Update: My Bank Account Setup To Maximize Interest

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Back in April I shared my personal bank account setup which I felt offered the best balance of convenience, liquidity, and interest paid out for my geographic location and tax situation:

previous bank setup

Basically, I used my Washington Mutual Free Checking / 5% APY Savings (see review) account combo as my core account, but kept most of my money in T-Bills for the higher yield and state income tax exemption. Since then, a couple of things have changed…

First, the rates on 28-day Treasury Bills started to drop significantly, making their tax-equivalent return unattractive. They remain so today, as even the 6-month T-Bill rates are unexciting. In May, FNBO Direct (review) came on the scene and offered 6% APY until 9/28. So as my T-Bills matured I gradually moved them into FNBO.

Then 3 weeks ago, the Fed Funds rate was cut for the first time in years, which caused many banks to adjust the interest rates paid out on high-yield savings accounts. FNBO dropped their rate to 0.85% APY. I have been waiting for the dust to finally settle since, and I think it has since the speculation is now about what will happen during the next Fed meeting at the end of October.

Through all this, the WaMu (online-only) savings account has stayed constant at 5% APY. I’m surprised! I must say though, I’ve been enjoying this sort of “Core and Explore” setup for bank accounts. Most of my day-to-day activities like online billpay, checkwriting, deposits, ATM withdrawals, even getting money orders – they can stay stable and familiar with WaMu. I can also keep a nice chunk of money within quick reach, but still earning 5%. Then I get to rate-chase online with the rest of my temporary $100,000 cash hoard. 🙂 So I think I’ll keep this way as long as I can:

current bank setup

So what is the Bank du Jour? Well I just mailed in my check and signature form for Everbank’s FreeNet checking account last week, but it hasn’t been cashed yet. I like that the 6.01% APY is guaranteed for 3 months, and my Rate Chaser Calculator says the move should clear me at least another $100 over those few months. It may not be as lucrative for smaller balances, but to each their own.

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  1. I had that Bank of America account u talked about but the rate is now a measly 4.50 percent, emigrant direct has dropped down to 5.05% I just sent 20k over to Everbank for that nice 6.01%…at least I have 3 months of a decent rate!

  2. You’re doing better than some – My mom applied for that Bank of America account (lives in different state, no WaMus) but got stuck with 0.25% and still isn’t sure if it’s all cleared up yet. Same problem other people have been having…

    I think you mean Emigrant is at 4.75% now.

    How do you like Everbank’s interface? More specifically, how long did it take for them to cash your check and get everything set up?

  3. For those of you who are Costco Executive members there’s Capital One Money Market Account. Current APY is 5.20%. Benefits include…
    *No fees
    *Access your money via free checks, an ATM card and online transfers to and from existing accounts
    *FDIC insured for up to $100,000 per depositor
    *$1,000 minimum deposit to open
    *Convenient online account access

    As a bonus…

    Costco Executive Members receive $50 when they open their first Money Market Account with a minimum of $5,000 within the first 30 days.

  4. Don’t forget that you can get a $50 bonus within 30 days after the 3 months at Everbank if you are “dissatisfied” and close the account.

    I think you need to make 3 bill pays during those 3 months to get this bonus…

  5. My EverBank application timeline:

    Friday September 28: Mailed my application and initial deposit check
    Wednesday Oct. 3: Received an email confirmation the reception of my application and deposit
    Monday Oct. 8: Another email saying my application has been processed and my account is open, but they will mail me my welcome kit and online login information
    Wednesday October 10: Checked online with my originating bank to see that my check cleared on Oct. 9. I am assuming this is the day the 3 month promo period begins. I have an image of my check through online banking, and on the back of the check they write your EverBank account number. You can call their 800 to confirm your balance. Then you can setup your ACH trial deposits from your originating bank before EverBank sends your Welcome Kit through the USPS.

    Also, if you use their bill pay at least three times within your 3 month trial period, they will give you $50 when you close the account.

