General Question

elbanditoroso's avatar

Why is there such a disparity in CD rates between local banks and national (online) banks?

Asked by elbanditoroso (28883points) March 6th, 2016

I have a 12-month CD maturing in about a month, from a local bank here it Atlanta. I have been shopping around for what I might want to do with it.

The local banks here (and even the local branches of the national chains) are offering pitiful interest rates:

Chase .10%
Bank of America .25%
BB&T .35%
Wells Fargo .20%
local credit union .45%
and so on..

When I look at the national (online) scene, I see rates like these:

Ally 1.05%
Synchrony Bank 1.25%
BBVA 1.35%

And there are any number of competitive and insured offerings in that same ballpark.

I suppose I would mildly prefer to have a local person to talk to, but not at the cost of a full percentage rate return. Rates are bad enough as it is?

Why aren’t the local banks competitive? Do they think people are suckers?

Is there a cogent reason NOT to move my CD to one of the national internet banks and earn 2–3 times the return?

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2 Answers

LuckyGuy's avatar

I can’t think of a reason. I have Ally for some “safe” CDs. I invest some in stock that gives dividends and they offer much higher rates but there is some risk.
XOM Exxon Mobil 3.57%
DIS Disney 1.43%
KO Coca Cola 2.99%
There are many blue chips that are similar..

tedibear's avatar

I think that part of this is because there is no branch network, which drastically cuts down on overhead. Fewer employees, far fewer buildings, smaller computer infrastructure.

Synchrony was once know as GE Capital Retail. They handle a lot of credit for retailers – places like Lowe’s, Amazon, jewelry stores, etc. From what I have seen of online reviews, their service and their business practices are horrendous. Not sure I would give them my money. (That’s an opinion based on some quick reading.)

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