BBVA $250 Easy Bank Bonus: $200 Checking + $50 Savings (Back Again)

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards and may receive a commission. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

$250 bonus is back. In the current low interest rate world, easy bank bonuses have become more attractive way to boost your safe interest income. BBVA has brought back their popular $250 bonus promotion for a limited-time.

  • $200 bonus for opening a new BBVA Free Checking account between April 12-26 and receive a qualifying direct deposit of $500+ by June 30th, 2021.
  • Additional $50 bonus by adding a new BBVA Savings account between April 12-26 and having a savings balance of at least $1,000 on June 30th, 2021.

If you want the entire $250 bonus, be sure to check the boxes for both offers on the promotion landing page. You must keep the account open for at least 12 months, otherwise they may claw back the bonus. You must be a new BBVA consumer checking customer who has not had a BBVA consumer checking account open within the last 36 months or closed due to negative balance to be eligible for the bonus. The promo code should be automatically applied, but it is SBOL2021. Note the following state restrictions:

For accounts opened online, eligible accounts include BBVA Free Checking and BBVA Easy Checking. BBVA Free Checking and Easy Checking are only available in Alabama, Arizona, California, Colorado, Florida, New Mexico, and Texas.

BBVA Free Checking account details:

  • No monthly service charge. No ongoing minimum balance.
  • Minimum opening deposit is $25.
  • No ATM fees at BBVA USA ATMs.
  • Free online and paper statements.

Savings account bonus details:

You must first meet stipulations for the $200 Checking Bonus to be eligible for the $50 Savings Bonus. The savings account must be opened at the same time as the checking account through this landing page using the “Open Bundle Now Button”.

Online Savings account details:

  • No monthly service charge. No ongoing minimum balance.
  • Minimum opening deposit is $25.
  • Currently interest rate is 0.01% APY.
  • You will automatically receive a paper account statement by mail for a fee of $3 per month. However, you can opt for free electronic account statements and eliminate the $3 Paper Statement Fee when you turn off paper statements through Online Banking. Don’t forget to opt out!

The good thing is that this bonus doesn’t require a lot of money to be tied up – you need to switch over a single direct deposit of $500+ by the end of June 2021 and move over $1,000 in the savings account by the end of June 2021. There are no ongoing monthly fees or minimum balances, it can be only entirely online, and the timeline is reasonable. For comparison, you’d have to keep $50,000 at 0.50% APY for an entire 12 months to get $250 in interest.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

OnJuno Review: 2.15% Bonus Rate on $5k/$30k, 5% Cash Back on Selected Brands

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards and may receive a commission. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

Updated. OnJuno is a new fintech banking app with the notable features of 2.15% bonus rate on up to $30,000 and also 5% cash back on select merchants. They partner with Evolve Bank and Trust for FDIC insurance. Here’s my updated review after a few months of use. Here are the basics of their two options:

  • Basic tier. 2.15% Bonus Rate on up to a $5,000 checking balance. 5% cash back on up to $500 a year in debit card purchases ($25 max). 1 free out-of-network ATM withdrawal per month. No monthly fee.
  • Metal tier. 2.15% Bonus Rate on up to a $30,000 checking balance. 5% cash back on up to $3,000 a year in debit card purchases ($150 max). 3 free out-of-network ATM withdrawals per month. $9.99 monthly fee.

OnJuno is providing all new sign-ups 6 months of Metal tier for free if you set up direct deposit. The bonus rate drops to 0.25% on balances above $5,000 for Basic and $30,000 for Metal, with a total limit up to $100,000.

Sign-up process. The sign-up process was completed 100% online and mostly fine, although I had to spend some extra time carefully taking smartphone photos of the back and front of my driver’s license. My pictures were rejected for being too dark, too much glare, too fuzzy, etc.

Immigrant-friendly. According to this American Banker article, OnJuno intends to target Asian immigrants who like to build up savings and then remit some of it internationally to their families abroad. You only need a Social Security number and state-issued ID to join.

Bank-to-bank transfers. OnJuno uses the Plaid service to link with external bank accounts for funding and free ACH transfers (both deposits and withdrawals). They also provide you with the full account number and routing number, which you can use to connect with other banks like Ally, Marcus, CapOne 360, etc. The routing number is 084106768 which is confirmed as that of Evolve Bank & Trust. I was able to make a deposit and withdrawal initiated at Ally without issue.

Bonus rate, not APY. You may notice that they don’t use “APY” and instead say “bonus rate”. Here’s their reason:

The 2.15% Bonus Rate is offered entirely by OnJuno and is not interest provided by Evolve Bank and Trust. The bonus rate You earn will be credited to Your account at the beginning of each month. Your funds begin generating a bonus rate once they are available on Your OnJuno Checking Account. Please note that OnJuno reserves the right to cancel, remove, and change this bonus at any time. OnJuno also reserves the rights, in sole discretion, to refuse this bonus without cause, reason, and notice.

I’ve been getting my bonus rate every month without issue, but this is the first time I’ve seen this language. Your interest is still shown on a 1099-INT at the end of the year.

5% cash back merchant list. You can choose 5 from the following list of brands. No Costco (sad face).

  • Amazon, Target, Best Buy, Walmart, Netflix, Amazon Prime, Disney+, Spotify, Headspace, Calm, Whole Foods, Walgreens, Trader Joe’s, CVS, Uber Eats, Grubhub, Postmates, Doordash, Starbucks, Dunkin Donuts, Blue Bottle Coffee, In N Out, Taco Bell, Wendy’s, Chick-fil-A, Uber, Lyft, and AirBNB.

Here are my picks, as I already have the Amazon Prime credit card with 5% back at Amazon and Whole Foods.

Additional features.

  • No minimum balance requirements for either Free or Metal tiers.
  • Fee-free access to both Allpoint and Moneypass ATM networks (85,000+ locations).
  • Free debit Mastercard.

Instant virtual cards. You can create “virtual” 16-digit debit card numbers in the app, which are different than your physical card and you can “lock” them at any time. This may be useful for fraud prevention and perhaps even pesky trial offers.

Apple and Google apps. OnJuno launched their app in February 2021.

No mobile check deposit. I have installed the app, but they do not have mobile check deposit as of April 2021.

Customer service. You can contact them via phone at 415-969-5775 (9am to 6pm Pacific) or online message (they replied to me within a few hours).

My quick take. I signed up and I’ll definitely take advantage of the higher rate for 6 months free on $30,000 as that is a pretty high limit, but paying the $10/month going forward will depend on them maintaining a high interest rate. The free tier is also a nice gesture, but even 2.15% on the full $5,000 only adds up to about $7 a month in extra interest over Ally Savings at 0.50%. If the rate drops, it may not be worth the extra effort. The benefit from the 5% cash back will depend on your personal spending patterns and existing credit card rewards. Let’s hope that rate stays high.

Bottom line. OnJuno has launched as a fintech checking account paying a 2.15% bonus rate on up to $30,000 and also 5% cash back at select merchants on debit card purchases. New customers that set up a direct deposit can get Metal tier perks for 6 months free (usually $10 a month). FDIC-insurance from Evolve Bank and Trust.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Best Interest Rates on Cash – April 2021

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards and may receive a commission. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

Here’s my monthly roundup of the best interest rates on cash as of April 2021, roughly sorted from shortest to longest maturities. There are many lesser-known opportunities to improve your yield while keeping your principal “safe” (FDIC-insured or equivalent). Check out my Ultimate Rate-Chaser Calculator to see how much extra interest you’d earn by moving money between accounts. Rates listed are available to everyone nationwide. Rates checked as of 4/5/2021.

Fintech accounts
Available only to individual investors, fintech accounts oftentimes pay higher-than-market rates in order to achieve high short-term growth (often using venture capital). I define “fintech” as a software layer on top of a different bank’s FDIC insurance. Although I do use some of these after doing my own due diligence, read about the Beam app for potential pitfalls and best practices.