    This fatwallet thread is quite a resource: link As a guide, I used this fatwallet thread to figure a lot of this stuff out.

  6. To each their own is right. Wouldn’t it be nice to have a spare $100,000 dollars. You make it seem like anyone can do this, but most of us are struggling away, lucky if we have a spare $100 to do anything with.

  7. Does anyone have any experience with the 7-days Internet CD offered by IndyMac? It has a current apy of 5.40%


  8. Thanks for reminding me to check rates; even with all the news, I forgot to do this. For me, with AMT and hefty state taxes, National tax-exempt money market funds now beat up to a fully taxed rate of 5.4%. It used to be that Treasury funds beat National tax-exempt funds for me (up to 5.8% tax equiv); no longer. State tax-exempt funds are better still (up to 5.9% for FSPXX tax equiv) but I don’t trust any one state with my emergency fund.

  9. Countrywide is paying 5.5% for 10k min bal. Have to keep the account 90 days.

    – Free bank to bank transfers
    – Schedule next business day or recurring transfers between your SavingsLinkSM account and your linked external accounts
    Unlimited deposits
    – Conduct up to six withdrawals each month

    Anyone have any experience with Countrywide? I’m looking for something better since eLoan dropped to 4.75%

  10. I like the convenience with citibank checking and ultimate savings accounts. It is 4.75% right now, and though I could go a step further to Ultimate money market account 5%….I feel it is a somewhat hassle just get the 5% every month.

    I feel once I reach $10k in my savings (next 6 months if everything goes smoothly), I will then start to rate chase for something over 5% if I can get it.

  11. Uh oh. I just checked the rate on my savings, and it dropped to 4.50%.

    Ok, guess it is time to rate chase after all!

  12. Got a question for you. When we open all these accounts, do we actually need to fill out the “beneficiary” section? What happens if we leave that blank?

  13. I recently opened CD accounts for my BT money in IndyMac and CountryWide.

    CountryWide’s interface is not bad.

  14. Has anyone actually gotten free traveler’s checks from wamu? The website for online saving says they are free but I’ve been told there is a charge of 1.5% if you don’t have the plus package. The plus package is $5/month…

  15. Still using a Fidelity brokerage account as my “core”. The FSLXX money market is currently 5.27% for the 7 day effective yield. Its just like a checking account, I can write checks and pay bills, fast ACH time. Everything free except for ATM, but I keep a small ammount in a local bank for ATM withdrawal’s and check deposts.

  16. Strabo Says:

    Don?t forget that you can get a $50 bonus within 30 days after the 3 months at Everbank if you are ?dissatisfied? and close the account…

    The link for the $50 bonus promotion is no longer working.

  17. Dont use indy mac. I signed up for a cd last month and have yet to receive any correspondence regarding my application. No emails or letters. When I call their CS they told me there was a problem?? Worse part is the funds I used for the CD (5k) were deducted from my other account, and it has not being accruing interest. No communication what so ever.

  18. I opened an account with Countrywide for their 5.50% APY and found it to be a quick and painless process (their account transfer seem swift, too).

    It requires a $10K minimum and there is no guarantee, and it is slightly lower than the 6.01% at Everbank, but for some intangible reason, I feel more comfortable with my money there than at Everbank. (I know this seems odd given their exposure to the subprime mess, and yet…)

  19. Minor nit-pick, “The Current Bank Setup” says it has instant transfer’s between WAMU 5% savings and Bank Du Jour.

  20. To those chasing the best savings account interest rates– it’s worth noting that it may take a couple months for you to earn the interest back that you will lose while the transfer is taking place (i.e. no longer earning interest in your old account, and not yet earning interest in the new account).

    For example, say you have $50,000 in ING direct @ 4.5%, and you want to transfer this money to Wamu @ 5%. The $50K in ING @ 4.5% makes about $6.15 / day. The Wamu account @ 5% would make about $6.85 / day. If that transfer takes 7 days (fairly typical including the weekend), you are losing ~$43.05 by not having the $50K earn interest. The daily difference between the 2 interest rates is $0.70. To make up the $43.05 you’d lose during the transfer, it would take ~62 days of earning interest in the new account.

