I just got this email from American Bank for their e-checking account.

March 4, 2005


Dear Friend:

American Bank’s e-Checking account has gotten even better!

For a limited time, we are offering you a special introductory rate of 3.00% APY1 to be paid on account balances up to $10,000 through July 1, 2005.

PLUS, the e-Checking account now has unlimited check writing so you can also write as many checks as you want AND your first order of 150 checks is FREE! With the e-Checking account, you GET IT ALL!


FREE online account access2
FREE online bill payment
FREE e-Statements
FREE ACH Direct service
ATM rebates3
In addition, we’ve improved our online bill payment by adding and enhancing the features and services within the service, including:
Online receiving and viewing of bills with over 300 billers
Funds deducted from your checking account on the scheduled payment date or when the check clears, depending on the method of payment
Ability to view if your payment was sent electronically or by check
Schedule payments up to one year in advance
Take advantage of this special offer today by either visiting us in person with a copy of this email or open your account using our convenient online application at www.pcbanker.com. Be sure to enter promotional code ECHK0305 into the online application to receive the special offer. So, don’t delay – this offer expires March 31, 2005.

If you have any questions, feel free to contact a member of our Customer Service team. They can be reached toll free at (888) 366-6622 or by e-mail at [email protected].

We appreciate your relationship with us in the past and look forward to working with you in the future!


Sincerely,

American Bank

That's strange, but it wouldn't be the first time that a customer service representative at a bank didn't understand the terms of a tiered rate account. Now, the only question is which representative got it wrong.

I went through it with her very carefully, several times and she sounded certain.

I just called them back and spoke with "Pat" who confirms your response. Since that makes two positive vs. one negative response, I'm going with the positive. It is; however, a little disconcerting that the structure is so ambiguous - with the rate schedule posted on their website showing an "NA" for amounts under $5,000 and their reps giving mixed messages.

Did anyone else get a positive response from them?

I called WFB and it's as I suspected, the balance below $5,000 is dead money...so, a $25K deposit yields 2.61% and a $50K deposit yields 2.93%. In fact, to get a 3.25% APY on that account, you need to deposit $1,035,000 - 10X the FDIC insured ceiling.

The indifference threshold between this account and an account that pays 3.0% on the entire balance (like EmigrantDirect.com) is $62,700.

Isn’t it sad what you have to go through for a lousy 25 basis points in this market?

Yes, it's hard to tell with certainty from the disclosure on their website. They state that it's a tiered interest rate structure and on their rate schedule it has an "NA" for the interest rate earned on amounts below $5,000. I would expect them to display the same 3.25% APY for all tiers if it is in fact applicable to all tiers, but they might simply have placed the "NA" on the rate schedule to reflect the fact that the minimum opening balance is $5000.

I'll give them a call during their business hours tomorrow to satisfy my curiosity. I hope the rate applies to all funds - I hate those tricky MBNA-style structures that lure you to what appears to be a market-leading rate, only to turn out to be barely competitive.

Capital One's Go Miles Platinum card is offering 18 months 0% transfers with no fees

The credit card market is as competitive as I've ever seen it in my 20+ years of monitoring the industry. Companies are so eager to take market share from competitors and gain new customers that they are offering 0% balance transfer offers for up to 18 months and allowing customers to deposit the transfer checks directly into their bank accounts (up to the card's available credit line less $100 - 200). Many are waiving or not imposing any transfer fees for new card applicants...and those that are imposing fees are capping them at $50 - 75.

So, you don't even need to have a balance on a credit card to be able to apply for a new card and transfer nearly its full credit line to your existing credit card or bank account. You can then put the money in a risk free account for the 18-month holding period and earn about 3% in the current interest rate environment. You will be required to repay 2 to 3% of the principal each month - so you would need to make sure that that amount of cash was unencumbered to meet minimum debt service requirements.

Who would have imagined that credit card companies would get into the business of making unsecured 0% 18-month loans without any fees?

The credit card market is as competitive as I've ever seen it in my 20+ years of monitoring the industry. Companies are so eager to take market share from competitors and gain new customers that they are offering 0% balance transfer offers for up to 18 months and allowing customers to deposit the transfer checks directly into their bank accounts (up to the card's available credit line less $100 - 200). Many are waiving or not imposing any transfer fees for new card applicants...and those that are imposing fees are capping them at $50 - 75.

So, you don't even need to have a balance on a credit card to be able to apply for a new card and transfer nearly its full credit line to your existing credit card or bank account. You can then put the money in a risk free account for the 18-month holding period and earn about 3% in the current interest rate environment. You will be required to repay 2 to 3% of the principal each month - so you would need to make sure that that amount of cash was unencumbered to meet minimum debt service requirements.

Who would have imagined that credit card companies would get into the business of making unsecured 0% 18-month loans without any fees?

Assuming my HP 12C has proper battery voltage, if the first $5,000 is dead money (earning no interest) then on a $25K deposit, the APY works out to 2.608%...and on a $50K deposit, the APY is 2.93%. Both examples assume daily compounding and a 360-day year.


Food for thought when comparison shopping