  • 3% APY on up to $100,000. The top rate is 3% APY for April through June 2021, and they have not indicated any upcoming rate drop. HM Bradley requires a recurring direct deposit every month and a savings rate of at least 20%. See my HM Bradley review.
  • 3% APY on 10% of direct deposits + 1% APY on $5,000. One Finance lets you earn 3% APY on “auto-save” deposits (up to 10% of your direct deposit, up to $1,000 per month). Separately, they also pay 1% APY on up to another $25,000 with direct deposit. New $50 bonus via referral. See my One Finance review.
  • 3% APY on up to $15,000. Porte requires a one-time direct deposit of $1,000+ to open a savings account. $50 bonus via referral. See my Porte review.
  • 2.15% APY on up to $5k/$30k. Limited-time offer of free membership to their higher balance tier for 6 months with direct deposit. See my OnJuno review.

High-yield savings accounts
While the huge megabanks pay essentially no interest, it’s easy to open a new “piggy-back” savings account and simply move some funds over from your existing checking account. The interest rates on savings accounts can drop at any time, so I list the top rates as well as competitive rates from banks with a history of competitive rates. Some banks will bait you with a temporary top rate and then lower the rates in the hopes that you are too lazy to leave.

  • 1.25% APY on up to $250k. ZYNLO is a division of PeoplesBank with its own FDIC certificate. It also offers 100% roundup matching on debit card purchases if you maintain a $3,000 balance. See my ZYNLO review.
  • T-Mobile Money is still at 1.00% APY with no minimum balance requirements. The main focus is on the 4% APY on your first $3,000 of balances as a qualifying T-mobile customer plus other hoops, but the lesser-known perk is the 1% APY for everyone. Thanks to the readers who helped me understand this. There are several other established high-yield savings accounts at closer to 0.50% APY.

Short-term guaranteed rates (1 year and under)
A common question is what to do with a big pile of cash that you’re waiting to deploy shortly (just sold your house, just sold your business, legal settlement, inheritance). My usual advice is to keep things simple and take your time. If not a savings account, then put it in a flexible short-term CD under the FDIC limits until you have a plan.

  • No Penalty CDs offer a fixed interest rate that can never go down, but you can still take out your money (once) without any fees if you want to use it elsewhere. Marcus has a 7-month No Penalty CD at 0.45% APY with a $500 minimum deposit. AARP members can get an 8-month CD at 0.55% APY. Ally Bank has a 11-month No Penalty CD at 0.50% APY for all balance tiers. CIT Bank has a 11-month No Penalty CD at 0.30% APY with a $1,000 minimum deposit. You may wish to open multiple CDs in smaller increments for more flexibility.
  • Lafayette Federal Credit Union has a 12-month CD at 0.80% APY ($500 min). Early withdrawal penalty is 6 months of interest. Anyone can join this credit union via partner organization ($10 one-time fee).

Money market mutual funds + Ultra-short bond ETFs
Normally, I would say to watch out for brokerage firms that pay out very little interest on their default cash sweep funds (and keep the difference for themselves). However, money market fund rates are very low across the board right now. Ultra-short bond funds are another possible alternative, but they are NOT FDIC-insured and may experience short-term losses in extreme cases. I personally don’t think the risk is worth the tiny yield at this time.

  • The default sweep option is the Vanguard Federal Money Market Fund which has an SEC yield of 0.01%. Vanguard Cash Reserves Federal Money Market Fund (formerly Prime Money Market) currently pays 0.01% SEC yield.
  • Vanguard Ultra-Short-Term Bond Fund currently pays 0.42% SEC yield ($3,000 min) and 0.52% SEC Yield ($50,000 min). The average duration is ~1 year, so your principal may vary a little bit.
  • The PIMCO Enhanced Short Maturity Active Bond ETF (MINT) has a 0.31% SEC yield and the iShares Short Maturity Bond ETF (NEAR) has a 0.45% SEC yield while holding a portfolio of investment-grade bonds with an average duration of ~6 months.

Treasury Bills and Ultra-short Treasury ETFs
Another option is to buy individual Treasury bills which come in a variety of maturities from 4-weeks to 52-weeks. You can also invest in ETFs that hold a rotating basket of short-term Treasury Bills for you, while charging a small management fee for doing so. T-bill interest is exempt from state and local income taxes. Right now, this section isn’t very interesting as T-Bills are yielding close to zero!

  • You can build your own T-Bill ladder at TreasuryDirect.gov or via a brokerage account with a bond desk like Vanguard and Fidelity. Here are the current Treasury Bill rates. As of 4/5/2021, a new 4-week T-Bill had the equivalent of 0.03% annualized interest and a 52-week T-Bill had the equivalent of 0.06% annualized interest.
  • The Goldman Sachs Access Treasury 0-1 Year ETF (GBIL) has a -0.01% SEC yield and the SPDR Bloomberg Barclays 1-3 Month T-Bill ETF (BIL) has a -0.10% (!) SEC yield. GBIL appears to have a slightly longer average maturity than BIL.

US Savings Bonds
Series I Savings Bonds offer rates that are linked to inflation and backed by the US government. You must hold them for at least a year. If you redeem them within 5 years there is a penalty of the last 3 months of interest. The annual purchase limit is $10,000 per Social Security Number, available online at TreasuryDirect.gov. You can also buy an additional $5,000 in paper I bonds using your tax refund with IRS Form 8888.

  • “I Bonds” bought between November 2020 and April 2021 will earn a 1.68% rate for the first six months. The rate of the subsequent 6-month period will be based on inflation again. More info here.
  • In mid-April 2021, the CPI will be announced and you will have a short period where you will have a very close estimate of the rate for the next 12 months. I will have another post up at that time.
  • See below about EE Bonds as a potential long-term bond alternative.

Prepaid Cards with Attached Savings Accounts
A small subset of prepaid debit cards have an “attached” FDIC-insured savings account with exceptionally high interest rates. The negatives are that balances are severely capped, and there are many fees that you must be careful to avoid (lest they eat up your interest). There is a long list of previous offers that have already disappeared with little notice. I don’t personally recommend nor use any of these anymore, as I feel the work required and risk of messing up exceeds any small potential benefit.

  • Mango Money pays 6% APY on up to $2,500, if you manage to jump through several hoops. Requirements include $1,500+ in “signature” purchases and a minimum balance of $25.00 at the end of the month.

Rewards checking accounts
These unique checking accounts pay above-average interest rates, but with unique risks. You have to jump through certain hoops which usually involve 10+ debit card purchases each cycle, a certain number of ACH/direct deposits, and a certain number of logins per month. If you make a mistake (or they judge that you did) you risk earning zero interest for that month. Some folks don’t mind the extra work and attention required, while others would rather not bother. Rates can also drop suddenly, leaving a “bait-and-switch” feeling.

  • The Bank of Denver pays 2.00% APY on up to $25,000 if you make 12 debit card purchases of $5+ each, receive only online statements, and make at least 1 ACH credit or debit transaction per statement cycle. The rate recently dropped. If you meet those qualifications, you can also link a Kasasa savings account that pays 1.00% APY on up to $50k. Thanks to reader Bill for the updated info.
  • Devon Bank has a Kasasa Checking paying 2.50% APY on up to $10,000, plus a Kasasa savings account paying 2.50% APY on up to $10,000 (and 0.85% APY on up to $50,000). You’ll need at least 12 debit transactions of $3+ and other requirements every month. The rate recently dropped.
  • Presidential Bank pays 2.25% APY on balances up to $25,000, if you maintain a $500+ direct deposit and at least 7 electronic withdrawals per month (ATM, POS, ACH and Billpay counts).
  • Evansville Teachers Federal Credit Union pays 3.30% APY on up to $20,000. You’ll need at least 15 debit transactions and other requirements every month.
  • Lake Michigan Credit Union pays 3.00% APY on up to $15,000. You’ll need at least 10 debit transactions and other requirements every month.
  • Find a locally-restricted rewards checking account at DepositAccounts.

