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Banks Raise Interest Rates, Savers Give Up Hope

This week, several banks raised interest rates for diligent savers taking advantage of so-called high-yield savings accounts. American Express Bank, a cousin of a credit card company you've probably heard of that reorganized as a bank holding company to better position itself for government protection and balance sheet building, raised its interest rate. Ally Bank, the result of GMAC's well-funded rebranding campaign, following government intervention in the bank's parent company, also raised its interest rates.

Banks have a balancing act today. Many banks, particularly those that are subsidiaries or corporate cousins of credit card companies, want to carry more cash on hand to meet newer federal regulations and to have something positive to show on their quarterly financial reports. The real business of a bank is to lend money, though, and when banks can borrow from the Federal Reserve at an extremely low cost, there's no incentive to seek deposits from customers other than expanding customer base.

Capital One, the fifth largest credit card issuer in the world, purchased ING Direct to strengthen the acquirer's balance sheet. It was a match made in plastic heaven; ING Direct's parent company was forced to divest its American branches in exchange for a European bailout. Since the acquisition, customers haven't seen much difference yet, but ING Direct employees have more to say on the quality of the transition. Layoffs loom throughout the former ING Direct throughout the United States. This isn't just conjecture. 235 employees are affected in Los Angeles alone.

Cosmetic changes are underway. The bank will lose its classic orange logo and color scheme (inspired by ING Direct's former headquarters on South Orange Street in Wilmington, Delaware), and the ING Direct name will cease to exist sometime next year. It still remains to be seen how customers will take to the rebranding. It's safe to say that among savers and credit card users alike, the ING Direct brand has a more positive connotation than Capital One, but keeping the ING Direct branding did not seem to be an option.

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