Public Service Credit Union (PSCU) of Colorado is trying Reverse Tier Savings to attract new deposits

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dratkinson
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Public Service Credit Union (PSCU) of Colorado is trying Reverse Tier Savings to attract new deposits

Post by dratkinson » Wed Dec 27, 2017 5:39 pm

My local CU is trying a reverse-tier, no-fee, no-minimum-balance, withdraw-the-money-at-any-time savings account idea to attract new deposits.

The rate structure is:
--$0-2K: 3.25% APY
--$2-5K: 1.5% APY
--$5-10K: 0.75% APY
--$10-50K: 0.4% APY
-->$50K: 0.3% APY

vs. their current personal share (savings) account: 0.10% APY.


While I’m a convert to livesoft’s idea of reducing Sch B part I income as a partial justification for not chasing teaser rates, this new CU offer looks like “found money” with no extra effort on my part. So guess I’ll pick it up, even if uncle sugar and his cousins at state get a taste.


See PSCU Rates: https://www.pscu.org/rates/




Edit. Completeness, fix broken link.
Last edited by dratkinson on Sat Dec 30, 2017 4:03 pm, edited 2 times in total.
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TD2626
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Re: Reverse tier savings?!

Post by TD2626 » Wed Dec 27, 2017 5:55 pm

dratkinson wrote:
Wed Dec 27, 2017 5:39 pm
BH Reverse tier savings

My little CU is trying this no-fee no-minimum-balance savings account idea. Only restriction, it must be new money:

0-2K: 3.25% APY
2-5K: 1.5% APY
5-10K: 0.75% APY
10-50K: 0.4% APY
>50K: 0.3% APY

vs. their current personal share (savings) account: 0.10% APY.

While I’m a convert to livesoft’s idea of reducing Sch B part I income as a partial justification for not chasing rates, this new CU offer looks like “found money” with no extra effort on my part. So guess I’ll pick it up, even if uncle sugar and his cousins at state get a taste.


For those interested, the CU is: www.pscu.org
Are you taking into account time costs of the "found money"? What do you mean by "no extra effort"?

Assuming you can get, say, 1.3% with large balances (in the Capital One Money Market, for example), you run out of "found money" after putting in $5k.

Say you invest $5k. You get (based on your figures) an average rate of 2.2% on that $5k (3.25% * 2/5 + 1.5% * 3/5). That is 0.9% above and beyond the "easy" 1.3%. So, for your work and hassle, you get 0.9% on $5k, which comes to $45 over the course of the year.

It isn't "found money" - you need to spend about 3 - 5 hours understanding the policies and terms, processing paperwork, more hassle, more complicated paperwork come tax time, etc. Depending on how much you value your time, the hassle may or may not be worth it.

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dratkinson
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Re: Reverse tier savings?!

Post by dratkinson » Wed Dec 27, 2017 6:35 pm

^^^ Sorry, I wasn't clear.

PSCU is my B&M financial home. I keep a month of living expenses (<$2K) in savings... just because.
--Today my <$2K is earning 0.10%.
--The teller said she could convert the account ("no extra effort on my part").
--I move in new money (through actually, which I do every month, when I rebalance into a linked single-state muni) and my new balance $0-$2K starts earning 3%.

Looks like "found money" to me. A blind squirrel....

You are correct though, I wouldn't open a new account at another bank/CU to get 3% on $2K.
Last edited by dratkinson on Wed Dec 27, 2017 6:52 pm, edited 1 time in total.
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TwstdSista
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Re: Reverse tier savings?!

Post by TwstdSista » Wed Dec 27, 2017 6:44 pm

Nice deal for small money! My CU is offering 5% on the first $1000 in my primary savings account. After the $1000, the rest only earns .05%, so I pull the interest out every few months.

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Re: Reverse tier savings?!

Post by dratkinson » Wed Dec 27, 2017 7:50 pm

Update. Talked to an account specialist. It's not as simple as I'd hoped.
--Original share accounts (00-xxxxx) are not used for this program.
--It requires opening a new share account (02-xxxxx).
--All money put into new share account (02-xxxxx) earns RTS rates.
--Original share account (00-xxxxx) can be drawn down to $5.

Need to see how much effort is required to add a new account link to my investment companies.



Edit. Corrected mistake. Account numbers are differentiated by a different prefix, not suffix.
00-xxxxx: share (savings) account.
01-xxxxx: checking account
02-xxxxx: reverse tier savings account.
Last edited by dratkinson on Fri Dec 29, 2017 6:38 pm, edited 1 time in total.
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ColoRetiredGirl
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Re: Reverse tier savings?!

