Last week Salem Five Direct lowered the intro rate of its eOne Savings Account from 1.25% to 1.00% APY. However, Salem Five Direct customers who had opened the eOne Savings with a 1.25% APY will continue receiving 1.25%, at least for now. Salem Five sent emails to their eOne Savings customers informing them of this. One reader forwarded me this email, and another reader pasted the email in a comment (Thanks!). Below is an excerpt of the email:
Those who have come on board as a Salem Five Direct customer at the 1.25% APY promotional rate over the last few months, will continue to enjoy this leading rate of return.
If you recently took advantage of the eOne Savings offer from Salem Five Direct at the 1.25% APY promotional rate, we wanted you to be aware that this promotional rate for new customers has come to an end. If you see a new lower rate advertised on our website, we didn't want you to think your rate was being lowered as well.
We appreciate you joining us during this past promotional period and are currently holding your rate at 1.25% APY.
For how long?
As long as we can.
How long is that?
With the interest rate environment in constant flux, we really can't say for sure. We are always striving to strike a balance between the long term needs of our bank and our long term commitment to our customer. Our overall customer satisfaction and loyalty over our many years in this business speaks to our dedication to providing highly competitive products and services, and our eOne customers are no exception.
It's nice that Salem Five Direct will keep this 1.25% APY for existing customers. However, as we have seen in the last couple of years, Salem Five Direct customers will have to keep a close eye on their accounts. It might not be long before the rate for existing customers falls below the new-customer rate. Since the only rate listed on the Salem Five Direct public website is the new-customer intro rate, you might miss a rate cut that only applies to certain existing customers. You'll have to check your bank statements or regularly call the bank.
Last June two DA readers who had eOne savings accounts described how they felt mislead in this forum thread. Their savings account rate was cut to 0.75% long before this rate cut was shown on the Salem Five Direct website. One reader said that he was only able to tell that the rate cut occurred when he reviewed his statement and noticed the rate was cut at the start of the statement cycle (over a month ago).
I'm starting to see other banks use a similar strategy in having public rates that are different than rates for existing customers. It would be better for all of us if the banks would be more transparent and publicly list all of its rates for both new and existing customers. A good example of a bank that does this is EverBank. It lists both the money market intro rate for new customers (currently 1.25%) and the ongoing rate (currently 0.76%).
Besides this rate listing issue, Salem Five Direct savings account also has other downsides. There are fees and small limits on its ACH bank-to-bank transfer system. Below is an excerpt of the CSR chat describing this:
There is a fee for outgoing transfers only if you initiate it from Salem Five. External Transfers outgoing from your account are limited to $2,000 per transaction, $2,000 in aggregate per day and $20,000 in aggregate per calendar month. Please be aware that there is a $3.00 fee for each outgoing transfer; there is no charge for incoming transfers. If you initiate it form another bank there is no fee and there is no limit to withdraw.
If you're going to move money to and from Salem Five Direct, it's better to initiate those transfers from another bank.
Salem Five Direct continues to offer a CD promotion with two special CD rates that are very competitive: 1.15% APY for 18 months and 1.40% APY for 30 months. Minimum deposit is $10,000. These rates are listed in the Salem Five Direct eCD page as of 2/18/2013. I have more details in my Salem Five Direct CD review.
I first reported on Salem Five Direct back in 2007 when it was offering the eOne checking account with a 5.30% APY. The eOne Savings account was launched in 2009.
Salem Five Direct is an online division of Salem Five Cents Savings Bank, which is based in Massachusetts. As a Massachusetts bank, it's a member of the Massachusetts Depositors Insurance Fund (DIF) which covers deposits that exceed the FDIC limits. One thing to note about DIF is that it's a private insurance fund. So there's no government guarantee. You can read the details at the DIF website.
Deposits up to the FDIC limits are guaranteed just like they are at every other FDIC member bank. Salem Five has been a FDIC member since 1981 (FDIC Certificate # 23296).
Salem Five has an overall health score at DepositAccounts.com of 3 stars (out of 5) with a Texas Ratio of 12.69% (above average) based on September 2012 data. Please refer to our financial overview of Salem Five Bank for more details.