Certificates of deposit (greater than 1 year)
CDs offer higher rates, but come with an early withdrawal penalty. By finding a bank CD with a reasonable early withdrawal penalty, you can enjoy higher rates but maintain access in a true emergency. Alternatively, consider building a CD ladder of different maturity lengths (ex. 1/2/3/4/5-years) such that you have access to part of the ladder each year, but your blended interest rate is higher than a savings account. When one CD matures, use that money to buy another 5-year CD to keep the ladder going. Some CDs also offer “add-ons” where you can deposit more funds if rates drop.

  • NASA Federal Credit Union has a special 49-month Share Certificate at 1.50% APY ($10,000 min). Early withdrawal penalty is 1 year of interest. Anyone can join this credit union by joining the National Space Society (free). Note that NASA FCU may perform a hard credit check as part of new member application.
  • Lafayette Federal Credit Union has a 5-year CD at 1.25% APY ($500 min). Early withdrawal penalty is 6 months of interest. Anyone can join this credit union via partner organization ($10 one-time fee).
  • You can buy certificates of deposit via the bond desks of Vanguard and Fidelity. You may need an account to see the rates. These “brokered CDs” offer FDIC insurance and easy laddering, but they don’t come with predictable early withdrawal penalties. Right now, I see a 5-year CD at 0.90% APY vs. 0.98% APY for a 5-year Treasury. Be wary of higher rates from callable CDs listed by Fidelity.

Longer-term Instruments
I’d use these with caution due to increased interest rate risk, but I still track them to see the rest of the current yield curve.

  • Willing to lock up your money for 10 years? You can buy long-term certificates of deposit via the bond desks of Vanguard and Fidelity. These “brokered CDs” offer FDIC insurance, but they don’t come with predictable early withdrawal penalties. You might find something that pays more than your other brokerage cash and Treasury options. Right now, I see a 10-year CD at 1.80% APY vs. 1.70% APY for a 10-year Treasury. Watch out for higher rates from callable CDs from Fidelity.
  • How about two decades? Series EE Savings Bonds are not indexed to inflation, but they have a unique guarantee that the value will double in value in 20 years, which equals a guaranteed return of 3.5% a year. However, if you don’t hold for that long, you’ll be stuck with the normal rate which is quite low (currently 0.10%). I view this as a huge early withdrawal penalty. But if holding for 20 years isn’t an issue, it can also serve as a hedge against prolonged deflation during that time. Purchase limit is $10,000 each calendar year for each Social Security Number. As of 4/5/2021, the 20-year Treasury Bond rate was 2.28%.

All rates were checked as of 4/5/2021.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Evidence-Based Doomsday Prepping and Personal Finance

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards and may receive a commission. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

I dug into the longread Doomsday prepping for less crazy folk today. The title pretty much says it all – I prefer to call it “evidence-based doomsday prepping”.

Effective preparedness can be simple, but it has to be rooted in an honest and systematic review of the risks you are likely to face. Plenty of excited newcomers begin by shopping for ballistic vests and night vision goggles; they would be better served by grabbing a fire extinguisher, some bottled water, and then putting the rest of their money in a rainy-day fund.

[…] I also found that to come up with a rational threat model, we need to think of “risk” as a product of both the probability and the consequences of a given event. By that metric, stubbed toes and zombie outbreaks are equally uninteresting; one of them has nearly zero significance, the other, nearly zero odds.

Strangely enough, my favorite part might have been the section on getting in shape and losing weight, as it very closely matched my own experiences and opinions on the topic. But since this is my money blog, I’ll talk about the personal finance aspects. If you’re going to build a resilient lifestyle, you’ll need some assets and figure out how to protect them.

Good ole’ emergency fund. The most likely “disaster” you’ll face is probably unemployment. Forget retiring at age 30, you’re just trying to survive having no income (or a severe cut) for 6 months. If you can figure out how to build a stash of 6 months of living expenses, you’ll already be way ahead of most people and have a rough blueprint for eventual financial freedom anyway.

Cash. You should be prepared to not have access to banks or ATMs for a short period of time. It could be a huge systemic crisis, or you might simply have a bad case of identity theft. Cash is still mighty handy for anything other than an extremely severe event – although it might be good to smaller bills.

For short-term survival, simple solutions work best: just keep about 2-4 weeks’ worth of cash somewhere at hand; have enough money on you to get you back home when traveling, too. Of course, be mindful of the risk of burglary, so if you’re keeping the funds at home, pick an unobvious location for the stash; more about that soon.

Break-ins are difficult to prevent, especially in suburban single-family homes with secluded backyards and street-level windows and doors; tall fences and window bars can work, but they are expensive and tend to draw the ire of your neighbors. The most cost-effective solution may be to keep your windows and doors closed when away, but beyond that, just optimize for hassle-free outcomes. You can leave some less important goodies in plain sight – say, some cheap jewelry, a modest amount of cash, and a beat-up phone – and put all the real valuables in a much less obvious or less accessible spot. A heavy safe will usually do; diversion safes fashioned into books, cans or clocks are pretty cool, too – if you trust yourself not to accidentally throw them away.

Banking. The author suggests splitting your money between two unrelated banks. This practice could easily extend to your brokerage accounts.

As for the remainder of your money, I suggest splitting it across two largely unrelated financial institutions with different risk profiles – say, a big national bank and a local credit union.

Gold. Before you follow the safety box suggestion, know that banks aren’t responsible if they lose the contents of safe deposit boxes. Serious preppers recommend paying for a reputable, international vault to store your gold – I imagine it to be dug deep into the mountains of Switzerland – but as noted that is expensive and reserved for those with a high net worth.

Because of its very high value-to-volume ratio, physical gold is stored and moved around very easily, but keeping substantial amounts at home can be ill-advised; theft is a very real risk, and most insurance policies will not adequately cover the loss. Safe deposit boxes at a local bank, available for around $20 a year, are usually a better alternative – although they come with some trade-offs; for example, the access to deposit boxes was restricted by the government during the Greek debt crisis in 2015. Non-bank storage services do not have that problem, but cost quite a bit more.

Bitcoin. Cryptocurrencies aren’t discussed at all, but they are meant to be independent of governments. If you put your keys into a hardware wallet, this is another store of value that could have an infinite “value-to-volume ratio” and possibly easier to move than gold or cash. Will Bitcoin be more or less valuable in a crisis? I don’t know. The answer also might change over time.

Stuff. Yes, yes, guns and ammo. But for the most likely scenarios the best thing you could have done was to take a bit of your money buy some everyday stuff: keeping your gas tank half full, keeping a full propane tank, packing a simple Go Bag with clothes/first aid kit/energy bars/extra prescription medicine, a few crates of water, and so forth. Fire extinguishers, fire ladders, smoke and CO detectors in every room could be the best money you ever spent. You might also throw in a will and an advanced health directive.

Insurance. I was surprised that there wasn’t a more detailed discussion of insurance. If we’re talking real-world life-altering disasters, either getting hit by a car or hitting someone else with your car has got to be one of the more likely ones. Do you have adequate health insurance? disability insurance? auto (liability) insurance? homeowners? flood? earthquake/hurricane add-on? Don’t forget these 11 reasons to buy an umbrella liability insurance policy.