    Bottom line, don’t change your setup too often, especially for a rate that may vary. You may end up losing money.

    P.S. – Another account worth noting is E*Trade savings @ 5.05%, with instant transfers into stocks (with E*Trade also as your broker). This is a very nice feature for me, as I could stand to lose a lot of money waiting for the transfers from Wamu while I want to invest quickly in a hot stock.

  21. Thanks for your blog, btw. And thanks to Pat for tip on Costco / Capital One. Has anyone tried grand yield direct? they are offering 5.15 apy…

  22. My Countrywide SavingsLink account is great so far. Smooth and easy. Was able to get through to customer service and they mailed me deposit slips. 5.35% Interest Rate/5.50 APY. I should have done this months ago.

  23. I have the same setup with WAMU, but now i’m using both Fidelity Smart Cash, and INGDIRECT’s Electric Orange. both are giving high interest checking accounts.

    I am leaning more towards Fidelity because i have a brokerage account with them, and i can setup that brokerage account to be a backup account. Pretty sweet setup.

  24. Chris in Boston says

    Jonathan, Personally, I think you have way too much cash in the third bank. You should put that into not FDIC insured accounts, and focus on Money Mkt accounst that can yield good rates and are relatively safe like Columbia Daily Shares or something similar.

    Even then, I would only put 1-2months of expenses in that, and put the remaining into some index etf such as VTI VEU or similar broad index.

    I think you should put only 20% of the cash into a safe account, and then the remaining 80% take slightly more risk with some investments that can help you maximize returns. I think you are play too safe with a pile of cash that could be working for you. 2-3 months of cash equivalents, and the rest into something like index etfs you can easily liquidate would serve you far better returns.

  25. Jonathan, hope you did not open a joint account. Then you may open MM account (6%) at EverBank for your wife for the next 3 months.

  26. Chris in Boston – if you need the cash for an event that is happening in less than one year (i.e. home purchase), it does not make sense to take on additional risk. Look at what happened to a number of ultra short bond funds the past few months… and those were touted as a minor step up risk-wise from money market funds.

  27. Chris in Boston says

    heather. Agreed! as often as I follow Jonathan’s blog (daily) I cannot believe I forgot his short term goal of a home.

  28. – Is that $50 satisfaction guarantee still around, I couldn’t find it on their site. I found an old link that does work, but I feel like its definitely not as prominently shown as it used to be.

    – IndyMac and Countrywide are basically the top overall money market accounts (with minimum balances), people don’t like them because of their exposure to the mortgage loan mess. I would use them, but count in the possibility of not having access for a few days to a week if they fail and the FDIC has to take over.

    – I have taken advantage of WaMu free money orders, but not traveler’s checks.

    – markh – Thanks, that is an error and left over from editing the old image which had T-BIlls. It should be 2-3 day transfers. I had actually changed it the first time around but then my computer crashed and I hastily (and grouchily) slapped it together.

    – Oleg – You’re also one step ahead of me 😉 People have said you can move it back and forth and still get 6.01% from both accounts, but that is a more dependable way.

    – Chris – You bring up a good point though, I forgot to add that I don’t want to lock up in a 6-month CD or something because I like it to be accessible in case I find a nice deal on a house.

  29. http://www.everbank.com/001CheckingGuarantee.aspx?TB_iframe=true&height=450&width=650

    According to that link, the Everbank $50 thing is still available. It’s their 100% Satisfaction guarantee.

  30. Do you guys know if FDIC covers non-US residents (H1-B working Visas).

    I would like to jump on the countrywide savings account for 5.5%, but i am afraid that i may not be covered under FDIC eventhough i will put less than 100k since i am not a US citizen or green card holder.

