Are High-Yield Savings Accounts Unfair?
Sunday November 23, 2008
Some banks offer especially high returns on savings and CDs. Is this unfair, immoral, or insane?
Competitors claim that small banks are snatching up deposits by offering the highest rates. This helps keep them afloat, but other banks have a hard time keeping assets on the books - a dangerous thing in today's world.
The Bankdeals blog recently covered the topic, and an interesting discussion follows. While banking executives call high-yield savings rates "insane", an astute commenter retorts:
"The insane interest rates are the interest rates that banks charge on their credit card balances."The discussion also gets into how FDIC insurance puts a safety net under banks fighting for deposits. If things go wrong, the insurance fund steps in - so people are more likely to chase rates at less established institutions.
Do you think it's unfair to offer annual percentage yields (APY) substantially higher than the competition? Tell us about it in the comments.
Further reading:
Comments
Im all for interest rates in my favor for a change. Given that the big banks charge us more to use our own money than they are willing to pay us in interest. I’ve gone online and found venturebankdirect.com who is offering 3.8% APY with no minimum balance. FDIC insured and was set up and earning interest in 1 day.
Thanks for the tip Chris, I checked out Venture Bank Direct and have been happy so far. They are launching their online checking account which is a big plus for me. Makes for easy access.