WSJ Says High Yield Savings Deceptive
The Wall Street Journal recently published, "When High-Yield Savings Accounts Come With an Asterisk," which says, "A few months after the Federal Reserve started aggressively raising interest rates in early 2022, Sam Kuperstein opened a savings account at online bank UFB Direct to earn more on his extra cash. The Springfield, N.J., resident assumed the advertised 1.81% rate -- which at the time was among the highest marketed by U.S. lenders -- would keep rising as the Fed kept hiking. Then, last September, he found out that his rate hadn't budged, even though the bank advertised a savings account that paid more than 5%. The bank had rolled out a new, nearly identical savings account every few months over that period, giving the product a slightly different name each time. Like Kuperstein, some customers with older accounts were unknowingly stuck earning lower rates, even as the Fed raised interest rates over two years by about 5 percentage points. Online-centric banks such as UFB, Capital One Financial and CIT Bank attract deposits by paying rates far higher than typical bricks-and-mortar banks. Rates on these high-yield accounts generally rise alongside U.S. interest rates without depositors needing to take any action. But some customers say these lenders deceived them by advertising competitive rates while paying longtime customers lower ones. In some cases, only customers who were monitoring their bank's every move could notice and respond to the changes. 'You think you'll get a higher rate and it will keep going up,' said Ken Tumin, founder of DepositAccounts.com, a website owned by LendingTree that tracks banks' account offerings. 'But there are games they play to get deposits without having to pay the highest interest rates.'" The article continues, "UFB is taking these tactics to another level. When Kuperstein opened his UFB account, the bank simply called the product Savings. A few weeks later, the lender advertised Rewards Savings as its main offering, paying 2.21%. It left the rate on the older account called Savings at 1.81%, Kuperstein said. The bank did this eight more times. Best Savings, Preferred Savings, and Priority Savings were among the names that followed. The current offering, Secure Savings, pays 5.25%. 'Only the biggest rate chaser that's monitoring what the bank is offering every week and what their account is paying will notice that. The vast majority of people won't be that observant,' Tumin said. Some reviewers on his site report that UFB lowered their rates after the bank established new accounts."
