This year will likely not be remembered fondly by conservative investors who depend on interest they earn from their bank accounts. Let's hope we see improvements in 2012. If the economy improves, perhaps we will at least see the end of falling rates. Even though you might want to forget 2011, there was a little bit of good news. Several banks launched new services that will make banking more convenient.
Hopefully, you haven't grown tired yet of all the reviews of 2011 that are blanketing the media this week. I thought I would jump in with my own review of 2011 with a focus on banking and deposit accounts. Below are my 10 top deposit account news stories of 2011:
- Deposit Rates Continue to Fall - I had hoped many times in 2011 that we were near the bottom, but unfortunately, rates continued to fall. Two examples include the 5-year CDs at Ally Bank and USAA Bank. Ally's APY fell from 2.40% to 1.79%. USAA Bank had similar rate cuts. Its APY fell from 2.40% to 1.80% (standard CD). Rates didn't fall quite as much at some credit unions. At Melrose Credit Union, the 5-year CD APY fell from 2.93% to 2.68%, and at Alliant Credit Union, the 49-to-60-month CD APY fell from 2.30% to 2.00% ($25K minimum).
- Fed's Mid-2013 Pledge - Hopes for rate hikes were dashed at the Fed's August meeting when they announced their pledge to keep rates near zero until mid-2013. The exact quote was "exceptionally low levels for the federal funds rate at least through mid-2013."
- Durbin Amendment Takes Effect - One part of the 2010 financial reform legislation was the Durbin Amendment which required the Federal Reserve to implement caps on debit card interchange fees. Even though these caps would only apply to financial institutions with at least $10 billion in assets, small and large banks pushed Congress to pass a bill to delay this regulation. The bill failed, and the caps took effect on October 1st.
- Debit Card Fees Come and Go - Banks thought they could justify new debit card usage fees due to the Durbin Amendment. Several large banks introduced new debit card fees, but none received the notoriety that Bank of America received. The protests and bad publicity finally caused Bank of America and other banks to drop their debit card fee plans.
- Bank Transfer Day - The new fees and general anger at the big banks spurred by the Occupy Wall Street movement lead to the grassroots Facebook-driven campaign to move money from the large banks to credit unions and community banks. Initial results of Bank Transfer Day may have been a little too optimistic.
- Treasury Announces End of Paper Savings Bonds - This didn't directly involve banks, but it affects many CD investors who also like the safety of savings bonds. In July the Treasury announced that paper savings bonds will no longer be sold at banks and credit unions starting in 2012. One important consequence of this change is that it cuts in half the amount of savings bonds you can buy per year. The only way to purchase paper savings bonds in 2012 will be from your income tax refund.
- CD Early Withdrawal Penalty Changes - Some banks and credit unions realized one consequence of their low CD rates: early withdrawal penalties (EWP) would be too small. That resulted in several of them to increase the EWPs. Bank of America increased its EWP for CDs with terms of 1 year and longer to be equal to 3% of the principal plus $25. PenFed increased its EWP on 5-year CDs from 6 months to 12 months of dividends. These larger penalties at both BofA and PenFed only affected new CDs. However, there was one credit union that decided its new EWP would apply to both new and existing CDs. Fort Knox FCU increased the EWP on CD terms over 2 years from 90 days to 180 days of dividends. In March I confirmed it applied to existing CDs, and we learned in September that the NCUA didn't find a problem with this change.
- Capital One to Acquire ING Direct - Capital One and ING Direct announced this acquisition in June. It has been known since October 2009 that ING Direct would be leaving its parent, ING Groep, due to a European restructuring requirement. Before June there had been rumors of several other banks acquiring ING Direct. One of those banks, GE Capital Financial, didn't stop looking for an internet bank after it failed to acquire ING Direct. This week GE announced its plans to acquire MetLife Bank.
- ING Direct Offers Paper Checks - The largest internet bank realized that too many people need the ability to write a paper check at least once in a while. So in August ING Direct started to allow paper checks. However, only its own special paper checks can be used, and those checks cost $5 for a book of 50.
- Online Check Deposit - Internet banks like Ally Bank and Bank of Internet released remote deposit capture this year. This allows customers to scan checks at home and deposit them online without mailing in the checks. It took a while at Ally Bank. A limited roll-out began in April. It was finally released to all customers in October. Back in March I was told by an ING Direct rep that remote deposit service was in the works. I just called today, and I was told the same thing. Perhaps ING Direct's acquisition by Capital One is slowing their efforts on this.