Guaranteed yields on savings are surging |
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The reward checking accounts offered by banks that
work with a company called BancVue, which provides such programs,
don't always guarantee their yields for any specific amount of time.
But the accounts are meant to be high-yield -- however that is defined
at any point in the yield curve.
"The key thing that is true for all of our customers,
whether they guarantee the yield for a period of time or not, when
they work with us they've made a strategic commitment to the rate
that they offer in their reward checking account being one of, if
not the, highest rate that they offer," says Gabriel Krajicek, CEO
at BancVue.
Reward checking is booming
Last November, BancVue's reward checking program was offered at some 350 institutions, primarily community banks. The program's popularity is growing and can now be found at more than 460 banks nationwide.
"Four months ago we opened a reward checking account
somewhere in America every 2½ minutes, 24 hours a day, seven
days a week," says Krajicek. "Today it's about every 50 seconds."
BancVue is trying to make it easier for people to find banks that carry the reward checking program by aggregating them in a database at www.checkingfinder.com. Since only about 60 banks are currently in the database, it's probably best to do a Web-based search for reward checking.
Guarantee brings customers
Some banks have come up with reward checking programs of their own
and are guaranteeing their high yields for long periods of time.
Dubuque Bank & Trust in Dubuque, Iowa, is paying 6.01 percent on
its Cash Rewards Checking until Jan. 1, 2010. Its sister bank, Phoenix
Bank & Trust in Phoenix is offering 6.01 percent until April 1,
2009. Both offers are available only to local customers.
"(The guarantee) was done in light of falling interest
rates because there was some consumer interest in how long we'd
offer the 6.01 percent," says John Berg, executive vice president
for sales and marketing at Heartland Financial USA, parent company
of both banks. "Many said, 'What's the catch? Is this a promotional
rate that will be changed right after I open the account?' The guarantee
gives some added long-term credibility to the product."
Berg says the company will take a look at the interest rate situation as the offers are about to expire and decide what to do with the rates. "The landscape is increasingly competitive and it's tougher bringing in new customers," he says. "It's tough to come up with a novel or differentiating offer that makes it worthwhile for people. When the concept for this product materialized, it seemed it could be the product that would get people to notice and switch, and so far it's doing just that."
Some caveats
Now, should you keep moving your money around to capture these high
yields? Probably not. Flagstar's 10 percent CD, for example, limits
the deposit to $2,500. You'll earn $125 in the six-month term. That's
nothing to sniff at, but your balance may be better served by researching
and asking questions before opening an account to get an idea whether
a particular bank is determined to compete in the high-yield arena
beyond its current promotion.
Bankrate's
high-yield database can also help in your search for higher
yields. Keep in mind that if you opt for CDs
instead of liquid accounts, you might want to stick with short maturities.
If the Fed raises rates toward the end of the year or early next
year, you don't want to be stuck with a low-yield deposit for too
long.
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