American Express has launched an online savings and certificate of deposit product that, while competitive, isn’t the best in the market. It’s part of their new Personal Savings From American Express product and the yields aren’t too shabby. They are offering a high yield savings account at 2.00% APY and a 24-month certificate of deposit for 2.40% APY. The 12-month is only 1.75% APY.
The bank is, as you would expect, FDIC insured and neither have a minimum balance requirement.
Recently the Department of the Treasury approved the FDIC’s request to extend the deposit insurance limit of $250,000 from 2009 to 2013, so our deposits will be protected up to the new amount for the next five-plus years. As you may remember, last year the limit was $100,000 and it was temporarily increased to $250,000 to calm people’s fears about bank failures. Originally, the increase was to expire on December 31st, 2009, so this extension adds many years to the existing protections. The limit is supposed to return to $100,000 in 2014, unless it is extended once again.
This extension of the increased limits applies to NCUA covered credit unions as well, protected by the National Credit Union Share Insurance Fund (NCUSIF).
GMAC Bank customers got a bit of a scare this week when a visit to GMACBank.com redirected them to Ally.com. That’s because GMAC Bank decided to rebrand itself, not a bad move given the turmoil surrounding General Motors and what appears to be an inevitable structured bankruptcy. GMAC/Ally Bank announced in a press release that would offer leading bank rates, no teasers, and 24-hour service! Hooray!
Technically, they are a unit of GMAC Financial Services, much like GMAC Bank was, and they would offer the whole breadth of financial products including CDs, online savings accounts, and money market accounts. For GMAC Bank customers, nothing changes – your login and passwords are the same.
To help kick off the fun, they now offer a no penalty CD. You can withdraw your funds from the no penalty CD after six days without penalty. You can read the full FAQ here and they are currently offering a 9-month 1.49% APY no penalty CD.
The Treasury announced the fixed component of the Series I Bond and it was a measly 0.10%. We already knew that the inflation component was going to be a terrible -5.55% based on CPI-U inflation numbers from September 2008 to March 2009. When you couple that with today’s announcement of the fixed interest rate component for bonds sold May – November 2009 set at 0.10%, we can expect bonds to return 0% for the next six months.
I bought I Bonds back in April 2008 to lock in a fixed rate component 1.20%. Using a Series I Bond Rate calculator, my bonds will be earning a whopping 0% (that’s the lowest it can go) for the next six months.
I’m hoping that either the inflation rate goes up next time or they increase the fixed rate component so I’ll have some incentive to buy more bonds. As it stands, the only reason to buy is if you want the full faith and credit of the US Government but you can get that with a savings account (at higher limits too!).
E*Trade Financial Corporation (NASDAQ: ETFC), the parent company of E*Trade Bank and E*Trade Brokerage, was notified by The Office of Thrift Supervision to “quickly” raise new capital for its bank and reduce the leverage of the holding company after it posted a 7th straight quarterly loss. (Interactive Investor) E*Trade reported earnings on April 28th and shares fell a whopping 25% as disclosed the directive from OTS.
What does this mean for consumers with accounts at E*Trade Bank? They are FDIC insured so your deposits are secure up to $250,000, so I wouldn’t worry too much. Their failure would be like any other bank and chances are your deposits will be available within a day or two (they usually fail banks on a Friday and reopen on Monday). If all of your savings are in E*Trade, you might want to withdraw a little bit just so you have it on hand in case you need it those few days the bank will be inaccessible. Better safe than sorry.
What does this mean for shareholders? The stock dropped 25% for a reason, failure of the bank would be very bad for the holding company. Should the holding company go bankrupt, shareholders would almost certainly be wiped out.
E*Trade faced this sort of pressure before, we’ll see if they can get themselves out.
When a bank of fails, it is usually sold to another bank. The new owner has the option of honoring the existing certificate of deposits, and their rates, or cutting them. Since a failing bank often increases their rates in an attempt to drum up additional deposits, the rates they offer are going to be higher than average and so the FDIC gives the new bank the option of accepting these higher than average rates or decreasing them.
Why would a bank keep higher than average rates? Most banks honor the higher rates because they want to build goodwill. It does them no good to buy the assets of a bank and then see them run out the door the next day. They’re trying to maintain those business relationships so the branches they do buy will be profitable and grow.
Do they always keep the higher rates? No, when Silver Falls Bank failed in late February, certificate of deposit creditors had their rates slashed:
As a former banker, Norm Andreen knew his certificates of deposit were safe when regulators shut down Silver Falls Bank.
But he was disappointed to learn this week that Citizens Bank of Corvallis, which took over his deposits, was slashing interest rates from as much as 4 percent to 1 percent or less.
Fortunately depositors aren’t bound to the new rates. Citizens, the buyer, was required to notify depositors of any rate change and let them cancel their CDs without penalty (which they did). Remember, the deposit itself was safe because it was covered by FDIC insurance, but the rate wasn’t.
Darby Direct is the online bank of Darby Bank, headquartered in Georgia. Darby Bank is member FDIC (Certificate 14580) though they don’t make reference to Darby Direct. If you’re concerned, give them a call and see if Darby Direct is their online operation.
Darby Direct is offering 3.00% APY as of 4/10/2009, a yield that is almost 50% greater than some other more well-known online banks, and this is nationally available.
Do you know what the interest rate is on your savings account? Is it more than 1.65% APY? If not and if you have more than a single dollar, you can open a high yield savings account at HSBC Direct and earn 1.65% APY. The days of a bank requiring you to have $1,000 or even $500 to open an account and avoid fees are over.
There are a ton of high yield savings accounts that offer great yields, no fees, and only require a single dollar to open an account. They also offer certificates of deposit, CDs, with similarly low minimum account balance requirements and you should take advantage. I know the interest rates aren’t exceptional right now, with the Fed trying to keep rates as low as possible, but getting 1% is infinitely better than 0%.
What’s stopping you from opening an account? Hopefully nothing!
PNC Bank is running a new promotion where you can get $75 if you open an account at PNC Bank with a direct deposit of at least $500 a month. There is no minimum balance and no monthly service charge, plus all non-PNC ATM fees will be reimbursed if you have over a $2,000 average monthly balance. Once you get that all setup, the $75 bonus will appear as a “Direct Deposit Reward” in 7 days. It has all the creature comforts of a standard checking account too.
This promotion expires 5/29/2009.
Key Bank has been known to offer some pretty nice promotions for new customers. Most recently, they’ve offered a free Garmin nuvi GPS unit when you open a new checking account at KeyBank by April 24th, 2009 and fulfill some requirements. The requirements are that you make a debit card transaction plus two direct deposits or automated payments of at least $100 by June 26th, 2009. If you open one of their free checking accounts, you get the Garmin nuvi 205W GPS and if you open a Privilege checking you get the 265WT GPS. You can read the promotional page for exact terms and conditions.
Here’s the fine print you have to check out though (and it’s standard for these types of promotions): The value of the Garmin® GPS will be reported on Form 1099-INT. You will get a 1099-INT of $166 for the nuvi 205W and $240 for the 265WT. For promotions where you get cash, it’s not a big deal, it’s in these scenarios that you have to keep an eye out. It’s because you can buy a Garmin GPS 205W unit for less than $150 on eBay. The 265WT is available for $230. While the price difference isn’t huge in that case, it can be in others.
It may be a better deal for you to buy the unit on its own and opening an account somewhere else!