Having Second Thoughts About our Bank

I had on of those “wait a minute…” thoughts today about our bank. A few weeks ago, they called me to try to see if I was interested in opening a savings account. The woman was very pushy about it too – she even tried to do it over the phone. Last week, my husband made a deposit and again they asked about opening a savings account. For some reason today, I started wondering if that was related to the current economic situation.

I was able to find financial information about our bank online and what I saw concerned me. Their financial reports looked very bleak and they have been posting significant losses for 2008. I decided to dig deeper to see if there is a rating system to find out how banks are doing. It turns out that Bankrate.com has such a site:

Safe & Sound

They rate banks from 5 stars (best) to 1 star (worst). A rating of 1 star doesn’t necessarily mean that a bank is going under. It just means that they have below average performance. I had a feeling our bank would rank low after seeing their financial reports and I was right. They are a one star bank.

Our bank is FDIC insured so we would receive our money back if the bank did fail (we are well under the limit). That does ease my mind some. But how long does it take to get your money in such a failure? I had no clue. So I went right to the FDIC for the answer.

According to the FDIC website:

Federal law requires the FDIC to make payment as soon as possible. Historically, the FDIC pays insurance within a few days after a bank closing either by establishing an account at another insured bank or by providing a check.

I have to be honest…I am uneasy that the FDIC says that they historically pay within “a few days.” That is very vague to me. But they are right. Historically a failed FDIC insured bank’s deposits are moved to another bank. You can see a list of failed banks since October 1, 2000 here and read what happened to the accounts. You’ll also see that many have failed so far this year. Who knows if that trend could increase and how busy the FDIC could be. For us, if our money was tied up, that could be very bad – especially right now. We need that money to pull from to make ends meet for a while.

In light of all this, we might open up a new account this weekend. We wouldn’t close our account at our current bank, but we would remove some of the funds so we are better diversified with our banking accounts. That way, if one bank does go under we would still have quick access to our other accounts if we need it.

I feel bad for our bank in a way. I’m probably not the only one who has been looking at their financials and wondering about their stability. But I get the feeling that this is probably a good move for our family at this point – putting your eggs in more than one basket is usually a good thing to do.

Posted by Tricia on October 16, 2008 at 11:14 PM in General Personal Finance | 17 Comments »
You can skip to the end and leave a response. Pinging is not allowed.

Newer Posts Older Posts

C responded:
Posted: October 17th, 2008 at 1:27 am
Very interesting. I always wondered what FDIC meant. I knew that it meant your money was insured, but didn’t know how they would return your monies. Thanks for the info on the star rating. I will have to check out our bank.
dogatemyfinances responded:
Posted: October 17th, 2008 at 7:20 am
No way! They used your private information to call to spam you? A cell phone even? I don’t trust companies like that. My last car loan sold my information, and I will NEVER use that bank again.

There are a lot of banks out there. Unless this one has something really special like a convenient location, I say move on.
Susan responded:
Posted: October 17th, 2008 at 7:34 am
A few weeks ago I got a little worried about the bank that holds our mortgage. This is our third house purchase using this bank and we always liked it because they don’t sell their loans. After hearing horror stories of loans that were sold I checked and the company that holds our mortgage actually made a profit the first quarter of 2008. Fortunately, all of our banks are 4 star or higher.
Brenna Kater, the Ocean Skater responded:
Posted: October 17th, 2008 at 7:42 am
Thanks for the heads up on this. Thankfully, all my banks got 4 stars.
nygirl responded:
Posted: October 17th, 2008 at 8:36 am
Tricia: Very interesting, thanks! I have a comment with regard to “Susan’s” post. Most lenders these days DO sell their mortgages. Usually the ones who “portfolio” their loans (Keeps them in house) are the smaller, local community banks. Just because your loan is sold does NOT change any of the terms of your mortgage. It simply means that you make your payment to someone else.
Sal responded:
Posted: October 17th, 2008 at 8:37 am
Tricia, this is great information. I just looked at my two banks and they are both 3 stars, which makes me a little more comfortable, but I would like to see them up around 4 stars. What are some other reasons you would want to change banks?
Kev responded:
Posted: October 17th, 2008 at 9:18 am
I honestly wouldn’t worry about the star rating as long as your funds are FDIC insured (or NCUA insured for certain Credit Unions).