  31. Jonathan,
    Re the $50 guarantee: go to everbank.com, click on earn 6.01% introductory APY freenet checking account (upper right of page), then on next page look to the right of the page under “additional information” and click on Everbank’s 100% satisfaction guarantee and that gives you page that says:

    100% Satisfaction Guaranteed1. Or we’ll send you $50

    We’re so confident that you’ll appreciate our FreeNet? Checking Account, we’re willing to guarantee it.
    We pledge to keep your yield in the top 5% of competitive accounts offered by the leading banks.2
    Pay no fees for the optional Online Bill Pay when you maintain a minimum average daily balance for the month of at least $1,500 or pay a low $4.95 per month should your balance drop below the minimum
    Write unlimited checks at no charge.
    Use our complimentary award-winning EverBank? Online Financial Center to manage your accounts. Even those not held at EverBank.
    Try the FreeNet Checking Account for three months. If you’re not completely satisfied, we’ll send you a check for $50 to show how much we appreciate you for giving us a try. To qualify for the $50 satisfaction guarantee, you must have used our Online Bill Pay feature at least three times and your account must have been closed within 30 days of your three-month anniversary.

    Customer must notify EverBank of reason for dissatisfaction within 30 days of 3-month anniversary. Limit one per household. New EverBank customers only. Not valid with any other EverBank offer. Minimum of 3 online bill payments over the 3-month period required. Then, if for any reason whatsoever you are not completely convinced that our FreeNet Checking Account is the best bank account in the nation, tell us about your experience. If you close your account within 30 days of your 3-month anniversary, We’ll send you a check for $50.00 after we hear from you, as our way of saying “Thank You!” for giving us a try.
    EverBank pledges to keep the yield on your account in the top 5% of competitive accounts as tracked in the Bankrate.com National IndexTM of leading banks and thrifts.

  32. Jonathan or others, I have an unrelated question and wondering if someone knows the answer.

    I often heard about yen carry trade technique that many big players use to borrow yen at very low rate (currently 0.5%) and invest it.

    How do we borrow yen if we don’t live in Japan?

  33. I was exactly like you except the third bank at the right most. All of my $$ I moved to WaMu statement savings 5% APY a/c when it was started. WaMu’s B&M Service is Excellent, their telephone customer service sucks for life. I love to starve and die instead of finding help on their telephone lines. I used to stick all my excess static $$ in an average 6% CDS.
    Now I got a local CU with 6% Checking account(very attractive) on the first $25K, I just moved to THAT checking account with my direct deposit. So, in total each and every $ for me is earing 6% from its first day of my ownership.. what else do I need for a learner PF management? I am happy

  34. Thanks, I was having trouble finding reference to it within the main website.

  35. Jonathan,
    Question regarding Savings vs short term CDs for an emergency fund…
    IndyMac is offering SA (5.5% APY) vs 7 days CDs (5.4% APY) (I read the bad review above, so this is more theoretical). Both seem to be FDIC insured.
    Is there a reason to even consider the CD over the SA?
    If MMAs had the highest rates out there, would you choose them over lower rate CDs/Savings accounts? Why/Why not?

  36. In general, the money market account rates are not guaranteed and could go down at any time; even as soon as tomorrow. They don’t have to give you any warning either.

    For the past few years, the only real direction rates have been going is up, but now there is a real chance that rates will continue to fall. So “locking in” a lower CD rate might actually work out to be better than a savings account a year from now. (might)

    As for the 7-day CD vs. savings account, any difference should be pretty trivial unless you’re talking big bucks.

  37. Joyce, FDIC covers non-us citizens and residents.


  38. So, assuming rates are stable over the period you’re investing for, it doesn’t really matter what type of account your money is in (Savings vs MMA vs CD vs Checking)–go for the best rate you can find! Excellent. I’ll get on that.

  39. I’m wondering how much money it takes to be worth it for the 3 months of 6% at Everbank given the time it takes for the transfers — it’s only a difference of 1% over that period . . . .

