Saving in a low-yield world
Can chasing top savings rates hurt you?

Built-in protections

Fortunately, hard pulls come with a few protections. For example, banks must get permission from the customer before doing a hard pull, says Carter Gibson, assistant vice president and commercial lender for First Alliance Bank in Memphis, Tenn.

In addition, credit bureaus grant consumers a short window of time to hunt for the best deal without it affecting their credit score.

"Whether it's loans or deposit accounts, (credit bureaus) give a two-week period to allow for rate shopping," he says. "No matter how many banks pull your credit report within that two-week period, it only goes on your credit report once."

The allowance only applies for consumers comparing "like" products. Someone comparing checking accounts at three different banks within the grace period would only have one pull on their report.

"It's the American way to look for the highest yield and earn as much as you can. Customers just have to be careful."

On the other hand, a consumer shopping for a loan, a credit card and a checking account with overdraft would have three recorded pulls.

The one exception to the overdraft rule might be if a checking account pulls overdraft funds from a savings account or a CD where funds are already available, says Bill Valerian, chairman and CEO of Liberty Bank in Cleveland.

"(A bank) probably wouldn't pull a report if the overdraft wasn't tied to a loan or credit card, but it's really at the bank's discretion," he says. "To be sure, the (consumer) should ask."

Long-term impact

Opening and closing accounts in pursuit of fleeting introductory deals could also damage a consumer's relationship with the financial institution in question, says Jim Vigars, president and CEO of Sonoran Bank in Phoenix.

"When we give customers an offer, we're trying to create a long-term relationship, not give them a one-time deal," Vigars says. "If we find out that a consumer has been opening and closing a lot of accounts -- especially small, $200, $300 accounts -- that's immediately a red flag to us."

However, customers with reputable financial histories probably don't have to worry too much about this, Vigars says. When opening a new account, banks frequently run a ChexSystems report which shows any accounts that have been overdrawn, mishandled or used in a check fraud scheme.

However, accounts that have been properly managed do not appear on the ChexSystems report, Vigars says. As a result, customers without financial blemishes can open and close accounts at will without it showing up on the ChexSystems report.

By contrast, those with previous account problems may have their entire financial history revealed without their knowledge.

"If we know through ChexSystems that a customer is chasing offers, we'll monitor the account much closer," Vigars says.

He adds that Sonoran "might also hold funds longer than we would otherwise," in the accounts of such customers before clearing checks.

Valerian says customers with a reputation for holding short-term accounts could also run into trouble when seeking a long-term loan, mortgage or letter of recommendation.

"When we give a loan, especially at a smaller community bank, we take factors like character and how good our relationship with you has been into consideration," he says.

"(Chasing yield) wouldn't be a terrible thing, but it wouldn't have a positive impact either."

Vigars is quick to add that if the accounts are properly managed without being overdrawn, customers are free to open as many checking or savings accounts as they like without fearing they'll be knocked out of the running for a loan or mortgage. They may, however, experience negative repercussions when it comes to qualifying for the best rates or lowest application or origination fees.

Even with all the drawbacks, chasing yield can be profitable. If executed with an eye on fees, credit score and a bank's goodwill, it can put a moderate sum of free cash into the pockets of those who play the game well.

"If it's done in a controlled way, it's the American way to look for the highest yield and earn as much as you can," Bonora says. "Customers just have to be careful."

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