Trust, But Verify
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By Ben Dolan, CFP®
I often mention to clients and friends the benefits of having an emergency fund separate from their daily checking accounts. Doing so helps define monies meant for monthly spending and those meant for other purposes. And with the Fed Funds rate currently 5.25% to 5.50%, you can earn a decent return compared to a couple years ago.
But to get the best rate on a High Yield Savings Account (HYSA) you may need to stay vigilant. Some banks are playing games with returns to reduce the yield they must pay and increase profitability. In yesterday’s business and finance section of the Wall Street Journal, Rachel Louise Ensign outlined the shenanigans of online bank UFB Direct, part of Las Vegas lender Axos Financial.
In early 2022, some UFB customers signed up for a HYSA earning 1.81%. As rates continued to rise throughout the year, instead of raising the rate on customers’ HYSA, UFB offered a new HYSA with another name and a higher rate, leaving behind customers that had signed up for a HYSA earning 1.81%. According to Ensign, “the bank did this eight more times,” assigning various names like “Preferred Savings” and “Priority Savings.” Currently, the best UFB HYSA offering pays 5.25%. A class-action lawsuit has been filed against the bank.
UFB isn’t the only bank playing games with account names, so be sure to keep an eye on your HYSA rate. Don’t hesitate to contact your bank to see if the rate you are getting is the best offered. If they make you open another account to get the best rate, let them know that time is money, and you’d prefer to work with a bank that adjusts the rate on your account rather than forcing you to open a new one.
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