Because interest rates have fluctuated quite substantially from bank to bank in the last year, consumers are finding themselves having savings at banks and credit unions which used to have some of the best interest rates around, but no longer do. Some banks are offering above market rate interest rates to their savings and CD customers so that they can get an in-flux of capital, while others have less of a desire to attract new customers don’t have as competitive of an interest rate.

The first place many savvy consumers head to when shopping for a new certificate of deposit or savings account is BankRate.com. With IndyMac and Bear Stearns recent failures, consumers want to ensure their money is at institutions with solid financials. BankRate offers a listing of interest rates on varying types of accounts as well as a rating system to give consumers an idea of how healthy the bank is financially, unfortunately, it cannot be trusted.

Consumer advocate, Clark Howard, recently reported that before IndyMac’s failure, it was a pretty loosely held secret within the banking industry that IndyMac was facing severe financial trouble. Up until the day that IndyMac closed its doors, it had a “Superior” rating according to BankRate.com’s “Safe & Sound®” rating system.

The Safe and Sound® rating system that BankRate provides might offer some insight as to the health of a bank, but it’s not be be-all and end-all. In order to make sure your money in savings is secure, you need to do two things. First, make sure that the bank is a FDIC member of a NCUA member. This will provide insurance if the bank fails and provide you up to $100,000 of coverage. Special situations exist where that number can be raised. The second thing you should do is never keep more than $90,000 inside any one bank. This ensures that your principal and interest will be protected.

You shouldn’t be terribly concerned about bank failures, because they are such a rare occurrence. The FDIC usually provides you access to your funds within a period of 24 hours anyway, so it’s a very seamless transition for you. Just ensure that your bank is a FDIC member or NCUA member and that you don’t keep more than $90,000 in any one bank and you’re good to go.

This entry was posted on Tuesday, August 19th, 2008 at 3:00 am and is filed under commentary. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

• Links: Lending Club Interview Debtkid from Lending Club approached me about doing an interview for them. I'm generally very open to doing interviews for other sites and this was no exception. He came at me with some questions that required me to be more...
• Things I'm Thankful For On Thanksgiving Happy Gobble Day! I'd like to list out some things that I'm thankful for (in no particular order): My family My friends Blogging friends My RSS subscribers Everyone who has ever read Free From Broke Everyone who has left a...
• Why Certificates of Deposit Are A Good Idea Today's article is written by guest blogger Jim of Bargaineering. If you've saved up a few dollars and aren't sure if you should put them in the stock market or stick them in your mattress, let me give you another...
• Compounding and the Rule of 72 The reason why it is so important for you to start saving early is the magic behind the concept of compounding and the rule of 72. People who wait until they are later to begin saving are going to have...
• How to Start Saving More Right Now For many of us, saving is something that we always plan to do, but never quite get around to it. The bottom line is, if you don’t have a savings account and a regular plan for putting money aside, you...