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Best Bank Account Interest Rates - Summary for Week Ending February 4, 2012

2012/02/04 14:39

The January jobs report was well above expectations which led some to speculate that it may be a "wake-up call" for the Fed which could cause them to "re-evaluate their policy stance". However, as Bernanke suggested in his January 25th press briefing, the Fed is going to have to see dramatic improvements in the economy for them to pull in their late-2014 commitment to keep rates near zero. So don't expect much change for a while.

If you have been wondering if Bernanke has any understanding of the effects that the Fed is having on savers, you might be interested in Bernanke's testimony on Thursday to the House Committee on the Budget. A Congresswoman asked Bernanke "does a zero interest rate encourage savers to save". Bernanke appeared irritated by this question as he tried to respond. I have the transcripts of this exchange along with a link to the video in this Thursday blog post.

This good economic news this week did push up all Treasury yields. The Fed funds futures also showed higher expectations for a rate hike in 2013. However, the implied probabilities remain low. This will likely continue unless the Fed removes the late-2014 language from its policy statements. The summary of the yields is shown below (Numbers are based on Yahoo bond rate data and the CME Group FedWatch.)

Treasury Yields:

  • 6-month: 0.08% up from 0.07% last week
  • 2--year: 0.23% up from 0.21% last week
  • 5--year: 0.76% up from 0.75% last week
  • 10-year: 1.92% up from 1.89% last week
  • 30-year: 3.12% up from 3.06% last week

Fed funds futures' implied probability for a higher rate by:

  • July 2013: 19.4% up from 12.8% last week
  • Sept 2013: 22.1% up from 12.8% last week

There were no bank failures this week so the total for the year remains at 7. One of the banks that failed on the previous Friday (January 27th) was Tennessee Commerce Bank (TCB). The FDIC arranged for Republic Bank to assume all deposits. We learned this week that Republic Bank decided to slash all TCB CD rates to an unbelievably low rate of 0.05%. Fortunately, readers with TCB CDs have reported that they have been able to quickly close their CDs and transfer their money to other banks.

Savings & Checking Account Rates

There were a few rate cuts this week, but it wasn't as bad as I had feared with the new month after the Fed's new late-2014 policy. There was even some good news. Salem Five Direct has started another savings account promotion for new customers. It's guaranteeing 1.00% APY through the August statement cycle (see review).

A 1.00% yield is low, but I'm afraid that's competitive compared to other savings accounts. UFB Direct used to have a rate well above 1.00%. For over 5 months UFB Direct's savings account held at 1.30% APY. Its first cut came on January 19th which dropped the yield to 1.10%. We had another cut this week which brings the yield down to 1.05%. Even with this cut, it remains on the list of only five accounts with yields significantly above 1.00%.

Two of the accounts on this list of 5 are the internet banks of New York Community Bank (AmTrustDirect and MyBankingDirect). Both continue to offer 1.15% APY on their money market accounts. I reviewed AmTrustDirect's Premium e-Money Market Account this week. For most all of 2011, this account remained very competitive.

Reward Checking Accounts

We finally had a rate cut in my short list of nationally available reward checking accounts. First New England Federal Credit Union reduced its reward checking account by about 50 basis points. Its top rate without a relationship status is now 1.52% APY for balances up to $15K. Even before the rate cut, this account was far from the best in terms of rate and balance cap. Fortunately, the top reward checking accounts are holding steady. I reviewed three of the best on Thursday.

I'm afraid the 4.00% club is getting close to extinction. These are local reward checking accounts that pay at least 4% APY on balances of at least $25K. The club is now down to 2 members: Coppermark Bank and Southwest Airlines FCU. Liberty National Bank fell out of the group this week when it reduced its reward checking rate from 4.01% to 3.01% APY.

To find the highest reward checking rates in your area, please refer to our reward checking rate table. This can be used to find accounts available nationwide and accounts with higher rates in your state. If you're new to these tables, my new rate table guide should be useful, and if you're new to reward checking, my blog post, 10 Common Traits of High-Yield Reward Checking, should also be useful.

Rate Hikes:
  1. Salem Five Direct Savings promo - 1.00% [was 0.85%]
Rate Cuts:
  1. First New England FCU Rewards Checking w/o rel - 1.52% up to $15K [was 2.03%]
  2. UFB Direct Savings - 1.05% [was 1.10%]
  3. Capital One/Costco InterestPlus Savings - 0.82% [was 0.85%]
  4. Capital One InterestPlus Savings - 0.65% [was 0.70%]
Certificate of Deposit Rates

My recap of CD rate changes and the list of CD deals will now be in my survey of the best CD rates. This recap will now focus on banking news of the week and liquid accounts.

Recap for the Week - Links to This Week's Posts Banking News/Resources Savings/Checking Accounts - Nationwide CD Deals/Resources - National Checking/Savings/CC Bonuses Reward Checking Accounts CD and Money Market Deals - Local Posts from Previous Weeks The rates listed below are based on Annual Percentage Yield (APY). No minimum balances are required unless noted. MMA next to the rates indicate a money market account. Most MMAs have check writing and ATM cards. Online savings accounts usually lack both of these. Previous weekly summaries are available at this page.

Rates as of February 4, 2012 Checking/Savings/Money Market Accounts:

  • Noteworthy Accounts Available Nationwide:
Reward Checking Accounts:
  • Noteworthy Accounts Available Nationwide:
Certificates of Deposit: Various Deposit Account Deals Bank Account Alternatives Historical Rates from the Federal Reserve (Federal funds, Treasury bills, CD's)
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How to Retire Early

2012/02/04 12:11

At a time when many Americans are wondering not when, but if they will retire, is the notion of retiring early dead? Hardly. Even as late at 45 you could still say a grand goodbye to the 9-5 by 60. Doing so won't be easy, and will be a lot of work, but then of course you'll have eternity to get your groove back. Here's how to buck the trend and at 45 to start position yourself for a 15 year end-date.

Know your numbers. What will you need to retire? How much do you need to save? Assume a conservative rate of return and inflation, which is easy to do with calculators that you can find online. Do a "gap analysis" before pulling the trigger on retirement. Many people retire too early, only to find they need to return to work. A gap analysis can help you determine if there is a gap between your expected retirement income and expenses, says David Potter, a spokesperson for The Hartford.

Take for example, Jim, a 45 year-old who estimates he will have $3,500 in monthly expenses during retirement. If he has $100,000 saved in a conservative, short-term portfolio, yielding around 1.25%, at age 60, he would need approximately $850,000 to support an income stream of $3,500 per month. However, by age 60, investing short-term produced only around $125,000. Even with social security kicking in at 62, he would not be prepared for retirement, explains Mark Davis, senior vice president, retirement solutions with the Wealth Solutions Group.

Then there's Sally, 45, shooting for 60 too, with an estimated $3,500 in monthly expenses during retirement. She already has $500,000 in a portfolio evenly split between equities and bonds. Sally could have $1.1 million by 60, which would be adequate to cover her expenses. Even in poor markets, she could have about $774,00 which comes close to what she needs, says Davis.

Save systematically and keep it saved. Out of sight, out of mind. Understand the power of compounding returns and use "dollar cost averaging" to automatically buy more shares of something when it is priced lower and less when it is priced higher. Max out your 401k and IRAs. Understand the impact of taxes. Take advantage of every opportunity to tax deduct, tax defer and create tax-free retirement such as Roth IRAs.

