When High-Yield Savings Accounts Come With An Asterisk - WSJ

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When High-Yield Savings Accounts Come With

an Asterisk
Customers are earning less than they expected at some online-centric
banks
By Rachel Louise Ensign Follow

Feb. 25, 2024 5�30 am ET
A few months after the Federal Reserve started aggressively raising interest rates in early
2022, Sam Kuperstein opened a savings account at online bank UFB Direct to earn more on
his extra cash.
The Springfield, N.J., resident assumed the advertised 1.81% rate—which at the time was
among the highest marketed by U.S. lenders—would keep rising as the Fed kept hiking.
Then, last September, he found out that his rate hadn’t budged, even though the bank
advertised a savings account that paid more than 5%.
The bank had rolled out a new, nearly identical savings account every few months over that
period, giving the product a slightly different name each time. Like Kuperstein, some
customers with older accounts were unknowingly stuck earning lower rates, even as the
Fed raised interest rates over two years by about 5 percentage points.
Online-centric banks such as UFB, Capital One Financial and CIT Bank attract deposits by
paying rates far higher than typical bricks-and-mortar banks. Rates on these high-yield
accounts generally rise alongside U.S. interest rates without depositors needing to take any
action. But some customers say these lenders deceived them by advertising competitive
rates while paying longtime customers lower ones. In some cases, only customers who
were monitoring their bank’s every move could notice and respond to the changes.
“You think you’ll get a higher rate and it will keep going up,” said Ken Tumin, founder of
DepositAccounts.com, a website owned by LendingTree that tracks banks’ account
1 of 4 3/2/2024, 10:13 PM
offerings. “But there are games they play to get deposits without having to pay the highest
interest rates.”
UFB is taking these tactics to another level. When Kuperstein opened his UFB account, the
bank simply called the product Savings. A few weeks later, the lender advertised Rewards
Savings as its main offering, paying 2.21%. It left the rate on the older account called
Savings at 1.81%, Kuperstein said.
The bank did this eight more times. Best Savings, Preferred Savings, and Priority Savings
were among the names that followed. The current offering, Secure Savings, pays 5.25%.
“Only the biggest rate chaser that’s monitoring what the bank is offering every week and
what their account is paying will notice that. The vast majority of people won’t be that
observant,” Tumin said. Some reviewers on his site report that UFB lowered their rates
after the bank established new accounts.
Andrew Edwards, a 61-year-old product manager, found UFB through an internet search
and opened an account earning 3.01% in September 2022. The bank sent him an email in
March 2023 advertising a 5.02% rate on Preferred Savings, but it took Edwards eight
months to realize that his account was instead an Elite Savings one earning a lower rate.
The bank’s main website lists only one savings account—the newest one with the highest
rate. When Edwards visited his online-banking page, he thought there was a glitch where
his interest rate was listed.
“You just assume they only offer one high-yield savings account,” said Edwards, who lives
in Southern California and estimates he lost out on $3,000 on a six-figure balance.
UFB is a part of Axos Financial, a fast-growing

and publicly traded Las Vegas lender once known
as Bank of the Internet. Axos said the number of
customer interest-bearing checking and savings
accounts grew by nearly 100,000 last year.
Customers held $11 billion in those savings

accounts at the end of December, double the
amount from a year earlier, and earned an
average rate of 4.32%. Axos didn’t respond to
2 of 4 3/2/2024, 10:13 PM
several requests for comment.
“Who would reject making more interest on their

money?” Kuperstein wrote to UFB when he
learned of the different accounts after calling the
bank. He is now a plaintiff in a proposed class-
action lawsuit against the bank filed in federal
court over the issue.
Capital One is facing a similar suit. Some longtime

customers discovered that their legacy savings
accounts are earning 0.3%, far less than the 4.35%
the bank advertises on its main savings account,
The Wall Street Journal reported in January.
Capital One says its highest-yielding savings

account is marketed widely and isn’t restricted to
new customers.
Howard Bachman, 82, switched to CIT in February 2020. CIT’s account was paying nearly
2%, well above what his Capital One account was paying. The Omaha, Neb., resident left a
five-figure sum in the account.
After the Federal Reserve cut rates at the start of the pandemic, CIT dropped the rate on his
“Savings Builder” account to below 1%. Once the central bank started hiking, CIT, now
owned by Raleigh, N.C.-based First Citizens BancShares, saved its biggest rate increases for
customers with a newer product called Savings Connect.
The retired professor noticed in August 2022 and switched to the better offering. He
started watching the bank’s website more closely and moved accounts again a few months
ago to yet another account, called Platinum Savings. That account now pays more than 5%
on balances of $5,000 or more. He said CIT never told him about the better-paying
accounts.
Meanwhile, other CIT customers with accounts called High Yield Savings and Premier High
Yield Savings are getting just 0.25%.
“CIT Bank regularly and proactively communicates with our customers about our variety
3 of 4 3/2/2024, 10:13 PM
of savings accounts, including new products, each with unique features and eligibility
requirements, so that customers can choose the savings product that works best for them,”
a spokeswoman said.
Retired biology teacher and Clinton, Tenn., resident Theresa Holtzclaw, 74, has also
switched CIT accounts twice since early 2022 to earn more. “Their rate is very competitive
now that I know to keep my eye on it,” she said.
Write to Rachel Louise Ensign at [email protected]
Appeared in the February 26, 2024, print edition as 'Savings Accounts With High Yields Can Be Tricky'.
4 of 4 3/2/2024, 10:13 PM

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When High-Yield Savings Accounts Come With an Asterisk - WSJ https://www.wsj.com/personal-finance/savings/when-high-yield-savings...

When High-Yield Savings Accounts Come With

By Rachel Louise Ensign Follow

UFB is a part of Axos Financial, a fast-growing

Customers held $11 billion in those savings

several requests for comment.

“Who would reject making more interest on their

Capital One is facing a similar suit. Some longtime

Capital One says its highest-yielding savings

Write to Rachel Louise Ensign at [email protected]

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