They say everything in life is negotiable. So, with that in mind, I decided to see just how far I could get trying to negotiate a better rate at the bank.

To start, I had some money that I wanted to keep safe over the next 12 to 18 months. That meant no stock market or other risky investment. Before approaching banks, I took a look at the best online rates to serve as a benchmark and a negotiating lever. I also felt a bit pessimistic. Because banks are awash in cash following the financial crisis, now is a particularly difficult time to ask them for extra yield or perks. But I wanted to try.

As a first step, I contacted several banks via media query to see if they wanted to talk about negotiating with customers. Charlie Crawford, CEO & Chairman of Private Bank of Buckhead provided some useful insight. He told me that:

“Consumers should know that most financial institutions, and particularly those with a high-touch service model, are looking for a "total relationship;" that is, your bank wants to hold your accounts and help you with other products, but it also wants an opportunity to lend you money, whether that is through an SBA or other business loan or for an automobile or home loan. Rate shoppers who have a CD at one bank, a checking account at another and a mortgage at yet another may not actually save money because they are not taking advantage of a *total banking relationship* in which a banker who actually knows them tailors a menu of services just for them and works with the client to ensure a "win" for all parties on an ongoing basis. If a banker can work with a client on that total relationship, they may be more apt to waive fees wherever they can.”

In other words, the more business you bring a bank, the more they will reward you. This is called relationship banking.

According to Mr. Crawford, “there is room to negotiate with a bank if rate-shopping on one product is not your ultimate goal. But if you are just trying to get the best rate on one product (say, a CD) without looking at the big picture - the total-banking relationship I talked about - a bank likely will not be able to work with you on fees and such.”

Testing Negotiation Out in the Field

As a second step, I wanted to take the money I wished to deposit, and shop it around to see what banks would be willing to pay. I visited three banks –a small community bank, a medium sized regional bank, and a mega-bank.

For each of these banks I told them I had money to deposit, I wanted to keep it safe for 12 to 18 months, and that I had already researched rates for the online banks.

Community Bank

The community bank was eager for my business and thought that a special 15 month CD would be the right product. The CD rate, although high for brick-and-mortar standards, was significantly below some of the best online savings rates, nevermind the top CD rates. I brought this up and asked if they would be willing to negotiate the rate. I also told her I had a personal account which I’d be willing to move (true) and a business account (true). She first tried to convince me that opening an online account was not the best option for me because I didn’t have access to my money. For some people this might be a valid concern but I am comfortable online and don’t mind sending my cash into cyberspace. Then, she did tell me that if I deposited enough money and brought my personal and business checking accounts over, she could get her regional manager to discuss the rate. Bingo. I didn’t want to escalate the conversation yet, since I was still in research mode but at least I knew there was an opportunity to negotiate.

Overall, speaking with her was a very pleasant experience and I appreciated her willingness to entertain a negotiation based on what I brought to the table.

Medium Sized Bank

The medium sized regional bank could not compete in any way with the online rates. The banker made a half hearted effort to convince me that a local bank was better than online. She told me that if I wanted to get an “online like” rate I would need to speak to their investment advisor. Of course, investments usually mean a potential for loss and so I was not interested in that. No negotiation. She did try to sell me a checking account and home equity in the process though.

Mega-Bank

I walked into the mega-bank, sat down with the Assistant Branch Manager and told her my story. The bank’s rates were extremely low. I told her the online rates and she smiled and told me that they can’t come close. Game over. I asked if they negotiate – no. I told her I’d be willing to consider bringing them more business – no. She was very polite but it was clear that nothing I could do was going to get me a higher rate.

Bottom Line: Banks aren’t desperate for your cash so they are not eager to negotiate. They do want your lending and checking business so that is the leverage you have. And based on my three bank sample, the smaller banks seem more willing to negotiate than the bigger banks. The mega-banks – forget about it.

Have you negotiated successfully with a bank? Do you have any useful tactics? If so, please help the community and share them below.

• Find the best savings account rates

Savings and CD rates were mostly flat this past week with the top rates holding.