Bottom line. There are many simple things that you can do to make your life more resilient that doesn’t involve building your own underground bunker, and many of it meshes with basic personal finance advice. Here’s a nice ending line to keep things in perspective:

In the end, ladders, cars, and space heaters are a much greater threat to your well-being than a gun-toting robber or an army of zombie marauders could ever be.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

High-Yield Crypto Accounts: 6% Interest in Bitcoin or 9% Interest on Stablecoin

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards and may receive a commission. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

This WSJ article is the first mainstream financial article that I’ve seen discuss the high interest rates paid on Bitcoin and stablecoin (cryptocurrency backed by a “stable” asset like the US dollar). I am (again) not a cryptocurrency expert, but it does seem appropriate to educate and warn other curious investors about the risks. Here’s my take:

  • The price of Bitcoin can vary a lot. It probably went up or down by a hundred dollars in the time you took to read this sentence.
  • Stablecoin prices tend to vary less because they promise to be backed by a stable asset. USDT (Tether) and USDC (USD Coin) are both currently trading exactly at US$1.00, so it appears that the public believes this claim. However, US dollar stablecoins are not affiliated with the US government or any central bank.
  • Brokers/exchanges where you can buy and sell these cryptocurrencies are not backed by government insurance. They are businesses – some will end up worth billions, some will get bought by a bigger competitor, and some will probably fail (likely because they were hacked). Even though they might be called “savings” or “interest” accounts, no cryptocurrency is held in an FDIC-insured bank, or even an SIPC-insured brokerage account. They will promise to keep your crypto safe and pay interest, but it is possible they may not live up to their end of the deal, AKA “counterparty risk”. Not every exchange is equal.
  • This potential risk is a big reason that they have to pay you 6% annual interest in your Bitcoin and/or 9% annual interest in your USDC stablecoin.
  • The result is two separate risks – the risk of the price of crypto itself, and counterparty risk of the place holding your crypto.

In the end, I agree with this part of the article (even with the mocking tone):

If you’re a risk-taker who relishes the ride when an asset soars and can laugh off the losses when it crashes, then maybe you should consider letting a broker borrow your cryptocurrency at a generous rate.

After all, if you aren’t troubled by the extraordinary volatility of virtual money, you might as well earn some interest on it.

I did buy some crypto a few years ago as a purely speculative investment and to promote my own learning. We are talking less than 1% of net worth, but it has become a 5-figure amount. I was very skeptical at first, but now I am partial to the theory that either BTC is worth zero, or it will eventually be worth at least on par with the market cap of gold (roughly $200,000). I accept that both scenarios are possible.

I bought Bitcoin using the Voyager app ($25 bonus, publicly-traded with $3 Billion market cap) and also opened an account with BlockFi ($200 bonus, just completed $350m Series D at $3B valuation). Both of these companies are worth well over a billion dollars and gone though various rounds of funding, which isn’t bulletproof but it means that smarter people than me have vetted their security protocols and business practices.

BlockFi pays me 6% interest on up to 2 BTC (8.6% on USDC) and Voyager pays 6.25% interest on BTC (9% on USDC). I reinvest the interest so that I own a little bit more BTC each month. However, I fully accept that I am getting paid this interest and getting the convenience of buying BTC with a few taps in exchange for the potential risk that they will go bust while losing all my BTC. There are other options like hardware wallets, but I am don’t want the inconvenience or to worry about forgetting my bitcoin passwords for my relatively small investment.

Bottom line. Sorry, you can’t earn a 9% “safe” interest rate on your cryptocurrency, even if it is a US-dollar backed stablecoin. At a minimum, you still have counterparty risk. This is a business lending out your assets, charging interest, and giving you a cut. They can go bust, and not all exchanges are the same. Perform your own due diligence when picking a broker/exchange to buy from. I picked what I think are among the safest, but it’s still risky.

Even though the interest rates are quite low, I keep my “safe” cash in FDIC-insured bank accounts and similar.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

ZYNLO Bank Review: 1.25% APY (No Longer Available To New Signups), 100% Match on Roundups

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards and may receive a commission. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

Update: As of 4/8/21, the ZYNLO website now lists their money market as “no longer available”, although the rate is still 1.25% APY if you opened it in time. The savings account pays 0.80% APY and still includes the roundups. There is a new “Tomorrow Savings” account that only pays 0.40% APY, so I’m not sure why anyone would pick that one.

ZYNLO Bank is another new “digital-first” bank, backed by the FDIC insurance of PeoplesBank in Massachusetts. Along with the common features of no monthly fees and Allpoint ATM network access, ZYNLO differentiates itself from the banking app crowd in a few different ways.

0.80% to 1.25% APY. Their main page advertises 0.80% APY on their Money Market account, which is already a competitive rate, but if you enter the promo code BANK (should auto-populate at this promo link) at account opening, they promise a higher promo rate of 1.25% APY on up to $250,000. Looks like promo code NERD gives the same result. Unfortunately, there is no rate guarantee as to how long either rate will last.

100% match on Roundups. When you purchase something with the ZYNLO debit card from their checking account (ex. $4.44), they will round up the transaction to the nearest dollar (ex. $5), deposit that amount (ex. 56 cents) into your savings account, and also match that amount (ex. another 56 cents). Their Savings Account (not the same as Money Market) offers a 100% match on “roundups” during their first 100 days. After that, you must maintain an average daily balance of $3,000 to continue to receive a 100% match. Otherwise, you only get a 25% match. The savings account pays negligible interest.

Let’s say you make 20 debit card purchase per month. If your purchase amounts are random over time, you will average a roundup of 50 cents per transaction. At a 100% match, that works out to $10 a month in matches per month (plus $10 of your own money being put aside in savings for you). 40 debit transaction per month = $20 a month at 100% roundup, and so on. If you make a lot of debit card purchases, it might be worth keeping a $3,000 balance to keep that 100% match.

Note that they don’t accept applications from a few states:

Who can use ZYNLO?
Any U.S. citizen 18 or older with a valid Taxpayer Identification Number. We can open accounts for people throughout the United States with the exception of CA, CT, MA, & NY.

My take. The money market promo rate may be attractive to those with very high balances as it applies to balances up to $250,000. The roundup matching might be attractive for people that make a lot of purchases on their debit cards. The negative is that there is no rate guarantee period and thus the slightly higher promo rate may not be high to guarantee a solid return over what might be a short period of time, given the other bank options near 3% APY available.

Hat tip to DepositAccounts.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

TIPS Inflation Bonds Performance: Breakeven vs. Actual Inflation Rates

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I own inflation-linked bonds as part of my investment portfolio. Specifically, Treasury Inflation-Protected Securities (TIPS) make up about 1/3rd of the bond portion, or 10% of my total portfolio. I go into more detail in my post Reasons To Own TIPS, but essentially they pay interest based on a fixed real yield plus ongoing inflation. To simplify: if the real yield is 1% and inflation is 3%, they pay 4%.

Traditional “nominal” Treasury bonds simply pay a flat interest rate that doesn’t change with inflation (i.e. 3%). The difference between the TIPS real yield and the nominal Treasury yield is at any given time is what inflation would have to be for them to pay out the exact same total yield, called the “breakeven inflation rate”. If the real yield on TIPS is 1% while the nominal rate is 3% at the same moment, then the breakeven rate is 2%. You could call it a market-based prediction of future inflation.

It turns out that 10-year TIPS bonds that matured over the last several years mostly underpeformed regular nominal Treasuries, as the actual inflation turned out to be less than the breakeven inflation rate. David Enna of TIPS Watch created the interesting chart below comparing the final performance of TIPS vs. nominal Treasury bonds maturing over the last several years, where green means that TIPS “won” and red means TIPS “lost” in terms of total return. I removed some columns and highlighted the initial breakeven rate (the market-based guess) and the actual inflation rate.

Enna states:

Still, the market-determined inflation breakeven rate measures sentiment and should not be viewed as an accurate prediction. In fact, the market often does a lousy job of predicting future inflation. The fact is, over the last decade, investors have been betting on higher inflation than actually resulted, and that has led to TIPS (in general) under-performing nominal Treasuries of the same term.

I have read some articles suggesting that you could adjust your TIPS holdings based on the real yield, but perhaps another way is to adjust your holdings based on inflation breakeven rate instead. You can track the 5-year and 10-year breakeven inflation rates at FRED. As of this writing in March 2021, the breakeven inflation rate has been rising very quickly since dropping quickly in early 2020.

