Why You Might Want to Avoid Banks Owned by Whites when Getting a CD


NEW YORK (MainStreet) — Here's an unexpected guide to helping you find the right place to buy your CDs: a recent study conducted by the University of Wisconsin-Whitewater found that banks owned by minorities had better CD rates than those owned by whites.

The study was conducted over a period of years between 2002 and 2011 and included several thousand savings and commercial banks throughout the United States. On average, black-owned banks paid the best rates, 0.489% higher than white-owned ones. Coming in second were those owned by people categorized as "other" (including Latino-, female- and Native American-owned banks) with rates at 0.354% higher. Banks owned by Asians paid 0.308% higher interest on CDs than white-owned banks.

Russ Kashian, one of the authors of the study and an economics professor at UW-Whitewater, attributes the difference in interest rates to corporate values. "These are banks that proactively pursue deposits in order to serve their communities," he said in a press release about the study. Further, these are businesses that tend to operate in lower-income areas with less capital, meaning that they have to pursue investing aggressively.

While this means lower profit margins for the banks, it also means a bigger investment in the community. Kashian states that these banks are "playing an important role in getting minorities access to capital." In doing so, they are reducing reliance upon more predatory forms of banking services such as payday loans, check-chasing services and high-interest lending. On top of investment opportunities, these banks also provide employment in the areas where they operate.

Kashian and his co-author, Richard McGregory Jr., will present the study to the National Bankers Association this coming October. It was previously published in The Review of Black Political Economy in the June 2013 issue.


--Written by Nicholas Pell for MainStreet

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