3.50% Installment Savings Account for Terms of 1 to 3 Years at MetroBank - Texas Only


MetroBank, N.A. is offering a special type of savings account called the Smart Choice Installment Savings Account. Instead of making one initial deposit, you agree to monthly deposits. At maturity, the balance equals the sum of all the deposits plus the accrued interest. When you open the account, you specify the maturity balance (the contract amount). This can range from $1,000 to $100,000. Based on that amount, you then make monthly deposits. If you set it up so it automatically debits from your checking account, you'll receive the top rate. As of 3/24/09, these rates include 3.50% APY for terms of 1 to 3 years and 3.75% APY for a 5-year term. If you choose to make the payments by check, by mail or in person, the rates are 0.25% lower.

One example they give is a maturity balance of $10,000 and a monthly payment of $820.26 for a 12-month term. Without earning any interest, the 12 payments would equal $9,843.12. The interest rate of 3.50% APY would add another $156.88 to make the maturity balance equal to $10,000. Note, you can approximate the calculation of how much interest you would earn by multiplying 0.035 by half of $9,843. The reason you have to cut in half the balance is due to the fact that the $9,843 isn't earning interest for the full year. On average, only about half of it is.

According to the banking rep, the rate is locked until the account matures. And like a CD, there are early withdrawal penalties.

Also according to the banking rep, a branch visit is required to open accounts. Branches are located in the Houston and Dallas metro areas.

MetroBank has fair ratings for safety and soundness: 3 stars (adequate) at BauerFinancial (based on 12/31/08 data) and 3 stars (performing) at Bankrate.com (based on 9/30/08 data). It has been FDIC insured since 1987 (FDIC Certificate # 26937).

Other Installment Savings Accounts

It seems that installment savings accounts are becoming more popular at banks. I just posted on Nara Bank's installment account on Sunday. Nara Bank is offering higher yields, but it's only available for those in California, New York and New Jersey.
Anonymous   |     |   Comment #1
Pacific City Bank has a much better installment savings deal, with rates in the 4+% range starting at 30 months--and into the 5+% range for longer terms.
Geoff (anonymous)   |     |   Comment #2
This is good stuff. I normally do a monthly deposit into my savings account anyway.
unimax (anonymous)   |     |   Comment #3
What are requirements for opening a checking account? Does it require a direct deposit?
vladimir (anonymous)   |     |   Comment #4
You must open a metro bank checking account. The auto debit will occur on a certain date of the month, but if that date falls on a saturday, sunday or holiday, then the debit will occur the next business day. No or low interest will be earned on those dates. Coming once a month to put money in the account is not worth it unless you live/work close to the bank. DD may be better idea.