Bank of America:
The Bank of America Balance Rewards Money Market is a way for Bank of
America customers to earn a higher yield on their accounts. Also they offer no
monthly service charge if the accounts are liked to a prima checking account.
First of all, most other us banks do not charge monthly service fees on money
market accounts and have no requirements about linking checking accounts. Also
this account mentions a bonus depending on the lowest average monthly balance
over 12 months. This bonus is hardly worth opening an account because the
dollar value of the bonus is extremely low.
The money market rates at Bank of America are extremely low.
Balances below $2500 earn APY of .35%
Balances between $10,000 and $25,000 earn a whopping 2% APY!!! Might as well put money under the mattress.
And here is the kicker, balances over two and a half million earn up to 3,8% APY.
I don’t know anyone who would put two million dollars in a taxable money market account
to earn 3.8% APY unless you want to hand the Bank free money.Yes, Bank of
America is basically taking in free money by paying basically 0% interest on its
deposits and loaning out the money at let’s say 6% Investors take note, Bank of
America earns an amazing spread on consumer deposits.
about the normal savings rates?
No matter what your balance you earn 0.20% APY. On top of this you need to maintain at
least $300 each day to avoid a monthly service charge. I can’t believe people
actually sign up for Bank of America accounts.
Current Banking Trends
The current trend in the banking industry is to offer great rates because money is much more
liquid than ever as consumers can easily use the internet to find the best money
market rates. Bank of America is really going against the trend! Also, another
trend is to move to more fee based banking. Its seems as if Bank of America is
taking the fee concept to the extreme.
So why does Bank of America have such low money market rates? As usual we can blame the
government . There is a federal law prohibiting any bank in the United States
from having more than 10% of the United States saving deposits and BofA
currently has about 9.8% of these deposits!
Bank of America offers one of the lowest savings rates in the country. In order to
compensate for low rates they have other programs devised as a way to entice
consumers into signing up with Bank of America.
The company has made a bunch of innovations to stop less educated consumers from leaving the bank in pursuit of a better return on capital. One program is the Keep
the Change program that encourages consumers to use their checking account
(perhaps so more money is stored in the checking rather than the savings
account).
Another program is the My Expressions account that lets you get branded Bank cards
from the company. Are you willing to flaunt your Harvard Alumni status to
the gas station attendant or would you rather earn more money? You be the
judge.
Will Bank of America still be The Bank of America?
From this short analysis it appears as if they do not have any competitive advantages, but
this is not ture.
Being the largest consumer bank in the United States has a lot of benefits. Many people
use the bank because they are located all over. Everyone loves convenience,
(give me convenience of give me death) but now the internet is just as good and
things may start to change for the mammoth banks. Where else can I transfer
money to a friend at 2 am on a Sunday night?
Bank of America does have an innovative program that makes it easy to transfer money to
other Bank of America holders. I can’t tell you how many times my friends
(debtors) were angry when I told them they actually had to write me a physical
check instead of do a online BofA money transfer.
Bank of America has recently expanded into Investment Bank and has suffered a huge
loss. This was done by the Bank to have an opportunity to become a big player
in the corporate banking market and also lower its risk profile by making the
company more diverse. So far the plans have not worked as the investment
banking division has lost millions in the previous quarter.
conclusion: its your money do want you want with it
