The best savings account rates remain near the 2% range this week. Everbank tops the list with their guaranteed 2.25% 3-month promo rate for new money. Southern Community Bank has the highest non-promo rate with their Ready Saver Account.
The best savings and money market account rates remain near the 2% range this week.
Everbank tops the list with their guaranteed 2.25% 3-month promo rate for new money. Southern Community Bank has the highest non-promo rate with their Ready Saver Account, offering 2%.
I've liked the the Everbank account for new money for several reasons. It comes with a 3-month rate guarantee. So, it's an essence a liquid 3-month CD. The top 3-month CD rate is only 1.10% APY. Anyone considering a 3-month CD should be putting their money into the Everbank account. After 3-months, the rate drops down to 1.25% APY. The blended 1-year APY is 1.51% APY. That's not bad but it's the 3-month boost I like the best.
Southern Community Bank's 2% APY is well above the average BestCashCow savings rate of 1.46% APY. Other banks above the average include:
Citigroup recently informed the majority of it's checking account customers that it reserves the right to require seven days notice on withdrawals. Does this mean Citi is fearing a run on the bank?
Citigroup (C), that large banking behemoth that we have all come to love, recently sent out a notice to its checking account customers informing them of new changes to the rules associated with withdrawals of deposits.
The notice states that Citi has the right to require account holders to provide advance notice before withdrawing any money on their accounts. As per the notice, Citi says, “Effective April 1, 2010, we reserve the right to require (7) days advance notice before permitting a withdrawal from all checking accounts. While we do not currently exercise this right and have not exercised it in the past, we are required by law to notify you of this change”.
To any thinking man such a change has two adverse effects. The first is that I cannot withdraw my money in an emergency and may have to wait for it for seven days, should Citi decide to exercise this option, while the second could be more sinister – is Citi looking to restrict the amount of cash it can lose on any one day if ever there were to be a good old-fashioned bank run?
It’s not such a far fetched idea. Citi has only recently emerged from a massive government bailout which saw the United States take a majority stake in the company. Citi lost about 92% of it’s market capitalization since that period and the government still holds its equity stake. The firm was essentially worthless and would have collapsed had it not been for the government intervention that occurred. Had such an event materialized, Citi checking account owners would have flocked to the bank demanding repayment of their checking account funds, thereby worsening the situation and forcing Citi into bankruptcy even sooner.
The new regulations allow Citi to avoid this scenario by making clients wait seven days in the worst case scenario. Such protection is good for the bank but obviously bad for the customer.
Citi itself has said that the notice is just a technical requirement imposed by the FDIC as part of banking law changes that happened when that institution started offering unlimited account protection last year. It’s also worth noting that not only Citi falls under these new regulations and is not the only bank to have sent out “scary” notices. The changes have also occurred at Bank of America (BAC) and JP Morgan (JPM), amongst many other banks.
While there’s no need to be alarmist and stuff your money under your mattress, be warned that banks have numerous legal rights and caveats to keep your money for longer than you might anticipate.
In the Fed's semiannual report to Congress, Chairman Ben Bernanke reiterated that rates will stay low for an extended period. How long is an extended period? Certainly through 2010 and perhaps longer in my opinion.
Here's what Bernanke had to say in his prepared statement:
“Although the federal funds rate is likely to remain exceptionally low for an extended period, as the expansion matures, the Federal Reserve will at some point need to begin to tighten monetary conditions to prevent the development of inflationary pressures."
In other words, rates are staying rock bottom until the economy shows that it has some life. And that certainly hasn't happened recently. In his remarks, he said that much of the pick-up at the end of last year was attributed to companies repleneshing inventories and not due to an increase in demand.
“As the impetus provided by the inventory cycle is temporary, and as the fiscal support for economic growth likely will diminish later this year, a sustained recovery will depend on continued growth in private-sector final demand for goods and services,” he said.
There were a couple of very interesting and almost humorous exchanges, humorous in a pathetic way. Ron Paul, the arch-nemesis of the Fed insinuated that the Fed had helped finance the 1972 Watergate break-in as well as bankrolled Saddam Hussein. Bernanke replied:
“The specific allegations you have made are absolutely bizarre. I have no knowledge of anything remotely like what you’ve described.”
Both the allegations and the response made me chuckle.
And then I also sat and watched as Congressmen and Congresswomen botched basic economics, confusing the Discount Window with the Federal Funds Rate. One representative (a woman whose name I did not catch) kept pressing Bernanke to release the names of banks who borrowed from the Discount Window in the name of transparency. That of course, would defeat the very purpose of the Discount Window,which is to help stave off a financial panic. What bank is going to borrow if the fact they are borrowing becomes public knowledge?
It's sometimes scary to listen to the testimony and realize just how little our legislators understand how the financial system works.
