When free checking turns into “fee” checking. Let’s check on the latest update on a popular bank account.
Remember Washington Mutual? This bank (more familiar to many by the name WaMu) has undergone quite a transformation. So much has happened to this institution that I thought to provide an update. If you’ll recall, this financial institution has been bailed out and purchased by JP Morgan Chase. In effect, it is now pretty much absorbed by Chase. So what does this mean?
We first began covering WaMu because they were one of those banks offering some fabulous rates for their free CHECKING account, which were easily smoking the rates of their competitors at the savings level. I wasn’t too surprised about this. Why? They wanted to attract customers in order to beef up their client base and make themselves look attractive for a buyout. Too obvious? Too conspiratorial? At any rate, the deal is done, and they’ve reinvented themselves a few times over since then.
There was a point when Bankrate.com’s figures showed WaMu’s rates for their free checking actually being equivalent to longer term (5 year) CD rates. They went through a series of rate hikes that told me that WaMu wanted to attract depositors to their fold by setting the bar and working to stay competitive in the marketplace. And of course, based on what’s happened since, I’ve wondered whether it was a good idea to pursue higher rates at banks that offer them, despite “exogenous factors”. After all, if you were a last-minute customer of WaMu, then you’d have borne the risk of having your money locked up in a bank that ended up going through an emergency acquisition.
Lessons From WaMu’s Story
Before you go shopping for a free checking account or savings account, keep this in mind. The lesson I take away from WaMu’s story is that chasing rates and chasing performance can be a fool’s enterprise… or can be quite risky. So if you’re contemplating free checking at an extremely attractive rate, you’ll want to do some heavy due diligence. With any financial offer you receive, it’s always wise to step back and look at the bigger picture. When you’re out shopping for an account, study its other features, the bank’s strength, and the state of the financial industry today. Of course, it goes without saying that we should always take note of the current financial climate as we make decisions about where to place our money.
One other thing to note: the financial industry is extremely dynamic. And now that WaMu Free Checking is gone and replaced by a Chase product, you’d like to know what could happen if you happen to be a WaMu checking account customer. The answer is that anything can happen. The products of financial institutions change all the time. So if we are to trace what’s happened to this particular WaMu product, here’s its short history: the WaMu free checking account turned into the Chase Free Extra Checking account. But that version did not last long as Chase has now decided to drop the “free” feature. Chase Free Extra Checking is now the Chase Total Checking account. The free version used to have no monthly fee and no minimum balance. But the new “fee” version will now charge you $12 a month unless you have a direct deposit set up, maintain a minimum balance or incur other charges. More here.
What do you think? I’d be interested to know how high you’d want rates to go before you override inertia and think of switching or putting money into a particular bank regardless of current financial circumstances. Are you a rate chaser? What do you think about changes that may happen for those accounts you already hold?
Created: September 24, 2008; Vastly Updated: May 14, 2011
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