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Competition, locale influence bank rates

If you're among the 44-million Americans who move each year, you may be in for some surprises when you do business with a new bank. Even if the institution in your new locale bears the same name as the bank you just left, don't expect much else to be the same. What you'll earn on your savings, or pay when you borrow money, could be as different as night and day.

Reason: Most outfits set their interest rates and loan charges according to what their immediate area competitors are doing. In Washington, D.C., you'll earn an average yield of 8.34 percent on a one-year CD; in Detroit, the yield is 7.5 percent.

It will cost you only 9.66 percent to obtain a 30-year fixed-rate mortgage in Dallas or Washington, but the rate soars to 10.59 percent in San Francisco.

You may not have to move very far to stumble on those kinds of rate differentials. We've run across branches of the same bank in adjacent towns that pay different rates on identical deposit accounts. It's not uncommon to see a new bank branch offer bigger numbers just to get you in the door.

Here are some other geographic differences you're likely to find in your banking:

In California, banks and thrifts pay different rates at different CD balance levels. Wells Fargo Bank, San Francisco, reports it offers four different rates on a six-month CD ranging from 7.05 percent to 7.42 percent, depending upon whether your balance is $2,500 or $100,000. In New York, expect one rate generally to cover all balances.

In Mississippi and Alabama, some banks don't pay interest on all of your transaction account balances. They claim the reason is to cover their costs of FDIC insurance and reserves that the federal government requires them to set aside. At Trustmark and Deposit Guaranty banks in Jackson, Miss., a whopping 15 percent of a customer's checking account balance earns no interest.

Other banks in the South are looking at following Trustmark's example due to the escalating cost of FDIC insurance.

If you live in South Carolina, it's easy to find both checking accounts and credit cards with no fees _ a rarity in other parts of the country. Norman Boyd, assistant vice president of Lexington State Bank, recently reported that if he added an annual fee on his bank's credit card, he'd probably lose 15 percent of the bank's credit card accounts.

In Arkansas, credit card rates, according to state law, can't be any higher than five percentage points over the federal discount rate. Right now, that's 12 percent.

In Texas, $100,000 depositors at Southwest Federal, Dallas, earn as much as 10 basis points more if they invest in CDs from outside Texas than if they live in Texas.

California has high credit card rates, but in some cases those rates may be brought down with other account relationships. Security Pacific Bank's rate of 19.8 percent drops as low as 14.8 percent with as many as four different accounts at the institution.

In New York state, look for home equity credit lines at prime rate (currently 10 percent) for a specific period of time. In fact, Trustco Bank, Schenectady, N.Y., goes so far as to pay $150 to customers who close a home equity credit line of at least $20,000.

Then there are market-by-market differences in savings and mortgage rates. In some cities and towns you'll earn more or less on your CDs or shell out more for a mortgage or car loan. Yet, if you shop real hard in your new neighborhood, you'll almost always find a bank that beats the one down the street.

Some large banking organizations such as First Interstate in Los Angeles try to retain customers who move across state lines. The bank even has a name for its program, "The bank that moves with you," and refers account holders to one of the 57 banks with its name.

"They don't have to reapply at the new location," explained Mary Bankston, senior vice president. "We give them some free checks and goodies. The accounts are very similar in terms of features."

But when it comes to pricing, Bankston said, it's a different story.

So if you're planning a move from Walla Walla to Waxahatchee, remember one thing: Your new banking deal probably won't be the same as the last one. You must ask some basic bottom-line questions all over again: What will they pay you on your savings in dollars and cents, not percent? What's the real total cost to borrow? And how much will they nick you in hidden costs?

Latest rate trend: Mortgage and savings rates are down a bit since last week. That picture probably will repeat itself for several weeks unless there's a peace breakthrough in the Middle East. If that happens, expect rates to drop faster.

Robert K. Heady publishes Bank Rate Monitor, 100 Highest Yields and other financial newsletters from his office in North Palm Beach.

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