Post by ColoRetiredGirl » Wed Dec 27, 2017 10:10 pm

I opened this account with PSCU on Black Friday with $2,000. They immediately added an additional $100 to my balance. The extra $100 is mine if I leave the money in the account for 90 Days. The 3.25% is calculated on this balance. My primary bank only pays 0.10% on my savings account. Therefore, I believe depositing money with PSCU is “found money”. It took no time at all to link the account to Quicken.

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Re: Reverse tier savings?!

Post by TD2626 » Wed Dec 27, 2017 10:57 pm

dratkinson wrote:
Wed Dec 27, 2017 6:35 pm
^^^ Sorry, I wasn't clear.

PSCU is my B&M financial home. I keep a month of living expenses (<$2K) in savings... just because.
--Today my <$2K is earning 0.10%.
--The teller said she could convert the account ("no extra effort on my part").
--I move in new money (through actually, which I do every month, when I rebalance into a linked single-state muni) and my new balance $0-$2K starts earning 3%.

Looks like "found money" to me. A blind squirrel....

You are correct though, I wouldn't open a new account at another bank/CU to get 3% on $2K.
Oh - if you have an account there already and plan on having a $2k balance anyway it could be a great deal. Good luck with the mechanics of it - hopefully it's straightforward enough to make it worth it. And yes, having to pay more in taxes doesn’t mean to avoid earning interest, in my opinion.

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Re: Public Service Credit Union (PSCU) of Colorado is trying Reverse Tier Savings to attract new deposits

Post by dratkinson » Fri Dec 29, 2017 7:08 pm

Logistics.

After a false start, it looks like it will be easy to add a new account to my investment companies.
--Vanguard (after voice verification). CSR said, "No problem, we'll mail you a form."
--Westcore (single-state muni fund). CSR said, "Medallion signature guarantee required to add an account."

Went into PSCU and spoke with a service consultant.
--PSCU doesn't do medallion signature guarantees.
--We called and talked to same Westcore CSR. They (SC and CSR) decided that since I was only changing an account suffix (not the account number), the medallion signature guarantee was not required.

So yea! Opened new PSCU RTS account and funded it with check on VMSXX (TE mmkt) to meet the "new money" requirement.
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Re: Public Service Credit Union (PSCU) of Colorado is trying Reverse Tier Savings to attract new deposits

Post by nisiprius » Sat Dec 30, 2017 7:48 am

Just to be clear:

Total balance, grand total annual interest, effective interest rate:

$2,000 $65.00 3.25%
$5,000 $110.00 2.20%
$10,000 $147.50 1.48%
$15,000 $167.50 1.12%
$20,000 $187.50 0.94%

With e.g. Capital One 360 and other online savings accounts offering 1%, withdraw at any time, no minimum, no maximum, and 1.2%-1.3% if you can keep $10,000 minimum in the account.

In other words, for as long as the rates last, it is just about as good as any other savings account out there--maybe not better, but you're not losing anything by having it--up to around $15,000.

If I thought it would be permanent (or at least very durable) and everything else were right, I would definitely consider such an account, but since it is almost sure to be temporary I personally wouldn't bother. My life experience so far as been that, yes, it is not too hard to scoop up amounts like $100-$200 in "free money" one-shot deals involving opening a new account, but for me it is not worth the effort and even if I don't keep them forever, I tend to hang onto them too long out of inertia--which of course is just what they want.
Last edited by nisiprius on Sat Dec 30, 2017 8:49 am, edited 1 time in total.
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livesoft
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Re: Public Service Credit Union (PSCU) of Colorado is trying Reverse Tier Savings to attract new deposits

Post by livesoft » Sat Dec 30, 2017 7:59 am

This is a Behavioral Economics experiment.

A funny thing is that people will go out of their way to get an Admiral share class fund instead of Investor share class. You know, they will wait until they have $10,000 instead of starting with $3,000 just for the extra 0.1% reduction in expense ratio.

