small change toward a rich life

Customer goodwill worth more than high interest rates

J.D. at Get Rich Slowly recently opened up a discussion about chasing interest rates on savings accounts. The range of comments are pretty interesting, but the one recurring theme is that most people are willing to stay with a slightly lower rate as long as they’re happy with the service and convenience.

I guess I fall into the rate chaser category, at least up to a point. But like a lot of GRS commenters, my decisions have at least as much to do with emotions as finances.

I have opened savings accounts at three different banks in search of the best rate; two of them currently sit empty. Right now, having just made the month’s mortgage payment, we have $22K in savings. $15K of that is our minimum ‘emergency fund’, enough to hold us for three months in the unlikely event Jak and I both suddenly lost our jobs. Amounts above that are collected and spent on lump-sum Roth IRA deposits (I’ve done mine for the year but we still need $5K for Jak) and house remodeling projects.

Up until this week, I had about $18K in a Countrywide savings account and the rest at Washington Mutual. WaMu had a lower interest rate, but because our checking account is with Washington Mutual, transfers to savings are instant. I can keep our joint checking account (which earns no interest) at a low balance and move the excess from each paycheck into savings — even if only for a week or three, until the mortgage is due.

I opened the Countrywide account less than four months ago, when my 6-month CD expired and I was looking for a good savings rate. At the time, they were paying 4% APR, noticably higher than almost anyone else. In just three months, that rate had fallen to 3.55%, which was barely above the steady 3.5% being paid by HSBC, who holds my other currently empty savings account.

I had already decided that if Countrywide fell to 3.45%, I would transfer the balance to my existing HSBC account, despite the hassle of figuring out the login info for an account I haven’t used in a year and a half. But this was as much an emotional decision as a financial one — I’ve been feeling a bit disgruntled with Countrywide, and was looking for a reason to put our little sum elsewhere. (Countrywide holds our mortgages, and had rated pretty darn low on my customer service scale even before I opened the Plummeting-Rate Savings Account. I made nine calls — NINE — before someone was finally able to link both of our mortgages to the same online account. Took well over a year.)

If I’d been happy with Countrywide, I wouldn’t have bothered. And I wasn’t unhappy enough with Countrywide to open up a whole new savings account at another bank for the same .05% gain — the activation energy wasn’t there.

All of this was made moot, however, when last week WaMu upped its savings account rate from 3.3% to 3.75%. Interest was about to post to the Countrywide account, so I held it for an extra day to the end of the month, and then boom — over to WaMu. Took me about thirty seconds to make the shift.

Until just now, I hadn’t even bothered to work out the math for what this move is netting us in interest, which I suppose is an indication right there that it’s not all about the numbers. Turns out I’m only making about $3.30 a month extra at those rates (though with the way Countrywide is going, I expect the gap to increase). That’s like … not even a vanilla latte for Jak.

But again, there’s an emotional component. I’ve been a WaMu customer for over a decade now, and they’ve generally been good to me, especially at the local branch level. When we were trying to get paperwork together for home loan qualification two years ago, the manager of one local branch expertly wrangled WaMu Corporate Bureaucracy on our behalf, earning our undying gratitude.

Struggling banks — including Countrywide and WaMu — are tending to top the charts on interest rates, in a presumed effort to draw more customers. Looks to me like they’d do better to offer a merely good rate and spend the difference on improving customer service and experience!


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