How Low Can Bank of America’s Deposit Account Rates Go?
Offers Expired - All offers and rates listed below have expired. They are many years old and are only listed for historical purposes.
I’m amazed that the big banks like Bank of America are able to increase their deposit levels when their rates are so low. That is what I was thinking when I was reviewing Bank of America’s fourth quarter earnings report. Here are a few excerpts from the report:
Period-end Consolidated Deposit Balances Increased $14 Billion to Record $1.12 Trillion
[...]
Average deposit balances for the quarter of $528.8 billion increased $44.7 billion, or 9 percent, from the year-ago quarter. The increase was driven by growth in liquid products in the current low-rate environment and the $20 billion average impact of deposit transfers primarily from Global Wealth and Investment Management (GWIM). The average rate paid on deposits declined to 8 basis points in the fourth quarter of 2013 from 16 basis points in the year-ago quarter, due to pricing discipline and a shift in the mix of deposits.
As you can see, deposits increased and the average rate paid on deposits declined. Bank of America credited the decline of the average rate partly to "pricing discipline" which sounds like a euphemism for offering low deposit account rates.
Bank of America was profitable. In fact, Bank of America, Chase and Wells Fargo have reported earnings for the fourth quarter that have exceeded expectations. According to this CNN article:
Bank of America impressed Wall Street Wednesday with better-than-expected earnings and revenue for the fourth quarter, continuing a trend of solid results from the nation's largest banks.
[...]
The company's consumer and business banking division, which includes branch banking and loans for small businesses, reported a $2 billion profit, up nearly 40% from a year earlier.
So with deposits and profits increasing, banks can offer very low interest rates. You can see how low by looking at Bank of America’s rate sheet. Here are a couple of examples as of 1/24/2014:
- 0.03% 1-year CD
- 0.15% 5-year CD
If you have any CD maturing at Bank of America, I don’t see any reason to renew it. Make sure you don’t let any CDs automatically renew. If you did that at Bank of America, you could be stuck in a CD with a very low rate. So make sure you review your options well before the end of the CD grace period.
"Bank of America Corp., the second-biggest U.S. lender, took in more investment-banking fees than larger rival JPMorgan Chase & Co. (JPM) for the first time since acquiring Merrill Lynch & Co. during the financial crisis. Fees for debt and equity issuance, as well as advice for activities including mergers, rose 17 percent to $6.41 billion last year at Charlotte, North Carolina-based Bank of America. That edged out New York-based JPMorgan’s $6.33 billion in such revenue for the first time since 2008. Bank of America’s investment-banking operations, run by Christian Meissner and overseen by Chief Operating Officer Thomas Montag, benefited from a record year in debt underwriting as corporations took advantage of all-time low rates for junk bonds ahead of Federal Reserve plans to withdraw stimulus."
http://www.bloomberg.com/news/2014-01-16/bofa-overtakes-jpmorgan-for-investment-banking-fees.html
"If I don't like it" the remedy is very easy and I enjoy higher rates of return on my deposits. I just take my business to credit unions. In the United States, credit unions are not-for-profit organizations that exist to serve their members rather than to maximize corporate profits.
http://www.depositaccounts.com/blog/2011/05/bank-of-america-increases-cd-early-withdrawal-penalties....
Of course, this is a free country, and you're free to get 0.15% for your money at BofA, instead of 3.04% currently at PenFed.
As PT Barnum said... "There's a sucker born every minute..." And BofA sure has found a lot of them lately...
So I moved it to another local bank at my old rate and haven't been near a BOA since.