Savings Account Interest Rate Updates
Still not much action in interest rate land, but here’s another update.
Reward Checking Accounts
These are checking accounts, usually through local credit unions, that pay a very high interest rate if you jump through some hoops each month. However, if you make a mistake you’ll forfeit virtually all your interest for that month, so it can be tricky. But for the very diligent, their rates are still averaging around 3-5% APY usually on balances up to $25,000. A current example is FAB&T Kasasa checking at 3.50% APY on up to $50k, which requires 10 check card purchases each month, a direct deposit/auto-withdrawal, must log into your account once a month, and online statements only.
For more, see my review of rewards checking accounts and also this list of accounts by state. I’d stick with small local credit unions with limited membership eligibility if possible, as the rates tend to be more stable.
Online Savings Accounts Rate Updates
- Everbank is offering 2.51% APY for the first 3 months for new accounts. This rate is higher than any 3-month certificates of deposit currently available.
- ShoreBank Direct is offering 1.95% APY on its online savings account with $1 to open and no monthly fees.
- Ally Bank Online Savings recently raised their “no fine print” savings account rate to 1.50% APY as of 12/8/09. No minimums, no monthly fees.
Certificates of Deposit
As stated above, for 3-months or less go with Everbank. In general, CD rates have been very low, and given how fast rates can rise as compared to how much further they might fall, I don’t see the benefit in locking up for money for a slightly longer period of time. For example, a top 1-Year CD might get you 2% APY, while stretching out to 3 years might bump you up to 2.80% APY, according to CD “auction” site MoneyAisle.
If you are in a high tax bracket and have a 5-6 year horizon, you may also want to research the Vanguard Intermediate-Term Tax-Exempt mutual fund (VWITX). It currently has an average duration of 5.5 years and an SEC yield of 3.01% that is exempt from federal income taxes. In the 35% tax bracket, that is a tax-equivalent yield of ~4.61%. A top 5-year CD from MoneyAisle yields 3.39% APY. VWITX is not FDIC-insured and invests in high-grade municipal bonds, so weigh your options carefully.
Remember, the new $250,000 FDIC & NCUA insurance limits per titled accounts are currently extended through 2013.
Find more in Banking, Deals & Offers | 11/19/09, 4:32am | Trackback
November 19th, 2009 at 7:04 am
What are some techniques people use for quickly and easily reaching the 10+ debit card transactions for rewards checking? I heard someone say that they make ten separate payments to cover their monthly cable bill online. I have Time Warner and that would work for me unless TW prevents this somehow online. Something that I pay already would be preferable to buying ten packs of chewing gum separately at the convenient store each month. My problem is that all my bills are paid by credit card that I pay off every month. Mostly to capitalize on rewards, I haven’t used my debit card for years, as my checking account is just a waypoint for money destined for better places. I assume many here share my situation. Thanks.
November 19th, 2009 at 9:41 am
Personally, I’m still addicted to SmartyPig. They just made a lot of changes and don’t appear to require an automated savings plan anymore (you have the option of choosing “none” for monthly withdraws where before the minimum was $25.00 a month min). Their APY is currently 2.01% and they offer a lot of things other banks don’t. They are a goal oriented bank, reteaching us what we learned as kids and forgot after credit cards began to exist- if you want something, save for it instead of charge.
As opposed to putting your money back in the bank after you’ve reached your “goal” you can chose to use that money by buying a gift card with it through one of the many companies SmartyPig associates with and SP will give you up to a 12% cash boost depending on what company you choose. They explain it better than I do on their most recent blog update:
“Let’s say you need a new living room set, you’ve made an initial deposit of $25 and are putting away $300 a month over twelve months. One year after creating your goal, you’ll have $3,625 and will have earned approximately $25 in interest over the course of that year, bringing the goal balance to $3,650. Now, if you take your savings out on a Macy’s gift card, SmartyPig will give you a cash boost of 12% (nearly $440), bringing your goal plus interest plus boost to $4,090 ? some $465 more than the $3,625 you put away…. In addition, we have added three new recurring contribution options. We still have the monthly option, but we’ve gone ahead and added twice a month, every 14 days, and none.”
