Given the paltry rates banks are paying on savings accounts, it is no wonder America's savings rate is so low. But Bank of New York has introduced a new product that bolsters the return on money deposited with it by tying those deposits to money market mutual funds.

The product enables savers to reap returns in the five to six percent range as opposed to the two to four percent currently paid on savings accounts.

The new product is called CheckInvest Select. And while it has stiff minimum requirements, it does offer richer rewards to savers.

To open the account, a saver must deposit a minimum of $5000 in a no-interest checking account. Each night, all funds in excess of the $5000 are "swept" into one of six money market mutual funds affiliated with the bank where they can earn the higher returns offered by those funds.

The six funds include two third-party funds, a bank proprietary fund and three triple-tax exempt funds, one for each state within the financial institution's customer reach - New York, New Jersey and Connecticut.

As checks are written against the checking account, money is swept back into the account to cover those checks. A combined total of $15,000 must be kept in the checking and money market fund to avoid a $15 per month fee.

The product is aimed at "affluent customers who want to maximize their earnings but want a relationship with a local institution that they trust," said Leonard Blaifeder, vice president for marketing for the bank. The product addresses a gap the institution found in its offerings, he said.

"Savings accounts have not gone up very much, and our customers were requesting higher rates," he said. "By partnering with mutual funds, this was a way to get them higher returns."

While CheckInvest select may be new to New York Life's consumer customers, it is not new for the bank's business clients. A similar product called CheckInvest has been offered by the bank to small and mid-sized business for several years.

"The business sweep account area is red hot right now," said Peter Crane, vice president and managing editor of iMoneyNet, of Framingham, Mass., a publisher that tracks money market fund rates. "It's been one of the fastest growing segments for banks and money market funds over the last three to five years."

One reason the accounts have been popular is that federal law prohibits banks from paying interest on commercial checking accounts, he said. The sweep account is a method of sidestepping that prohibition.

On the other hand, banks can pay interest on consumer checking accounts.

"That reduced the incentive to do a sweep product on the consumer side of the business," Crane said.

"Bank of New York has been extremely innovative in finding ways to bring assets into its money funds and into the money funds of its partners," he said. "This is an extension of its expertise into the consumer area. They have the sweep infrastructure built so they're trying to leverage that technology into another business."

The bank also benefits from the product by sweeping deposits into the money market funds, Crane said. Bank deposits must be backed by reserves. The larger the desposits, the larger the reserves that the bank must pay into the FDIC fund, the pool of money used to insure deposits when a bank fails. By sweeping money into the money market funds, the bank sweeps them off the books as deposits and lowers its reserve requirements.

The New York Life product is not unique but the only other comparable consumer product Crane said he was aware of was that of First Union Bank of Charlotte, N.C.

Crane expects more new products to be introduced that combine banking services and money market mutual funds.

"We'll see more innovations like what the Bank of New York has done going forward, even though the ban on corporate checking-account interest is expected to be lifted within a couple of years," Crane said.

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