The people who fought the Great Toaster Give-Away War over your savings dollars are waging battle again. This time it's the Interest Rate War. The New York mutual savings bank are after your dollars again, as are those in other parts of the country.
This time, instead of full-page ads offering premiums ranging from household appliances to trips to Israel for customers who make large deposits, the banks are taking out full-page ads promising 20, even 35 percent annual return on your money if only you will invest right now. The offer expires Oct. 1.
Getting into the act locally this week were State National Bank in Rockville, Columbia First Federal Savings and Loan of Washington and Annapolis Federal Savings and Loan.
All you have to do is send $1,000 or more to State National and you will receive the equivalent of a 25 percent annual yield for the next five weeks. Got only $500? Send it to either Annapolis or Columbia First and get a 17 percent annual yield.
All these come-ons are aimed at getting a jump on the competition for the estimated $250 billion that is expected to flow into tax-exempt All-Savers certificates during the 15 months they will be offered, starting Oct. 1.
At that time the public will be able to purchase the one-year certificates with interest rates based on 70 percent of the one-year Treasury bill auction rate. The individual can exclude from federal income taxes up to $1,000 ($2,000 for married couples) interest earned on the certificates.
At current rates that means that individual will be able to deposit about $10,000 and the couple about $20,000 to reap the full benefit of a tax-free return.
The prospect of securing a hefty number of substantial one-year accounts paying a lower rate of interest than that paid on $10,000 money market certificates has set off a new war among troubled New York savings banks.
Another type of rate war is also going on in Maryland among state-chartered savings and loan associations. They are offering rates and terms in NOW accounts equivalent to those offered by money market funds.
Fairfax Savings and Loan in Baltimore was paying 19.23 percent annualized interest last week on a $1,000 minimum investment. The account -- but not the rate -- is insured by the Maryland Savings Share Insurance Corp. The account offers liquidity and a $500 checkwriting privilege.
This week First Maryland Savings Association is paying 18.492 percent on a $3,000 investment; Community Savings and Loan is paying 16.34 percent.
Because they are not federally insured, these state S&Ls may offer much higher rates and more liberal terms than their federally chartered counterparts. Their rates in some cases are even superior to money market mutual funds.