Savings Rates

Average rates remained at 1.34% APY. Southern Community Bank continues to have the highest non-promotional ate at 1.75% APY. For promotional rates, Everbank remains on top with their 3-month introductory bonus rate of 2.25% APY. After the three-month period, the rate drops down to 1.26% APY for a blended one year APY of 1.51% APY.

CD Rates

The average 1-year CD also remained steady at 1.57% APY. First City Bank continues to hold the top spot with a 1.80% APY CD. First City Bank is in bad financial shape and has been operating under a FDIC Cease and Desist Order since 10/09. Tennessee Commerce Bank maintained the second spot at 1.70% APY.

The average 3-year CD rate is the only average to drop and it fell from 2.45% APY to 2.43% APY. The top spot continues to be occupied by USAA Federal Savings Bank, which offers a 2.65% APY CD with a minimum deposit of $175,000. The next highest rate is Acacia Federal Savings at 2.50% APY and a $500 minimum deposit.

The average 5-year CD rate remained steady this week at 3.12% APY after dropping from 3.17% APY two weeks ago. The average is now closing in on the 3% mark.

USAA continues to have the top rate at 3.31% APY. Everbank which holds the second highest rate dropped from 3.30% APY to 3.25% APY. Two weeks ago Everbank was offering the same CD for 3.39% APY.

The spread between savings and 3-year CD rates dropped slightly and now stands at 1.09, from from a high of 1.24 in March.. While savings rates have continued to come down, 3-year CD rates are coming down even faster. The ratio between 1-year CDs and 5-year CDs has remained steady over the past month and appears to have topped off. Expect 3-year CD rates to fall further to bring this ratio down.

The Fed released their FOMC statement yesterday and it contained the phrase we've become accustomed to: "...low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period."

That means that savings and cd rates will continue to offer rock-bottom rates at least through 2010 and perhaps beyond. Indeed, rates continue to decline even as the economy seems to be sputtering to life. So, what's an income oriented investor going to do? I'd recommend going out a bit longer with a portion of your money to perhaps a 3 or even 4 year CD. Rates have been low for almost two years and many investors have stayed short waiting for inflation and rates to pick up. Hasn't happened and it may not happen for some time. Indeed, bond vigilantes seem to have given up on the US and are conceding rates may stay down for some time.

I'd also look at municipal bonds. Yields are way down because of the flood of money into munis but the composite muni rate for a 10-year bond is 4.56%, after tax advantages are factored in.

Many of my friends have begun to buy dividend stocks, which can generate 5-6% per year and are more tax advantaged that deposit income. And if the stock market keeps going up, you can get the capital appreciation also. Sean Riskowitz lists many good dividend stocks worth taking a look at.

Of course, none of those investments come with the security of FDIC insurance. If you do want to stash your cash in a bank for a period of time, then check out the savings and cd rate rate tables to be sure you are getting the highest rate on your money.

The Fed's not going to help you out so you need to help yourself.

Below is the full text of the FOMC statement:

Information received since the Federal Open Market Committee met in March suggests that economic activity has continued to strengthen and that the labor market is beginning to improve. Growth in household spending has picked up recently but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software has risen significantly; however, investment in nonresidential structures is declining and employers remain reluctant to add to payrolls. Housing starts have edged up but remain at a depressed level. While bank lending continues to contract, financial market conditions remain supportive of economic growth. Although the pace of economic recovery is likely to be moderate for a time, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability.

With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to be subdued for some time.

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability.

In light of improved functioning of financial markets, the Federal Reserve has closed all but one of the special liquidity facilities that it created to support markets during the crisis. The only remaining such program, the Term Asset-Backed Securities Loan Facility, is scheduled to close on June 30 for loans backed by new-issue commercial mortgage-backed securities; it closed on March 31 for loans backed by all other types of collateral.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Donald L. Kohn; Sandra Pianalto; Eric S. Rosengren; Daniel K. Tarullo; and Kevin M. Warsh. Voting against the policy action was Thomas M. Hoenig, who believed that continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted because it could lead to a build-up of future imbalances and increase risks to longer run macroeconomic and financial stability, while limiting the Committee’s flexibility to begin raising rates modestly.