In one respect, Washington Mutual (WaMu) customers who have uninsured deposits, and the FDIC, should be breathing a big sigh of relief. JP Morgan Chase agreed to accept those uninsured deposits in its buyout of the nation’s biggest thrift — the biggest banking failure in U.S. history.

“You’re never happy to see a bank fail, but you couldn’t expect a better outcome for a bank of this size to be closed and it not costing the FDIC any money,” says FDIC spokesman David Barr. “But again, you’re never happy when a bank fails; particularly one this size that touches so many people’s lives.”

Some WaMu customers may have hoped the crippled institution could hold on until the bailout, but too many of them were emptying their deposit accounts. The final blow came Thursday.

“Their credit got downgraded again yesterday,” says Robert Ellis, senior vice president of the wealth management group at financial consulting firm Celent.

“One of the lessons we’ve learned — again — in this country is you can’t borrow short-term to fund long-term assets. When their credit gets downgraded, people aren’t going to lend them money in the short term, and they didn’t have sufficient long-term financing lined up. It’s the same story time and time again. Short-term borrowing can kill you when you’re lending long.”

So, now that WaMu is well on its way to the crowded graveyard of failed financial institutions, its customers have to be wondering if they’ll like being a customer of JP Morgan Chase.

Chase is the retail banking operation of JP Morgan Chase, and the fast, smooth takeover could mean that the transition — which will take months to complete — will be as seamless as possible for customers.

“The initial reaction has been, ‘Whew!'” says Chase spokesman Tom Kelly. “I think people are relieved. There’s been a lot of attention to WaMu’s challenges, and I think this is a big sigh of relief for people. The transition will take time, but we’re very interested in making sure it goes very well. This is a big investment for us, and we want to keep those customers and do more business with them.”

The acquisition means Chase will have more than 5,400 branches and 14,000 ATMs in 23 states.

Keeping the account status quo

For now, WaMu customers will keep their same account numbers and use their WaMu checks, debit cards, credit cards and deposit slips. Eventually, you’ll see the Chase name added to checks, credit cards and the like as they’re reissued.

Online banking, user names and passwords will also stay as is. Direct deposits, automated payments and transfers should continue uninterrupted.

Customers with Chase credit cards, loans or mortgage payments should continue to make them at Chase branches. If you have deposit accounts at both banks, the accounts will be kept separate and remain separately insured for an estimated six months.

What about free checking?

For the typical WaMu retail customer, free checking was an important feature. Chase has free checking also, as long as you have a direct deposit check or at least five debit card purchases during each statement period. Otherwise you’ll pay a fee of $6 per month. The Chase Free Checking or Chase Checking, as it’s known, has no minimum balance requirement and comes with free online bill pay, e-mail alerts, online check images, online statements, and a Visa Check Card.

There are three other checking options; the cheapest one requires a minimum balance of $1,500 to waive the monthly service fee, or a combined average balance of $5,000 across your other Chase accounts.

Chase may disappoint on yields

The one area where Chase may disappoint is in yields on deposit accounts. For now, at least, they’re keeping WaMu’s offer of 5 percent on a 12-month CD. But, generally, Chase yields are less enticing than WaMu’s.

Chase CD specials
Terms (months) APY
7 2.90%
12 3.00%
30 3.50%
48 4.00%
84 4.75%
 
WaMu online CDs
Terms (months) APY
6 2.00%
8 4.25%
12-13 5.00%
18-36 4.00%
48 4.15%
60 4.50%

Chase’s money market account yields are awful. Balances up to $9,999 earn an annual percentage yield, or APY, of 0.2 percent. Balances of $10,000 or more receive 0.4 percent. The national average for money market yields is 0.7 percent, according to Bankrate surveys.

Celent’s Ellis says customers may not bolt just because of lower yields.

“In these days of uncertainty, who wants to go shopping for a bank? You may be trading the devil you know for the devil you don’t know. I think the attrition of clients will be fairly small.”

Chase customers who like the free checking and other Chase services can easily tap into better CD yields by perusing Bankrate’s high-yield database.

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