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Clear Sky Stops Accepting New Customers and Deposits from Existing Customers

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Clear Sky Accounts
Update 4/27/09: Clear Sky Accounts is now accepting new applications.

Clear Sky Accounts (the internet unit of Chesapeake Bank) just sent emails to its customers announcing that it is no longer accepting new account applications and that it will not allow existing Clear Sky customers to make additional deposits. The CEO of Chesapeake Bank stated that they were overwhelmed by deposits and their capacity for any more deposits has been reached. On the plus side, they plan to continue to guarantee 3.75% APY until March 31, 2009. Also, he stated that this is just a short-term situation. Below is the full email that a reader had posted:

Important information from Clear Sky Accounts - Please Read:

When Chesapeake Bank opened our online-only banking arm, Clear Sky Accounts, last November, we saw an opportunity to provide the same level of high-quality service and banking products online that has been the hallmark of our bank for more than 100 years. While we expected that our savings and checking rates would be well-received by the banking public, we could not have predicted the tremendous response we have received to our offerings, in particular, the 3.75% annual percentage yield savings rate that we made available earlier this year and guaranteed through March 31, 2009.

To be frank, we have been overwhelmed by deposits, and while banks are in the business of accepting deposits from customers, our capacity for any more deposits has been reached. Regrettably, that means that not only will we not be opening any new accounts, but that existing depositors will not be able to make any additional deposits into their existing Clear Sky accounts.

We recognize that this decision will raise more than a few eyebrows, particularly at a time when financial institutions are under a great deal of scrutiny. But for more than a century, we have operated through sound banking principles (we did not solicit nor did we receive any of the federal TARP funds, for example). However, given the many millions of dollars that have been deposited over the past few weeks in Clear Sky, we are at capacity for online deposits. We regret that we had to take this action.

You no doubt have a number of questions, which we stand at the ready to answer (1-877-257-7594). Meanwhile, we want to assure you of the following:

* Your deposits are safe and are available to you at any time
* You are guaranteed the 3.75% annual percentage yield rate of return until March 31, 2009

We anticipate this to be a short-term situation. We look forward to earning your trust and continuing to serve your online banking needs.

Jeff Szyperski
President and CEO
Chesapeake Bank
www.chesbank.com

Details of the Deposit Restrictions:

For those who have set up direct deposits with Clear Sky Accounts, I've asked a CSR via their online chat system about this issue. According to the CSR, they'll continue to accept direct deposits.

Update: Readers have informed me of an important detail, and I just confirmed this with the CSR via the online chat. The deposit restriction for existing customers only applies to the savings account opened as part of the 3.75% APY promotion. It does not apply to their checking account, and it does not apply to customers who opened the savings account after the 3.75% promotion had ended.

This is the first time I can remember seeing an internet bank implement such an action. For a Clear Sky customer who was about to make a large deposit, this will be very frustrating. It also makes me wonder about similar add-on accounts from other institutions. As this shows, accounts that lock a rate for a period of time and allow unlimited deposits can be overwhelming to an institution. I've mentioned several credit unions that offer add-on CDs. Will they be forced to limit future deposits? I discuss the possibility in this post.

One thing important to realize about Chesapeake Bank is that it's a small bank with only $524 million in assets and $417 million in deposits as of 9/30/08 (data available at this FDIC page). So in the last few months, they could have easily doubled their deposits through the internet.

I've had conversations with managers from other banks and credit unions who have mentioned that new deposits during their account specials over the last two months have far exceeded their expectations. One manager said an account special brought in 10x over their original expectations.

With the stock market crash and the endless stories of Bernard Madoff, it appears many people are turning to the safety of federally insured banks and credit unions. With the temporary $250,000 insurance limits and new rules on revocable trust accounts (see post), it's easier for people to place large amounts under the insurance limits. One bank manager mentioned to me that he had a customer make a deposit of over $2 million. He was able to keep it under the insurance limit through a long list of beneficiaries. Unfortunately, this will continue to put downward pressure on deposit rates.

For more information on Clear Sky Accounts, please refer to my Clear Sky Accounts review.

Clear Sky Accounts are FDIC insured through Chesapeake Bank of Virginia. There's a link to the Clear Sky website on the left side of Chesapeake Bank's front page. Chesapeake Bank has been FDIC insured since 1934 (FDIC Certificate # 6862).

