Kudos To Small Banks With Big Rates

We were breaking furniture around Bankaholic World Headquarters yesterday afternoon after Randolph Bank limited its high-yield checking account to North Carolina residents.

In this lousy market, the Extra-Mile Choice account was a real deal.

We first wrote about it less than two weeks ago, and the bank had just gotten its online application working the day before it closed the account to most savers.

After we calmed down a bit, we reflected on how unfair it was to get angry at small banks like Randolph. They are not the ones to blame for the fact that it’s almost impossible to get a reasonable return on our savings.

We’ve seen the same thing happen time and time again. A small bank offers a good rate and it’s bombarded with more applications than it can process and more money than it knows what to do with.

As Randolph acknowledged on its Web site, it was overwhelmed by the response to its offer.

The real problem is with the big banks and the lousy interest rates every single one of them is paying on everything from savings accounts to CDs.

When was the last time you saw a Citibank, or Chase, or Wells Fargo, show up in our rankings of the best available rates?

We’re working on years.

Yet a recent story about bank consolidation in the Wall Street Journal said Bank of America, J.P. Morgan Chase and Wells Fargo now have 33% of all U.S. deposits.

That’s up from 21% in mid-2007, a change that the Journal characterized as “the fastest shift of such a large chunk of deposits in history U.S. history.”

Have savers lost their minds?

No. The paper said much of the gain came through the acquisitions of Countrywide Financial Corp., Washington Mutual Inc. and Wachovia Corp.

“At the end of the day, consumers and small businesses will benefit” from consolidation, Bank of America executive Mark Hogan said in the story.

Well, that might be the case if the only way you want to measure that benefit is by counting how many branches and ATMs you pass on the way to work.

But to the Journal’s credit it challenged that highly questionable assertion in the very next graph:

To keep their cost down, however, the big banks generally pay lower rates on certificates of deposit and other types of savings products than the small players, meaning less interest income for millions of depositors.

That seems like a pretty big drawback to us.

So kudos to you Randolph and all of the other small banks that are trying to do the right thing. We appreciate your effort to pay us a fair return on our money.

Shame on all the big banks that are paying us a pittance — and don’t seem to care.