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The new higher savings account rate at American Express Bank isn't anything to get excited about, but it's nice to see a major internet bank increasing rates for a change. The AmEx High-Yield Savings Account rate was increased today from 0.75% to 0.85%. The last rate change was on February 24th when AmEx cut the rate from 0.90% to 0.75%.
It appears the competition from other internet banks pushed AmEx into this rate hike. With new internet banks like Barclays, TIAA Direct and CIT Bank offering savings account rates over 1.00%, I'm sure AmEx is seeing their deposits falling. That February rate cut to 0.75% was harsh, and it even put AmEx below ING Direct on the savings account rate list.
It has been common for banks to offer high rates for a while to attract deposits. When they reach their deposit goals, they can lower the rates and hope that most customers will be lazy and won't move their money. This strategy probably works better at brick-and-mortar banks where it's harder to find other local deals and to move your money. However, this strategy isn't as effective for internet banks. By their very nature, internet savings accounts make it easy for customers to move their money. Customers only need to log in and initiate a bank-to-bank transfer. Also, many online savings accounts (including this AmEx one) have no minimum balance requirements and no monthly service fees. So customers can move their money without worrying about falling below minimum balance requirements (It's still best to keep at least $1 in any account to ensure it remains open).
This rate increase may not be large enough for AmEx to win back a lot of deposits, but it may prevent some customers from moving their money to Ally, Discover or ING Direct. Banks hope their online banking features can keep customers even with less competitive rates. This may help some, and it may have helped AmEx which does have some nice online banking features such as a fast ACH bank-to-bank transfer service. For more information about this account, please refer to my American Express Bank's Internet Savings Account review.
Have you kept your money at an internet bank when rates have fallen due to the bank's attractive banking features? How much higher a rate does it take for you to move your money to a new internet savings account?
