After almost a year at 1.25% APY, TIAA Direct lowered the APY of its savings and money market accounts this week to 1.00%. This news only affects existing customers since TIAA Direct remains closed to new customers. There has also been additional news on TIAA Direct. Thanks to the readers who emailed me on this. Customers have received notice from TIAA Direct about changes taking effect on February 9, 2013. For savers the big change is a new $5,000 limit for ACH withdrawals initiated from within TIAA Direct. If you haven't received a notice in the mail about these changes, you can read about them at the bottom of TIAA Direct's deposit agreement. Here's the important excerpt:
On February 9, 2013, TIAA-CREF Trust Company, FSB is making the following changes that will apply to you and all of your deposit accounts.
You may not instruct us to process more than $5,000 in ACH withdrawal transactions from any or all of your accounts with us in one business day.
Currently, there is no limit on the size of ACH withdrawals. So this is a major change. I could see going down to a $250K or $100K limit, but a $5K limit seems extreme. I haven't been able to get a reason for this change from TIAA Direct. It is suspicious that this change is occurring right after a rate cut. For savers who don't have accounts at other internet banks, this could be a major issue especially if more rate cuts come.
One important thing to note is that this new $5K limit won't apply to ACH withdrawals initiated from another bank (i.e. an ACH pull). This has been confirmed with TIAA Direct CSRs. If you don't have another internet bank, you might want to consider either withdrawing your funds from your TIAA Direct account before February 9th or opening an account at another internet bank like Ally Bank or Sallie Mae Bank which allows for large ACH transfers. Another option for making large withdrawals after February 9th is by check if you have TIAA Direct's checking or money market account.
In July 2012 TIAA Direct stopped accepting new customers for its bank accounts. This continues to be the case as of today (1/12/2013). They continue to claim that this was just a pilot of TIAA Direct, and before moving on to the next phase, they "will be making enhancements to the customer experience." I was hoping this next phase would begin in early 2013. Perhaps these changes are in preparation for this next phase.
Another disappointment with TIAA Direct has been on the issue of designating beneficiaries. According to the bank's FAQs as of 1/12/2013, you still can't assign beneficiaries to your accounts. I was told in October that they expected to have this ready by December.
I hope the management at TIAA-CREF Trust Company is committed in making TIAA Direct a competitive internet bank. With the internet bank still not accepting new customers and with the recent changes, you have to wonder about its future.