I have a checking/depository account with Chase, in the city where I live. It pays practically nothing in interest. In a neighboring state I keep a checking account which I keep healthy by shifting money from Chase. That account has no fees at all, and pays me 5.04 percent each month, up to a balance of $25K. It comes to just about $100 per month, which is added to my balance. With Chase, I can't get even that much with a CD!

I asked my Chase banker about it, and his explanation was that only small banks can make such an offer, and Chase is too large for that.

Doesn't make much sense to me. Any thoughts?

Deposits are liabilities on a commercial bank's balance sheet. They are, in effect, "loans" made to a bank by its customers.

Like any other borrowers, those who are the most credit-worthy pay the lowest interest rates. Thus Chase, a well-heeled bank, pays less than another bank perceived to be less stable.

If Chase management determines that it needs to increase deposits to make more loans or to meet reserve requirements, then it might increase the interest rates on deposit accounts. For now, apparently it has the deposits it needs to conduct business.

It does not make sense for Chase to increase its expenses simply to match someone else's rate if it has enough money on deposit already.

In your own personal life, would you offer to pay your mortgage company a higher rate of interest simply to match that of a borrower with lesser credit? Of course not! And neither will Chase.

I understand, up to a point. It never occurred to me that a bank might have all the deposits it needs. Are you also saying that they have made all the loans they want? Why do they continue to advertise?

Now I'm thinking they wouldn't care at all if I did all my banking somewhere else. True?