Seek appropriate asset allocation and diversification. It's important to rebalance, typically twice a year, or as needed, to be sure your asset mix is consistent with returns needed, risk toleranace and your time horizon goal. With 15 years or more to go before you need your retirement savings, it doesn't make sense to have everything invested in fixed income or cash, says financial coach Kelley Long.

Understand the certainty of uncertainty. Plan for contingencies by having the correct amount of money in four areas -- cash reserves, insurance, fixed and equity assets. Having enough cash reserves can help you avoid forced selling of equities at a loss when markets are down because of a job change or income loss, says Peter Velardi, president of the educational website FiPath.com.

Do away with debt. In the best case scenario you should pay off your mortgage prior to retirement. Simply adding to your monthly payment will accelerate the timing of your mortgage burning party says Klea Theoharis, managing director at the investor relations firm Crescendo Communications. Strive to be rid of credit card debt. Spend wisely. If you haven't been a stickler for budgeting, it's time to change, otherwise you can kiss you early retirement dreams goodbye.

Anticipate obstacles. There are any number of risks to your early exit. Consider health care costs. Don't forget about health care coverage and affiliated costs required to bridge you from 60 until you reach Medicare age. Studies put the price tag of health care in retirement in the hundreds of thousands, says JJ Montanaro, a certified planner with USAA. Other threats include unexpected illness or disability; early job loss; inflation: rates higher than 2-4% could prove problematic; extraordinary low fixed-income yields that penalize savers; rising tax rates as governments attempt to close fiscal deficits, and stagnant real estate prices are just a few, points out Albert Lu, managing director of WB Advisors.

Life begins at retirement. Don't you want it sooner, rather than later?

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Survey of the Best CD Rates for February 3, 2012

2012/02/03 20:30

After the Fed's new late-2014 pledge, I was worried the new month was going to bring a surge of rate cuts. A few banks and credit unions did cut their CD rates, but there weren't as many as I had feared. In fact, PenFed actually raised one of its CD rates. Its 7-year CD yield increased from 2.75% to 2.76% APY. In today's world, a one basis point increase is good news. One thing nice about PenFed is that it typically keeps its rates unchanged for the month. So if you're wanting to purchase a long-term CD, you should have plenty of time at PenFed. However, don't forget that PenFed's 5-year and 7-year CDs have an early withdrawal penalty of up to 1 year of interest (see my PenFed CD review).

A few credit unions did cut rates in February. One disappointment was Melrose Credit Union. Its 5-year CD had a large rate cut falling from 2.68% to 2.27% APY. The 4-year CD rate fell by 10 basis points to 2.07%, and the shorter terms fell by 5 basis points. Even with these cuts, the rates remain competitive. However, since its early withdrawal penalty is so harsh (see review), CDs at other credit unions are better deals.

Credit unions weren't the only ones to cut rates. US Bank reduced its special 59-month CD rate from 2.15% to 2.00% APY.

Local CD Deals

We lost another 3.00% CD this week. NavyArmy Federal Credit Union in Corpus Christi Texas reduced its 30-month CD rate from 3.00% to 2.25% APY. The 3.00% club now includes only 3 institutions with a 3.03% APY 5-year Jumbo CD in El Paso Texas, a 3.35% APY 10-year Jumbo CD in San Antonio Texas and a 3.03% APY 6-year CD in Nebraska.

I added two local deals this week. The first addition was a 2.00% APY 3-year CD at Leominster Credit Union which is available in several counties of MA. The second was a 13-month CD special with a rate up to 1.65% APY at Community Trust Bank which has branches in Dallas/Fort Worth Texas and in several cities of Louisiana and Mississippi.

Long-Term CD Break Strategy

For the short-term CDs in my lists, you might notice CDs with the note "5-year CD closed after X years". These take into account the yield after the early withdrawal penalty is applied. Since Ally Bank's 5-year CD only has a 60-day interest penalty, it's still a good deal when closed early even with the recent rate cuts.

The risks of planning for early withdrawals of long-term CDs was recently highlighted by another credit union which raised the early withdrawal penalty on existing CDs. The credit union is CEFCU which is based in Illinois. I have more details in this blog post. CEFCU is now the second credit union which has raised the early withdrawal penalty on existing CDs. Last year Fort Knox FCU did the same thing (see my blog post).

Note About the CD Survey

As I described in my rate table overview, you can use our CD rate tables to find the best rates for both nationally available CDs and local CDs. This CD survey blog posts are intended to highlight nationwide CD deals that may not be apparent in the tables. For example, I'll include the post-penalty yields of a few long-term CDs.

The CD survey blog posts are also intended to highlight the local CD deals that are available in large metro areas. There are many high CD rates, but most of these are at small banks in rural areas or at small credit unions with very narrow fields of membership. In these local CD surveys, my focus is on local CD deals that are in big cities or that are available in large areas of a state.

Yields Accurate as of February 3, 2012

Under 1-Year CD Rates
  • Noteworthy Local Deals
1-Year CD Rates
  • Noteworthy Local Deals
18-month CD Rates
  • Noteworthy Local Deals
2-Year CD Rates
  • Noteworthy Local Deals
3-Year CD Rates
  • Noteworthy Local Deals
4-Year CD Rates
  • Noteworthy Local Deals
5-Year CD Rates
  • Noteworthy Local Deals
Over 5-Year CD Rates
  • Noteworthy Local Deals

Note: All rates listed above are Annual Percentage Yields (APY) which factor in compounding.

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Review of AmTrustDirect's Premium e-Money Market Account

2012/02/03 10:59

It has been a while since I last took a look at AmTrustDirect. With the top rate of its Premium e-Money Market Account, I thought it was worth another look. AmTrustDirect has been around for a while, but there have been several changes. I first reviewed the internet bank in 2006. Its parent, AmTrust Bank, failed in 2009, and New York Community Bank assumed all deposits. AmTrustDirect continues to operate as a division of New York Community Bank.

AmTrustDirect offers both internet CDs and a money market account called the Premium e-Money Market Account. It has a 1.15% APY for balances over $5,000 (0.25% for under $5,000) as of 2/3/2012.

The Premium e-Money Market yield has been very competitive since I first reported on it in April 2011 when the yield was 1.25%. The yield fell to 1.15% on October 20th. According to the bank's CSR, the rate could change at anytime.

Important details of the account are listed in AmTrustDirect's FAQs. Some important features mentioned in the FAQs include:

  • minimum average balance requirement of $1,000. A minimum balance fee of $10 will be imposed each month that the average daily balance for the month falls below $1,000.
  • After making your initial deposit by electronic transfer or check, you can link your Premium e-Money Market or e-Savings account with up to six accounts that you hold at other institutions.
  • electronic transfers out of a Premium e-Money Market or e-Savings account are limited to $100,000 per day and $2,500,000 per month.
  • ATM transactions are not available for these accounts.
  • AmTrust Direct verifies identification and submits new account applications to a Credit Bureau background check. By applying for a new account, each account applicant consents to AmTrust Direct obtaining a credit report and verifying his or her background information.

I was told by the bank CSR that they don't offer checks, but you can order third party checks. As with any money market account, federal regulations limit the number of checks or electronic withdrawals to six per statement cycle.

Customer Service?

A few readers who had AmTrustDirect CDs have reported issues with customer service. One reader described the problems he had when he tried to close an AmTrustDirect CD.