The bogleheads.org should come up with the best way of fooling people into saving their money.
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Re: Public Service Credit Union (PSCU) of Colorado is trying Reverse Tier Savings to attract new deposits

Post by nisiprius » Sat Dec 30, 2017 8:52 am

dratkinson wrote:
Fri Dec 29, 2017 7:08 pm
...So yea! Opened new PSCU RTS account and funded it with check on VMSXX (TE mmkt) to meet the "new money" requirement...
PLEASE update this thread once a year or so and let us know how long it lasted. Not "how long the offer stayed open," but, on the account you opened, how long the rate structure lasted... how many dollars of extra interest were you able to earn compared to, say, a 1%-with-no-tiers savings account.
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Re: Public Service Credit Union (PSCU) of Colorado is trying Reverse Tier Savings to attract new deposits

Post by Tamarind » Sat Dec 30, 2017 9:19 am

You have probably already spent the "found money" by thinking and posting about it for this long.

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Re: Public Service Credit Union (PSCU) of Colorado is trying Reverse Tier Savings to attract new deposits

Post by radiowave » Sat Dec 30, 2017 10:58 am

dratkinson wrote:
Wed Dec 27, 2017 5:39 pm
My local CU is trying a reverse-tier, no-fee, no-minimum-balance, withdraw-the-money-at-any-time savings account idea to attract new deposits.

The rate structure is:
--$0-2K: 3.25% APY
--$2-5K: 1.5% APY
--$5-10K: 0.75% APY
--$10-50K: 0.4% APY
-->$50K: 0.3% APY

vs. their current personal share (savings) account: 0.10% APY.


While I’m a convert to livesoft’s idea of reducing Sch B part I income as a partial justification for not chasing teaser rates, this new CU offer looks like “found money” with no extra effort on my part. So guess I’ll pick it up, even if uncle sugar and his cousins at state get a taste.


See PSCU Reverse Tier Savings: https://www.pscu.org/personal/accounts/ ... s-account/
The link is broken, here is the rate URL: https://www.pscu.org/rates/

Putting this side by side with Ally and their currently competitive CD and savings rates, I just don't see any advantage of PSCU.
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Re: Reverse tier savings?!

Post by b4real » Sat Dec 30, 2017 2:47 pm

ColoRetiredGirl wrote:
Wed Dec 27, 2017 10:10 pm
I opened this account with PSCU on Black Friday with $2,000. They immediately added an additional $100 to my balance. The extra $100 is mine if I leave the money in the account for 90 Days. The 3.25% is calculated on this balance. My primary bank only pays 0.10% on my savings account. Therefore, I believe depositing money with PSCU is “found money”. It took no time at all to link the account to Quicken.
We did the same thing on black friday. I don't think it took more than 5 minutes. Deposited $1900 and they added $100 the next day so now $2000 earning 3.25%. Easy found money. Will withdrawal and close the account if the rate drops.

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Re: Public Service Credit Union (PSCU) of Colorado is trying Reverse Tier Savings to attract new deposits

Post by dm200 » Sat Dec 30, 2017 4:00 pm

There are two types of "tiered" rate accounts - (whether upward or reverse downward) - the disclosure will tell you.

Tiering method A - once you reach the next tier - the rate applies to the full balance

Tiering method B - once you reach the next tier - the rate only applies to the balance in that tier.

Method A is much more common. For reverse tier, though, method B is more favorable to depositors.

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Re: Public Service Credit Union (PSCU) of Colorado is trying Reverse Tier Savings to attract new deposits

Post by dratkinson » Sat Dec 30, 2017 6:11 pm

Fixed broken link.


Updated calendar to check/report status of this rate next Dec. (Wonder if it will disappear as fast as the USAA 2.5% CC?)


My excess PSCU savings money (1mo of living expenses sitting in 0.10% share account) will be rebalanced (leave only required $5) after the first-of-the-month account reconciliations and rebalancing. So I’ll again have <$2K in PSCU savings.


I only picked up this PSCU money to demonstrate to economists that the market is efficient: "…someone would have come by and picked it up already."
See: http://www.google.com/search?q=economis ... ollar+bill

And because a few years back, I began the process of simplifying my financial life… but didn’t finish it.
--Sold remaining stock shares.
--Redeemed all savings bonds (realized I didn’t have 20 years to wait) so closed TD account and linked online HSBC HY savings accounts (5.05% when opened in 2007; 0.10% when closed).
--Thought about closing online Presidential Bank HY checking account ($1K min balance to avoid fee, 4.5% when opened in 2007; 0.12% today). But this change provided least simplifying bang so didn’t get around to it.

Maybe this PSCU behavioral experiment is working on me. I’m okay with it being the impetus that causes me to get rid of an extra ~0% checking account and its associated $1K cash drag (PB min balance requirement). And the extra PSCU interest will pay for printing new checks. :)
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