Is it Time to Break Up with your Bank?

Is it time to try online banking?  Maybe, says Senior Planet’s Money and Finance Contributor. Get info on an online class here. 

Determined to find a better return for the money I had in my non-interest-bearing checking account, I spent an afternoon walking up and down K Street in downtown Washington, D.C. to find a CD or money market account that paid a decent interest rate.

First Stop:  Big Banks

My first stop was the big national bank where I had both personal and business accounts. The staff at my branch had been cut back and it had gone through several managers recently, so I talked to the acting manager. The best he could offer was a CD paying .3% interest.

My next stop was another big national bank. I told the young woman sitting at the front desk that I was looking to open a CD, and she said I could do that online. I walked away incredulous that the bank turned away my money.

Next: Regional Bank

Next up was a big regional bank which had more than 1,000 branches. Seeing no one in the lobby, I went to the teller. She didn’t know the CD rates her bank was offering, so she called over the manager. He had to check the computer to see his bank’s rates. But he never came from behind the glass teller cage. And he said to open a CD I had to make an appointment with a “relationship” banker. Hmmm.

Next: A Local Bank

Frustrated, I walked a few doors down to a local bank with only 15 branches. The manager greeted me when I walked in and seated me at her desk. I told her I was looking for a CD or a money market. She told me the various accounts and rates and handed me several pieces of literature. She sat patiently and answered all my questions.

Guess where I moved my money.

Are Banks Safe?

Today older adults and retirees are wondering if their banks are safe. Probably, but there are concerns about a few, as seen by the collapse of The Silicon Valley Bank and the Fed’s takeover of Signature Bank.

But FDIC insurance accounts of up to $250,000 per bank, per depositor, for each account category. So, a retiree could have $1 million without worry if it’s deposited in multiple banks or multiple account types.

A better question might be: is it time to break up with your bank?

CDs, once a staple of retirement portfolios because of their relative safety and solid returns, have been paying near zero interest for years. But the Federal Reserve’s inflation fighting policies are finally pushing up rates for consumers, making CDs and money market accounts relevant once again.

According the Bankrate.com, CD rates remained low at many of the nation’s big banks, as low as .01%. But rates were as high as 4.5% to 5% at some community and online banks.

However, some older Americans may be in for a shock if they want to avoid the volatility of stocks and return to the safety of banks. Their favorite branch may be gone, and if they do go to a bank, they may find longer wait times and fewer staff.

Additionally, low CD rates and less service may drive people to community banks credit unions, which are known for their service, says John Waggoner, a personal finance writer and editor for AARP.

Waggoner says that his bank recently advertised a CD paying 3.5 percent, and he assumed that’s what he was earning on his account, which he’s had for years. But he was earning only .3%. He had to open a new account and transfer his money to get the higher rate.

Paul McAdam, senior director, banking at J.D. Power, says banking surveys have shown customers reporting lower service and longer wait times.

“Customer satisfaction with branch service has declined during the past couple of years,” he says. “We see that very clearly. And part of the reason is a certainly the staffing. But courtesy is still rated high.”

“I don’t want to imply that banks are providing poor service,” he says, “because when we look at different elements of the banking experience, branch service actually holds up pretty well relative to all the other things we do in our banking relationships. But with that said, branch satisfaction has declined, and wait times have increased.”

Waggoner says retirees need to bite the bullet and consider online banks, which offer some of the highest rates on money market accounts and CDs.

“There are times you need some fairly serious bank services like a safety deposit box or certified check or a medallion signature check” he says. “And if you have to drive halfway across town to get a mildly advanced service, that’s not really customer service either.”

“Brick and mortar institutions are much more expensive (to operate) than an online bank,” Waggoner says. “But at some point, you have to count the cost of alienating the customers that need you,” Waggoner says.

Waggoner says retirees need to consider online banks, which offer some of the highest rates on money market accounts and CDs. If you have enough savings, you could live on a 5% yield, he says.

“The financial planning advice is to take out 4% of your retirement savings. If you’re sitting on a substantial amount of money, with a few clicks you could make a couple thousand bucks just by transferring your money. And that’s a real difference.”

Want to learn more about Online Banking? Check out the upcoming Money Matters webinar on April 19 on online banking, safeguarding your privacy and money saving tips. Learn more and register here.

Rodney A. Brooks is the former deputy managing editor/Money at USA TODAY. His retirement columns appear in U.S. News & World Report and Senior Planet.com. He has written for National Geographic, The Washington Post and USA TODAY. The author of “Fixing the Racial Wealth Gap,” Brooks has testified before the U.S. Senate Special Committee on Aging. His website is www.rodneyabrooks.com.

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