MyBankingDirect

Before acquiring AmTrust, New York Community Bank had its own internet division called MyBankingDirect. This continues to operate, and it also has its own money market account with the same rates and tiers as the AmTrustDirect account. There used to be a few differences between these two accounts, but I can't see any significant differences. I reviewed the MyBankingDirect money market account last June. When I contacted the MyBankingDirect in June I was told bank-to-bank ACH transfers were done through MoneyHQ, and there were some fees. This might be one reason to go with AmTrustDirect instead of MyBankingDirect. If you have experience using the ACH transfer services at these banks, please leave a comment.

New York Community Bank Overview

New York Community Bank is a sizable bank with $39.47 billion in assets. It has an overall health rating at DepositAccounts.com of 4 stars (out of 5) with a Texas Ratio of 16.79% (average) based on September 2011 data. Please refer to our financial overview of New York Community Bank for more details. The bank has been a FDIC member since 1943 (FDIC Certificate # 16022).

How the Money Market Rate Compares?

Currently, these two money market accounts have the highest rate of any nationally available savings, money market and checking accounts that doesn't have a balance cap and doesn't have monthly requirements. It's tied with the savings account at Flagstar Bank. However, that 1.15% APY is an intro rate that's only guaranteed for the first 4 months. After that time, the rate goes way down.

The highest liquid account rate that's nationally available is Bank of Internet USA's rewards checking account. It has a 1.25% APY on all balances if certain monthly requirements are met (see my review). Like any reward checking accounts, there are monthly requirements to qualify for this 1.25% APY. Several reward checking accounts offer higher rates, but there are balance caps (typically from $10K to $50K).

Searching for The Highest Savings Account Rates

The best rates can be from savings accounts, money market accounts or checking accounts. You can use our tables to find the best rates:

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Special 13-Month CD at Community Trust Bank in Parts of TX, LA & MS - Local Only

2012/02/03 10:57

Community Trust Bank is offering a 13-month CD special with some competitive rates. If you meet all the checking account requirements, you can get a very competitive rate of 1.65% APY. That requires opening a checking account with a debit card, online banking, e-statements and direct deposit. Without direct deposit, the rate falls to 1.40% APY. Without a checking account, the rate is still quite competitive with a 1.15% APY. Minimum deposit is $5,000, and new money is required. This special is listed at the bank's promotions page as of 2/3/2012.

It appears that a branch visit is required to open this CD. Branches are located in the Dallas/Fort Worth, Texas and in several cities in Louisiana and Mississippi including Farmerville, Monroe, Shreveport, Madison and Ridgeland.

The bank has an overall health score of 5 stars (out of 5) with a Texas Ratio of 9.12% based on September 2011 data. Please refer to our financial overview of Community Trust Bank for more details. The bank has been a FDIC member since 1934 (FDIC Certificate # 12614).

How These CD Rates Compare

Even if you don't want the checking account, the 1.15% APY is competitive for CDs with terms around 1 year. The best 1-year CD rate available nationwide is 1.16% APY at Pentagon Federal Credit Union.

Searching for the Best CD Rates

To search for the best nationwide CD rates and the best CD rates in your state, please refer to the CD rates section of DepositAccounts.com.

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Bernanke Tries to Justify Zero Interest Rate to House Committee

2012/02/02 17:20

Fed Chairman Ben Bernanke testified today before the House Committee on the Budget on the economic outlook for 2012. Most of the meeting dealt with representatives trying to get Bernanke's opinions on fiscal policy issues. However, monetary policy was brought up a few times. There was one exchange between Rep. Diane Black (R-TN, 6th District) and Chairman Bernanke that I found most interesting. Rep. Black tried to understand how it can be helpful for the economy in an environment where savers have no incentive to save. Her question seemed to irritate Chairman Bernanke, and his reply was confusing.

I don't expect anything to come out of the exchange that will directly help savers, but it does show there are members in Congress who think the Fed has gone too extreme with the zero interest rate.

You can view the full 152 minutes of Bernanke's testimony at this C-Span video library page. The exchange between Rep. Black and Chairman Bernanke starts at time 2:17:00 into the video. I've transcribed the exchange below. The committee chair is Paul Ryan (R-WI, 1st District), and I included his statement that ended the exchange:

Black: On the other end, does a zero interest rate encourage savers to save?

Bernanke: It may, because there's both what economists call substitution effects and income effects, because you may need to save more to get the same return, but...

Black: I'm not sure that putting my money into accounts where I'm going to get a zero return is probably what I would want to do especially in an economy that's so uncertain.

Bernanke: Let's think this through. Suppose in order to solve savers problems, suppose the Fed raised interest rates sharply. That would almost certainly throw the economy back into recession. It would mean the stock market would decline. It would mean returns on other investments would go down. And it might mean increase deficits might lead to more concerns about our federal government. So, again, we understand the concern that savers have, but we are trying to deal with a bad situation, and this is one of the tools we have to try to get the economy back to full employment.

Black: I know my time is out, but I'm not advocating a sharp increase. I'm just saying that there's not an incentive right now if there's zero percent interest. Thank you.

Ryan: There's a case for normalizing policy.

Bernanke appeared to take Rep. Black's question as if she was advocating high interest rates. As Rep. Black said at the end of the exchange, she wasn't "advocating a sharp increase". Also as Rep. Ryan said, "there's a case for normalizing policy". The representatives weren't trying to debate the usefulness of low interest rates to help the economy. There's a big difference between low interest rates and never-ending zero interest rate.

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Beware of CD Alternatives Being Pushed By Banks

2012/02/02 09:24

One of my readers told me in an email that an investment guy at his bank was trying to sell him on bonds while he was redeeming a matured CD. In the last month I also have seen this. While I was at PNC and Chase, the bankers referred me to one of their investment advisors. It should be noted that you may also see this at credit unions. Some examples at large credit unions include Golden 1 Investment Services and BECU Investment Services. So I thought it was worth repeating the following advice from Clark Howard:

You should never buy insurance or investments in a bank, though they'd love if you do just that. When you buy investments at a bank, you pay monster commissions and they tend to push you into their own products. It's a disaster for you.

If you are looking for alternatives to CDs, it's a good idea to do your own research. Here are two good sources of basic investment information:

These provide an overview of sound investment strategies with a review of the basic asset classes like stocks and bonds. I plan to continue to focus on deposit accounts in this blog, but I'll try to touch on other products like immediate fixed annuities and Treasury Inflation Protected Securities.

I often post in the DepositAccounts.com Investments sub forum. Most of these posts include links to articles and resources on the web covering various topics of investments. If you come across useful articles and information on the web, feel free to post in this forum. You can follow the forum using this forum page which will show you the blog-like view of all of the featured forum posts.

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Top 3 Reward Checking Accounts Available Nationwide

2012/02/02 09:22

Reward checking accounts continue to be a good alternative to internet savings accounts at least for small balances. If you have a large amount of money that you want to keep in a liquid account, internet savings accounts will be much easier to maintain. One exception is the rewards checking account at Bank of Internet USA. Its top rate applies to all balances. However, its top rate (1.25% APY as of 2/2/2012) is low compared to other reward checking accounts with caps from $10K to $25K. If you want to maximize the interest on your liquid accounts, the low-cap reward checking accounts are the best option.

I thought it would be useful to highlight three of the top reward checking accounts that are available nationwide. I list the rates of the top ones each week in my weekly summary. They are a little hard to compare since the balance caps range from $10K to $50K. Also, some have difficult requirements. The three that I've chosen not only have top rates, but have features that qualify them for this short list.

Please note that rates and balance caps can change quickly. Also, institutions can reduced the availability of reward checking accounts. So an account that's available nationwide may not stay that way.

