Tired of getting no interest on your bank deposits?
Well, there is an alternative. It will require moving your bank account. It won’t require taking any risk.
You’ll need to move your money because the largest banks in America are paying next to nothing for their deposits. They do this with the blessing of the Federal Reserve. Many smaller banks aren’t paying much either, also with the blessing of the Federal Reserve.
What we have here is a de facto, but invisible, tax on the people I call Solvent Seniors— or anyone else who isn’t broke. But it is the retirees and pre-retirees who are most threatened because their other sources of income are limited. We save money all our lives so we can use the interest earnings on our savings to pay bills when we retire.
But the banks are paying next to nothing on deposits. This makes them more profitable and less likely to need more money from Washington because they are taking it out of depositor’s pockets. The big banks rebuild while savers quietly go broke. In the farce that is banking, some of these jokers still think they are smart because they can be profitable when they have no costs.
That’s why I left my big bank and, yes, that noise you hear is my teeth grinding.
Some will say the low interest rates can’t be helped. We’re in a recession and interest rates tend to fall in recessions. But the reality is that our biggest banks are getting away with stiffing their depositors. If you have an interest bearing checking account at Bank of America it will have a yield of 0.05 percent. Chase and Wells Fargo offer the same rate. Citibank is even worse, 0.01 percent. The average yield on internet-based banks offering interest bearing checking accounts is 0.728 percent, quite a bit higher. (All figures, which change regularly, can be found on www.bankrate.com .)
The depositor abuse continues on CD yields. Chase and Wells Fargo offer 0.20 percent on one year CDs. Bank of America offers 0.40 percent and Citibank offers 0.60 percent. But the national average for a one-year CD is 1.24 percent. That’s quite a difference.
The alternative is to move your money to a bank that offers “reward checking.” You can find an insured bank or credit union that offers these accounts in your area by going to the website www.checkingfinder.com. Then click on “Compare & Open,” and enter your zip code.
The site will quickly give you a list of institutions in your area offering the service. When I did it, it provided a list of 20 institutions ranked by distance from my zip code or by interest rate. The closest was 47 miles away. The highest yield was 4.26 percent.
Yes, you read that right, 4.26 percent. That’s more than the yield on a 30-year Treasury bond.
Checkmark the three institutions that are most appealing to you and the site will then compare the exact terms and deposit limits for getting the stated interest rate from each institution. All of these accounts want you to be an online customer who receives online statements and uses a debit card for a number of transactions. You can use any ATM nationwide and any fees will be refunded. There is no minimum required balance, but the maximum balance you can have and earn the stated interest rate varies with each bank.
Looking for maximum yield, I could earn $426 a year on a $10,000 maximum deposit if I used the debit card 10 times in a month, had one automatic deposit, used online billpay, and viewed my account online once a month. If the balance of the account ran over $10,000, the interest rate on the overage would drop to 1.66 percent.
Another bank offered an annual percentage yield (APY) of 4.00 percent on balances up to $25,000 if you used your debit card 12 times in a month. These accounts offer a high yield, with no time commitment, and all you have to do is become an efficient electronic banking client.
Don’t want to move your money but still want to earn the $426 a year you can earn on a $10,000 deposit at one of these reward checking banks?
Well, there’s a solution for that, too. All you need to do is keep $852,000 at Bank of America, Chase, or Wells Fargo. At Citibank you’d have to plunk down $4,260,000.
For most of us, moving our money will be a lot easier.