A recent comment asked why we don’t provide some indication of a bank’s financial health when we write about them.
The answer is simple: At one time we regularly included Bankrate’s “Safe & Sound” ratings in our posts. But we didn’t get much love from our readers.
In fact, they said that everyone knows that many of the banks offering the best rates are doing so because they’re in financial trouble and need money.
As long as the banks are FDIC insured — and they all are if they’re in our posts — readers made it clear they didn’t care about the ratings.
After all, when federal regulators seized and sold insolvent banks, the new owner would routinely honor the existing rates.
From a saver’s perspective, about the only thing that changed was the name on the door.
The situation is a little different now than it was a year or so ago.
Some buyers are no longer willing to pay the top rates they inherit from failed banks and impose new, lower rates on those accounts.
Of course the principal, and whatever interest customers have earned up to the seizure and sale, is guaranteed.
But if the new rates are low enough, it could force savers to reclaim their money and take it somewhere else.
“That is a hassle no one wants to deal with,” according to the comment.
But it seems like a pretty minor hassle that not many readers will ever face.
New FDIC rules that took effect Jan. 1 limit the savings rates troubled banks can offer.
As a result, fewer banks on the verge of failure are offering rates good enough to land on Bankaholic.
Only two of the banks currently offering top rates on 3-month to 5-year CDs — First City Bank and Earthstar Bank — have the lowest, one-star ratings from “Safe & Sound”.
We also checked to see how often we’ve touted rates from the 16 failed banks the FDIC seized last week.
We found only one — Broadway Bank of Chicago, which hasn’t been mentioned since June.
Considering all of this, we don’t think we’ll go back to the old policy of routinely providing financial ratings.
If you disagree, let us know.
You can always click here to check the “Safe & Sound” ratings for virtually any bank or credit union.