The last time that the breakeven inflation rate dropped so drastically was in 2009. As with stocks, it can pay off to buy when everyone else is afraid. I was lucky to buy a chunk of long-term TIPS in 2009, but I didn’t buy much in 2020 since the real yields were still quite low.

I hold Treasuries, TIPS, and FDIC/NCUA-insured CDs because I like my “safe” assets to be of the highest quality, with no worries about getting both my principal and interest. In addition, TIPS also serves as a hedge against higher-than-expected inflation. However, that also means I might suffer if there is lower-than-expected inflation. My “insurance” didn’t pay out over the last 10 years, but that’s okay. I’m also fine if my don’t make a claim on my auto insurance, homeowners insurance, (and definitely life insurance!).

p.s. If you want to buy TIPS, these days you should consider buying Series I Savings Bonds first these days (up to the purchase limits). Their 0% real yield is better than the negative real yields on nearly all TIPS right now.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Best Interest Rates on Cash – March 2021

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards and may receive a commission. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

Here’s my monthly roundup of the best interest rates on “safe” cash as of March 2021, roughly sorted from shortest to longest maturities. I keep 12 months of expenses as part of my semi-retirement cashflow planning, and there are many lesser-known opportunities to improve your yield while still being FDIC-insured or equivalent. Check out my Ultimate Rate-Chaser Calculator to see how much extra interest you’d earn by moving money between accounts. Rates listed are available to everyone nationwide. Rates checked as of 3/8/2021.

Fintech accounts
Available only to individual investors, fintech accounts oftentimes pay higher-than-market rates in order to achieve high short-term growth (i.e. higher interest via venture capital). I define “fintech” as a software layer on top of a different bank’s FDIC insurance. Although I have open accounts with the ones listed below after doing my own due diligence, read about the Beam app for potential pitfalls and best practices.

  • 3% APY on up to $100,000. The top rate is 3% APY for January through March 2021, and they have not indicated any upcoming rate drop. Sign up now and complete a direct deposit to get the highest tier in April. HM Bradley requires a recurring direct deposit every month and a savings rate of at least 20%. See my HM Bradley review.
  • 3% APY on 10% of direct deposits + 1% APY on $5,000. One Finance lets you earn 3% APY on “auto-save” deposits (up to 10% of your direct deposit, up to $1,000 per month). Separately, they also pay 1% APY on up to another $25,000 with direct deposit. New $50 bonus via referral. See my One Finance review.
  • 3% APY on up to $15,000. Porte requires a one-time direct deposit of $1,000+ to open a savings account. $50 bonus via referral. See my Porte review.
  • 2.15% APY on up to $5k/$30k. Limited-time offer of free membership to their higher balance tier for 6 months with direct deposit. See my OnJuno review.

High-yield savings accounts
While the huge megabanks pay essentially no interest, it’s easy to open a new “piggy-back” savings account and simply move some funds over from your existing checking account. The interest rates on savings accounts can drop at any time, so I list the top rates as well as competitive rates from banks with a history of competitive rates. Some banks will bait you with a temporary top rate and then lower the rates in the hopes that you are too lazy to leave.

  • T-Mobile Money has the top rate at the moment at 1.00% APY with no minimum balance requirements. The main focus is on the 4% APY on your first $3,000 of balances as a qualifying T-mobile customer plus other hoops, but the lesser-known perk is the 1% APY for everyone. Thanks to the readers who helped me understand this. There are several other established high-yield savings accounts at closer to 0.50% APY.

Short-term guaranteed rates (1 year and under)
A common question is what to do with a big pile of cash that you’re waiting to deploy shortly (just sold your house, just sold your business, legal settlement, inheritance). My usual advice is to keep things simple and take your time. If not a savings account, then put it in a flexible short-term CD under the FDIC limits until you have a plan.

  • No Penalty CDs offer a fixed interest rate that can never go down, but you can still take out your money (once) without any fees if you want to use it elsewhere. Marcus has a 7-month No Penalty CD at 0.45% APY with a $500 minimum deposit. AARP members can get an 8-month CD at 0.55% APY. Ally Bank has a 11-month No Penalty CD at 0.50% APY for all balance tiers. CIT Bank has a 11-month No Penalty CD at 0.30% APY with a $1,000 minimum deposit. You may wish to open multiple CDs in smaller increments for more flexibility.
  • Lafayette Federal Credit Union has a 12-month CD at 0.80% APY ($500 min). Early withdrawal penalty is 6 months of interest. Anyone can join this credit union via partner organization ($10 one-time fee).

Money market mutual funds + Ultra-short bond ETFs
Normally, I would say to watch out for brokerage firms that pay out very little interest on their default cash sweep funds (and keep the difference for themselves). However, money market fund rates are very low across the board right now. Ultra-short bond funds are another possible alternative, but they are NOT FDIC-insured and may experience short-term losses in extreme cases. I personally don’t think the risk is worth the tiny yield at this time.

  • The default sweep option is the Vanguard Federal Money Market Fund which has an SEC yield of 0.01%. Vanguard Cash Reserves Federal Money Market Fund (formerly Prime Money Market) currently pays 0.01% SEC yield.
  • Vanguard Ultra-Short-Term Bond Fund currently pays 0.38% SEC yield ($3,000 min) and 0.48% SEC Yield ($50,000 min). The average duration is ~1 year, so there is more interest rate risk.
  • The PIMCO Enhanced Short Maturity Active Bond ETF (MINT) has a 0.24% SEC yield and the iShares Short Maturity Bond ETF (NEAR) has a 0.38% SEC yield while holding a portfolio of investment-grade bonds with an average duration of ~6 months.

Treasury Bills and Ultra-short Treasury ETFs
Another option is to buy individual Treasury bills which come in a variety of maturities from 4-weeks to 52-weeks. You can also invest in ETFs that hold a rotating basket of short-term Treasury Bills for you, while charging a small management fee for doing so. T-bill interest is exempt from state and local income taxes. Right now, this section isn’t very interesting as T-Bills are yielding close to zero!

  • You can build your own T-Bill ladder at TreasuryDirect.gov or via a brokerage account with a bond desk like Vanguard and Fidelity. Here are the current Treasury Bill rates. As of 3/5/2020, a new 4-week T-Bill had the equivalent of 0.04% annualized interest and a 52-week T-Bill had the equivalent of 0.08% annualized interest.
  • The Goldman Sachs Access Treasury 0-1 Year ETF (GBIL) has a -0.01% SEC yield and the SPDR Bloomberg Barclays 1-3 Month T-Bill ETF (BIL) has a -0.08% (!) SEC yield. GBIL appears to have a slightly longer average maturity than BIL.

US Savings Bonds
Series I Savings Bonds offer rates that are linked to inflation and backed by the US government. You must hold them for at least a year. If you redeem them within 5 years there is a penalty of the last 3 months of interest. The annual purchase limit is $10,000 per Social Security Number, available online at TreasuryDirect.gov. You can also buy an additional $5,000 in paper I bonds using your tax refund with IRS Form 8888.

  • “I Bonds” bought between November 2020 and April 2021 will earn a 1.68% rate for the first six months. The rate of the subsequent 6-month period will be based on inflation again. More info here.
  • In mid-April 2021, the CPI will be announced and you will have a short period where you will have a very close estimate of the rate for the next 12 months. I will have another post up at that time.
  • See below about EE Bonds as a potential long-term bond alternative.

Prepaid Cards with Attached Savings Accounts
A small subset of prepaid debit cards have an “attached” FDIC-insured savings account with exceptionally high interest rates. The negatives are that balances are severely capped, and there are many fees that you must be careful to avoid (lest they eat up your interest). Some folks don’t mind the extra work and attention required, while others do. There is a long list of previous offers that have already disappeared with little notice. I don’t personally recommend nor use any of these anymore.

