As of October 3, 2009, KeyDirect is providing products and services to existing clients only.
KeyDirect is the internet division of KeyBank N.A., a large bank with headquarters in Cleveland, Ohio and with hundreds of branches in several states including Ohio, New York, Washington and Colorado. KeyDirect has provided online savings accounts, checking accounts and CDs for years. So I'm surprised to see KeyBank make this change. I called KeyBank this morning, and according to the CSR, they've decided to focus on their local market areas.
KeyDirect used to offer competitive CD and money market rates, but in the last couple of months the rates haven't been competitive. The last best deal at KeyDirect was a year ago when it was offering a 5% 29-month CD with an extra 0.25% for checking account customers. KeyBank seemed to be cautious in its investment in KeyDirect. The internet products were only offered in states in which KeyBank did not have branches. Also, many readers reported various problems with KeyDirect's customer service. Another thing that was frustrating about KeyDirect was its history of creating new money market accounts which had competitive rates. These new accounts would be advertised while the old money market accounts with the low rates would be kept in the background.
KeyBank has been hit hard in this financial crisis. In July, Key reported its fifth straight quarterly loss. In the second quarter, it reported a loss of more than half-billion dollars from loans that went bad. As reported by Cleveland.com Key has been working to cut expenses and "has reduced its workforce by 8 percent, or 1,500 positions, mostly through layoffs." Even with the reduced workforce, it was able to grow deposits. According to FDIC data, deposits have grown from $67.2 billion in June 2008 to $72.7 billion in June 2009.
With a need to cut expenses and without a pressing need to raise more deposits, I guess KeyBank didn't see much value in continuing to accept new customers at KeyDirect. For existing KeyDirect customers, you may not have many reasons to stay. Rates continue to be very low. For example, KeyDirect's top 12-month CD rate is only 0.50% and that requires $25K and checking. The top rate of the Key Gold Money Market Savings account is only 0.65%.
Thanks to the reader who mentioned this change in the bank deals hub page