Rates & Balance Caps as of 2/2/2012
  • Consumers Credit Union: 4.09% APY up to $10K guaranteed to 6/30/12 - The small balance cap is a big downside to this account, but it qualified for my top list due to the high rate and the rate guarantee. My last review of this account and credit union was in October 2011. There's also a nice refer-a-friend bonus (see our promotions page)
  • ABCO Federal Credit Union: 2.52% APY up to $25K - Its Premiere Checking Account has the highest rate for a $25K balance cap for the nationally available accounts with reasonable reward checking requirements. One downside is that there isn't an online application. I have more details in my ABCO FCU checking review.
  • INOVA Federal Credit Union: 3.00% APY up to $20K - The Ovation Checking balance cap is close to $25K. Its monthly requirements are a little tougher than average with 15 signature-based debit card purchases required. I first reviewed this account and credit union when the top yield was 4.00% in April 2010.

There's also a question about how much to put into liquid accounts and how much to put into CDs. The above rates may be much lower in another year. I have a discussion of this topic in my post Strategy for Getting the Best Yields in Deposit Accounts.

If you're new to reward checking, my post on the common reward checking traits should be useful. To compare reward checking accounts based on interest rates and balance caps, you can use our reward checking rate table. Refer to this post for details on how to use the rate tables.

Edit 2/3/2012: Added info about Consumers CU's promotion.

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Top 3-Year CD Rate at Leominster Credit Union in MA - Local Only

2012/02/02 09:20

If a 5-year term is too long for you, a 3-year CD may be a better maturity length. Unfortunately, most 3-year CD rates are under 2.00%. That's not the case with Leominster Credit Union which was one of the very few institutions to raise CD rates in February. Its 3-year CD and IRA CD have a 2.00% APY. Its 5-year CD and IRA CD rate remained the same in February, but they remain competitive with a 2.25% APY. Minimum deposit is $1,000. These rates are listed in the credit union's deposit rates page as of 2/2/2012.

Credit union membership is open to those who live, work, or have business in Worcester, Middlesex, Norfolk, Hampden, Franklin, or Hampshire Counties in Massachusetts. Please refer to the credit union's Membership Eligibility Page for the full details. Membership requires maintaining a minimum $25 in a deposit account.

Leominster Credit Union branches are located in the cities of Leominster, Worcester, Clinton, Holden and Sterling.

The credit union has an overall health score at DepositAccounts.com of 5 stars (out of 5) with a Texas Ratio of 3.40% (excellent) based on September 2011 data. Please refer to our financial overview of Leominster Credit Union for more details. The credit union is federally insured by the NCUA (Charter # 66699).

How These CD Rates Compare

The best 3-year CD rate that's available nationwide is 1.90% APY at Fort Knox FCU, and the best 5-year CD rate is 2.35% APY (2.60% w/relationship) at Digital Credit Union. The best 3-year and 5-year CD rates used to be at Melrose Credit Union, but Melrose cut its CD rates in February.

Searching for the Best CD Rates

To search for the best nationwide CD rates and the best CD rates in your state, please refer to the CD rates section of DepositAccounts.com.

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Another Salem Five Direct Savings Account Promotion - Available Nationwide

2012/02/01 12:06

It's not quite as good as last year's promotion, but it's still a good deal compared to what's available today. Salem Five Direct's new savings account promotion offers a 1.00% APY on balances up to $500K on its eOne Savings Account. This rate is guaranteed through the August statement cycle. Eligibility is limited to consumers who apply online and who do not have an existing checking or savings account. They set up a limited time offer page on its website with the details. The eOne Savings Account rate had been 0.85% before this promotion. It has no monthly fees or minimum balance requirement.

Last year Salem Five Direct was offering 1.25% APY guaranteed to April 1, 2012. At that time, you could get rates around 1.50% in savings accounts at a few other banks.

One thing that Salem Five Direct has changed since last year's promotion is to make it clear that only new customers can qualify. Two readers commented last year of the problems they had when they applied for a new eOne Savings account. The bank's disclosure and the CSRs make it appear that existing eOne savings account customers could qualify for this promotion. After they applied and funded the accounts, the bank closed the new accounts without notice.

Bank Overview

I first reported on Salem Five Direct back in 2007 when it was offering the eOne checking account with a 5.30% APY. The eOne Savings account was launched in 2009.

Salem Five Direct is an online division of Salem Five Cents Savings Bank, which is based in Massachusetts. As a Massachusetts bank, it's a member of the Massachusetts Depositors Insurance Fund (DIF) which covers deposits that exceed the FDIC limits. One thing to note about DIF is that it's a private insurance fund. So there's no government guarantee. You can read the details at the DIF website.

Deposits up to the FDIC limits are guaranteed just like they are at every other FDIC member bank. Salem Five has been a FDIC member since 1981 (FDIC Certificate # 23296).

Salem Five has an overall health score at DepositAccounts.com of 4 stars (out of 5) with a Texas Ratio of 13.42% (above average) based on September 2011 data. Please refer to our financial overview of Salem Five Bank for more details.

How This Savings Account Rate Compares

In today's rate environment, the highest rate on a money market account is 1.15% at AmTrust Direct and MyBanking Direct. Flagstar Bank has a promotional rate of 1.15% APY that's guaranteed for four banks from account opening.

If you want a rate that's guaranteed to last until August, you'll need a 6-month CD, but it's hard to find 6-month CD rates of at least 1.00%. KeySource Commercial Bank is offering a special 7-month CD with a 1.00% APY. The best 6-month CD rate at an internet bank is only 0.85%. This is at AloStar Bank.

Ally Bank still offers its No Penalty 11-month CD. The no-penalty feature allows this CD to have any term from 7 days to 11 months. The rate is 0.91%.

These rates are accurate as of 2/1/2012.

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Republic Bank Slashes Rates on Tennessee Commerce Bank CDs

2012/02/01 10:57

As I reported on Friday, Tennessee Commerce Bank (TCB) was closed by regulators, and the FDIC arranged for Republic Bank to assume all deposits. I just found out this morning that Republic Bank has decided on Tuesday to slash all TCB deposit rates to 0.05%. Also, this change will retroactively take effect on last Saturday (1/28/2012). This is what I was told when I called Republic Bank this morning at 877-684-2265. TCB depositors are free to close their CDs without early withdrawal penalties. With a new rate of only 0.05%, TCB depositors have no reason to wait before they move their money.

One thing I found dishonest is one of Republic Bank Q&As that was posted on its website. This Q&A suggested that CD rates would remain competitive. Below is an excerpt:

Q Will there be changes to my CD or IRA?
A You will continue to receive your interest payments as you have in the past. Your rates on your Certificates of Deposit may change to more competitive rates. As a deposit customer you will receive a letter from Republic Bank via U.S. Mail within 7 days of the transaction with an enclosure titled "Notice of Rate Changes to your Interest Bearing Deposits". Please read the document carefully.

Even in today's awful interest rate environment, a 0.05% is not competitive for any deposit account. Some average rates listed at the FDIC's Weekly National Rates and Rate Caps include: 0.32% for a 1-year CD, 0.72% for a 3-year CD and a 1.19% for a 5-year CD.

Unfortunately, the bank that acquires the deposits of a failed bank is allowed by law to lower CD rates, and they're allowed to change rates effective the day after the bank's closure. On the plus side, the acquiring bank is required to allow CD holders to make a penalty free early withdrawal.