  40. crazor,

    u can not do yen carry trades unless u some how have wondreful access to a japanese bank that will loan you some money in yen…

  41. WaMu’s bill pay is one of the least appealing; very cumbersome to setup compared to BoA or DCU. And their credit card website is still not integrated with their banking website.

    What has been the experience of Jonathan and others?

  42. Also, did anyone here try the Charles Schwab’s free 4% interest checking ? I think it has no minimum, billpay, Visa check card, unlimited checks etc. Catch is, you have to have their Schwab One brokerage account or you must open them together.

  43. Can somebody please reply to my question below:

    Do you guys know if FDIC covers non-US residents (H1-B working Visas).

    I would like to jump on the countrywide savings account for 5.5%, but i am afraid that i may not be covered under FDIC eventhough i will put less than 100k since i am not a US citizen or green card holder.

  44. I have found Etrade bank to have blazing fast ACH transfers out. I have transfered money out to both Wamu and Compass Bank (Compass pays no interest but I use their account for a debit card, which pays rewards. Only keep $500 or less in it.)

    Funds transferred from Etrade (5.05% APY savings) show up as available balances in both Wamu and Compass the next day. Example: I initiate a Xfer from Etrade on Monday, it shows up in the other bank by Tuesday morning at 5AM Pacific.

  45. SavingEverything says

    Yes, the Schwab’s High Yield Investor Checking Account, now at 4.00% APY, with no min require, no monthly services, free standard checks, free billpay, and no ATM fees are true!! They also reimburse you the ATM fee that goes to the owner of machine, upto 6 transactions not to exceed $9/ statement. If you open it up with the Schwab One account, then you also have a very good broker for your investment needs.

  46. If you already have BofA checking, it might be a good idea to open 4 months term CD at 5.35% APY, online only offer. $25,000 combined balance will also qualify you for 30 free trades a months at Banc of America Investment Services.

  47. As of today, Etrade lowered their savings from 5.05%APY to 4.70%APY. Wamu remains at 5.00%APY, for now.

    So if I move $10000 to Wamu I will lose 1 day at 4.7%APY=$1.26. It will take a little over 15 days to make up the lost $1.26 at the higher Wamu rate.

    However, I have a feeling that Wamu may lower their rate also. The 6mo CD rate is 4.50%APY and goes down as the term gets longer. (State of AZ).

  48. Pete – The problem with that is – what if the rates after 4 months are horrible? Then I’d be stuck either without free trades, or losing out on a lot of interest.

    Fresh – WaMu’s BillPay was about average, but now it’s pretty good. Have you used it recently? It has the “Start on” day, and also the “Paid by” day marked separately, as well as the “Date of Last Bill Paid” just like BofA and others.

  49. Jonathan,
    Assuming that Fed is going to continue decreasing prime rate, DDA TDA and CD rates are going to continue dropping. I actually pulled money from BofA credit cards for 2% to 3% balance transfer option (allowed to simply deposit in to my checking) with cap on transfer fee, for about 8 months. At first, I opened Money Market at BofA at 5.71% APY however as that rate dropped and I wanted to keep money at BofA (not lose time in bank to bank transfers and try BofA IS), I invested in 5.35% CD. I mean, your questions are right, I just wrote about CD offer they have in case someone is interested, which depend on individual situation. It would certainly be better if they offer same rate for longer term, but this is what they have. After CD term is over, if I don?t move money to my main investment account, I will look at whatever rates are available in any other institution including WaMu. At this point, it is a good idea for relatively conservative investors to look for stable international large cup companies with high dividend yield, but this is of topic.

  50. What about Zions Bank? They’re offering 5.56% APR for $50k+ accounts (http://zionsbank.com/deseret_learnmore.html)

  51. Anybody know much about UFBDirect.Com? They have a Premier Savings Account at 5.31% APY, which you can link to a checking account that offers free initial checks, no ATM fees, and ATM reimbursement (up to $6/monthly cycle). The only thing I don’t know is if you can link an external account to either account (preferably savings). Any comments would be greatly appreciated.

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