  Tags: Clear Sky Accounts, savings account

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Comments
31 Comments.
Comment #1 by the Ramen Noodle (anonymous) posted on
the Ramen Noodle
I can still have direct deposits? The CSR hadn't told me that. However, a slight clarification is that only the 3.75%-APY accounts are being locked against further deposits. If you opened a savings account after they dropped the rate (February 2), then you may continue depositing into that savings account, or any checking account you currently hold with them.

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Comment #2 by Anonymous posted on
Anonymous
Before someone starts talking about suing -- Remember that banks have considerable discretion in unilaterally amending account agreements, operational rules, etc. They can even refuse to cash a check that is drawn on them (true, check it out). Respectfully suggest that no one get hyper about this,

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Comment #3 by Rick Z. (anonymous) posted on
Rick Z.
Anonymous is right that they CAN do this, but should they? If they posted a rate for a savings account and said it could change at any time, that would mean exactly that. But when they "guarantee" a rate for a specific period of time on a deposit-taking account, one expects not only the rate guarantee to be honored, but the nature of the account itself. I imagine they will see a sharp outflow in April.

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Comment #4 by Anonymous posted on
Anonymous
When I opened the account with them,
I was told the same thing over the phone that they may amend the time, rate and conditions at any time, and that there is no guaranty of 3.75$ rate. So, while keeping the rate at current level, we are being given a break. I'm not complaining.

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Comment #5 by Anonymous posted on
Anonymous
So what's the reason behind the deposit limit? They can't or don't want to pay the 3.75% on deposits above what they already have?



Doesn't having more deposits put them in a better position than other banks? Can they not figure out a way to use those deposits to make money, or to make enough money to pay the 3.75% and a small amount for the bank?

Tell us more! Dig dig dig!

This is a really interesting situation to me for the bank to be in, so I am super curious.

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Comment #6 by Anonymous posted on
Anonymous
Clear Sky has been absolutely great in their customer service....and provided excellent individual service to me.

It is completely understandable that they have a lot of funds now that they need to put to work earning money for THEIR side of the ledger.

Proves the old adage..."You snooze, you lose." I checked them out by making a small original deposit, then I completed sample deposits and withdrawals to test the system. They were very quick and easy without a glitch, so I quickly put the rest of my intended savings into the account and am happily sitting with my 3.75% guaranteed for another 45 days or so. Nothing changed on that guarantee, Rick Z.

Sue them? I don't think so...

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Comment #7 by Anonymous posted on
Anonymous
To: Anon @ 8:30 AM

It is pretty simple - they DON'T have a use of that much cash that earns more than 3.75% - so they don't want any more. This makes perfect sense to me, since most short-term investments like treasuries and commercial paper are yielding well less than 3.75% today, and the demand for loans from credit worthy borrowers is down significantly due to the recession and the tightening of lending standards.

Part of the reason we had a subprime lending crisis was excess liquidity that needed a place to make a good return. Since there weren't enough "prime" loans in the world to soak up all the dollars that wanted to earn a good return, Wall Street had to come up with other vehicles. This bank is doing the fiscally responsible thing by shutting off the flow of excess liquidity rather than trying to "find" something to invest the funds in. The alternative is for them to cut everybody's rate to a level where they can invest the money profitably; today, that level would be darn close to zero.

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Comment #8 by Sofa King Frustrated (anonymous) posted on
Sofa King Frustrated
This development speaks volumes about how truly bad our economy has become.

Can you have ever imagined things would get so bad that a bank would REFUSE deposits because they cannot make enough money on said deposits?

Or just that a bank would ever refuse deposits in the first place?

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Comment #9 by Anonymous posted on
Anonymous
Expect the non-guaranteed rate to drop like a stone....

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Comment #10 by Anonymous posted on
Anonymous
If you think it is bad now...just wait til the government finishes providing "assistance" to our economy. I expect a dramatic dip in interest rates, followed by "Jimmy Carter Style" inflation. This is the time to buy a house (that you really can afford), lock in the interest rate in the sub-5% range, then wait for the inflation to start heading for those 15% CDs again. I'm no longer looking at 5 year CDs because I expect MUCH better rates before then.

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Comment #11 by Anonymous posted on
Anonymous
Good thing I already put in all the money I planned for that account. I'll echo the prior comments re: excellent customer service. The first time I called, I stumbled a bit talking to the live person who picked up the phone. I was expecting an IVR tree, and had just taken a sip of coffee when she picked up. Nearly spit it all over my keyboard.

