The Credit Power Index
Every deposit or loan that takes place at a bank can be boiled down to a simple transaction: One party takes temporary custody of the other party’s money, and pays interest for the privilege. On the deposit side, consumers leave their money in the bank for a period of time and receive an agreed-upon amount of interest in exchange. On the loan side, banks lend consumers money for a period of time, and in exchange the consumers pay interest until they’ve returned the original amount.
Unfortunately, the balance of power in these transactions doesn’t favor the consumer, and the new Credit Power Index quantifies the wide gap between the interest that banks demand on loans and what they offer on deposits. The index is calculated by comparing the differences between a predetermined set of deposit and loan products; the higher the index, the more consumers are getting squeezed by their bank.
The national average for the index currently stands at 23.74, a significant increase from four years ago, which suggests that the interest rate climate for consumers has become significantly worse during the past few years. To see where consumers have fared particularly poorly, we’ve rounded up the worst cities to bank.
One caveat: Banks that don’t offer every product included in the index – personal unsecured loans, home equity loans, new auto loans, adjustable-rate mortgages and 12-, 36-, 48-, and 60-month certificates of deposit – are excluded from the final list. As a result, the calculation of a city’s Credit Power Index may exclude data from some of its banks.
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#10: Conyers, Ga.Credit Power Index: 27.144
The banking scene here is dominated by branches of larger regional banks like SunTrust and Branch Banking & Trust Company. And while those institutions offer reasonable rates on mortgages and home equity loans, they’ve also joined the national trend of miniscule CD rates – the best you’ll do in Conyers is 0.2% on a 12-month certificate.
Photo Credit: John Trainor
#9: Pikeville, Ky.Credit Power Index: 27.261
The city of Pikeville is not without its bright spots – for instance, the 1.11% rate you can get on a 12-month CD at Community Trust Bank, or 3.625% for an adjustable-rate mortgage at Branch Banking & Trust Company. But residents can also expect steep rates on unsecured loans, and should look elsewhere for financing on a new car.
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#8 : Macon, Ga.Credit Power Index: 27.723
Want a CD in Macon? Don’t bother. The best rate you’ll get for a 12-month CD is 0.401% at Capital City Bank; the other banks included in RateWatch’s survey of the area offer just 0.2%. This mid-sized city in central Georgia also has nothing to write home about on the loan front, earning it a place in the bottom 10.
Photo Credit: Josh Hallett
#7: Omaha, Neb.Credit Power Index: 27.935
If you want to know why the American consumer’s credit power is on the wane, look no further than Omaha, Neb. While the city’s banks have fairly reasonable loan rates, their deposit rates are abysmal – the National Bank of Omaha offers just 0.05% interest on a 12-month CD, and US Bank, which has a significant presence in the city, isn’t much better at 0.15%. In this way Omaha is a microcosm of the banking sector on a national level, as rock-bottom deposit rates have been the primary engine of declining credit power.
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#6: Zanesville, OhioCredit Power Index: 28.161
There are worse places to get a CD than Zanesville, a small town in Ohio east of Columbus, but you might want to check out the surrounding communities if it’s a loan you’re looking for. Personal unsecured loans are through the roof, home equity loans are on the high side, and even adjustable rate mortgages will cost you a pretty penny in Zanesville.
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#5: Martinsburg, W.Va.Credit Power Index: 28.394
The small West Virginia city of Martinsburg doesn’t impress with its banks’ CD rates, though few cities do. But the local banks there also tend to charge interest on loans above the national average, with poor rates on new auto loans and adjustable rate mortgages in particular.
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#4: Harrisonburg, Va.Credit Power Index: 28.568
The South as a region outperforms the national average when it comes to consumers’ banking power, but evidently someone forgot to inform the banks in this small city in the Shenandoah Valley. Larger banks like SunTrust hurt the town’s ranking with poor rates on home equity loans, while the town’s smaller institutions lag behind on auto and home loans.
Photo Credit: Andrew Bain
#3: London, Ky.Credit Power Index: 28.699
London’s deposit rates aren’t too out of line with the rest of the country’s, but loan rates in this tiny Kentucky town are fairly high in comparison to other cities. High rates on personal unsecured loans make credit cards look reasonable, and if you’re forced to go to the bank to finance your new car you’ll find interest rates higher than the national average.
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#2 Corbin, Ky.Credit Power Index: 28.682
Want to get a loan? Don’t go to Corbin, another small Kentucky town where (relatively) good CD rates are balanced out by higher-than-expected rates on most of the relevant loan products. The average rate on an adjustable-rate mortgage here is 5.23% – considerably higher than the 3.94% national average as of December 2010.
Photo Credit: Brent Moore
The Worst Place to Bank in America: PhoenixCredit Power Index: 30.334
Many states fell on the wrong side of the Credit Power Index’s national average, but Arizona stands alone as the worst state to bank. It’s no surprise, then, that its largest city claims the title of the city with the worst interest rate climate. Deposit rates are in line with the national average, but home equity loans are lousy across the board, with Compass Bank one of the worst offenders at 9.4% – well above the national average of 6.57%.
Photo Credit: Ken Lund
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