It has been two months since I reported that Eloan broke into the online savings market with a super-competitive offer of 5.50% APY for savings account and 5.75% for 2-year CDs. If attracting as many deposits as possible is its goal, Eloan is apparently very successful. According to its own press release, in the first five weeks, it has attracted $754 million deposits in 18,132 accounts.
The fact that no other bank has attempted to match the offer offers enough evidence that Eloan probably overpaid for the hot money. Actually, in the last few weeks, I have noticed that Eloan has been gradually backpedaling its compelling CD offers. In fact, the original 5-year CD rate of 5.75% APY has been dialed down at least three times to 5.10% APY as of today. Eloan's 6-month and 1-year CD offerings only yield a bit more at 5.20% APY. It is only a matter of time before Eloan recognizes it has enough money and brings the rate on the savings account back to normal.
(Disclosure: I have to say I was quite lucky to lock in $35,000 in 5.75%-APY 2-year CDs in early November. I also have another $30,000 in Eloan's savings account.)