You’re probably correct in that your bank is most likely pushing it’s services in an attempt to raise capital. Financial organizations are businesses too and they want your money just as much as retailers and service companies and so on…

This is sometimes a good thing. What does Walmart do when they really want your business? – they offer incentives, deals, more coupons, etc b/c they have to compete for it. It works the same with banks – when they really want your business they offer things like free checking, better rates on savings and CD’s, and 0% transfer offers on credit cards.

Right before WaMu went down the tubes they where doing anything and everything to get people’s business. The had the best rates on short-term CDs and High-Yield savings accounts around. They were also giving out 0% credit card offers like no tomorrow. I opened up a new credit card account with them and will be finishing off my debt this year at 0%. Chase took over Wamu’s financials once they collapsed, but my 0% deal is still intact.

I loved the irony of it… Credit Card lenders took advantage of my situation for years. How fitting that I would ultimately get out of debt by taking advantage of them during their desperate time.
Joy Smith responded:
Posted: October 17th, 2008 at 9:24 am
Our main bank isn’t even listed on there. The one that holds our mortgage is and has a 5 star rating.
Tricia responded:
Posted: October 17th, 2008 at 9:34 am
dogatemyfinances – they called our home land line. I was trying to remember if I signed an opt-out of notification when we started the account but I don’t remember. So they were probably fine with trying to market more services to me. My cable company, on the other hand, does it all the time and drives me nuts. I’ve told them to take me off their phone list (which they did) but now I get something in the mail at least once a week. What a waste of paper.

The thing that really bothered me about the call was how pushy the woman was. That always puts me off. And then I started thinking about the bigger picture about the bank’s health.
Tricia responded:
Posted: October 17th, 2008 at 9:34 am
Oh, for those curious – ING Bank has three stars
Da Big D responded:
Posted: October 17th, 2008 at 9:37 am
Ok a few things… First, them trying to get you to open a savings account allows them to have more “accounts”. The more they have, the better off the look (its a marketing thing). They might be trying to position themselves for sale, or shocking, they might feel that you can make more money in a saving account and are looking out for your better interests.

I have had 2 banks get closed on my in the last 12 months. Needless to say, I was never without my money. The worst thing that happened was I could not access the “online” account for 24 hours. I could still use the ATM, write checks etc… The FDIC won’t say nothing will happen, because they can’t guarentee it.

Dump your money into ING and you will be fine (they bought one of my banks) if there is a closing, they are experts at it.
Christy responded:
Posted: October 17th, 2008 at 9:51 am
Never thought I’d ever see the day where I heard someone say “I feel bad for our bank…”. LOL
Brittany responded:
Posted: October 17th, 2008 at 1:30 pm
I wouldn’t worry too much about the FDIC takeover. A bank I used years ago was taken over by the FDIC. Something to do with financial irregularities (aka people skimming money all the time). It closed on Friday and on Monday they reopened as part of another bank. I noticed no interruptions in service but, then again, I didn’t try to withdraw money between Friday and Monday. The only downside was that the new bank’s policies included a lot more fees so I ultimately ended up closing the account and moving to another bank.
Jessica responded:
Posted: October 17th, 2008 at 1:53 pm
I think you will be okay if your bank is sold or goes under. The FDIC has been doing a pretty good job of making dure they are seemless, although many people recommend that if you suspect anything, keep copies of all your statements in case. Anyway, I reccomend a credit union if there is one available to you. Since they are non-profit, they have never tried to sell me anything, aside from the occasional flyer with my statement announcing new rates, new services, or new products that I can take advantage of. This is pretty rare however. My parents have belonged to two credit unions since they were married; a joint checking and savings account at a county credit union and my mother has a checking account and her 401(k) in a company credit union. I get pretty good rates on my emergency fund and christmas club savings, and all my other savings go through ING.
meg responded:
Posted: October 17th, 2008 at 6:15 pm
Thanks for the link, I just checked our bank and it made me feel much better knowing they’re a 4.

onourwayonline.com
Budget Mama responded:
Posted: October 17th, 2008 at 6:21 pm
This was a good post. I never thought about how long it took to get back funds from the FDIC. I also checked both my banks and they got 4 stars.
Abigail responded:
Posted: October 18th, 2008 at 12:14 pm
Sorry to hear about your worries. Liz Pulliam Weston did a great article about this whole subject: http://articles.moneycentral.msn.com/Banking/BetterBanking/what-if-your-bank-is-seized.aspx

Essentially, she says the FDIC tends to use the weekend to take over and usually has the bank up and running by Monday. But read the whole article since she goes into what happens if they can’t find a healthy bank to take over yours.