Based on this rate cut, it certainly appears Republic Bank has no desire to keep TCB customers. I wonder if it might be due to TCB having many customers from outside of Tennessee. In the past years TCB had many savings account and CD specials, and accounts were available nationwide. A quote by Republic's chief executive in this The Tennessean article suggested that his main concern was the Nashville market:

Republic’s chief executive, Steve Trager, said virtually all Tennessee Commerce deposits will be protected and automatically transferred to Republic accounts.

“Our interest is gaining a foothold in the Nashville market,” Trager said.

In my opinion, if a bank wants to keep customers of a failed bank, it should keep the CD rates the same until maturity. As I reported on Friday, US Bank did this with the other Tennessee bank that failed on Friday, BankEast. On its website, US Bank stated that BankEast CD rates will remain the same.

Sometimes banks will say that they're changing a rate to what's competitive in the current environment. I don't consider that as fair even if the rate may be considered reasonable by today's standards. If they're going to lower the rates, it should be no lower than what was competitive when the CD was first issued. For example, if a problem bank sold 5-year CDs in 2008 with a 6.00% APY and that bank fails in 2012, how should that 5-year CD rate be changed? A bank that acquires that failed bank may think a 1.19% APY is fair since that's the current national average rate based on the FDIC numbers. That's not fair in my opinion. It should be no lower than the national average rate that was in effect when the CD was first issued in 2008. My guess for that average would be around 3.00%.

This issue is the main concern for depositors when banks fail. It hasn't been losing money from uninsured deposits. It has been losing CD rates. Since rates have fallen so much in the last few years, that can be a significant loss.

Thanks to readers who commented and emailed me about this rate change.

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When Do CD Rates No Longer Matter?

2012/01/31 09:21

CD ladders can be a good way to invest in CDs. In a typical CD ladder, when a CD matures, you roll that into a long-term CD with the best rate you can find. I reviewed this strategy in this post. Many savers stick with 5-year CDs. In today's environment, some have increased the terms of the CDs in their ladders to 7 and 10 years to maximize their interest.

Poll Question

If CD rates keep falling, is there a point in which CD ladders no longer make sense? That leads me to today's poll question. When one of your CDs matures, how low of a CD rate would it take for you to keep that money in a liquid account instead of rolling it into a new CD? For example, if the best long-term CD rate you can find is only 1.00%, would that be so low that you would just move the money into a savings or checking account?

CDs vs. Savings Accounts

I hope we don't face this situation, but with the Fed's late-2014 pledge, it's possible that CD rates will continue to fall. A few internet banks already have unbelievably low 5-year CD rates. For example, the 5-year CD APY at iGObanking.com is only 1.10%. ING Direct's 5-year CD rate is even lower with a 1.00% APY (as of 1/31/2012).

The two reasons to purchase a CD rather than putting that money into a liquid account is a higher interest rate and a rate that's guaranteed not to fall until maturity. As CD rates fall, those two advantages become less important.

I reviewed a similar issue with savings accounts last year. In my last year poll, I asked when do savings account rates no longer matter. In the poll, 60% of the readers who responded said rates of 1.00% (or higher) were too low. As I described in that post, when rates are so low, the extra amount that you could earn by moving your money to another savings account may be too small to make the effort worthwhile.

The main issue with CDs isn't the effort to open a new account. It's locking your money into a low rate for a long period of time. A mild early withdrawal penalty can reduce this problem, but there are still potential risks. I have more details in my post, What to Do with Maturing CDs? Choosing the Best New Long-Term CD.

For those who want to keep the money 100% safe with no risk of principal loss, the main alternative to CDs is a liquid account like a savings or checking account. If you had a 5-year ING Direct CD maturing today and you wanted to keep your money with ING Direct, I think most savers would choose ING Direct's savings or checking account instead of a new 5-year CD with a 1.00% APY. Currently, ING Direct's savings account pays 0.80%. That CD rate isn't high enough to make up for the loss of liquidity in my opinion. However, it should be noted that the savings account rate may be much lower next year. That doesn't help make the CD much more attractive. Even if the savings account rate falls to 0.40%, that 1.00% CD doesn't look much better. In short, I think there's a CD rate so low that most everyone will choose the liquid account over the CD.

I'm Not Giving Up on CDs Yet

In my opinion, we have not reached the point where CD rates don't matter. Certain long-term CDs can still make more sense for safe money than keeping that money in liquid accounts. I reviewed using CD ladders with the highest CD rates in this post, and I reviewed choosing long-term CD rates with mild early withdrawal penalties in this post.

For savers with CDs maturing over the next year, CIT Bank's 2-year Achiever CD can be useful. If CD rates continue to fall, you can always fall back on this CIT Bank 2-year CD which allows for a one-time add-on deposit. I have more details in my CIT Bank CD review.

Searching for the Best CD Rates

To search for the best nationwide CD rates and the best CD rates in your state, please refer to the CD rates section of DepositAccounts.com.

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Checking Account Rate Deal at Cardinal Bank in VA, MD & DC - Local Only

2012/01/31 09:18

Cardinal Bank is offering a good checking account deal. Its First Choice Checking has a 2.01% APY for balances up to $100,000 (0.31% over). These rates are listed in the bank's First Choice Checking page as of 1/31/2012. It's a limited time offer, and there's no mention how long this rate will last. Credit to iBankDesign member ichaelm for this find.

Unlike the typical reward checking account, you can qualify for the top rate without debit card usage. To qualify for the top rate, they give you the choice between direct deposit OR 10 debit card purchases per statement cycle.

One downside to this account is a potential monthly fee of $15. To avoid this fee, you have to maintain a $5,000 minimum daily balance. The bank has more First Choice Checking details in its FAQs page. On the question about how long the 2.01% APY will last, it states "While we cannot guarantee our rates will never change, no formal end date to the offer has been set." The FAQs also mention that there is no minimum amount for the direct deposit.

There's an online application for accounts. However, at the bottom of the rate sheet, the following is mentioned:

Accounts opened online through cardinalbank.com are available to customers who reside in the Cardinal Bank market which includes the Washington DC metropolitan area of Virginia, Maryland and the District of Columbia.

Most of their branches are in Northern Virginia with one branch in DC and one in Bethesda, Maryland.

The bank's overall health score at DepositAccounts.com is 5 stars (out of 5) with a Texas Ratio of 5.31% (excellent) based on September 2011 data. Please refer to our financial overview of Cardinal Bank for more details. The bank has been a FDIC member since 1998 (FDIC Certificate # 34733).

Finding the Best Reward Checking Account

Compared to other reward checking accounts, this Cardinal Bank checking account rate is a little low. However, its balance cap is way above average, and that may make this account worthwhile for some.

If you're new to reward checking, my post on the common reward checking traits should be useful. To compare reward checking accounts based on interest rates and balance caps, you can use our reward checking rate table. Refer to this post for details on how to use the rate tables.

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Can New-Account Bonuses at Chase & Other Banks Help in This Rate Environment?

2012/01/31 09:15

If you have large savings, the amount that you can make from bank bonuses may not be enough to matter. However, for savings balances around $10K, bank bonuses can be significant. For example, if you have $10K in a savings account with a 1.00% rate, you'll earn about $100 over a year. With many bonuses, you can earn $100 soon after you open an account.

The bank best known for its new-account bonuses is Chase Bank. They have long offered $100 checking account bonuses. Unlike interest rates, bonus amounts have gone up. In the last year, a $150 checking account bonus has been made available online at Chase. Here's a Chase promo link for the latest $150 checking bonus. This one is scheduled to expire on 2/15/2012 (credit to FW member leenga for the find). This requires a new Chase Total Checking account with direct deposit, and it's only available for new Chase checking customers.

