On Wed, 14 Dec 2011 18:49:54 -0500, Bill wrote:

Larry Jaques wrote:

Same here. How do you like bank accounts which pay you a whopping
0.05% interest on your checking? I'm still thinking "WTF?" over why
they would even do that.

Perhaps so they can maintain that they pay interest on some of their
checking account, maybe? Also, some people can't tell the difference
between 5% and .05%.

That's probably the whole story right there. Most people think $39.99
is thirty nine bucks. I call it forty.


I know that their "reserve rate" (the amount on deposit a bank can't
lend) is higher on demand deposit (checking) accounts than for savings
accounts. So, assuming that they wish to make loans, it makes sense that
they would prefer the money in the savings accounts. That is also
related to the requirement that they (have to) restrict the number of
w/d's per month from savings accounts--else, in the eyes of the federal
reserve, they would resemble demand deposit accounts.

Truth! They're giving a generous 0.1% interest on checking now, and
nearly half a percent on $10k+ CDs. Well, they were before the
Eurocrisis...

--
However beautiful the strategy, you should occasionally look at the results.
-- Sir Winston Churchill