WaMu Raises Savings Rate to 4.00% APY

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Washington Mutual has raised the rate on their Online Savings + Free Checking combo to 4.0% APY. This is now the highest of the no-minimum no-fee savings accounts. Curiously, HSBC Direct actually dropped their rate to 3.25% APY earlier this week.

You can learn more about this account at my WaMu review post. They also again have 12-month CDs yielding 5% APY.

I’ve already laid out why I am sticking with Washington Mutual. In short, why would I mess with this nice setup as long as my money is still insured?

[Some pages still say 3.75%, but my account details confirm the 4.0% APY. Existing account holders can log in and click on “About this account”. Or just click here and hit Apply Today, and you should see the new rate.]

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  1. Even with the bailout, it will be luck that WaMu survives till the end of the week.

    Stay below the $100k mark!

  2. What happens exactly if Wamu does fail and the government comes in, does the interest rate hold, is there any freeze on the insured funds, do automatic bill payments still go out?

  3. Here’s hoping WaMu pulls through for the both of us! 🙂 Just signed up for an account when they started the 5% CD offer and I have to say their online banking is actually really good. Would be a shame if it went away so quickly.

  4. Jonathan: ..why would I mess with this nice setup as long as my money is still insured

    If you figure that WaMu is going to fail (not a big stretch), then it’s definitely a pain when the bank does go under. You’re definitely out of money for at least a couple of days during which time it’s not making any interest. You’re also saddling yourself with a bunch of paperwork.

    The FDIC is also having some of its own issues: paying off Washington Mutual depositors could eat up half the FDIC’s reserves, which currently stand at $45.2 billion…That means the FDIC could bottom out, unless Congress steps in.

    So what happens if WaMu succeeds for a year and then fails?

    So the brief answer to your question, a WaMu failure would cost you:
    1. Paperwork / hassle
    2. Lost interest
    3. The possibility that FDIC may not be able to cover everything.

  5. You finally talked me into it. I’ve opened an account and am in the process of moving my European vacation money to WaMu. 4% is to good to pass up right now.

  6. HSBC did not drop their rate. They were running a promotion of 3.5% that expired in September. Their rate before the promotion was 3.25%.

  7. C’mon WaMu, hang in there!

  8. "New to Online Savings Accts" says:

    I have all my accounts at BOA. Is there an easy way to move funds to these online accounts (i just opened a cap 1 (3.55%) and now plan to open a waMu account), withOUT paying the wire transfer fees?
    My Cap1 account just requested the initial deposit from BOA and its pending today. I can’t tell yet if I will have to pay the fee which really drags on the return. ??

  9. I hope WAMU holds on too. I’ve been using them forever now and they have a great prescence in my area. Hope they stick around.

  10. Isn’t WashMu next in line to kick the bucket?

  11. pardon my ignorance, but when does the interest earned show up in the account balance? i just opened a wamu checking/savings account after reading your blog post about savings accounts a month ago (thanks for the tip!). and since they are allowed to modify the apy whenever they like, what are the chances that the rate will go down?

  12. I love WAMU. They are one of the best deals around, which explains why they’re doing so poorly, but I’ll stay with them until the last minute.

  13. I opened the 5% CD back in August, verified 2 trial deposits, but the fund was not transferred. Called them, told me they would try again, and still nothing happened. This made me wonder whether they want my money or not! I love the 5% but have to email them to cancel my CD. I did open the checking and savings account, so maybe they can get my trust back if things go OK in there.

  14. Check out Indymac.com. IndyMan was taken over, and the only thing that changed was the logo from IndyMac Bank to IndyMac Federal Bank. People can still log into their original website just like before. I have heard of no additional paperwork. Only closed for 3 days, and even then checks still cleared and ACH transfers went through. They are even still advertising, with pretty competitive rates on savings (3.10%+).

    My opinion: Stay under FDIC limits, don’t panic, enjoy the rate, and let the chips fall where they may. If rates drop, move your money when there is a reason to. A bank run would only worsen things.

  15. Yes! Don’t panic. Keep your total under 100k.

    If enough people start to transfer their funds out of WaMu, this bank will sure fail. We don’t want it to fail because none of the mega banks will offer us 4% apy on their savings accounts.

  16. Zombie Money says:

    Too risky for me as they are the next to fail.

    I’ll stick with 3.75% at Dollar Direct. Thanks for the info though.

  17. I actually wanted to pull my balance but they would only allow 10k per day transfer from their account. Only for this and I am out of this game. I know I don’t need monies now but I always thought that I could transfer 100k in one day.

    4% is ok but so is 3.30%. I believe 4% will not last for long anyway. It’s better for me to know my monies are in a place where I can move them more freely and I can also sleep ok.

  18. I have $25 at WAMU… I just want to see what happens. : )

  19. The fastest way to get your money out, if that is your goal, is to go to a physical branch and use their free wire transfers.

