I mentioned in my previous post What Happens When a Bank Goes Out of Business that I favor larger international or national banks over smaller no-name banks based on the theory that larger banks have larger budget and more sophisticated systems for security. I decided to take a look at the popular high yield online savings accounts and see who their backers are and their relative sizes.
The list of banks were selected from the Bank Deals blog. The deposit data were collected from the FDIC web site. The last column shows the combined total domestic deposit as of Sept. 30, 2006, the latest available from FDIC when I checked. If a bank is owned by a bank holding company which also owns other banks, deposits from all banks under the same holding company are added together. Please note only domestic deposits are counted. Deposits outside of the United States are not included. Citibank, HSBC and ING all have large presence outside of United States.
|dba||Bank||Total Deposit ($ billion)|
|Washington Mutual||Washington Mutual||209.9|
|ING Direct||ING Bank||62.5|
|Capital One||Capital One||45.0|
|Zions Bank||Zions First Nat’l Bank||31.8|
|E*Trade Bank||E*Trade Bank||21.2|
|AmTrust||Ohio Savings Bank||17.2|
|Emigrant Direct||Emigrant Bank||12.3|
|UFB Direct||Sky Bank||11.6|
|GMAC Bank||GMAC Bank||2.9|
|Amboy Direct||Amboy Nat’l Bank||2.0|
|iGo Banking||Flushing Savings Bank||1.7|
|OneUnited Bank||OneUnited Bank||0.4|
|Presidential Bank||Presidential Bank||0.4|
As the data show, there is a huge difference in size between the larger, more established banks and the smaller banks. Citibank has 18 times more deposits in the U.S. than Emigrant Bank. Emigrant Bank in turn has 30 times more deposits than Presidential Bank. These banks, offering the same online savings account service, are on entirely different scales. It’s inconceivable that a smaller bank has the same level of investment or sophistication in security measures as a bank several hundred times larger.
If a smaller bank offers higher yield than a larger bank, should you go for the higher yield? You will have to decide for yourself. For me, I don’t use any of these banks because I keep my emergency fund in a Vanguard money market fund. See my previous post A Baby Step for Simplifying My Finances.