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Bank’s cooling ‘teaser’ rate burns saver

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Dear Dr. Don,
I’m a little frustrated with my bank, Zions Bank. Last year, I opened an Internet money market account with them at a good interest rate (about 5 percent). My interest rate slowly went down without notice. Now it’s at about 2 percent, although they don’t make it easy to know what you’re getting exactly.

Now, thanks to, I see Zions is offering a new Internet money market account with a better rate, around 3.5 percent.

Why couldn’t they just raise the rate on my account? In my opinion, their plan is to lure in new customers with high rates, counting on them to be oblivious to their rate changes, while still luring other customers with “new” accounts that have better rates.

As far as I’m concerned, the account I opened and the new one they are offering are the exact same except that my interest rate is lower and I’m sure it probably won’t ever go up dramatically. What is your opinion on this tactic?
— Kody Conundrum

Dear Kody,
I’m sympathetic to your point of view, which I’ll restate as, “Why would my bank treat a new customer better than it treats an existing customer?”

However, teaser rates are designed to get the deposit in the door. It’s up to you to monitor what’s going on in your accounts, including what the account earns. Banks hope that customers’ inertia will keep them from moving the accounts after the teaser period ends, allowing them to hold on to deposits at lower rates.

If you’re going to manage your accounts as “hot money” — chasing teaser rates to capture higher yields — the burden is on you to know the terms of the account and how the interest rate can change on the account.

The current teaser rate at Zions that you cite has this language in the account terms:

To obtain the listed Annual Percentage Yield the balance must be equal to or greater than $2,500. Annual Percentage Yields (APY) and internet rates are current as of date viewed, and are subject to change at any time. The APY is variable and may change once the account is opened. Fees may reduce earnings.

Try talking to the bank to get the teaser rate in your existing account. Then monitor the interest rates paid in the account when you view your monthly statements. A rough measure is: ((interest paid)/(average balance)) x 12.

For example, if the interest paid is $20 and the average balance is $10,000, use the following equation to figure out the APY: ($20/$10,000) x 12 = 2.4 percent

Vote with your feet if you can’t get satisfaction. Bankrate’s “Compare high-yield money market and savings account rates” feature currently shows four banks offering a higher APY on a money market account than the rate offered by Zions.