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.

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