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Salem Five Direct1.00%-$500keOne Savings - New Customers Only
Accounts mentioned in this post. Rates as of August 22, 2014

Salem Five Direct Lowers Savings Account Promo Rate


Salem Five Direct

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.

CD Promotion

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.

Bank Overview

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 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.

  Tags: Salem Five Direct, savings account, checking account

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Comment #1 by Anonymous posted on
I'll give them a month or two, before they cut it to 1% or less. Any other bets?

Comment #2 by OldGuy posted on
The "Account Information" page for my online accounts has a line for "Interest Rate," but it is blank.  I've emailed customer service for an explanation, pointing out that this is a problem because existing and new customers are getting different rates.

Comment #3 by Anonymous posted on
Salem5 likes to be able to decide the interest rate for the prior month when they create the statement, despite the fact that this violates the Truth in Savings (TIS) act.

Comment #4 by Anonymous posted on
This is a discrimination, the long time customers deserve same or better rates.

Comment #5 by OldGuy posted on
It looks like Anonymous #3 has it nailed.  This is the response I received from Salem 5: "Salem Five is not able to publish the daily rate within your online banking because the rate varies, and is subject to change at any time. The percentage you earn is the rate on the date your statement cycle ends."  I don't see how they can publish, say, a 1.25% APY on one day if they can retroactively adjust it to 1.00%, or even .001%, on a subsequent day.  That's stretching the concept of a "variable" rate a little far, in my view.

Comment #6 by Anonymous posted on
The TIS is okay with variable rate as long as you know what that rate is, and since Salem5 won't say the rate they're not complying with the disclosure requirements. In other words, the TIS requires not only truth but also precludes lies/errors/misguidance through ommission of information. I dropped Salem5 months ago.

Comment #7 by Anonymous posted on
I dropped Salem 5 recently myself.  They made many mistakes on my account that required phone calls and aggravation on my part  but the topper was ****ing up the last four digits of my SS# for 2011 1099 which I didn't notice (neither did my tax preparer). It had been filed with my income tax as it was as I only learned there was a problem when Salem 5 sent me a notice many months later that I was going to be subject for backup withholding if I didn't send them the right number. It was their mistake; I found a copy of my old paperwork and it was correct. (Naturally they would not admit to any 'wrongdoing'.) To make matters worse after I hurriedly mailed in the new form they actually lost it!! I went thru hell to get yet another form sent with 2 days left before I was "going to be reported for backup withholding".  I couldn't drop them fast enough after that.

Comment #8 by Anonymous posted on
I was astonished to learn of the fee for external transfers, since it was nowhere mentioned when I opened the eOne Savings account.  I found out only because a customer service supervisor called me to ask if things were ok now after a rather harrowing account-opening process.  I'm glad to find out here that external transfers initiated from the receiving bank do not incur that fee, because I was going to have to open a eOne checking account just to get fee-free access to the money I put in as the initial deposit!  But then I figure there must be fees for the "free" checking account, too, which are likewise not going to be mentioned on the website.  There are fees for inactivity, as well, so I can't just let the money sit there, either.  I hope the high rate lasts long enough for this bad experience to be worth surviving.