  • One of the few notable cards left in this category is Mango Money at 6% APY on up to $2,500, along with several hoops to jump through. Requirements include $1,500+ in “signature” purchases and a minimum balance of $25.00 at the end of the month.

Rewards checking accounts
These unique checking accounts pay above-average interest rates, but with unique risks. You have to jump through certain hoops which usually involve 10+ debit card purchases each cycle, a certain number of ACH/direct deposits, and a certain number of logins per month. If you make a mistake (or they judge that you did) you risk earning zero interest for that month. Some folks don’t mind the extra work and attention required, while others would rather not bother. Rates can also drop suddenly, leaving a “bait-and-switch” feeling.

  • The Bank of Denver pays 2.00% APY on up to $25,000 if you make 12 debit card purchases of $5+ each, receive only online statements, and make at least 1 ACH credit or debit transaction per statement cycle. The rate recently dropped. If you meet those qualifications, you can also link a Kasasa savings account that pays 1.00% APY on up to $50k. Thanks to reader Bill for the updated info.
  • Devon Bank has a Kasasa Checking paying 2.50% APY on up to $10,000, plus a Kasasa savings account paying 2.50% APY on up to $10,000 (and 0.85% APY on up to $50,000). You’ll need at least 12 debit transactions of $3+ and other requirements every month. The rate recently dropped.
  • Presidential Bank pays 2.25% APY on balances up to $25,000, with fewer hoops than some others.
  • Evansville Teachers Federal Credit Union pays 3.30% APY on up to $20,000. You’ll need at least 15 debit transactions and other requirements every month.
  • Lake Michigan Credit Union pays 3.00% APY on up to $15,000. You’ll need at least 10 debit transactions and other requirements every month.
  • Find a locally-restricted rewards checking account at DepositAccounts.

Certificates of deposit (greater than 1 year)
CDs offer higher rates, but come with an early withdrawal penalty. By finding a bank CD with a reasonable early withdrawal penalty, you can enjoy higher rates but maintain access in a true emergency. Alternatively, consider building a CD ladder of different maturity lengths (ex. 1/2/3/4/5-years) such that you have access to part of the ladder each year, but your blended interest rate is higher than a savings account. When one CD matures, use that money to buy another 5-year CD to keep the ladder going. Some CDs also offer “add-ons” where you can deposit more funds if rates drop.

  • Wings Financial Federal Credit Union has a 5-year CD from 1.26% APY ($500 min)up to 1.41% APY ($250,000 min) . Early withdrawal penalty is big – 2 years of interest! Anyone can join this credit union via partner organization for as little as $5 (Wings Financial Foundation).
  • Affinity Plus Federal Credit Union has a 5-year certificate at 1.25% APY ($500 minimum). Early withdrawal penalty is 1 year of interest. 4-year at 1.05% APY, and 3-year at 0.95% APY ($500 minimum). Anyone can join this credit union via partner organization ($25 one-time fee).
  • You can buy certificates of deposit via the bond desks of Vanguard and Fidelity. You may need an account to see the rates. These “brokered CDs” offer FDIC insurance and easy laddering, but they don’t come with predictable early withdrawal penalties. I see a 5-year CD at 0.90% APY right now, which might still pay more than the other options at your brokerage. Be wary of higher rates from callable CDs listed by Fidelity.

Longer-term Instruments
I’d use these with caution due to increased interest rate risk, but I still track them to see the rest of the current yield curve.

  • Willing to lock up your money for 10 years? You can buy long-term certificates of deposit via the bond desks of Vanguard and Fidelity. These “brokered CDs” offer FDIC insurance, but they don’t come with predictable early withdrawal penalties. You might find something that pays more than your other brokerage cash and Treasury options. Right now, I see a 10-year at Vanguard for 1.80% APY. Watch out for higher rates from callable CDs from Fidelity.
  • How about two decades? Series EE Savings Bonds are not indexed to inflation, but they have a unique guarantee that the value will double in value in 20 years, which equals a guaranteed return of 3.5% a year. However, if you don’t hold for that long, you’ll be stuck with the normal rate which is quite low (currently 0.10%). I view this as a huge early withdrawal penalty. But if holding for 20 years isn’t an issue, it can also serve as a hedge against prolonged deflation during that time. Purchase limit is $10,000 each calendar year for each Social Security Number. As of 3/8/2021, the 20-year Treasury Bond rate was 2.18%.

All rates were checked as of 3/8/2021.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

PPP Updates For Self-Employed and Independent Contractors: Single-Page Forgiveness Form, 2nd Draw Applications Open

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards and may receive a commission. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

Updated. There are many people who are eligible for 100% forgivable federal assistance from the Paycheck Protection Program, but aren’t applying for it, either due to misinformation or being discourage by all the bureacracy. Many PPP loan recipients are self-employed workers, sole proprietors, freelancers and/or independent contractors that file a Schedule C who may be eligible only for a modest amount, but that amount can still make a big difference. I am not an accountant nor a lawyer, but I encourage the (really) small businesses out there to get help if impacted by COVID. It’s not too late, and COVID isn’t over!

New focus on business with LESS than 20 employees. The Treasury Department just announced that businesses with more than 20 employees will be shut out of the PPP for a two-week period starting Wednesday, 2/24. In other words, only businesses with less than 20 employees can apply for PPP loans during the next two weeks. From ABC News:

In an attempt to improve equitable distribution of loans, administration officials said changes would also be aimed at helping sole proprietors, independent contractors and self-employed individuals to receive more financial support by revising the program’s funding formula.

PPP Round 2 loan applications now open. First of all, if you never took a PPP loan, you can still apply for a first-draw PPP loans under the more lenient first-draw eligibility rules. Second-draw PPP loans have a different set of eligibility rules, notably you need to show a reduction in revenue. If you are a self-employed worker with no other employees and have higher than a $100,000 net income (2019 IRS Form 1040 Schedule C line 31 or equivalent), then you must reduce it to $100,000. Here are the full SBA 2nd Draw guidelines. In terms of loan size, you can still get 2.5 times your average monthly net profit from 2019.

The next general hurdle is that you must show a 25% drop in income when comparing the same quarter in 2019 and 2020:

Applicant must demonstrate that gross receipts in any calendar quarter of 2020 were at least 25 percent lower than the same quarter of 2019. Alternatively, Applicants may compare annual gross receipts in 2020 with annual gross receipts in 2019 if they were in business in 2019.

Looking for a PPP lender? One problem is that most banks are restricting PPP applications to those with existing business credit relationships. Many freelancer and independent contractors don’t have that. The small-business fintech Fundera has an open PPP loan application (both for first and second-draw loans) to help freelancers and independent contractors find a lender without any no prior relationship.

Single-page form for PPP Round 1 loan forgiveness now available. If you have an existing loan under $150,000, there is now a single-page form that requires you to submit no additional documentation (it must still exist, of course, and they may ask you for it later if audited). That form, called the PPP Loan Forgiveness Application Form 3508S, has been released and lenders are starting to accept them. You may even be able to use the longer 24-week covered period and get more of your loan forgiven than with the previous 8-week period. (I haven’t heard of widespread final forgiveness being granted by the SBA yet.)

Looking for a self-employed or small business payroll provider? I want to mention Gusto here, as I use them for payroll and saw them create many tools this year to help their users satisfy the PPP documentation requirements and help them take advantage of this relief. If you are a single-person company, they have a basic tier that costs only $25 per month, which is much less than the major payroll providers. (You can also split up your direct deposit however you like, handy for various banking promotions.) Right now, referred user can get a $100 Visa gift card after running your first payroll with Gusto (my referral link).

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Debit Card Arbitrage: $4.7M Tax Payment Results in $47,000 Cash Back

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards and may receive a commission. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

An under-the-radar loophole is now out in the open, thanks to fintech app Jiko* publishing a PR release bragging about their $4.7 million debit card charge, which led to Axios writing about it as quite likely the “largest consumer debit transaction ever”. In a nutshell: Someone made a $4.7 million tax payment to the IRS using a Jiko debit card, paying less than $4 in fees while earning $47,000 in cash back!

