Too Big to Fail: JPMorgan Chase
Written: Mar 14 '09 (Updated Mar 15 '09)
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Product Rating:
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Pros: Convenience, I suppose.
Cons: The feeling that I can't entirely trust them.
The Bottom Line: Bigger may not be better.
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| WilliamJones's Full Review: JP Morgan Chase Bank |
Having survived two bank failures, I currently find myself with JPMorgan Chase, "one of the most stable banks in America," or so they say. Admittedly, I did feel a sense of relief initially, when the takeover of Washington Mutual—my previous bank—was first announced on September 25, 2008. Today, however, I'm feeling less sanguine.
In a February 2009 Forbes.com article, Nouriel Roubini, a professor at New York University, writes: "Merging two zombie banks is like having two drunks trying to help each other stand up. The JPMorgan Chase takeover of insolvent Bear Stearns and WaMu; the Bank of America takeover of insolvent Countrywide and Merrill Lynch; and the Wells Fargo takeover of insolvent Wachovia, all show that the too-big-to-fail monster has become even bigger."
What he's saying, then, is that these banking behemoths are the problem, not the solution. And what is the solution? Who knows? Possibly some form of nationalization, like it or not, whereby the big banks are broken up into smaller, stronger banks, and a future in which banks compete for customers on the basis of safety.
In light of the current banking crisis I'd have a hard time recommending any of the big guys, although, to be fair, JPMorgan Chase appears better positioned than a Citi or Bank of America, both of which are dancing on the edge of insolvency.
So what does JPMorgan Chase have to offer? Well, if there's any truth to the idea there's safety in numbers, you can take some comfort in the fact that Chase has over 100 million customers and nearly a trillion dollars in deposits. Chase also offers convenience, with over 5,400 branches nationwide and over 14,000 ATMs.
In terms of products, you get a wide variety including: free checking and interest checking; various types of savings and money market accounts; time deposits (i.e., CDs); online bill pay; IRAs and investments; credit cards (plenty of options here); and, of course, loans.
According to Suze Orman, if you're not in debt of some kind you're unusual. Call me unusual then, because I have no debt, and I make it a point of honor never to pay credit card interest. In other words, I use a credit card only for convenience, and pay off the entire balance each month. Thus, low introductory APRs and other enticements are of little value to me. You ought to be aware, too, that credit card issuers—including Chase—are currently slashing rewards and raising rates.
Aside from a municipal bond fund, I have no investments with JPMorgan Chase. What I do have is savings. And here I have a big gripe.
First, if you're thinking about opening a CD or savings account at Chase I recommend you do it online. Go to the branch to introduce yourself, maybe open a checking account, but don't open a savings account or CD at the branch. Why? Because the rates are always higher online—and I should know, because I've done both. Look, I stop by my local branch all the time to withdraw cash from various online accounts. There's really no difference, aside from the fact you'll get a better interest rate with an online account.
To open an online CD or savings account takes about 5 minutes, and you'll need three things. First, your social security number or taxpayer ID number. Second, your driver's license or state ID. And lastly, if you want to use an external account for your opening deposit, you'll need the routing number and account number for that account.
Be careful, however, with money market savings accounts. The other day I noticed the current rate on my money market savings account dropped to 0.25%. When I checked Chase's current rate for money market savings accounts in my area, I noticed it was 0.75%. Same date, same bank, same type of account. Puzzled, I sent an email asking for clarification. I received the following response:
Dear William Jones:
Thank you for your email.
Please be advised, the interest rate on your account will be the same which was provided to you when you had opened the account.
Our current rates are competitive with other financial institutions located in your area. The rates we are offering cant be modified. They are based on the current market.
We appreciate you considering WaMu for your banking needs and apologize for any inconvenience.
Uh, excuse me, but what are you talking about? This is a money market account. Rates fluctuate. Of course it's not going to be the same as when I opened the account. The question, clearly spelled out, or so I thought, concerned a discrepancy in the rate.
With the issue unresolved, I phone them up hoping for a better response. Here, at least, I speak to someone who gets it. I don't get an explanation, a why, but I'm told the rate will be adjusted.
Fine.
Next day I check it out and, as far as I can tell, there's no change. The rate for everybody else in my zip code is 50 basis points higher than what I appear to be getting. I also notice a footnote at the bottom of the screen:
These interest rates and APYs may not apply to all accounts of this type. Interest rates and APYs may vary at any time, including after account is opened. We may change rates and APYs and/or make different changes, for some, but not all accounts of this type. Fees may reduce earnings. Minimum to open is $10,000.
Always read the footnotes. Anyway, based on the above, I'd have to say this product isn't suitable for me. In fact, I'll got one step further and say this product isn't suitable for anyone.
I'm sorry, but this smacks of dishonesty. If you've ever purchased a money market mutual fund you know the rate is published daily and it's the same for everyone in the fund. You'd like to think that banks operate by a similar set of rules. But that isn't the case at all. It's as if they're saying, "We'll pay you whatever we feel like paying you." If you think I'm wrong about that, read the third sentence again.
Recommended:
No
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WilliamJones
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Member: William Jones
Location: So-Cal
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