How To Get Better Rates And Higher Service From Banks
The best money market rate you can find online varies with timing. If you want to get better rates and higher service from banks, you need to build a relationship and consolidate your assets.
In the weeks before Lehman Brothers collapsed on September 15, 2008, I decided to spread my savings across various banks to hedge against risk. At that time, Bear Stearns had already been taken over in the spring, and Washington Mutual was in serious trouble before being acquired by Chase.
Now, with my assets consolidated at Citibank for ease of management, I’m aware of the risk of having more than the FDIC-insured amount of $250,000/$500,000 for singles and married couples. However, I don’t believe there’s a significant risk of Citibank failing, especially with higher tier 1 capital ratios mandated by law. Besides, the economy is much stronger now than it was five years ago.
This concentration of savings with one bank is only temporary because I plan to make a large down payment on a property this year and spend a considerable amount on remodeling. This will reduce my liquid savings to a minimal amount.
I recommend everyone aim to have $250,000 in assets with one bank. This includes savings, CDs, or investments. From my experience, once you reach this threshold, banks start treating you much better. If you have significantly more than $250,000, consider having at least one other bank for convenience and safety. For example, I dislike paying $3 ATM fees, so by spreading money across two major banks, I minimize the chances of incurring those fees.
Five Benefits Of Consolidating Your Assets With One Bank
1. No more bank fees: Bank fees can be annoying, especially when they hit you unexpectedly. I once had a checking account fee of $25 that wiped my checking account to negative $16.75 because I only had $8.25 in it. Thankfully, I got the fee removed due to my CD assets. Now, I don’t pay checking fees, overdraft fees, wire fees, or credit card late fees, thanks to my loyalty and assets with one bank. I also avoid mutual fund fees by buying a different class of shares, provided I hold them for over a year.
2. Friendlier bankers: When you have a significant amount of money with a bank, the tellers and bankers tend to be friendlier. I’ve had tellers give me their contact information for drinks after work and share their life stories. I’ve been invited to events like sushi-making classes and sports games. This friendly treatment feels good and builds a sense of loyalty.
3. Higher savings rates: Although money market rates are low, having more than $25,000 on deposit got me a 3X bonus rate for three months, earning me an extra ~$700. For CDs, there’s a significant rate difference between normal, jumbo, and super jumbo rates, often 0.25% or more.
4. Lower mortgage rates: Many banks will lower your mortgage rate if you have a certain amount of assets with them. For example, I locked in a 2.5% jumbo 5/1 ARM with a 0.375% credit because I crossed Citibank’s $250,000 asset threshold. Without this, my rate would have been 2.625% or 2.75%. First Republic and other big banks like Bank of America, Chase, and Wells Fargo offer similar programs. It’s also wise to shop around for mortgage rates online to get multiple competing offers.
5. Better service: Having a good relationship with your bank can lead to excellent service. I can email my personal banker for various requests, such as opening or closing accounts, getting investment advice, or starting a mortgage process. We’ve developed a good relationship through shared activities like attending Giants games. When she offered to open a $50,000 unsecured line of credit, I agreed because I knew it would help her. I don’t have to navigate 1-800 numbers to get a live person. If you want prompt responses to emails and calls, focusing your assets can achieve that.
Motivation To Save Money
A great way to boost your savings is to identify specific goals. Some people save money to buy a car they can’t afford, while more prudent individuals save for a first home or a child’s college education. You can add the banking benefits mentioned above to your list of motivations to save.
Attractive people often get better treatment, but besides working out and dressing well, there’s not much you can do to change your appearance. However, anyone can decide to save more, get another job, invest, take risks, and do other things to accumulate more money. Once you reach the ~$250,000 asset threshold, banks will treat you better, and you might even get invited to special events.
Wealth Building Recommendations
Shop Around For A Mortgage: Look for the lowest refinance rates by checking with multiple lenders. This way, banks compete for your business, and you get the best deal.
Manage Your Finances In One Place: Using a free online platform that aggregates all your financial accounts can help you optimize your money. Personal Capital, for example, allows you to see your net worth, track spending, and use tools like a Retirement Planning Calculator. Since I started using these tools in 2012, I’ve been able to maximize my net worth and see it grow significantly.