As noted in my post on How Fintech Bank Apps like Chime Make Money, a significant portion of fintech revenue comes from debit card fees. Large banks have their debit card interchange fees regulated, as Durbin fee limits only apply to large banks with $10 billion in assets and above. But smaller banks are classified as exempt, and the Federal Reserve shows the average intercharge fee is 1.4% for exempt transactions. This is why small fintech banks can offer 1% cash back on debit card purchases.

Meanwhile, it appears that the fee that the IRS payment processors charge is based on the regulated interchange fee of 0.05% (yes, 1/20th of 1%!) plus 21 cents per debit card transaction. That means even a $10,000 tax payment would result in a regulated interchange fee of $5.21, and the vast majority of tax payments are much less than $10,000. Perhaps they have some sort of special agreement? Either way, they all charge a flat fee ranging from $2.55 to $3.95 on any payment amount.

This creates an arbitrage opportunity between the fees paid and cash back earned for those can that justify really large tax payments (usually those with really large incomes). On a $10,000 payment, your net profit would be about $96. Meanwhile, making an unnecessarily high payment might encourage an audit or raise other flags. You’ll also need to fund and use an appropriate fintech bank that offers 1% cash back with no limits. I’m not sure if this was a smart move by Jiko, as the added spotlight may also end this important source of revenue for all fintech banks.

* The Jiko app doesn’t act as a bank as they hold your money in a brokerage account and invest your money in US Treasury bills (essentially equally safe, but not the same). However, they do have their own bank charter, apparently to process debit card charges – Jiko Bank, a division of Mid-Central National Bank, Member FDIC. I’m confused too! But interestingly since funds are backed by T-Bills, it made it safer to hold $4.7 million at Jiko, as that huge balance would have exceeded the FDIC insurance limits.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Best Interest Rates on Cash – February 2021

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards and may receive a commission. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

Here’s my monthly roundup of the best interest rates on cash as of February 2021, roughly sorted from shortest to longest maturities. I track these rates because I keep 12 months of expenses as a cash cushion and there are many lesser-known opportunities to improve your yield while still being FDIC-insured or equivalent. Check out my Ultimate Rate-Chaser Calculator to see how much extra interest you’d earn by moving money between accounts. Rates listed are available to everyone nationwide. Rates checked as of 2/3/2021.

Fintech accounts
Available only to individual investors, fintech accounts oftentimes pay higher-than-market rates in order to achieve high short-term growth. I will define “fintech” as an app software layer on top of a different bank’s FDIC insurance backbone. You should read about the story of the Beam app for potential pitfalls and best practices. Below are some current options with decent balance limits:

  • 3% APY on up to $100,000. I am happy to see the top rate staying at 3% APY for January through March 2021. HM Bradley requires a recurring direct deposit every month and a savings rate of at least 20%. See my HM Bradley review.
  • 3% APY on 10% of direct deposits. One Finance lets you earn 3% APY on “auto-save” deposits (up to 10% of your direct deposit, up to $1,000 per month). Separately, they also pay 1% APY on up to another $25,000 with direct deposit. New $50 bonus via referral. See my One Finance review.
  • 3% APY on up to $15,000. Porte requires a one-time direct deposit of $1,000+ to open a savings account. $50 bonus via referral. See my Porte review.
  • 2.15% APY on up to $5k/$30k. Limited-time offer of free membership to their higher balance tier for 6 months with direct deposit. See my OnJuno review.

High-yield savings accounts
While the huge megabanks pay essentially no interest, it’s easy to open a new “piggy-back” savings account and simply move some funds over from your existing checking account. The interest rates on savings accounts can drop at any time, so I list the top rates as well as competitive rates from banks with a history of competitive rates. Some banks will bait you with a temporary top rate and then lower the rates in the hopes that you are too lazy to leave.

  • T-Mobile Money has the top rate at the moment at 1.00% APY with no minimum balance requirements. The main focus is on the 4% APY on your first $3,000 of balances as a qualifying T-mobile customer plus other hoops, but the lesser-known perk is the 1% APY for everyone. Thanks to the readers who helped me understand this. There are several other established high-yield savings accounts at closer to 0.50% APY for now.

Short-term guaranteed rates (1 year and under)
A common question is what to do with a big pile of cash that you’re waiting to deploy shortly (just sold your house, just sold your business, legal settlement, inheritance). My usual advice is to keep things simple and take your time. If not a savings account, then put it in a flexible short-term CD under the FDIC limits until you have a plan.

  • No Penalty CDs offer a fixed interest rate that can never go down, but you can still take out your money (once) without any fees if you want to use it elsewhere. Marcus has a 7-month No Penalty CD at 0.45% APY with a $500 minimum deposit. AARP members can get an 8-month CD at 0.55% APY. Ally Bank has a 11-month No Penalty CD at 0.50% APY for all balance tiers. CIT Bank has a 11-month No Penalty CD at 0.30% APY with a $1,000 minimum deposit. You may wish to open multiple CDs in smaller increments for more flexibility.
  • Lafayette Federal Credit Union has a 12-month CD at 0.80% APY ($500 min). Early withdrawal penalty is 6 months of interest. Anyone can join this credit union via partner organization ($10 one-time fee).

Money market mutual funds + Ultra-short bond ETFs
Normally, I would say to watch out for brokerage firms that pay out very little interest on their default cash sweep funds (and keep the difference for themselves). However, money market fund rates are very low across the board right now. The following ultra-short bond funds are a possible alternative, but they are NOT FDIC-insured and will also fluctuate in price somewhat:

  • The default sweep option is the Vanguard Federal Money Market Fund which has an SEC yield of 0.01%. Vanguard Cash Reserves Federal Money Market Fund (formerly Prime Money Market) currently pays 0.01% SEC yield.
  • Vanguard Ultra-Short-Term Bond Fund currently pays 0.44% SEC yield ($3,000 min) and 0.54% SEC Yield ($50,000 min). The average duration is ~1 year, so there is more interest rate risk.
  • The PIMCO Enhanced Short Maturity Active Bond ETF (MINT) has a 0.23% SEC yield and the iShares Short Maturity Bond ETF (NEAR) has a 0.43% SEC yield while holding a portfolio of investment-grade bonds with an average duration of ~6 months.

Treasury Bills and Ultra-short Treasury ETFs
Another option is to buy individual Treasury bills which come in a variety of maturities from 4-weeks to 52-weeks. You can also invest in ETFs that hold a rotating basket of short-term Treasury Bills for you, while charging a small management fee for doing so. T-bill interest is exempt from state and local income taxes. Right now, this section isn’t very interesting as T-Bills are yielding close to zero!

  • You can build your own T-Bill ladder at TreasuryDirect.gov or via a brokerage account with a bond desk like Vanguard and Fidelity. Here are the current Treasury Bill rates. As of 2/3/2020, a new 4-week T-Bill had the equivalent of 0.04% annualized interest and a 52-week T-Bill had the equivalent of 0.08% annualized interest.
  • The Goldman Sachs Access Treasury 0-1 Year ETF (GBIL) has a -0.01% SEC yield and the SPDR Bloomberg Barclays 1-3 Month T-Bill ETF (BIL) has a -0.06% (!) SEC yield. GBIL appears to have a slightly longer average maturity than BIL.

US Savings Bonds
Series I Savings Bonds offer rates that are linked to inflation and backed by the US government. You must hold them for at least a year. If you redeem them within 5 years there is a penalty of the last 3 months of interest. The annual purchase limit is $10,000 per Social Security Number, available online at TreasuryDirect.gov. You can also buy an additional $5,000 in paper I bonds using your tax refund with IRS Form 8888.