Chase also has a $200 business checking account bonus that's available at this promo page (credit to iBankDesign markber for this find). This promotion is scheduled to end today (1/31/2012). However, this is another common bonus that I'm sure we'll see come back.

Not all Chase bonuses are online. Chase often mails targeted bonuses to customers. Chase recently mailed me a $100 offer for opening a new savings account with an opening deposit of $10,000 or more of new money. The promotion doesn't require that the $10K balance be maintained. As you might expect, the savings account rate is very low so you won't want to keep a large balance in this account.

As I described in this post from last years, bonuses may be larger, but you have to be more careful to avoid monthly fees. All of Chase checking and savings accounts have monthly service fees. Most can be avoided if you meet certain requirements such as minimum balance or direct deposit.

Other Bank Bonuses

We have a bank promotions page with a table of all of the active bank and credit union promotions. You can filter the table based on the type of promotion and based on your state. I have more details about how to use this page in this blog post.

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Occasional Brokered CD Rate Deals

2012/01/30 09:17

In many of our past articles on brokered CDs, readers have commented that the CDs offered through their brokerage firms had rates lower than what they could get by buying them directly at banks or credit unions. However, a reader commented on Friday about one recent exception. Vanguard Brokerage has been offering new issue brokered CDs from Goldman Sachs Bank with a 3.00% rate and a 10-year term. This currently tops the best CD rate that you can get directly from a major bank. That best rate is 2.45% APY for a 10-year CD at Discover Bank (2.50% APY for AAA members). It also tops the best CD rate that you can get directly from an all-access credit union (2.75% APY for a 7-year CD at Pentagon Federal Credit Union). These rates are accurate as of 1/30/2012.

You can see a summary of the most recent brokered CD rates at Vanguards Bonds & CDs page. Unfortunately, the shorter terms are currently not as competitive as the 10-year CD rate. For example, the 1-year CD rate is only 0.40%, and the 5-year CD rate is only 1.75%.

The new issue brokered CD rates listed at Vanguard are currently higher than those listed at Fidelity. To see the latest rates at Fidelity, go to the Fidelity CD page and click on the "See new issue CDs" link at the top of the right menu. There is one brokered CD listed with a 3.00% rate, but it has a 16-year term and it's a callable CD.

Vanguard has a summary of its brokered CDs in this CD information page.

I reviewed the pros and cons of brokered CDs in my post Brokerage Certificates of Deposit and IRAs. One important downside to brokered CDs is that you have to sell it on the secondary market if you need the money before maturity. You could lose a significant amount of principal if you have to sell it. You typically would lose more if interest rates are rising. However, as I described in that post, you can lose money even if you sell the CD when interest rates are falling.

All of the CDs offered by Vanguard Brokerage and Fidelity are FDIC-insured. However, it's important to understand that if you purchase a CD at a premium on the secondary market, the amount of the premium is not FDIC insured.

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Best Bank Account Interest Rates - Summary for Week Ending January 28, 2012

2012/01/28 20:19

The big news story this week was the Fed and its late-2014 rate "pledge". The FOMC policy statement changed from "exceptionally low levels for the federal funds rate at least through mid-2013" to "exceptionally low levels for the federal funds rate at least through late 2014". This technically isn't a guarantee that rates will stay near zero until late 2014. However, Bernanke suggested in his press briefing that it would likely take a dramatic improvement in the economy for this to be revised. The economy continues to improve but as described in the Calculated Risk blog, it's sluggish growth.

You can see below in how the news from the Fed affected Treasury yields. The 10-year Treasury yield is once again below 2.00%. The summary of the yields is shown below (Numbers are based on Yahoo bond rate data and the CME Group FedWatch.)

Treasury Yields:

  • 6-month: 0.07% up from 0.06% last week
  • 2--year: 0.21% down from 0.23% last week
  • 5--year: 0.75% down from 0.88% last week
  • 10-year: 1.89% down from 2.02% last week
  • 30-year: 3.06% down from 3.10% last week

Fed funds futures' implied probability for a higher rate by:

  • July 2013: 12.8% down from 21.8% last week
  • Sept 2013: 12.8%

The number of bank failures are picking up. There were four on Friday. The total number of bank failures this year is now up to seven.

Savings & Checking Account Rates

Only two banks on my list cut rates this week. That's not too bad, but I'm worried next week may be worse as the new month starts and after the banks have time to factor in the new Fed policy.

The top savings account yield remains 1.15%. This is offered by Flagstar Bank and the two internet divisions of New York Community Bank, My Banking Direct and AmTrust Direct. It should be noted that 1.15% is a promotional yield for these three banks. The highest non-promotional yield continues to be 1.10% at Incredible Bank and UFB Direct.

Reward Checking Accounts

The reward checking accounts continue to hold up better than the savings accounts. This was another week with no rate cuts on my short list of nationally available reward checking accounts. Some of these have been around now for over four years. I reviewed the history of some of these old ones this week.

The 4.00% club remains the same with 3 institutions paying 4% APY on balances up to $25K. If you don't live near one of these three institutions, be sure to check our reward checking rate table. This can be used to find accounts available nationwide and accounts with higher rates in your state. If you're new to these tables, my new rate table guide should be useful, and if you're new to reward checking, my blog post, 10 Common Traits of High-Yield Reward Checking, should also be useful.

Rate Hikes:
  1. None
Rate Cuts:
  1. Clear Sky Accounts Savings - 0.95% [was 1.00%]
  2. CNB Bank Direct Savings - 0.85% [was 0.90%]
Certificate of Deposit Rates

My recap of CD rate changes and the list of CD deals will now be in my survey of the best CD rates. This recap will now focus on banking news of the week and liquid accounts.

Recap for the Week - Links to This Week's Posts Banking News/Resources Savings/Checking Accounts - Nationwide CD Deals/Resources - National Checking/Savings/CC Bonuses
  • No new posts this week
Reward Checking Accounts CD and Money Market Deals - Local Posts from Previous Weeks The rates listed below are based on Annual Percentage Yield (APY). No minimum balances are required unless noted. MMA next to the rates indicate a money market account. Most MMAs have check writing and ATM cards. Online savings accounts usually lack both of these. Previous weekly summaries are available at this page.

Rates as of January 28, 2012 Checking/Savings/Money Market Accounts:

  • Noteworthy Accounts Available Nationwide:
Reward Checking Accounts:
  • Noteworthy Accounts Available Nationwide:
Certificates of Deposit: Various Deposit Account Deals Bank Account Alternatives Historical Rates from the Federal Reserve (Federal funds, Treasury bills, CD's)
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Strategy Secrets of Extreme Savers

2012/01/28 09:39

While many Americans are wondering not when, but if they will ever retire, Beverly Solomon, 57 and husband Pablo could chose to at any time. A lifetime of discipline has paid off.

"We've been savers since we married 36 years ago. One of the first things we did was put up a poster with 100 squares on it. Each square represent $100 and when we put $100 into savings we put a gold star on our poster. While a bit corny, it worked. In less than two years we put a down payment on our first house," says Solomon.

What's their strategy? They lived on one income, saved and invested the other. She and her artist husband always had at least one side line business, says the former model who runs an international art and design business. They shop yard sales, resale shops, use coupons, stockpile nonperishables like paper products, wine and cleaners when on sale, and never pay full retail for anything. Their penny pinching enabled them to snap up bargains on raw land and houses in downturns.

