Dedicated to Deposits: Deals, Data, and Discussion

Installment Savings Account with Rates Up to 4.86% at Center Bank in CA, WA & IL - Local Only

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BBCN Bank
Center Bank is offering an installment savings account with rates up to 4.86% APY for a 5-year term. Below are the rates listed in the bank's advertisement page as of 9/03/09:
  • 3.56% APY 12 & 18 months
  • 3.82% APY 24 & 30 months
  • 4.08% APY 36 months
  • 4.60% APY 48 months
  • 4.86% APY 60 months
The above rates require that you open a new Center Bank checking account and that the monthly installments be done by automatic transfers from that checking. Without the checking, the rates are about 26 basis points lower.

Some important details of this account listed in the bank's small print include:
  • Interest rate and APY in effect at account opening will be paid until maturity
  • Any withdrawal before the end of the term will result in your account being closed.
  • If you close your account before maturity, a penalty equal to the interest paid during the previous quarter will be imposed
  • Interest will be compounded daily. Interest will be credited to your account quarterly.
These rates are a little deceptive due to how installment savings account work. With installment accounts, you don't make a lump sum initial deposit. Instead you make equal monthly deposits during the term. So for the first month, you only earn interest on your first monthly installment. The second month you earn interest on the first and second month installment, and this continues through the entire term of the installment savings account. So if you have a contract amount of $10,000 and a 12-month term, you'll make 12 deposits of $813.30. As you can see, the high interest rate doesn't help much early in the term since there's not much of a balance.

Comparing an installment savings account to a CD requires some math. I described how this can be done in this post.

My last post on this bank was in March when they were offering a 3.40% 12-month liquid CD and a 3.30% money market account.

A branch visit is required to open an account. Branches are located in several Southern California cities including Los Angeles, Orange County and San Diego. It also has two branches in Washington State and one in Chicago, Illinois.

The bank's ratings for safety and soundness are fair: 3½ stars (good) at BauerFinancial and 2 stars (below peer group) at Bankrate.com. Both ratings are based on 3/31/09 financial data. Center Bank has been a FDIC member since 1986 (FDIC Certificate # 26610).

Thanks to the reader who emailed me info on this account.

Other Installment Savings Accounts

Installment savings accounts are common among Korean-American banks. Refer to my installment savings account page to find other banks offering these. One bank that offers its installments savings accounts nationwide is Wilshire State Bank (see post).

  Tags: California, Washington, Illinois, BBCN Bank

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Comments
4 Comments.
Comment #1 by Anonymous posted on
Anonymous
Does anyone have any idea why
Korean banks consistanly have higher deposit rates?
Am I missing something?

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Comment #2 by O-Qua Tangin Wann (anonymous) posted on
O-Qua Tangin Wann
Dear Anonymous Above,

Unfortunately, two big Korean-American Banks (Center Bank and Wilshire State Bank) have lowered their money market account rates below what Alliant CU is offering.

So, the Korean Bank alternative is no more when it comes to regular money market/savings accounts.

All of the other Korean-American banks, such as Hanmi, are also offering a lot lower money market/savings account rates.

~O-Qua Tangin Wann

1
Comment #3 by Anonymous posted on
Anonymous
Installment savings accounts are a bit of a mystery for me, because this Bank does not explain what it means, consequence-wise, if one would ever miss a payment. Their disclosure document says nothing about rules for ISA's. If one misses/can't make the last (or an earlier)payment, what happens? Loss of all interest? Something else? I am trying to find out and will post later if I can get more information, but there is a bit of a language barrier over the phone to this point. In any event, I would want a written document explaining the rules for ISA's.

I have had regular CD's with Center Bank in the past, and all has worked well. The in-branch visit is most important, again because of the language issues. Allow at least an hour to set up a CD, because things do not always go smoothly.

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Comment #4 by William (anonymous) posted on
William
This is to answer Anonymous' question about the ramifications for missing a payment. If the depositor misses three straight deposits, the installment savings account automatically converts to a regular savings account. Usually, a bank employee will give the depositor a courtesy phone call to remind them that they missed a payment. When you open the account, there is a disclosure where it lets you know that if you miss a deposit or you make it later than the scheduled date, the target amount initially set will be less at maturity.

Banks have various policies if you close the account but most of the time its 3 months worth of interest.

Finally, those who aren't familiar with installment savings accounts, you must remember that in Asia, saving before spending is a common way of life. It is a convenient vehicle for a depositor to set a goal and to be a disciplined saver. I know that most readers want to maximize earning interest but installment savings is the best of both worlds: disciplined and easy savings and a higher interest rate than most regular savings accounts.

PS Right now, Hanmi Bank has the best rate for one year term at 4.25%. As long as you are below the FDIC limits, you are safe if you are concerned about the bank's health.

I wanted to also comment on the first post: most Korean banks if not all have decreased their deposit rates in the last month or two. Generally speaking, the competition for deposits at Korean American banks have been competitive because of the many different banks. Now, they are more cognizant of the general interest rate environment.

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