After hearing the news about NetBank and Coast Bank this week, I decided to look up their safety ratings at Bankrate.com. Sure enough both were rated with one star, the lowest possible rating available. While I always check out the rating of a bank or credit union before I open an account with one, recent events made me start to wonder about just how many poorly rated banks are out there. Now, I know that there are other tools that might have a different set of rankings, but Bankrate’s are easy to find and easy to read. You can access the search page from here.

Well this is what I found:

  • In Iowa (where I live), there are 6 banks/thrifts and 5 credit unions that have only a 1 star rating.
  • In California, there is 1 bank and 21 credit unions with a rating of 1 star.
  • Of the 61 banks listed in Bankrate’s top yields for savings and MMAs, 2 had ratings of 1 star (NetBank is one of the two) and 6 had a rating of 2 stars. This means that slightly more than 10% of the highest yielding savings and money market accounts have below average safety ratings.

It may be worth your while to check out your bank’s rating. While ratings can change, and subversive parties can cook the books, it still doesn’t hurt to examine the financial footing of your banking institution given the data available. Given how many safe banks there are, even in the high yield arena, I can’t really see a reason to bank at an unsound institution. Can you?

Hat tip to the HousingBubbleBlog Bits Bucket for the leads.