TIAA-CREF Launches New Internet Bank with Top Savings Account Rate
Update 2/25/2012: I spoke with another CSR today. I was told it had been limited to TIAA-CREF employees, but it was recently transitioned to allow anyone in the nation to apply. About beneficiaries, I was told there was a problem with the beneficiary option, and it's currently not available. However, they are supposedly working to fix it.
Update 2/22/2012: Some readers have reported being told by TIAA-CREF officials that accounts are currently only available to TIAA-CREF employees. However, other readers have reported being able to open accounts online even though they were not employees. I again called TIAA Direct at (855) 842-2372, and I was again told anyone can apply. I was also told that you can apply by phone. It appears they have not done a good job at planning the TIAA Direct rollout. So right now, opening an account may be a "Your Miles May Vary" (YMMV) situation.
TIAA-CREF has entered the internet banking market last week with its launch of TIAA Direct. It was a quiet launch with no apparent press release. I learned about it from a reader's email (Thanks!). The new internet bank offers CDs, checking, savings and money market accounts. The savings and money market accounts are the most noteworthy due to the very competitive rate. It's 1.25% APY on all balances as of 2/20/2012. I was told by the customer service representative (CSR) that this is a promotional rate. It is subject to change at anytime.
Both the money market and savings accounts require only a $25 minimum initial deposit. There is no minimum balance requirement and no monthly fee. The money market account appears to have all the features of the savings account with the additional benefit of limited check writing (up to 6 checks are allowed per month). Below is a short summary of the checking, savings and money market account features:
- Accounts can be opened online or by phone
- Accounts can be funded by ACH transfer or by check
- $25 minimum initial deposit
up to 4 POD beneficiaries allowed (per CSR)Update 2/25/12: I was told by a CSR that the beneficiary option is currently not working. They are supposedly in the process of fixing it.
- Update 2/25/12: Readers have reported they do a hard pull via Equifax. CSR claims they only do a soft pull for ID verification purposes (Note, CSRs are often wrong on this issue)
- No monthly fees or minimum balance requirement
- Remote Deposits from your iPhone
- Free ATM card
- No ATM fees when used at an ATM in its nationwide ATM network
- Free first set of checks (MMA & checking only)
- Debit card & online bill pay (checking only)
ACH Fund Transfer Features:
- Links to external accounts verified via trial deposits
- No limit on the number of links (per CSR)
- No limit on the size of transfers (per CSR)
- Transfer speed and hold times depend on deposit size (per CSR)
They have a decent FAQs section, but it didn't have many details about the ACH bank-to-bank transfer service. These details were also absent in the disclosures so I had to call their customer service for more information. I was able to connect with a customer service rep without any problem.
TIAA-CREF Bank Overview
TIAA Direct is a division of TIAA-CREF Trust Co, FSB. Deposits at TIAA-CREF Trust Company, FSB are insured by the FDIC to at least $250,000 per depositor. You can verify the FDIC membership at this FDIC page. It has been a FDIC member since 1998.
The bank has an overall health score at DepositAccounts.com of 5 stars (out of 5) based on September 2011 data. Please refer to our financial overview of TIAA-CREF Trust Company, FSB for more details.
TIAA-CREF is short for Teachers Insurance and Annuity Association – College Retirement Equities Fund. It's the leading retirement provider for people who work in the academic, research, medical and cultural fields. More details about the company are in TIAA-CREF Company Stats and Facts page.
Is a New Internet Savings Account Worthwhile?
TIAA Direct's savings account rate is currently the best savings account rate available nationwide. It's currently 10 basis points over the previous leaders. You can see how it compares to other accounts in my last weekly summary.
Is the rate high enough to interest you? Is rate chasing on savings accounts worthwhile these days? I've been asking this question since 2010. With interest rates so low, there's not much difference between this and the rate of an average internet savings account like ING Direct Orange Savings (0.80% as of 2/20/2012). Even if that spread is large enough to be worthwhile, there's the question about how long the competitive rate will last.
We have seen many new internet savings accounts over the years that started out as competitive. Most become average or uncompetitive after one to two years. The latest example is UFB Direct which started out with a very competitive rate in August 2011. After 5 months, the rate has plummeted to average status (and may still be falling).
Since a large institution like TIAA-CREF is behind this new internet bank, my guess is that they will keep the rate competitive for several months. So if you get in early, it could be a worthwhile deal. It will very likely be better than any 3-month and 6-month CDs that are available today.
For those only interested in a savings account for the long term, it's hard to say if it will remain competitive. One thing that makes me a little skeptical is its current CD rates. They are below average as compared to other internet banks.
One thing nice about these accounts is that they don't have a minimum balance requirement. You should be able to easily move your money if the rates fall too low.
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