The other day, I got a glossy advertisement in the mail. It was from a local bank that was offering me a “Premier Relationship.” If I deposited $500K or more into a Premier Checking Account by May 21st, and kept the money there for at least 90 days, I would get a bonus of $3,500.
It sounds good so far. They also promised waive a monthly $35 fee (which sounds steep to me), give me no ATM fees, and 24/7 phone support. I read the fine print, got my pencil and a calculator out, and started working the numbers.
The actual interest on the account is 0.01% APY – yes you read that right. The $3,500 bonus is only 0.7% simple interest if I kept the money there 90 days or more. So on an annualized basis (assuming I could get future bonuses), the compounded interest rate would be under 3%.
For comparison, a 90 day T Bill will currently yield an annualized rate of over 5.3%, and that’s state income tax free (if you are in one of those states that imposes such a tax). Amazingly, I bet there are people that are flocking to take advantage of this. Don’t be one of them!
This is another great reason to have a competent Financial Planner who won’t let you make mistakes like this.
The Bottom Line: This is an offer you can refuse.
–Michael Ross, CFP®