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Comment #12 by Anonymous posted on
Anonymous
If you "Cowards" who hide behind a computer would stop blogging and Physically do something about this behavior it would most defintely stop!

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Comment #13 by Anonymous posted on
Anonymous
That is a Loser Coward attitude " I'm not complaining" no because your a puss of a man or woman.What the fight is about is "Guarantee of Rights".Yes tards that means making by any way necessary "The Fed" mind you not the other way of "You mind them".Only Pig deafeatest, Marxist,Progressive Pukes have this attitude.

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Comment #14 by davedit (anonymous) posted on
davedit
My experience with Chesapeake Bank has been great so far. Nice customer service and I especially like the speed of interbank transfers. Interface is useable although it could be a little better.

Fortunately I already transferred all the money I wanted to into my Clear Sky account, but I can't help feeling as if this move is a little unfair. Allowing people with the 3.05% APY savings account to continue to make deposits, but not people with the 3.75% APY savings account... They should at least give people with the 3.75% the choice of dropping their rate down to 3.05% so they can deposit more money.

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Comment #15 by Terrin (anonymous) posted on
Terrin
I have nothing but good things to say about Clearsky. The customer service was prompt, and the woman spoke clear english. Moreover, she was friendly.

Clearsky sent me an iTunes gift card (totally unexpected and appreciated).

Clearsky is shutting down the deal is akin to retailer offering a sale on goods. The sale is only good for as long as the good last. Here, the rate was good only for as long as Clearsky could loan the funds out at a higher rate and make money.

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Comment #16 by Anonymous posted on
Anonymous
Vineyard Bank would not take a deposit from me on a CD that was subject to unlimited deposits in the disclosure form.

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Comment #17 by Anonymous posted on
Anonymous
What about pending interbank transfers? I checked mine and the status still is listed as 'Pending'.

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Comment #18 by Snippy (anonymous) posted on
Snippy
Well, anonymous @6:55 PM, instead of expecting the Banking Guy and his readers to answer your questions about Clear Sky Accounts, why don't you contact Clear Sky Accounts and ask them? Really, wouldn't it be simpler and more direct to ask people who work there and already have the information you need, rather than expecting others to find out for you? They aren't hiding anything; they're pretty forthcoming.

Perhaps you haven't noticed the numerous positive comments posted here about the excellent customer service at Clear Sky Accounts. I have found them to be extremely friendly and helpful, and I'm sure you would, too, if you bothered to contact them by phone, email, or on-line chat via the Apply link at their site.

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Comment #19 by Anonymous posted on
Anonymous
Banks are starting to act like mutual funds which can be closed to new investors and reject new investments from current investors. This action is understandable given that it is a small bank. The problem is that a large sum of money is not being invested in money market funds nor US Treasury securities because of very low interest rates. People will search out the banks with the best rates and then flood that bank with deposits. The megabanks don't offer the better rates since they have other business operating areas that can generate revenue for it.

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Comment #20 by Anonymous posted on
Anonymous
To all the blind chumps talking about how "great" "My experience with Chesapeake Bank" was, no one really cares.

We got ****ed, we can't get the bulk of our money in now. That's what is at issue!

We're out to dry, "great" customer service, "great" bank!!

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Comment #21 by Anonymous posted on
Anonymous
I rather have a Bank with bad service but great rates, than great service with bad rates.
Service is not that important if we have to play by Bank's rules only.
They are polite because they are afraid of the sudden Capital outflows and the anger from most of the customers, otherwise, they don't care about you and me.

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Comment #22 by Anonymous posted on
Anonymous
To 6:55---and Snippy...just found out about this new development by reading my email from Clear Sky- and realized I had a pending transfer. I checked, and it did go through. Maybe because I set it up a week ago?

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Comment #23 by A Grownup (anonymous) posted on
A Grownup
I must say that I'm puzzled by the harsh and negative tone of some of the comments posted here, not to mention the ones that are insulting and even suggest taking some kind of physical action. (What did you have in mind? Marching on the bank with torches and pitchforks?)

It's perfectly understandable that you may feel disappointed at not being able to make further deposits in order to earn a high promotional interest rate. Hell, I'm disappointed that I missed out on the higher interest rates they were offering on CDs and savings accounts several weeks ago. But what's with all the aggressive rhetoric about your "rights" and how you "got ****ed"?

