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Handling Today's Diverging Bank Rates

Friday, April 5, 2013 - 8:59 PM
There are days when you can clearly see which way the wind is blowing. And then there are days when the weather vane twists in a new direction with each gust.

Trying to spot a trend in interest rates lately is like trying to gauge the weather on one of those days when the wind is swirling unpredictably. The signs are pointing in different directions, meaning consumers have to adopt different interest rate strategies depending on what they want to accomplish.

Bank Rates Move in Different Directions
4
ShorebreakShorebreak2,371 posts since
Apr 6, 2010
Rep Points: 12,629
1. Friday, April 5, 2013 - 9:27 PM
The article makes a good point about long-term CDs:
"With long-term CD rates collapsing ever closer to savings account rates, the reward for committing to long-term deposits is shrinking."

A good example of this is at Capital One 360. Its 5-year CD rate is 0.90% and its savings account rate is 0.75%. I can't see anyone putting money into the 5-year CD instead of the savings account.
6
Ken TuminKen Tumin5,442 posts since
Nov 29, 2009
Rep Points: 123,699
2. Saturday, April 6, 2013 - 10:14 AM
Can anyone explain to me why certain banks like Chase only offer approx. 1.01% for a 10 year CD and others offer more than that for 5 year CD?  Is it mainly because they can and don't need our deposits?  They claim they go by what the Federal Reserve makes possible so how can other banks and credit unions give better (?) rates?  Is it because they need the deposits?  If the Fed is loaning money to them at zero percent interest rates why would not all banks and credit unions have the same rates? 

I am planning on sending a letter to the district manager of my local Chase soon since I have a couple of CDs maturing this year with them.  I would like to be able to keep enough money at Chase since my main checking account and IRAs are with them.  However, I will be forced to take the CDs elsewheres when they mature due to the abominally low rates Chase offers.  Just would like some understanding of "why" a bank like Chase which considers themselves a "People's Bank" keeps such rock bottom CD rates.  Thanks for any info you can share.
1
paoli2paoli21,142 posts since
Aug 10, 2011
Rep Points: 5,091
3. Saturday, April 6, 2013 - 12:11 PM
Re: Paoli2 @ 2. Saturday, April 6, 2013 - 10:14 AM

According to Bloomberg, as of October 2011 JPMorgan Chase surpassed Bank of America as the largest U.S. bank by assets.

Like other big banks, JPMorgan’s earnings have been bolstered by a surge in mortgage lending, driven in part by a series of federal programs that have helped drive down interest rates. As homeowners seize on the low rates, JPMorgan is experiencing a flurry of refinancing applications. The bank is also making bigger gains when those loans are packaged and eventually sold to big investors.

Over all, the mortgage banking group posted profit of $418 million for the fourth quarter, compared with a loss of $269 million in the period a year earlier.

But those low interest rates also present a challenge for JPMorgan, which is dealing with glut of deposits. The bank reported average total deposits of $404 billion, up 10 percent from the fourth quarter of 2011.

As deposits pile up, the situation is weighing on profitability. The margin on deposits continued to shrink, dropping to 2.44 percent from 2.76 percent the period a year earlier.

JPMorgan Cuts Dimon's Pay, Even as Profit Surges - NYTimes.com
3
ShorebreakShorebreak2,371 posts since
Apr 6, 2010
Rep Points: 12,629
4. Saturday, April 6, 2013 - 12:31 PM
Shorebreak:  Thanks so much for doing my research for me on Chase and sharing it.  After reading the included article, I realize that my letter to our local district manager will do little good.  They could care less about losing our deposits.  I know now that I have to start looking for a local bank to transfer our IRAs to when they mature next year.  No bank in our city is offering decent rates but there may be one which will give me a better IRA rate.  I will have to find out how much I have to leave with Chase to keep my checking account fee free because I don't want to have to put it in a new bank and have to redo all our direct deposits and autopays.

Thanks again for the education on Chase.  Not good news for me but necessary to know so I can start ahead of time planning on where to put maturing CDs and IRAs.  Much appreciation, as usual, for your knowledge and your help.
1
paoli2paoli21,142 posts since
Aug 10, 2011
Rep Points: 5,091
5. Saturday, April 6, 2013 - 12:43 PM
Re: paoli2 @ 4. Saturday, April 6, 2013 - 12:31 PM

You are welcome. As you have discovered by now, the too big to fail (TBTF) banks don't really need any more deposits when they can make larger profits receiving funding from the Fed at what amounts to a 0% lending rate. Not only are these banks being capitalized on the backs of prudent savers but these savers are being punished by the zero interest rate policy (ZIRP) perpetuated by one Benjamin Bernanke and his private corporation called the Federal Reserve Bank.
3
ShorebreakShorebreak2,371 posts since
Apr 6, 2010
Rep Points: 12,629
6. Saturday, April 6, 2013 - 2:53 PM
It is interesting how mortgage and treasury rates increased somewhat slightly since the beginning of the year, yet long-term CD rates have continued to fall. It seems like savers get ****ed no matter what happens to rates. You know the situation is out of control when you have a number of posters on Ken's site bragging about their gains from stocks, structured CDs and junk bonds.
2
loulou521 posts since
Aug 3, 2010
Rep Points: 3,239
7. Monday, April 8, 2013 - 3:20 PM
Oh, excuse me while I cry in my Burgundy meatballs!!  I just got a letter in the mail from Chase Bank about how they are "Reducing the penalty if you need to withdraw from your CD early"!  For example if one has a CD of 24 months or longer, the penalty will be 2% of the principal withdrawn etc. etc.  They "hope these changes make Chase CDs an even better savings option and give you more peace of mind".  

I would NOT cash in my Chase CD early if I had to stand on the corner and sell my delicious Burgundy meatballs to my neighbors!  Who do they think they are kidding? They don't give a rat's butt for us.   What they want is to get CDs with those 3% long term rates out of the hands of customers like myself!  If they really wanted to help us they would find a way to give us at least 2% for a 5 year CD.  Not 1% for 10 years!  They also let me know in the letter that they would normally waive the penalty for such as a death or disability.  Hmmmm,  could that have a double meaning? :)
1
paoli2paoli21,142 posts since
Aug 10, 2011
Rep Points: 5,091
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