LITTLE INTEREST
Small banks use high rates to lure deposits
Americans by now know that big banks pay very little attention — or interest — to them.
However, some newer bank offerings are changing that with interest rates as high as 7 percent this year, ushering in a new era for consumers beaten down by years of low returns and high fees, The Post has learned.
Their pitch: No customer fees and no customer charges — and tantalizing savings rates much higher than the national 0.01 percent average. With annual inflation of 1.7 percent eroding today’s typical returns, higher competitive rates can offset the losses, consumers are often reminded.
Analysts say this approach could help smaller banks chasing deposits from customers of major consumer entities like Citi or Bank of America, which are notorious for customer fees and squat rates.
“The average savings account hasn’t changed because the biggest banks — where most of the deposits are — haven’t boosted payouts,” said Greg McBride, chief financial analyst at Bankrate.com, referring to rate trends.
“Why? Because they don’t have to. The biggest banks are swimming in deposits, and have a ton of pricing power by virtue of their vast branch networks and broad product lineups.”
Some want to see change. And one small banker is not shy about flexing some big interest rate muscle. Starting in November, Beam, a 10-person, bare-bones banking startup based in San Francisco, told The Post it will offer rates on a savings account that could hit the high single digits, based on a customer’s activity on Beam’s app. Beam said it is affiliated with an established, FDIC-insured US bank it did not want to identify.
“A customer could push their rate as high as 4 to 7 percent by engaging each day with certain features on Beam,” said Beam founder and CEO Yinan Du, 34.
Every qualified Beam customer is guaranteed a 2 percent annual percentage yield.
“Think of us as the Southwest Airlines of banking, because we’re not offering all the perks and can focus on what we want to do best — provide more interest to consumers,” added Du, a computer scientist and economist and former JP Morgan banker.
Beam is not alone. Numerous digital platforms such as Ally have savings rates that start at above 1 percent, with no minimum deposit requirements or fees.
Some savers are picking up rates of 2 percent or more on interestbearing checking accounts at 21 smaller banks and credit unions nationwide, according to a recent study. McBride said individual consumers can generate hundreds of dollars in interest earnings per year this way. The catch is that banks on the list often require customers to ratchet up activity, such as pay bills online.
Still, it’s hard to beat the whopping 5 percent offered on checking accounts by Northpointe Bank in Grand Rapids, Mich.
The bank pays on a maximum of $10,000 in deposits, with a requirement that the account holder uses his or her ATM card at least 15 times during a statement period.
“Paying a better rate on savings accounts and CDs is a more effective way to bring in deposits than trying to out-market the competitors that have branches on every corner, billboards all over town, and their name on the stadium,” said Warren Taylor, co-founder and CFO of Bank Mobile, which identifies itself as America’s first no-fee mobile bank.