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Banks lower interest rates on savings

By David Milstead, Rocky Mountain News (Contact)

Published February 7, 2008 at 12:05 a.m.
Updated February 7, 2008 at 11:19 a.m.

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When the Fed cuts rates, banks follow. That has meant a wholesale whacking of the rates offered to Denver customers.

The Federal Open Market Committee decided Jan. 30 to lower the federal funds rate 50 basis points to 3 percent. (A basis point is 0.01 percent, so 50 equals one-half of 1 percent.)

Starting that day and continuing through Tuesday, Denver-area banks and credit unions cut rates on more than 330 certificates of deposit and savings and money-market accounts, according to Datatrac, a provider of rate information. More than 100 of the cuts reduced savers' yields by a quarter-point or more.

"Especially when rates are going down, it's in their interest to move quickly because their competitors are moving quickly," said Don Childears, CEO of the Colorado Bankers Association.

Charlotte, N.C.-based Wachovia Bank cut rates on seven products by 100 basis points or more. A two-year CD went from 4.53 percent to 2.43 percent, according to Datatrac.

Wachovia spokesman Joe Stroop said declining CD rates "are a national phenomenon driven largely by the Federal Reserve's rate cuts over the last two weeks." He said Wachovia does not comment on its pricing strategy for competitive reasons.

Bank of the West cut rates on nine types of CDs from 120 to 130 basis points. (Because the CDs were offered at multiple locations, Datatrac counted 37 rate cuts by Bank of the West.) A two-year CD from the bank went from 4.2 percent to 3 percent.

"We price our CDs to be competitive, but we rarely offer the highest rates," said Bank of the West spokesman John Stafford.

Other cuts, while smaller in raw terms, made a bigger impact on yield. Boulder Valley Credit Union cut its money-market rate to 0.50 percent from 1.40 percent.

Centennial Bank and American National Bank cutrates on their savings accounts by half, and First National Bank of Colorado in Boulder did the same to its money-market rates.

Only one savings product saw an increase in the last five days. Bellco Credit Union bumped up its three-month CD to 3.75 percent from 3.50 percent.

CEO Doug Ferraro said Bellco saw members put "a huge amount of money" in one-year CDs earlier this year as talk of rate cuts began. To rebalance its liabilities, it bumped up the rate to "try to incent people to move to 3-month CDs," Ferraro said.