November 19th, 2009 at 9:46 am
jonathan,
What’s your current checking set-up? Still with WaMu? or have you updated recently?
November 19th, 2009 at 12:40 pm
i finally bit the bullet and opened a regional rewards checking account a few months ago to earn 4.5%. i always hated the thought of jumping through all of the hoops but in reality it’s actually really easy.
electronic statements? one time setup and done.
1-2 direct deposits OR withdrawals? easy enough.
10-12 purchases a month? i just schedule multiple payments for one of my bills (cable, internet, phone, gas, electricity, whatever). doesn’t take longer than 15 minutes in total.
November 19th, 2009 at 2:55 pm
Is there a limit to the size of these 10-12 purchases? In other words if you are making multiple payments, how many times can you pay for something. My “problem” is that I don’t have a lot of high bills. My highest regular montly bill is my phone/internet bill which comes out to $45 a month. Often my gas or electric is more than that, but they are seasonal. So even a minimum $10 mini-payment wouldn’t be convenient for me. Anybody know what the minimum verizon payment is? Can I set it up to make $1 transfers?
November 19th, 2009 at 5:18 pm
I don’t know why people think rewards checking accounts are a hassle or that they make you jump through hoops. For me, it’s a no-brainer. I make roughly 20-25 debit card transactions per month, have no problem with getting an e-statement and my employer offers direct deposit. Doing things I would normally do anyway allows me to earn a 4% interest rate on my money.
I could understand if they required you to make a certain number of deposits or had minimum transaction amounts.
Even if you don’t meet the requirements one month, the account is usually still free but you don’t get the bonus interest rate for that month. If you meet the requirements the next month, you get the high interest rate again.
November 19th, 2009 at 5:21 pm
I don’t use a “rewards” credit card. Instead, I use my rewards debit cards (I have several accounts) for most of my shopping (I can’t bring myself to use a card for $1 - $2 purchases). Groceries, prescriptions, catfood, cigarettes, coffee, the occasional MickyD’s — it’s easy to use your card at least 10 times per month.
November 19th, 2009 at 6:33 pm
You’ll have to check with the bank offering the rewards checking on the minimum for purchase. Most don’t have any. Some have a minimum per transaction.
November 19th, 2009 at 7:20 pm
To meet my rewards checking requirements I make individual payments to my Verizon cell phone bill online. Verizon will not let you make multiple payments of the same amount in one day, so what I do is make 12 separate payments on the same day that are 1 cent more than the previous one ($1.01, $1.02, $1.03, … $1.12). You can process all 12 in less than 10 minutes and when I look at the account history of my rewards checking it is extremely easy to count up all the transactions to make sure I meet the requirement.
November 19th, 2009 at 8:42 pm
Thanks Kevin. Very helpful. I’m going to do this. Anybody have a favorite site they use for this? My preference is a site that is easy to use and is unlikely to go away in 6 months.
Believe it or not, if it wasn’t for online payments I wouldn’t be able to use a debit card 10 times a month. I just don’t buy that much stuff, and when I shop I buy in bulk, and I don’t have any daily money consuming habits like buying coffee.
November 20th, 2009 at 4:32 am
I use CountyBank’s Kasasa Cash (ecountybank.com, 4.65% APR). It is basically a vat to hold my emergency fund, direct deposits, auto pay credit cards (and other billers that only allow ACH payments), and pay Comcast (in 10 small chunks to reach the minimum debit card transaction). Thus far, I’ve been pleased with this setup. CountyBank has no residency restrictions and was easy to setup.
I am in the process of switching my discretionary spending (primary banking account for ATM withdrawals, etc.) & credit card accounts to Schwab. Soon, all my card transactions will be through their 2% cash back Invest First card.
