TIAA Direct Finally Accepting New Customers But Rates Are Disappointing


0.90*%$100k-TIAA DirectMoney Market
0.65*%--TIAA DirectHigh Yield Savings
Accounts mentioned in this post. Rates as of October 21, 2016.

About two years ago, TIAA Direct quietly launched its internet bank to the public. Its very competitive savings and money market accounts attracted a lot of attention, and many readers opened accounts. Then in July 2012, TIAA Direct stopped accepting new customers. After 18 months, TIAA Direct has finally reopened its accounts to new customers. Anyone can now apply, but not many people may want to with its current rates.

When TIAA Direct first launched, the savings and money market accounts had a 1.25% APY on all balances. That held until January 2013. Then the rate fell and continued to fall through 2013. The savings account currently has a 0.40% APY on all balances. The money market account has a 0.50% APY on $50K+ balances and a 0.40% APY on balances under $10K (rates as of 2/18/2014). With the current rates, I don’t know why anyone would want to open these accounts. You can get much higher rates at the popular internet banks like Capital One 360 and Ally Bank.

TIAA Direct also offers CDs, and some of the CD rates are respectable, but there are still several better CDs at other internet banks. The best deals at TIAA Direct are currently a 1.90% APY 5-year CD and a 1.15% APY 2-year CD (rates as of 2/18/2014).

Yesterday, I asked a TIAA Direct CSR about the reason why they were closed to new customers for so long. The CSR just said were making enhancements for things like their account application process. I don’t know why it would take 18 months for this. Based on this time and the low rates, it seems likely TIAA management lost interest in the internet bank. Perhaps their demand for deposits shrunk.

After 18 months of making improvements, you would think the application process and account management features would be top notch. From what I was told by the CSR, that’s not the case. For example, I was told there is no ACH funding for a CD. Customers have only three ways to fund a CD: 1) internal transfer from your TIAA Direct checking or savings account, 2) mail in a check, or 3) wire transfer (no fee for incoming). When the CD matures, the only free option to receive the money is to ask for a transfer of the CD funds back into your TIAA Direct checking or savings account. I was told they charge $5 if you want them to mail you a check or $20 for an outgoing wire transfer.

TIAA Direct does have an ACH transfer service for its checking, savings and money market accounts. However, one big limitation is that they restrict the maximum outgoing transfer to $5,000. Please refer to TIAA Direct’s "Transferring Money" FAQs for more details.

In summary, the good news is that TIAA Direct is accepting new customers. The bad news is that there are no accounts worth opening. Hopefully, we’ll see some better rates from TIAA Direct in the future that will remind us of the time when TIAA Direct first opened its doors to the public.

QED   |     |   Comment #1
Thank you, Ken, for posting this news.  Regrettably it has come too late to help me . . . not your news, but the policy change itself.  You see:

I try to "clean house" at year's end and broom all accounts no longer needed.  I was hanging onto TIAA Direct only because prior there would have been no way to take advantage of upcoming good deals, if any, without my legacy accounts.  Now there's no reason at all to keep the old accounts.

TIAA Direct is the classic "not ready for prime time" financial institution.  There's really not a reason to dislike them, unless you have a low tolerance for ineptness.  They're not so much useless as they are simply annoying.  I'll shed no tears getting them out of my life.  And if TIAA Direct ever in future offers some product worth having, I'll now be able simply to jump back in.  Certainly there are no signs at present of anything good in the offing.
hoho (anonymous)   |     |   Comment #2
I got out last year. Many better banks out there. They are not competitive with rates and service.
MidAtlantic   |     |   Comment #3
They seem to have gone out of their way to annoy existing customers by substantially reducing their interest rates and not letting anyone know what was happening. I have also said goodbye to them.
kcfield   |     |   Comment #4
Like USAA, TIAA senior management does not comprehend how noncompetitive their rates are. Both have responded back with courteous letters that do not grasp the issues at hand. With TIAA the issue has been the frequency and precipitousness of their changes (though higher than USAA). USAA hasn't been precipitous in their changes - just abysmally low and no longer honoring to military families. 
DCGuy (anonymous)   |     |   Comment #5
I am surprised that they opened this type of account to the general public.  Their main customer are people employed in a specific career sector.  Perhaps the drop in rates created a drop in active accounts on their books, so they can now manage more accounts now?
Anonymous   |     |   Comment #6
Their ACH is reason enough to close all accounts with them.
Maecl   |     |   Comment #7
I have less than $100- left there. I should have closed the account when they asked where my deposits were coming from. I was hoping for better things to come. It's time to get out.
DCGuy (anonymous)   |     |   Comment #8
Maecl (#7) -  They asked you where your deposits were coming from?  I have been banking for over 40 years and have never been asked that question before.
Maecl   |     |   Comment #9
Yes, a letter came requesting a call to answer some questions. If a response wasn't received they would close the account. When I called them both my husband & I had to answer separately. I think they said it was part of the Patriot Act. Not sure, but something like that. Never been asked by any other bank.
HoHo (anonymous)   |     |   Comment #10
I closed my accounts and a few weeks letter they sent letters that I had to to answer questions regarding the patriot act.  The bank was always awkward to deal with.  Once they dropped their savings rate I closed the account. Don't bother with them.
IvoryMale   |     |   Comment #11
I got out of this bank last year. Many better banks out there with better rates. They are not competitive with rates and service falls below average.
hoho (anonymous)   |     |   Comment #12
I got all my money out last year and they are still calling me for more information they need.  I have a 0 balance. Ditto #11
Anonymous   |     |   Comment #13
FWIW, they have raised their rates to 0.8% on savings.

I still keep my account open there, mostly because I like their remote deposit app for sucking up the odd paper check that I seem to get every couple of months. The app uses a separate login/password, and does only one thing: deposit checks. Good for keeping security compartmentalized.

But the $5000 limit on ACHs out means that it is still unsutiable for use as a savings account for grown-ups.
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