Says Solomon, "Saving money is one of our values. Once you see saving as fun, you are home free."

Extreme saving is a sport of sorts where the end game prize is financial security. Extreme savers share their secrets.

Dr. Stuart Jeanne Bramhall says she always lived modestly, but when her daughter left home in 1999, she got serious. In the last five years prior to her retirement at 63, in 2012, she saved $100,000 of her $140,000 a year income. Even when she was making a lot less she managed to save more than $50,000 a year. Today she gets by on $35,000 (her home is paid for). What does she have in her bag of tricks? She saves about $5,000 a year making her own beauty and cleaning products in a food processor (from bar soap, calcium carbonate, vinegar and baking soda). "They work a lot better than commercial products and it keeps toxic chemicals out of our waterways," says Bramhall, an author. She uses prepaid cellphone plans, and Skype at 2.5 cents a minute for long distance calls. She saves nearly $50 a week eating mostly vegetarian. She grows her own vegetables and potatoes and buys rice, beans and other staples in 50 pound bags. She doesn't own a car and manages this by choosing carefully a home that was ideally suited to essential transportation. She walks or cycles everywhere. She cuts down on energy costs by not operating an electric drying, hanging clothes instead. Her best advice, "Get rid of big ticket items, like your car."

Does she feel deprived? Hardly. "I live quite comfortably and I'm really happy. It's wonderful not to work and to be able to do what I want with my time."

If you think clipping or clicking on coupons is a waste of time, Stephanie Nelson would heartily disagree. "I've been saving at least $100 a week on groceries since my first son was born 18 years ago. That's a total of $90,000, which is enough to pay for him to go to college," says Nelson, the founder of CouponMom.com. She says the key is to be a strategic shopper. "Know prices, over time you learn when you see a deal. Educate yourself about stores' savings programs and polices. Set a spending limit, not a percentage saved goal so you don't get caught up in a numbers game that leads to buying too much salad dressing and not enough salad."

David Bakke, editor of Money Crashers Personal Finance, managed to save while getting rid of $30,000 in debt. "I wear shirts and pants that I've had for over 10 years. I also preserve them by air-drying them, which has the added benefit of saving a significant amount of money on my monthly energy bill. I save about $500 a year." He also signed up for MagicJack which costs $40 annually for his home telephone. That switch saves him $320 a year. Another big cash saver was getting rid of $70 a month for satellite television. "I scrapped my membership and signed up for Netflix. They have more than enough options to satisfy my TV needs. Their basic membership is $8 per month, so each year, I'm saving almost $750." Believe it or not, with the permission of his employer, he brings his garbage to work so he saves $300 a year by not having garbage service. What's his advice? "Use common sense, shave and eliminate spending wherever you can."

Jim Dailakis, an actor and comedian doesn't consider himself cheap because he does treat himself and others from time to time. "My sister calls me economical, I like that." Whatever you call it, it works. At 42, he has saved enough to buy two houses, and paid off one. His philosophy is simple, "Buy what you need before you buy what you want. When you have enough, then spoil yourself as a reward." But mostly, he's a minimalist. "It's not because I have to be, but I feel a lot happier this way. I'm a true believer that the more possessions you have and the more expensive they are, the more of a slave you'll become to them."

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Four Banks in Florida, Tennessee & Minnesota Closed by Regulators

2012/01/27 22:57

Four banks failed this Friday which brings the total number of failures for the year to seven. First Guaranty Bank and Trust Company of Jacksonville was the first failure of the day and the second bank failure for the year in Florida. Last year Florida was second in the nation for the state with the most bank failures.

Unlike Florida, Tennessee has avoided bank failures since 2002. That changed on this Friday after two Tennessee banks closed. The first was Tennessee Commerce Bank and the second was BankEast. Many readers may recognize Tennessee Commerce Bank. Accounts were available nationwide, and many of its CDs and savings accounts had been very good deals.

The fourth bank failure of this Friday was Patriot Bank Minnesota. That's the first bank failure in Minnesota for the year. There were only two Minnesota bank failures in 2011.

Tennessee Commerce Bank is the first billion dollar bank to fail this year. It had $1.185 billion in assets and $1.156 billion in deposits. It's interesting to note that it had only one office. It seems likely that a large percentage of its deposits were acquired from the internet.

Tennessee Commerce Bank customers don't have to worry about losing any money. All deposit accounts, excluding some brokered deposits, have been assumed by Republic Bank & Trust Company. That was also the case with the other three bank failures. However, for Patriot Bank Minnesota and BankEast all deposit accounts, including brokered deposits, were assumed by the acquiring banks.

The main concern for Tennessee Commerce Bank customers will be the question of future rates. CD rates may be lowered. Customers can make a penalty free early withdrawal, but as we know, customers will be unlikely to find new CDs with rates close to the old ones. Update 2/1/2012: I was told by a bank CSR that all deposit rates will be lowered to 0.05%. I have more details in this post.

Every once in a while, the acquiring bank will make the decision to keep the CD rates of the failed bank the same until maturity. One bank announced that decision this Friday. U.S. Bank assumed the deposits of BankEast, and in U.S. Bank's Q&As on its website the following was stated:

Your CDs are safe and FDIC insured. The rate remains the same and you will be notified prior to the date your CD matures. If you wish to close your CD, you may do so. Per the terms of the FDIC agreement, you may do so without penalty. However, there is no need to close your CD. The rate remains the same and U.S. Bank is among the nation’s safest and strongest banks.

Unfortunately, I didn't find this same pledge from the other three acquiring banks.

Below is the summary of Friday's bank failures.

4th Bank Failure of 2012 (2nd in Florida)

  • Closed Bank: First Guaranty Bank and Trust Company of Jacksonville, Jacksonville, FL
  • FDIC Press Release
  • Size: 8 branches, $377.9 million in assets and $349.5 million in deposits
  • Acquiring Bank: CenterState Bank of Florida, N.A., Winter Haven, FL
  • Possible Uninsured Deposits: All deposit accounts, excluding the Cede & Co. deposits, have been assumed by CenterState Bank of Florida, N.A.
  • Rate Changes: Some deposit rates on checking or savings accounts may change in accordance with current market indices (bank's Q&A)
  • Estimated Cost to Deposit Insurance Fund: $82.0 million
  • Enforcement Action: FDIC 8/11/10 Consent Order
  • Financial Ratings: 1 star at Bankrate.com, 0 star at BauerFinancial, 1 star & Texas Ratio of 520.46% at DepositAccounts.com (see financial rating note)
5th Bank Failure of 2012 (1st in Tennessee)

  • Closed Bank: Tennessee Commerce Bank, Franklin, TN
  • FDIC Press Release
  • Size: 1 branch, $1.185 billion in assets and $1.156 billion in deposits
  • Acquiring Bank: Republic Bank & Trust Company, Louisville, KY
  • Possible Uninsured Deposits: all deposit accounts, excluding the Cede & Co. deposits, have been assumed by Republic Bank & Trust Company
  • Rate Changes: rates will be reviewed by the new bank and may be lowered (FDIC Q&As) Update 2/1/2012: Rates will be lowered. Refer to this post for details
  • Estimated Cost to Deposit Insurance Fund: $416.8 million
  • Enforcement Action: FDIC 5/25/11 Consent Order
    • , FDIC 11/2/11 PCA
  • Financial Ratings: 1 star at Bankrate.com, 0 star at BauerFinancial, 1 star & Texas Ratio of 272.94% at DepositAccounts.com (see financial rating note)
6th Bank Failure of 2012 (1st in Minnesota)

