About Ken Tumin

Ken Tumin founded the Bank Deals Blog in 2005 and has been passionately covering the best deposit deals ever since. He is frequently referenced by The New York Times, The Wall Street Journal, and other publications as a top expert, but he is first and foremost a fellow deal seeker and member of the wonderful community of savers that frequents DepositAccounts.

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Is Bank Transfer Day Good For Savers?


After news came out that Bank of America was going to add a $5 monthly fee for debit card usage, the movement to leave megabanks reached a new level of popularity. Credit unions have reported significant increases in new members this month. Next week may see even more people leaving their megabanks with Bank Transfer Day. This is a Facebook-driven campaign urging people to close their accounts at the megabanks and move their money to credit unions by November 5th.

With the megabanks controlling so much of the banking industry, anything to encourage people to move their money to credit unions and community banks should be helpful. However, it may not help deposit rates, at least in the short-term. This New York Times article describes one reason why we're seeing such low deposit rates: banks are awash in cash. The recent fears of a new recession only added to banks deposits as people moved their money from stocks into bank accounts. Here's how the NYT article described why the deposits are not helping the banks:

Lending levels have not bounced back from only a few years ago and the loans going out are not keeping pace with the deposits rushing in.

What’s more, the profitability of each new loan has shrunk. Because the Federal Reserve effectively sets the floor off which banks price their lending rates, its decision to lower interest rates to near zero means the banks earn less money on the deposits they lend out.

The banks are also earning less on the deposits left over to invest.

With more deposits going into credit unions and community banks, will we see our deposit rates fall? In my opinion, I don't think this will put more downward pressure on deposit rates. Most people involved in this move-your-money campaign are probably not big savers with lots of money in their bank accounts. Most will just be moving their checking accounts. Active checking account users are always looked upon as the most profitable customers.

An example of banks wanting new checking account customers can be seen with so many banks offering new-account bonuses. In fact, one of the banks mentioned in the NYT article, Hyde Park Savings Bank, is offering a checking account bonus. According to the article, Hyde Park Savings Bank has "lowered its C.D. rates this spring to encourage less-profitable customers to move on." Those without checking accounts are the ones they consider to be less-profitable. That's why their $100 bonus is for opening a new checking account.

With most people moving their checking accounts for the Bank Transfer Day, that should be good for credit unions and community banks, even for those which are awash in cash.

It might seem like the megabanks may raise their deposit rates to keep customers. However, their rates are so low now, even sizable rate increases will probably still result in uncompetitive rates.

Over the long-term, hopefully the megabanks will shrink while we see growth in the community banks and credit unions. This will make for a more competitive environment which should be good for savers in the future.

Bank Transfer Day Help

If you are looking for a credit union, my post on Finding the Best Free Checking Accounts at the Best Credit Unions should be useful. There are many credit unions, and they are not all equal. I described several features to look for in both the credit unions and in the checking accounts.

If you don't have any good credit union or community bank in your area, internet banks are another option. Please refer to my post Leaving Your Big Bank and Choosing an Internet Checking Account.

  |     |   Comment #1
A General Comment.

The NYT this week ran a story about how banks are so flush with cash they don't want further deposits.   What is curious to me and perhaps to your readers is as well is why then banks are so loathe to let go of the funds when a CD expires!!!!  I am sure my experiences regarding impediments set up by banks to timely repay CDs upon maturity are not isolated.   Among my most favorite are: (i) the refusal to do an ACH transfer when the funds were originated through a wire transfer and interest is paid monthly by wire transfer as well; (ii) maturity notices that contain no information about the prcedures to take to notify the bank when a decision is made not to renew, including on some the failure to even provide any contact information; and (iii) reflection of maturity dates 1 or 2 days following the actual maturity date on the CD itself.   Perhaps, your readers will also want to "vent" on this issue.  Thank you
  |     |   Comment #2
If banks are so flush with money that they don't "need" our deposits, why aren't they doing more lending to those who want loans?  This entire scenario stinks, imo.  The banks look for any excuse to drop interest rates for savers and the Feds help them by making sure they get lots of money.  BUT.....from what I always understood, the idea was so that the banks could give MORE loans!!  However, someone has missed the boat on this because it seems the American public is afraid to take out any loan unless it is an emergency or absolutely necessary!  People are afraid to spend and take on more debt because they don't trust where our country is going in the future.  If the Feds try to help us any more, we ALL may be hiding in cellars sitting on what savings we have and hoping they don't manage to destroy our currancy's value any more than they already have!  Will we ever be able to sing "Let the Good Times Roll" again?  What a mess we are in!
  |     |   Comment #3
To RichieRich.  The reason they make it hard to let go is it's (1) Free money when they are not paying "jack squat" and (2) and oppurtunity to get you with fees if you miss the grace period or for some service as a wire transfer.  They don't miss a beat to pad the executives wallets.
  |     |   Comment #4
The banking system is rigged against the savers, starting from the FED down to your local bank.

They all work from a set of rules faxed to them by the FDIC.

Don't expect anything good to come out of them, now or in future.
  |     |   Comment #5
My local savings bank, at which I just keep my checking acct. (free), has a 1-yr CD special on placards everywhere: 0.70%.  Who are they kidding?   I'll go out as long as 10 years on a CD to avoid that rip-off.
  |     |   Comment #7
The local citibank actually has the nerve to advertise on the door of the local branch a 5-YEAR CD (locking your money up for FIVE YEARS) -- at 1.01%. Thankfully I already bank solely with a credit union.
  |     |   Comment #9
In this reader's opinion, the Fed Chairman and all the bankers, are not much better than a bunch of crooks!!

This reader will do with less and not lock up savings for any long term at next to nothing in interest.  So I and my family will do with less.  We won't spend in the economy except on necessities --  The Fed is counting on consumers going out and spending willy nilly.    In the meantime, they rob savers, mostly retirees, of the hard-earned interest they expected to earn in retirement while Helicopter Ben drops money as we have seen reported in the news as fast as his printing press can go.   We get higher home heating oil, gasoline and food prices as a result --- again in this reader's opinion.   Senior savers have spent a lifetime preparing for retirement and it seems like almost within an instant Helicopter Ben has destroyed everything they worked so hard for all their lives.   He and the rest of the robber-barons will have to answer to their maker one day.   I have no faith in our government or any of its leaders nor will I --- ever again!!!!!!!!!!!

  |     |   Comment #10
#9 I think we have a lot of readers who have had to learn to live on less whether they want to or not.  I have written to Bernanke, Obama, etc. about how the savers are being ripped off and no one replies.  I wonder why??  "Faith in our government"???  That used to be an OLD way of thinking, imo.  Maybe in our lifetime it will return but not until we can throw out the unleaders and get in some people who really care about the citizens.  Going out to eat is now at "McDonalds" and "that" is only when I feel like splurging!!
  |     |   Comment #13
Norman:  Where are you finding CHERRY pies at McDonalds??  All we have are those apple pies.  I LOVE cherry pies!  Being poor isn't as difficult when you have a delicious cherry pie to chew on!  You are SOOO lucky.  You'll probably find some CU in your area with 6% CDs at this rate!  Lucky you!

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