Let's see... You have not lost any of your deposits. You are not being denied access to the funds in your accounts. The bank is not failing to live up to the terms that it guaranteed, and it is not refusing to answer its phones and your questions. Therefore, it sounds like you're just ****ed off that you will not be able to continue getting a promotional interest rate that was only guaranteed until the end of March, and only for those who opened accounts before a deadline that passed weeks ago. It was always a short-term promotional offer.

Do you expect them to keep accepting deposits above what they are prepared to handle if they have determined that doing so would create a risk for their customers and stockholders, all because you feel somehow entitled to keep benefiting while they would start operating at a loss? A bank cannot survive if it fails to adhere to safe and secure practices, and it is not a non-profit organization. Get a grip, OK?

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Comment #24 by Another GrownUp (anonymous) posted on
Another GrownUp
Nicely put...

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Comment #25 by Anonymous posted on
Anonymous
A Grownup,

thanks for your "defense of banks" & their major profits, but we are here to get good rates for our hard earned savings, so no one really cares about how you defend a cold, selfish bank.

If you take your head out of your bank's ***, then you might understand.

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Comment #26 by A Grownup (anonymous) posted on
A Grownup
RE: Anonymous @ 8:32pm

What defense of banks making "major profits" do you see in what I wrote? I come to this blog to stay on top of the best rates for my savings, just like you do, and I have made good use of the information provided here. (Thanks, Banking Guy!) I also try to analyze things objectively, using common sense, rather than jumping to conclusions and acting on emotion.

You still don't seem to be offering any reason for your hostility toward Clear Sky Accounts (or perhaps it's to all banks in general) other than that you resent them for deciding that they cannot continue offering their short-term promotional rate for any additional deposits.

If someone was offering "Ice cream cones for half price while supplies last," would you start yelling at them and calling them names once they ran out of ice cream? Would you start screaming at a company that could no longer continue its former policy of offering free refills due to rising costs?

I regret that I cannot offer a better example -- but I'm questioning why you feel so justified in being angry when you have not lost anything except the chance to earn a temporary high interest rate on further deposits. There aren't any great options right now for high interest rates. Being ****ed off about it doesn't change that fact.

I wish that there were banks offering higher CD rates and guaranteed high rates on savings accounts, but that ain't happening in the current economic climate. We all need to face reality and deal with it instead of seething with resentment that everything is not the way we wish it to be. Of course, if the only way you can cope is to vent your frustration by yelling about how banks are evil and greedy, hey, knock yourself out.

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Comment #27 by Anonymous posted on
Anonymous
Interest rates were very low back in 2003 after they were quite high back in 1999. And interest rates were much higher in 1984 and then gradually started to descend over the next decade. This is all a seesaw economic cycles phenomenon. You cannot sustain economic prosperity indefinitely while the population keeps expanding and resources are used up. There will be future booms and busts, make no doubt about it. It all just depends if you are still alive when those other cycles comes around later.

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Comment #28 by Anonymous posted on
Anonymous
A Grownup,

You are bloody tedious. Take your little analytical mind & analyze your idiotic little brain.

We are here for rates, not to listen to you preaching the gospel of reality.

You are clueless.

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Comment #29 by Anonymous posted on
Anonymous
Simply put, while that rate may be guaranteed, it is only for 2 months, and so after 3/31, who knows what the rate will be and as you hopefully know, an APY of 3.75% will only mean something significantly if you actually have it for a reasonable period of time (like a year, but certainly longer than 60 days). Also, at this point, a difference between 3.5% and 3.75% is actually not going to make a big dent at all if you are only depositing minimal amount of money. That’s not judging you at all (as I used to also avoid high minimums) but just stating a fact that if you have $25 or even $100, then .25% is not going to really matter, and again, you wouldn’t even see a .25% increase depending on how long that 3.7% rate remained in place.
I’m not CPA or financial guru, so I am only loosely speaking about rates, compounding monthly/annual, APYs based on what I believe is the case and from experience.

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Comment #30 by Anonymous posted on
Anonymous
Decimal rate differences only are significant if you got a big balance and a long time period. If you take those two factors out of the equation, then the rate difference has to be more than 1% to be of any value to you. I had one account go from a 5% rate in October of last year down to 0.7% now. BIG DROP. My monthly income dropped by over 2/3. This was a six figure balance account. I am breaking the balance apart and moving the funds to different banks so that I don't get hit with a big drop again in the same manner.

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Comment #31 by Anonymous posted on
Anonymous
Clear Sky Accounts is now accepting new applications.

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