More than a decade ago, when GMAC Bank had just rebranded as Ally Bank, they ran a series of commercials designed to build the Ally brand around integrity of treating their customers equally, and not giving preferential treatment to new customers over existing customers. I’ve only been able to find a handful of these commercials on YouTube, but there were many more than these:

The commercials were outstanding. They set Ally apart as a bank that could be trusted to treat its customers fairly, and they also set a paradigm for the online banking industry which virtually all of Ally’s customers were forced to follow for more than a decade.

But, now as interest rates are increasing, some banks feel the need to attract new capital by offering new customers better rates than existing customers. This practice enables them to keep their cost of capital lower as rates rise. To be clear, it is perfectly legal to segment your market, but as Ally understood, it is just really bad business.

Here are four culprits who are at it already.

First, Flushing Savings Bank. This bank has been in the online space for quite a while and it operates IGoBanking, BankPurely and GiftsforBanking. The bank has a bit of a checkered history of moving rates around between the different banks in order to segment the brand (as does Emigrant Direct which does the same thing through the parent brands, MySavingsDirect and Dollar Savings Direct). Segmenting the market with different brands, however, is at least transparent. The IGoBanking and BankPurely brands have been increasing their rates, but the new rates are only available to new customers. I personally had been a customer for many years through one of the brands and when rates started to rise, I reached out and asked them to extend the new rate to me, and was invited to haggle for something midway) I obviously closed the account.

Second, Sallie Mae Bank. This bank has been competitive over the years, and this year as rates have started to rise, they’ve rolled out a whole series of No Penalty rates through a third-party broker that are much higher than those available to existing customers. I had been a customer for over a decade and when I asked them to make one of these products available to me, I received a curt email which made it clear that I was no longer valued as a customer.

Third, Goldman Sachs or Marcus or Goldman Sachs Marcus, or whatever they have decided to brand themselves this week, has been very competitive since the business was bought from GE Capital a few years ago, and always treated its customers very fairly. However, as rates began to increase in 2022, they decided to be competitive only for those customers who are hawking the bank to their neighbors and social media acquaintances (i.e., you only get their most competitive rate if someone signs up with your referral code). Those long-term customers who don’t have quite the following of a Kardashian are left out in the cold with an uncompetitive rate. Not exactly the kind of loyalty that you would expect from a brand like Goldman Sachs.

Ally’s ads of a decade ago were right! Banking is a people business and people expect to be treated fairly. We are in a rising rate environment and there are banks that are desperate for your hard earned capital. There is no reason to play gotcha and there is no reason to allow a bank that you’ve been loyal to for many years to give you anything but their best rate.

If that is happening to you, find a new bank here:

Did you have an experience where you were extended a lower rate than a new customer? Let us know below.

To absolutely nobody’s surprise, the Federal Reserve has voted unanimously to raise the Fed Funds rate by 75 basis points today, setting a Fed Funds rate target of 2.25% to 2.50%. The move follows a similar 75 basis point increase six weeks ago and is the Fed’s fourth move since beginning the year at a 0-0.25% target.

We’re still suffering from a Fed that held rates at zero for too long in the aftermath of the pandemic and then has moved too late and too slowly to address the inflationary pressures caused by Putin’s invasion of Ukraine.

While this will be the Fed’s last move until September, the Fed Funds rate is still likely to be at least one percent higher than where it is right now at the end of the year as the Fed tries to play catch up.

Savings and money market accounts will probably move up toward the new Fed target, although some well-known online banks are flush with deposits and are not moving aggressively. We have seen banks stall out, such as Purepoint which is still at 0.40% APY, in spite of having been one of the most aggressive competitors for your online deposits just three years ago! For this reason, it is important to regularly compare your online savings rate with the best rates here.

We’ve seen a lot of skepticism about savings accounts and the value of getting 2% on your money while inflation is burning at 9% plus. The difficulty in maintaining purchasing power parity underscores the insidious nature of inflation, and how important it is for the Fed to move still more aggressively to get it under control. And, while you may be losing purchasing power, a guaranteed 2% is a whole lot sweeter than anything we’ve seen for a while. It is well worth reaching for, especially in a bubbly environment where asset prices in the US are still stretched.

The Federal Reserve has finally become much more serious about controlling inflation. Inflation has gotten so hot by any measure, including core CPI, that Jay Powell can no longer keep his head in the sand. His Fed is pulling trillions in liquidity out of the market by reducing the size of its balance sheet and moving the Fed Funds rate up by 75 basis points to a range of 1.50% to 1.75%. And, there is more to come.

Powell now says that the July meeting will involve either a 50 or a 75 basis point increase in the Fed funds rate and that additional rate increases in 2022 will be warranted. The Fed’s own Fed funds forecast now puts the Fed funds rate at 3.40% by the end of 2022 and 3.80% by the end of 2023.

Historically, periods of extreme inflation are not necessarily appropriate times to be in cash. Real assets, like real estate and equities, can perform better as a means to maintain and store value.

This time is different. It is coming on the heals of a decade of Fed-induced real asset price inflation – and a bubble in speculative assets, including crypto – that has become especially exacerbated since the pandemic started in 2020. These bubbles are all going to need to be unwound as the Fed moves aggressively to normalize the economy and to protect it from continuing to be overcome by inflation. Perhaps it can be done without causing a recession (as argued by Ben Bernanke in today's New York Times). But, against the concurrent backdrops of an economy that is now dramatically slowing, Russia extending its war in Europe, an ongoing insurrection in the US, and a global climate crisis becoming a climate catastrophe, we may not see much in the way of other safe real assets that maintain value until valuations are fully reset.

Savings rates and CD rates are rising and these products seem like attractive places to sit for while.