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BS teaser rates: More typical bank behavior

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I have become increasingly turned off by big banks (I use Wells Fargo). Maybe it’s the 80% of my friends who hate dealing with their banks. Or the nickel-and-dime fees that produce $50 billion in fees per year for banks (“more than twice the total of a decade ago”) (link via Consumerist).

That’s why online banks like ING (which I also use), Emigrant Direct, and HSBC Direct are eating the Big Banks’ lunch: They’re simple, easy, and they don’t try to trick us. I’m a big fan of these accounts.

So when I got an email from a bank’s PR firm yesterday, I was not surprised to see more of the same — only this time using a new online bank.

I liked your recent blog posting and was interested in the commonwealth club. As I was reading some of the comments, I thought you might enjoy sharing this new 6.00% APY [] from [BANK NAME] with your readers. (See details in release pasted below.)


SOMEPLACE, SOMEWHERE — MAY 21, 2007 — [BANK NAME], member FDIC, a subsidiary of [BIG BANK NAME], the largest private banking company in the United States, today launched its new Internet bank – [BANK NAME] – to establish a national presence in the $120 billion Online Savings Account market (1). [BANK NAME] is entering the market with a 6.00% APY (2) Online Savings Account (XXX), an industry high, with no fees or minimum balances required. Any and all account holders will receive the rate of 6.00% APY, today through September 28, 2007.

I was happy that the bank is reaching out to bloggers, but unfortunately I’m not interested in teaser rates, which are just more typical bank behavior. I told the bank this and asked them to write back when they had new products that would benefit my readers.

Guys, these teaser rates are BS. I’ve seen them from huge banks and now I’ve seen them from small banks. Think long-term: Do you really want to go with a bank that’s just giving you a teaser rate, only to reduce your interest rate later? Can you imagine spending 5, 10, or 20 years with that kind of bank?

Also, do you really want to spend the time figuring out which bank is offering the best deals this month? That’s a colossal waste of time for most of us, since 1% more here or there equals a few dollars/month more in interest.

I always say that managing money is not that hard. But part of that is choosing financial accounts that are built for the long-term, even (especially?) if they don’t have shiny teaser rates.

Note: A few months ago, I spoke at the National Association of Credit Unions, where I advised them to create products (like savings accounts) that really resonate with what young people want today. If you’re interested, I’ll post more about what I said. (Invite me to speak for your organization, company, or school.)

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  1. First, thanks for writing a first rate finance blog for younger adults. I’ve been lurking for well over a year and have enjoyed it immensely.

    I’d like to add that among your list of better online banks is one that is engaging in TBB (typical bank behavior): HSBC. I recently transferred money out of my account into another bank to cover an expense. I was charged $3. I couldn’t believe it! I had to pay them to get my money. I’ve decided to close the account because I refuse to pay such fees in the future.

    I also have a Citibank account and I am happy to report that this bank does not charge to tranfer money out of the account.

    Best to you,
    Nancy C.

  2. Hahha I got that same email the other day but I never wrote about that big bank for this very reason, teaser rates are a joke. I’m not sending all my personal data over to them for a piddy teaser rate that will last only a couple months. Sure I like getting the best rate but half a percent for a handful of months isn’t going to convince me to move my banking.

  3. Ramit,
    What I have learned from working in the financial industry is that if you can’t beat ’em…join ’em!
    The comment you made about the fees is the exact reason why I’ll buy bank stocks all day long for my retirement portfolio!

  4. You can’t argue that those teaser rates are good for certain people though. Say a couple who has $100k saved up for a down payment for a house wants to get the most interest out of a liquid account in case they find their perfect house (that’s me). I’ve been getting 6% out of these teaser rates for the past year, which equals an additional $1000 over a stable 5% interest-earning savings account elsewhere. I’d say that was well worth the nuisance of applying for a new bank account every 4 months.

  5. Also, I’d have to agree w/the 1st post. I don’t think HSBC is very good at all. Their ACH transfers are the worst and you sometimes lose interest for up to 4 days when making a simple bank to bank transfer. GMAC Bank (which is my main online bank) has had long term similar interest rates over the long term, plus they offer free check writing!

  6. I was at Bank of America last week getting my account shifted to my new state. The guy kept trying to get me to enroll in KeepTheChange and asked why I didn’t have a savings account with them.
    “Because I get 10x more interest elsewhere”
    “I agree, but nobody really uses their savings account to earn interest. It’s a place to accumulate your savings.”
    Thanks, but I’ll take 5% over 0.5% any day.

  7. When a supermarket puts out a coupon, do you become just as outraged?

    You also say you use HSBC Direct? They just had a promotion on a 6% apy for new money. This promotion (I know what bank you are talking about) is for all money. I’m assuming you’re not as upset about the HSBC promotion because a) You don’t have enough money to care; b) A 5.05% rate is good enough.

    This promotion is better than the HSBC promotion. For the effort of a few clicks today and then a few clicks on September 28th (even though the rate after September 28th will still be competitive), you’re going to make yourself a few bucks.

    Take a deal for what it is. You’re not being forced into it.

    BTW – I have an account with this “teaser rate” bank and I have had ZERO problems with it.

  8. I’ve been generally dissatisfied with the brick and mortar banks that I have been with the past few years. I already have an online savings account at HSBC, but I think it’s time to move my checking account to Everbank. They have an interest bearing checking account and they benefits and terms seem reasonable.

  9. Don’t forget So far I have had fast, easy transfers to and from my ING checking account. The account is only 6 months old but there 24/7 customer service is great.

  10. ATM fees in this country amount to extortion. If I use my Bank of America card at another bank’s ATM I will get charged twice; 1st by the host bank, then by BoA. They will even charge for a balance inquiry.
    That’s one reason I’m moving to another bank. One in a long list of things that piss me off about BoA. Even if they agreed to refund every charge, past and future, the damage is already done.