 9 Mo CDs, 12 Mo CDs, 18 Mo CDs, 24 Mo CDs, 36 Mo CDs, 48 Mo CDs, 60 Mo CDs, 84 Mo CDs, CDs by state Comments: read and discuss
As of March 6, 2010
Checking/Savings/Money Market Accounts:
3-Month Certificates of Deposit:
6-Month Certificates of Deposit:
9-Month Certificates of Deposit:
12-Month Certificates of Deposit:
18-Month Certificates of Deposit:
24-Month Certificates of Deposit:
36-Month Certificate of Deposit:
48-Month Certificate of Deposit:
60-Month Certificate of Deposit:
84-Month Certificate of Deposit:
High Yield Reward Checking Accounts - Open to All
Recent CD Specials at Local Credit Unions and Banks
Historical Rates from the Federal Reserve (Federal funds, Treasury bills, CD's)
As I was checking the ratings of yesterday's failed banks, I noticed that BauerFinancial has updated its bank ratings with financial data that the FDIC released on February 23. If you do a search at BauerFinancial, it will say "based on December 31, 2009 financial data." It had been based on 9/30/09 data. The data has also been updated for credit unions.
Some recent bank and credit union failures had high ratings, and this may be due to the ratings being based on financial data that is over 4 months old. An example of this happened yesterday with the credit union that was liquidated. Bankrate's rating, based on 9/30/09 data, was 4 stars (sound) and BauerFinancial's rating, based on 12/31/09 data, was 0 stars (lowest).
Now we'll have to wait on Bankrate.com to update its database. When the FDIC released its third quarter data on November 24, Bankrate didn't update its database until around January 20 (almost two months.) So we may not see new Bankrate ratings until late April.
If you keep under $250K, should you care about bank ratings?
The FDIC and NCUA have demonstrated that they pay all insured deposits up through the day of the closure. This includes both the principal and accrued interest. So if you keep under the insurance limit (the standard limit is $250K until 12/31/2013), you don't have to worry about losing your money. However, there are at least three reasons why depositors should care about the health of their bank or credit union even if they keep under the insurance limit:
Can you think of other reasons to care about the health of a bank or credit union?
This is disturbing news for savers. Las Vegas Review-Journal reported that Nevada Federal Credit Union is paying bonuses to members to transfer their savings OUT of the credit union. According to the article:
Starting Monday, the credit union has cut the variable interest rates on deposits held by members that only save money to zero.
"We're losing money, and they are not making money," Beal [CU's President/CEO] said.
So the credit union will pay these savers a $25 bonus for withdrawing amounts between $25,000 and $49,999. The bonus jumps to $50 for amounts up to $74,999 and goes to $75 for larger sums.
Here's an excerpt of the letter to the members from the credit union's President/CEO:
With investment rates near all-time lows, very weak loan demand and increasing deposit insurance costs, it has become difficult for your credit union to earn a positive spread on some of the high-balance deposits. As a result, we have asked a small number of our members with higher balances to consider moving their money to another financial institution to earn a higher rate than what we currently offer.
The credit union has already set many of its deposit rates to zero. Currently, all of its certificates are listed with a zero percent rate.
This reminds me of what happened at ETrade Bank when it slashed deposit rates last year as part of its strategy to shrink its banking business. If banks and credit unions can't make enough loans, they're forced to invest the money into investments like short-term Treasuries which are paying very little. Add on the deposit insurance premiums, and they have no incentive to pay any decent interest rates. According to the article, the credit union expects the NCUA to boost deposit insurance premiums by 0.15% to 0.40% this year. Hopefully, the economy will grow and loan demand will increase so that we won't see more banks and credit unions give up on attracting deposits.
Thanks to the reader who emailed me this news.
| March 2010 |