So really, it’s not hard. Schwab’s Investor Checking account also gets .75% which is better than most mainstream brick & mortar banks. By month’s end, I’ll no longer have a traditional brick & mortar bank account.
Oh yea, and I use Yodlee for account/transaction aggregation. Someone asked how to quickly view transactions. CountyBank shows qualifying transactions on their site starting with “POS” for Point of Sale, so it’s really easy to count them up. Even easier when their all clustered on one date from paying my Comcast bill.
November 20th, 2009 at 12:57 pm
Using your debit card over the internet is technically a visa credit transaction as it runs over the visa network. To be a “Debit” transaction you need to type in your pin instead of signing. Those transaction run over a different network and are usually cheaper for the merchant. Do they still count to meeting minimum requirement?
November 20th, 2009 at 3:43 pm
to get your 10 transactions:
go to self serve and rings some items up separately.
when getting gas, make 2 transactions instead of 1.
mp3 music files can be bought over the internet for .99/file.
November 21st, 2009 at 9:15 am
A little off topic but… Speaking of multiple small transactions, the Chase Rewards Visa card recently dialed back the rewards (no more 3% on top 3 categories) but they did add a bonus of 10 cents reward per transaction. So, for example, if you filled your gas tank with numerous transactions of $1 each, you would in effect get 10% off your tank of gas.
November 21st, 2009 at 12:48 pm
Nice catch Warren. I might have to try that. I wonder though if they’re not gonna quickly find about it and close the loophole
November 22nd, 2009 at 10:01 am
I had the same concern that “Bill” had. When you don’t input pin on your debit card transaction, its essentially going thru Visa network. Do they still count towards the needed number of transaction. Can Kevin or someone pls confirm this. Kevin, during the past months, were you seeing your interest amount kick in even with the above “over the internet” transaction of your debit card. Your confirmation will help us all.
November 22nd, 2009 at 3:38 pm
debit transactions do not count.
visa transations do.
November 22nd, 2009 at 8:30 pm
CountyBank counts any point of sale (POS) purchase, debit or credit. Just as long as you use your card. The bank will specify if they have stipulations (usually telling you you need to sign and NOT use your pin so it’s charged over the Visa/Mastercard network). CountyBank has no such stipulations as far as I know.
November 23rd, 2009 at 12:56 pm
I’ve had 2 different rewards checking accounts, and I have only done VISA transactions and have always gotten the rewards interest. But check with the bank you plan on opening an account with.
FYI, thru Verizon online there is an option to enter your PIN to make it a debit transaction but I never use that options.
For security reasons, I would never use a rewards checking account if I had to do only debit transactions. I was a victim of identify theft this summer when a credit card number was stolen at a local gas station, thankfully I didn’t use a debit card or else they would have had my PIN too and would have cleared out my banking account.
November 24th, 2009 at 2:32 pm
BTW, GREAT tips above, thanks to all!
Back to the online savings accounts.
We’ve used ING for years, however their rates have fallen significantly & I’ve been shopping around.
My dear technophobe husband doesn’t use a computer and ING sends statements via snail mail for free. Ally charges something like $2 a page. So, if something should happen to me, he wouldn’t have a clue, even though I have the numbers written down. But hey, he does all the cooking so I can’t complain.
So best to check for small stuff like that may make a difference when shopping around for any online account.
November 24th, 2009 at 2:39 pm
Many brick & mortar banks that offer high interest checking have electronic statements as one of their requirements. I know, CountyBank does, as do all the other Kasasa Cash account participating banks (kasasa.com). However, you can print your own statements each month for filing/records keeping purposes.
November 24th, 2009 at 4:08 pm
ShoreBank has one of the higher rates among true no-minimum accounts, but it’s probably the WaMu effect. Bauer Financial has ShoreBank listed at Zero Stars:
http://www.bauerfinancial.com/btc_ratings.asp
They might go under soon.