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thats alot of debit card transactions. i dont think i could even find away to do 10 transactions each and every month as well as the required transfer
I am sure there are a handful of folks that will dutifully use their debit card two plus times each and every week of the month. They might also have enough cash that they can treat the $25k minimum as "invested", leaving it u touched to earn interest.
The transfers coming in above $25k won't earn the Interest, so at the end of the year the bank pays you about a grand. Not bad if you follow the rules, but hardly something to base your retirement plans around, and that has traditionally been the biggest segment of safety seeking CD investors...
In a sense I worry a bit about the banks that are offering this overly restrictive high interest account -- they probably are badly in need of some reserve funds. These are pro ably the banks that went a little nuts lending to developers and now that those loans are bleeding red ink all over the books there is need to shore up the balances. It probably takes 100 or more $25k "Parkersburg" to make up for one crazy strip mall or subdivision gone wrong. All those debit card transactions are going to be another avenue of compromise that some folks will figure out a way to game, and the bank not make up the overhead / security costs...
to tell you the truth i wouldnt even want to use a debit card once a month if i didnt have to. the liabilities with a debit card are much different then a credit card if someone gets those numbers.
i had a debit card which had the info stolen from right inside the banking system . thankfully that card was never used in any thing but this one particular bank atm so i didnt get a hard time.
with debit cards the fraud protection only applys on signature sales. if someone gets that info and pin and cleans out your account you may never see that money.
just about all those banks on the list have those stipulations and hitches in order to get that interest. i only pulled 1 out at random bank of sierra and already that list on the link above was outdated .
miss any of these requirements and you get zero interest for the month but fees may apply too.
LIKE I SAID,THE RISK OF USING A DEBIT CARD COMPARED TO A CREDIT CARD CAN BE SOOOO BIG AS TO MAKE IT NOT EVEN WORTH DOING .
BANK OF SIERRA Requirements: 12 debit card purchases; one direct deposit or ACH automatic payment; one online bill pay; eStatements.
Editor's note: On April 5, 2010, Bank of the Sierra stopped offering Sierra Reward Checking nationally.
im not going to go any further on that list but if you have any interest in doing it read every bit of fine print. theres always a catch when good strong banks can borrow from each other or the fed at almost zero and they are not doing it.
The average interest rate spread that a bank charges between bank loans and bank deposits is 6%. So to offer 4% rate on the deposits, the bank must charge 10% for the loans.
I wouldn't deal with a bank whose assets are primarily 10% loans. It's too risky and probably not a FDIC member.
All of these numeric assumptions are incorrect. A couple of years ago, interest rates were in the 5-6% range and CD rates were in the 5- 5.5 range. Why do people just make up numbers to make their points?
Interesting. Why do they want you to use the debit card so many times per month? How does that help them?
Interchange fees. When you use your debit card, each dollar you spend the financial institution makes a %. Not off of the card holder per se, but from the merchants. So the more you use, the more a financial institution makes. This is one of the hotly debated issues with the durbin amendment. Folks feel that banks are charging merchants too much, and is being passed down to the consumers. So the thought is that they'll legislate this so they can't charge as much... and merchants will save, and pass those savings to customers (more complicated... but you get the picture). Time will tell how well this works...
As for the original question. You need to understand how banks make money (yes, its still a business. It provides a number of services for a price). The income is usually in the form of interest income and non-interest income.
Interest income comes from the interest paid to them from various loans. non-interest income include the fees they charge for various services, or gains from the sale of loans, capital etc.
When you have conditions like we do now, banks aren't really making a whole lot of money in interest - low rates but still very little demand. So they're not really going to do something that will increase their interest expense.... unless they're making it back elsewhere.
When you have conditions like we do now, banks aren't really making a whole lot of money in interest - low rates but still very little demand. So they're not really going to do something that will increase their interest expense.... unless they're making it back elsewhere.
It's my understanding that there is plenty of consumer interest in borrowing money, but the banks are not lending unless your credit score is very high. In other words, they are willing to lend at attractive rates, but shrinking the number of people they will lend to. Everybody with a 29% credit card balance would love to go to their bank and borrow the payout at 6%. But the bank won't let them past the security guard.
When banks do that, they reduce their default exposure, which enables them to borrow from depositors at a rate much closer to the lending rate that they collect. If the banks on the list have loaned money out to only the most secure of borrowers, they can afford to pay depositors 4% and lend at 6%.
All of these numeric assumptions are incorrect. A couple of years ago, interest rates were in the 5-6% range and CD rates were in the 5- 5.5 range. Why do people just make up numbers to make their points?
I'm not making these numbers up. My source is a textbook.
Amazon.com: Financial Markets and Institutions, 9th Edition eBook: Jeff Madura: Kindle Store (http://www.amazon.com/gp/product/B0040ZN04O/ref=pd_lpo_k2_dp_sr_2?pf_rd_p=486539851&pf_rd_s=lp o-top-stripe-1&pf_rd_t=201&pf_rd_i=0324162618&pf_rd_m=ATVPDKIKX 0DER&pf_rd_r=1JDZH1VDV9FV1YS7G30Q - broken link)
A couple of years ago, CD rate was in 5% because some banks were facing bank runs. And those banks did fail. It was not sustainable for them to lend at 5% and pay 5% on deposits.
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