  • “I Bonds” bought between November 2020 and April 2021 will earn a 1.68% rate for the first six months. The rate of the subsequent 6-month period will be based on inflation again. More info here.
  • In mid-April 2021, the CPI will be announced and you will have a short period where you will have a very close estimate of the rate for the next 12 months. I will have another post up at that time.
  • See below about EE Bonds as a potential long-term bond alternative.

Prepaid Cards with Attached Savings Accounts
A small subset of prepaid debit cards have an “attached” FDIC-insured savings account with exceptionally high interest rates. The negatives are that balances are severely capped, and there are many fees that you must be careful to avoid (lest they eat up your interest). Some folks don’t mind the extra work and attention required, while others do. There is a long list of previous offers that have already disappeared with little notice. I don’t personally recommend nor use any of these anymore.

  • One of the few notable cards left in this category is Mango Money at 6% APY on up to $2,500, along with several hoops to jump through. Requirements include $1,500+ in “signature” purchases and a minimum balance of $25.00 at the end of the month.

Rewards checking accounts
These unique checking accounts pay above-average interest rates, but with unique risks. You have to jump through certain hoops which usually involve 10+ debit card purchases each cycle, a certain number of ACH/direct deposits, and a certain number of logins per month. If you make a mistake (or they judge that you did) you risk earning zero interest for that month. Some folks don’t mind the extra work and attention required, while others would rather not bother. Rates can also drop suddenly, leaving a “bait-and-switch” feeling.

  • The Bank of Denver pays 2.50% APY (dropping to 2.00% APY on 2/18/21) on up to $25,000 if you make 12 debit card purchases of $5+ each and at least 1 ACH credit or debit transaction per statement cycle. If you meet those qualifications, you can also link a Kasasa savings account that pays 1.50% APY (but dropping to 1.00% APY on 2/18/21) on up to $50k. Thanks to reader Bill for the updated info.
  • Devon Bank has a Kasasa Checking paying 3.50% APY on up to $10,000, plus a Kasasa savings account paying 3.50% APY on up to $10,000 (and 1.25% APY on up to $50,000). You’ll need at least 12 debit transactions of $3+ and other requirements every month.
  • Presidential Bank pays 2.25% APY on balances up to $25,000, with fewer hoops than some others.
  • Evansville Teachers Federal Credit Union pays 3.30% APY on up to $20,000. You’ll need at least 15 debit transactions and other requirements every month.
  • Lake Michigan Credit Union pays 3.00% APY on up to $15,000. You’ll need at least 10 debit transactions and other requirements every month.
  • Find a locally-restricted rewards checking account at DepositAccounts.

Certificates of deposit (greater than 1 year)
CDs offer higher rates, but come with an early withdrawal penalty. By finding a bank CD with a reasonable early withdrawal penalty, you can enjoy higher rates but maintain access in a true emergency. Alternatively, consider building a CD ladder of different maturity lengths (ex. 1/2/3/4/5-years) such that you have access to part of the ladder each year, but your blended interest rate is higher than a savings account. When one CD matures, use that money to buy another 5-year CD to keep the ladder going. Some CDs also offer “add-ons” where you can deposit more funds if rates drop.

  • Affinity Plus Federal Credit Union has a 5-year certificate at 1.50% APY ($500 minimum). Early withdrawal penalty is 1 year of interest. 4-year at 1.20% APY, and 3-year at 0.95% APY ($500 minimum). Anyone can join this credit union via partner organization ($25 one-time fee).
  • Hiway Federal Credit Union has a 5-year certificate at 1.34% APY ($25k minimum) and 1.24% APY with a $10,000 minimum. Early withdrawal penalty is 1 year of interest. 4-year at 1.19% APY, and 3-year at 1.10% APY ($25k minimum). Anyone can join this credit union via partner organization ($10 one-time fee).
  • You can buy certificates of deposit via the bond desks of Vanguard and Fidelity. You may need an account to see the rates. These “brokered CDs” offer FDIC insurance and easy laddering, but they don’t come with predictable early withdrawal penalties. I see nothing special right now, but it might still pay more than your other brokerage cash and Treasury options. Be wary of higher rates from callable CDs listed by Fidelity.

Longer-term Instruments
I’d use these with caution due to increased interest rate risk, but I still track them to see the rest of the current yield curve.

  • Willing to lock up your money for 10 years? You can buy long-term certificates of deposit via the bond desks of Vanguard and Fidelity. These “brokered CDs” offer FDIC insurance, but they don’t come with predictable early withdrawal penalties. You might find something that pays more than your other brokerage cash and Treasury options. Right now, I see a 10-year at Vanguard for 1.35% APY. Watch out for higher rates from callable CDs from Fidelity.
  • How about two decades? Series EE Savings Bonds are not indexed to inflation, but they have a unique guarantee that the value will double in value in 20 years, which equals a guaranteed return of 3.5% a year. However, if you don’t hold for that long, you’ll be stuck with the normal rate which is quite low (currently 0.10%). I view this as a huge early withdrawal penalty. But if holding for 20 years isn’t an issue, it can also serve as a hedge against prolonged deflation during that time. Purchase limit is $10,000 each calendar year for each Social Security Number. As of 2/3/2021, the 20-year Treasury Bond rate was 1.69%.

All rates were checked as of 2/3/2021.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

How Fintech Bank Apps like Chime Make Money: Debit Card and ATM Fees

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards and may receive a commission. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

An uncomfortable fact of personal finance is that you don’t necessarily “pay for what you get”. When a bank offers “Free Checking”, it means “we won’t charge you a monthly fee but we’ll get our money from overdraft charges, ATM fees, and more”. For example, US banks charged their customers over $11 billion in overdraft charges in 2019. Many people had zero overdrafts, while 80% of the overdraft fees were paid by just 9% of account holders. A minority of users often ends up subsidizing the perks for everyone else. This extends to everything from no-annual-fee credit cards to free-trade stock brokers.

Fintech banks like Chime are growing in popularity with their lower cost structure and user-friendly apps. Chime doesn’t charge overdraft fees at all! But despite their claim of “no hidden bank fees” and heavy use of emojis, these are still profit-seeking businesses. This Axios article provides some interesting numbers:

  • Chime made an average of $208 per user per year (annual gross revenue) as of June 2020.
  • The majority of Chime’s revenue was through debit card interchange fees. Chime does not offer any cash back on its debit card. Whenever you use their debit card, Chime keeps whatever transaction fees it generates. Given that other debit card programs offer up to 1% cash back, I can only estimate that Chime can end up making a little more than 1% of purchases overall.*
  • ~20% of Chime’s revenue was from their $2.50 fees for every out-of-network ATM cash withdrawal. This fee in on top of whatever is charged to you by the ATM owner itself. According to the article, Chime only pays about 10 cents to the ATM owner and the rest is profit.

This is not to criticize Chime, as they provide a useful and valuable service to many people who might otherwise not qualify for a traditional bank account, all without charging monthly fees. A lot of people basically use Chime to get their electronic direct deposit as opposed to the traditional paper check, and then spend it right away. Chime’s business model is well-suited for that customer, who previously may have paid a check-cashing service. I have an account with Chime myself (my review + $75 easy bonus) and I can understand why they have become so popular.

My point is that understanding how financial services make money can help you adjust your behavior and/or comparison shop. For banking apps, watch out for overdraft charges and ATM fees adding up despite no monthly fees, as well as spending too much on debit cards when you could be earning better rewards elsewhere. For credit cards, don’t focus on earning frequent flier miles when your debt balance is growing exponentially at 18% interest. For brokerage accounts, those free trades are partially offset by paying nearly no interest on your idle cash.

* Large banks have their debit card interchange fees regulated, but Chime (Stride Bank) is on the exempt list of smaller issuers. Durbin fee limits only apply to large banks with $10 billion in assets and above. The Federal Reserve shows average fee is 1.4% for exempt transactions and 0.54% for covered transactions for debit cards. But both Bancorp and Stride Bank (the two banks behind Chime) are on the exempt list of smaller bank issuers.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.