  • Closed Bank: Patriot Bank Minnesota, Forest Lake, MN
  • FDIC Press Release
  • Size: 3 branches, $111.3 million in assets and $108.3 million in deposits
  • Acquiring Bank: Resource Bank, Savage, MN
  • Possible Uninsured Deposits: all deposit accounts, including brokered deposits, has been assumed by First Resource Bank
  • Rate Changes: rates will be reviewed by the new bank and may be lowered; however, you will be notified in writing of any changes (FDIC Q&As)
  • Estimated Cost to Deposit Insurance Fund: $32.6 million
  • Enforcement Action: FDIC 9/29/10 Consent Order
  • Financial Ratings: 1 star at Bankrate.com, 0 star at BauerFinancial, 1 star & Texas Ratio of 263.98% at DepositAccounts.com (see financial rating note)
7th Bank Failure of 2012 (2nd in Tennessee)

References:
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Survey of the Best CD Rates for January 27, 2012

2012/01/27 19:06

There were a few CD rate cuts this week, but considering the Fed's new late-2014 low-rate pledge, it could have been worse. Discover Bank reduced its 10-year CD yield from 2.50% to 2.45%. This remains the highest nationally available bank CD rate in the nation. For all-access credit unions, PenFed continues to be on top with its 2.75% APY 7-year CD. PenFed will come out with new rates for February next Wednesday. I wouldn't be surprised if this rate falls.

Local CD Deals

There were a handful of banks and credit unions that cut their CD rates this week. On the plus side, I added two credit unions. One addition is Miami Postal Service Credit Union in the local CDs for terms under 1-year. Its Jumbo 9-month CD has a very competitive 1.26% APY. It's a small Jumbo CD which requires only a $25K minimum deposit. Many Southeast Florida residents should be able to qualify to join this credit union.

The other new credit union that I added this week is Our Community Credit Union in Washington State. Its 1-, 2-, 3- and 4-year CD rates are all very competitive. Anyone who lives, works or attends school in Washington State is eligible to join the credit union.

There continues to be four institutions in the 3.00% club. These are credit unions and banks that offer CD yields of at least 3.00%. Three are Texas credit unions, and one is a Nebraska bank. You can find a few other institutions in our rate tables with 3.00%+ CDs, but these are small credit unions with very narrow fields of membership or small banks in low populated areas.

Long-Term CD Break Strategy

For the short-term CDs in my lists, you might notice CDs with the note "5-year CD closed after X years". These take into account the yield after the early withdrawal penalty is applied. Since Ally Bank's 5-year CD only has a 60-day interest penalty, it's still a good deal when closed early even with the recent rate cuts.

The risks of planning for early withdrawals of long-term CDs was recently highlighted by another credit union which raised the early withdrawal penalty on existing CDs. The credit union is CEFCU which is based in Illinois. I have more details in this blog post. CEFCU is now the second credit union which has raised the early withdrawal penalty on existing CDs. Last year Fort Knox FCU did the same thing (see my blog post).

Note About the CD Survey

As I described in my rate table overview, you can use our CD rate tables to find the best rates for both nationally available CDs and local CDs. This CD survey blog posts are intended to highlight nationwide CD deals that may not be apparent in the tables. For example, I'll include the post-penalty yields of a few long-term CDs.

The CD survey blog posts are also intended to highlight the local CD deals that are available in large metro areas. There are many high CD rates, but most of these are at small banks in rural areas or at small credit unions with very narrow fields of membership. In these local CD surveys, my focus is on local CD deals that are in big cities or that are available in large areas of a state.

Yields Accurate as of January 27, 2012

Under 1-Year CD Rates
  • Noteworthy Local Deals
1-Year CD Rates
  • Noteworthy Local Deals
18-month CD Rates
  • Noteworthy Local Deals
2-Year CD Rates
  • Noteworthy Local Deals
3-Year CD Rates
  • Noteworthy Local Deals
4-Year CD Rates
  • Noteworthy Local Deals
5-Year CD Rates
  • Noteworthy Local Deals
Over 5-Year CD Rates
  • Noteworthy Local Deals

Note: All rates listed above are Annual Percentage Yields (APY) which factor in compounding.

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Can Reward Checking Account Rates Hold Up?

2012/01/27 10:21

The latest news from The Fed isn't good for our savings account rates. Even before the latest low-rate pledge from the Fed, rates were trending down. Most online savings account rates are now below 1.00%, and there are just a few with rates around 1.10%. We have seen similar rate trends with reward checking accounts. On the plus side, you can still get rates around 2.00% on balances up to $25K on several nationwide reward checking accounts. Also, there are many local reward checking accounts with rates around 3.00% for balances up to $25K. Even with the monthly requirements, these accounts can look more appealing than long-term CDs. However, unlike CDs, reward checking rates can fall at anytime, and they can fall substantially. So if you're thinking about choosing a reward checking account instead of a CD, make sure to keep that in mind.

I thought it would be interesting to review some of the old reward checking accounts to see how well they have held up over the years. A history of competitive rates is no guarantee of future competitive rates. Nevertheless, it can provide some insights about what changes we might see.

Rates & Balance Caps as of 1/27/2012

Connexus Credit Union: 2.00% APY up to $25K (nationwide) - I first reported on Connexus Credit Union's reward checking account in April 2007. At that time it was offering 6.01% APY for up to $25K. Rates have fallen. The last rate cut was in June 2011 when the APY fell from 2.30% to 2.00%. The reward checking account (called Xtraordinary checking) continues to be available nationwide since anyone can join the credit union via an association. Also, they provide an online application on its Xtraordinary checking page.

Provident Credit Union: 2.26% APY up to $25K (nationwide) - I first reported on Provident's reward checking account, called Super Reward Checking, in July 2007. At that time it was offering 6.01% APY for up to $25K. Rates have slowly fallen over the years. The last rate cut was in January 2011 when the APY fell from 2.51% to 2.26%. The account continues to be available nationwide since anyone can join the credit union via an association. One of the associations with easy membership is the Sierra Club.

First Arkansas Bank & Trust (FAB&T): 3.03% APY up to $25K (Arkansas only) - My first post was in late December 2007 when its reward checking account (now called Kasasa Cash) was paying 6.06% APY on all balances with nationwide availability. A few months after that, the top rate fell to 4.44% APY for up to $50K. Another change happened in 2009 when they limited new accounts to only Arkansas residents. The last rate cut was on January 2011 when the APY fell from 3.50% to 3.03%. FAB&T's Kasasa Cash is an important example with reward checking accounts. It shows reduced rates is not the only concern. Lower balance caps and reduced availability often happen.

State Bank of Toledo: 1.51% APY up to $25K (nationwide) - I first reported on its reward checking account in June 2007 when the yield was 6.01% for all balances. The lack of a balance cap and its nationwide availability made this account quite popular in 2007. It remained available nationwide, but the lack of the balance cap didn't last long. Before 2007 ended, a balance cap of $70K took effect. Both the rate and the balance cap continued to fall. The last rate cut was in May 2011 when the APY fell from 2.01% to 1.51%.

Finding the Best Reward Checking Account

If you're new to reward checking, my post on the common reward checking traits should be useful. To compare reward checking accounts based on interest rates and balance caps, you can use our reward checking rate table. Refer to this post for details on how to use the rate tables.

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