Issue of Interest.

There are so many little ways that banks manage interest rates on savings products. A nip here, a nip there. It's pennies to you and millions to them.

My example du jour is Bank One Corp., which operates in 11 states and has the ill luck to have as a customer Joseph Belth, insurance professor emeritus at Indiana University in Bloomington. Belth is the scourge of the insurance industry. His newsletter, "The Insurance Forum," publicizes many an industry misdeed.

Belth keeps a "market index" savings account at Bank One. Depositors currently earn 2 percent on amounts up to $15,000. But on larger amounts, the bank pays rates equal to the rate on the average money market mutual fund.

The average money-fund rate is computed weekly by LBC Financial Data Inc. (currently, around 5 percent). You would think that's cut and dried. Whatever IBC publishes, Bank One pays.

But there are two ways of looking at interest rates on savings. There's the stated rate and the annual percentage yield (APY). The APY is a little higher, because it compounds the stated rate. For example, a one-year certificate of deposit, compounded daily at 5 percent, has an APY of 5.13 percent.

Until March 1999, Bank One was matching IBC's stated rate, so a saver's actual, compounded earnings were a little higher. Since March, however, Bank One has been paying less. After compounding, the depositors' rate will equal the IBC stated rate. So savers are getting a little less than they otherwise would.

Belth figures that, over about 10 months, a depositor with a $60,000 account received about $50 less in interest. "Peanuts," you might say. But would you like $50 lifted out of your pocket without being told?

Depositors were indeed told, on their statements, says Edward Snelz, Bank One's manager for savings deposit products. He's right - but they got the message in an indecipherable paragraph of legalese. I would never have understood it myself.

Snelz says that the language meets all state and federal disclosure requirements and resembles the bank's previous rate disclosures. To me, this shows that disclosure language needs to be reformed.