By: Steve Dinnen
Our state’s largest bank is advertising that if we’re willing to give it a minimum of $1,000 for the next nine months, it will grace us with an interest rate payout of .70 percent – that’s “point seven” percent! Bump that to 36 months and the rate zooms to 1.35 percent. Really? Is that all the better it gets? Unfortunately these days, financial institutions are being quite stingy when it comes to rewarding those who choose to save rather than spend. By the way, that .7 percent is actually not a horrible deal. A quick look atwww.bankrate.com shows that Bank of America was offering .08 percent interest on a Money Market Account while US Bank was paying .05 percent on its MMA.
You don’t have to settle for .05 percent. But it will take a bit of work to ferret out deals, especially since many institutions demand a huge investment, cap the amount on which they will pay out, or stretch the interest rate to a length of time that may not be prudent. Many more mandate that you commit to a certain number of debit or PIN transactions every month.
The internet is the place to start shopping, as every financial institution has a presence there. Some good websites have popped up to collate information on interest rates and terms, such as a ratebrain.com, bankaholic.com, or the aforementioned bankrate.com.
About the best deal we find is in suburban Chicago, at Consumers Credit Union (www.myconsumers.org). It will pay 4.09 percent on its Free Rewards checking account, up to $10,000. You’ll have to complete at least 12 debit or check card point-of-sale purchases a month and assign at least one direct deposit. And it doesn’t do much good to stash more than $10,000 in the account, since the rate for higher balances falls to .56 percent. “Unlike a lot of offers that are here today, gone tomorrow,” says Hal Coxon, Vice President of Consumers Credit Union, “this is a permanent account. It’s a regular product, not a gimmick or promotion.” Coxon adds that the Free Rewardsaccount has been around since 2007. And it’s open to anyone, anywhere, which is atypical for credit unions.
When it comes to non-checking accounts, CDs offer the best payout (followed by MMAs). Here, rates are hovering in the 1 percent-plus range, and “non-bank” banks such as CIT (a finance company) and Ally (formerly General Motors Acceptance Corp.) lead the way. CIT (www.cit.com) will pay 1.15 percent on a one-year CD with a $25,000 minimum. Ally (www.ally.com) will pay .99 percent on a 12-month, $25,000 CD.
For ease of use, Chesapeake Bank of Virginia (www.chesbank.com) has one of the simpler products. Its onlineClear Skies savings account pays 1.04 percent interest on accounts up to $249,999.
All of this is predicated on you being willing to shuffle your money around and around, and likely out of your town. If you don’t care to do that, check out what special deals your local bank may have (that .70 percent deal). They may be lower than the top national rate, but they won’t force you to constantly move your money.
Look for as few restrictions as possible, so you can move your money when you want. Also, there’s not much to be gained by stretching the maturity date. State Farm Bank, for instance, will pay .60 percent interest on a 12-month CD and .65 percent on a 24-month version. Is doubling your time commitment worth 5 basis points? On longer CDs, interest rates will tick back up someday, though not likely until mid-2012, as the Federal Reserve has signaled its intent to keep them low until then. For now, this is the hand we have been dealt.