You may not realize it, but your bank has some super powers that they’re willing to exercise when it comes to helping out their clients. Mind you, not all banks do so willingly – some require a certain quid pro quo – but overall, they want to keep your business, so they’ll eventually exercise their powers. Unless you’re just an ass, in which case, we’re happy to show you the door and point you to the competition. Sorry, but we like to deal with nice people. Check your baggage at the door.

OK, back to super powers. As you may know, every bank sets their rates by the Fed fund rate, which influences prime and so on. Because the Fed fund rate is so low, loan rates are fantastic, but unfortunately, savings and CD rates suck! But, the point is, everyone is getting the crap end of the deal when it comes to savings and CD rates.

However, there may be a small glimmer of hope for you should your bank’s rates seem lower than a competitor’s. Some people are just rate shoppers. They check the rates at every bank each time their CDs come due and they move them around accordingly. They don’t have a serious relationship with any one bank, and that seems to suit them fine. Each person has their various reasons for doing this, but I suspect that they’re not aware that a relationship with a bank can help them out.

By now I bet you’re wondering what these mysterious powers are that I keep referring to. Well, when it comes to CD rates your bank has discretionary power to match rates of their competitors. So, there really is no need to move your money around unless you have a perfectly good reason for doing so. There is one small caveat to this, however, and I think you’ll understand the necessity for it. The only rates they will match are the printed rates. You’ll need an advertisement showing the posted rate and you should be able to negotiate a rate increase on your CD.

Ok, some tips and things to know about doing this.

Tip # 1 – Have the advertisement

Don’t make your bank do the work. While in theory, they should be willing to go the extra mile to help you, the fact is most banks won’t. Don’t give them a reason to send you away empty-handed.

Tip # 2 – Be polite

I wasn’t just being funny at the beginning of this article. Seriously, we see a lot of negative people in a day’s time. The few nice people we get we appreciate and will show that appreciation. Ask nicely, and very often ye shall receive.

Tip # 3 – Leverage your relationship

The truth of the matter is that if you don’t have a relationship with a bank, they’re not going to do the rate match. This discretionary power is really for those customers who are loyal and make the bank in question their primary financial institution. So, if you fit this description, let the bank know it. Point out the CDs and loans you’ve had, how long you’ve been there, and anything else that you have going on. If you’ve got investments with the bank, use that too. Just remember to be nice about it.

Now, every once in a while, the rate you’re requesting may be over the limit of the employees at the branch. Typically, when talking CD rates, the branch level can only increase the rate by 25 basis points, or .25%. However, that doesn’t mean your request is dead. It just means it’s got to go up the ladder. So, if you’re wanting more than 25 basis points, the request will have to go to the district or area manager for approval.

I will tell you that if you want more than 25 basis points, the bank in question had better be your primary financial institution, you better have some money with them, and I hope you were really nice to the person you were talking to because if not, that request will get denied. There are reasons for this though.

Here’s how it works. You put your money into a CD for a certain period of time. Your bank pays you an interest rate for that period of time. But, that money is then figured into the big picture by the chief financial officer (CFO). They make a company budget and projections based on the money they have in the CDs (and various other things). Typically, that money is then leant out to someone else at a rate about 2-3% higher than what your CD is. That marginal difference is called the spread and is one of the ways that banks make money. It’s one hell of a balancing act to keep up with that and I don’t envy the CFO in the slightest.

At any rate, if they increase your rate, that eats into their spread and by extension their profit. Contrary to popular belief, there’s not a committee of people who get the money in profits and negligently spend it – not all banks, at any rate. The current financial situation notwithstanding, most banks use their profits to offer free or enhanced services, open new branches for customer convenience, and various other activities that benefit customers but require money.

The banks that have fallen this year have made poor investment choices, but look at the major players like Chase and Bank of America. Yes, they’re stocks fell a little – which was to be expected because investors were panicking – however, their balance sheets overall allowed them to take in two of the biggest brokerage houses when they fell. Their profits and careful investments are what allowed them to do that without financial difficulty.

The problem I have with this is that with some of the other big banks like Wachovia, Washington Mutual, and Wells Fargo struggling, it leaves them open for Chase and Bank of American to buy up. I’m not too keen on the idea of either bank taking over the industry at large because I believe competition is better for customers in general. But, that’s another post entirely.

So, back to discretionary powers. If you’ve got a good relationship with your bank, don’t hesitate to ask them to match a rate you’ve seen somewhere else. Follow the tips above and nine times out of ten, you can get your rate matched.

In my six years of banking, I’ve only turned away three customers. One was because he wanted 2% above the rate and that wasn’t going to happen. The rate he was being offered was because the bank needed the money to pad their FDIC accounts – which, incidentally, is why some of the large banks I mentioned are offering in the 5-6% range. Another was because the guy was just a jerk. We were closing his accounts anyway and sending him the nice little letter that said he should look for another bank. And the third was a rate shopper who had no relationship with us, but demanded we match the rate or he would take his CD and leave.

What are your thoughts on this? Did you know your bank could do this? Have you asked for a rate match before? If so, what was the outcome?

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