  20. I’m not encouraging a run at all here. In fact I’m leaving my money at WaMu as well.

    However account holders also get free cashier’s checks at WaMu so if you were wanting to transfer your money to another local bank, you can get the cashier’s check made to yourself and deposit it elsewhere maybe?

  21. Diana, I’ve had the same experience with the 5% WAMU CD. Verified the transfers but after a couple weeks, nothing has been transferred.

  22. Just a note on the cashier’s checks to make you feel more secure. Their checks aren’t even drawn on the WaMu bank. The funds are transferred over to CitiBank who is the issuer of the cashier’s checks and has been since around May (it was Integrated Payment Systems before that).

    Don’t panic. You’ll get your money.

    IndyMac was closed LESS THAN three days. It closed 4PM (so you could say that they got almost an entire business day in). It was closed Saturday, opened monday. and like Jonathan said ACH/Checks/Debit cards still posted. In effect it was closed 0 business days (let’s say open friday, sat+sun arent business days).

  23. @Gates VP

    There exists no “possibility that FDIC may not be able to cover everything.” The FDIC is backed by the full faith and credit of the United States government. This means that they will simply PRINT MORE MONEY to pay these depositors before they would ever let the FDIC fail.

  24. Mickey Blue Eyes says:

    IMHO, opening a WaMu savings account is like climbing aboard the Titanic shortly after it hit the iceberg. It hasn’t gone under yet but when it does it won’t be pretty.

    Yes, deposits are insured. I don’t know about IndyMac, et al, but in the case of Netbank, the assets were sold to ING. I don’t know if ACH transactions still worked after FDIC took over but before the transfer to ING was completed. I didn’t stick around to find out. I ran away as soon as the merger with Everbank fell through.

    Yes, deposits are insured, but it is a PITA. I’m sure accounts are frozen while the FDIC gets organized and figures out their systems.

  25. As I was filling out my application for a new WaMu customer, I noticed an alternative to the ACH transfers:
    Has anyone used a Credit Card to make the initial opening deposit to the WaMu Checking and Savings account? Do we know if this will count as a cash advance to the credit card?

    Andrew – If you are right, then inflation might be even more likely than I thought 😉

  26. TriviaDuchess says:

    If you check out municipal money market funds @ Vanguard and Fidelity, the yields are currently over 4% and this is before converting to taxable equivalent yields.

  27. “Do we know if this will count as a cash advance to the credit card?” It is almost certainly a purchase. After funding my WAMU accounts, I have $200 pending on my card ($100 funding limit per account) and my cash advance limit is unchanged. I’ve funded accounts at other banks before and it has been classified as a purchase each time.

  28. FTEXX at fidelity is yielding 4.65%. Considering it’s tax exempt from federal tax, it’s rate is very high.. I can’t resist to move money from wamu to fidelity just for the high yield. hopefully its NAV won’t drop below 1$

  29. I actually just opened an HSBC account, the higher rate was in fact only temporary, but it still seems to be pretty competative. This is my first savings account ever so it was a little intimidating to go with a completely online account, but so far so good!

  30. I have an s-corp and keep most of my monies in a wamu biz checking account and biz money market account. My balance when I last check was a little over 125k? If wamu was to fail at the end of this week, is my money still insured?

    I know the FDIC insures single account holder up to 100k, but what about business account holders?

  31. Can someone explain the “7 day yield” business of FTEXX? Sure it sounds like a high number but if you dig further the YTD return is a measly 1.46% I own this as the cash pot for my brokerage and doing the math on the monthly dividends (div amount * 12)/balance gives me numbers around the 1.46% and this is during a time when the “7 day yield” was posted to be around 3%.

  32. Imagine if FDIC fails. Not that it’s absolutely impossible, but the prospect of that will be the complete loss of credibility of the country as a whole. Without a doubt, if that happened, the US of A will become a 2nd class country like UK today. Nah, I doubt that it will happen any time soon.

  33. simplesimon says:

    @ starhusker and JohnC

    You have to understand what why drives those yields. Tons of money left munis and went into treasuries as per “flight to quality” when the market was getting rocked last week. Yes the rate is very high especially for a tax-exempt fund but it will not persist. As for breaking the buck, the chance that will happen is slim to none. FTEXX’s YTD is so low because it is a tax-exempt fund and in general, these funds have very low yields. I forget how Vanguard/Fidelity explain 7-day yield, you can look on the site and it will tell you. But I think it is the yield you can expect to earn on principal for that time period (7 days). Notice it is not “APY” like it is for banks so you can’t do the math like you did from various dividends.

  34. FDIC limit is $200k if you have a joint account, be it with your spouse or a parent. Then you can also have another $100k on your single name account protected on top of the $200k.

    The 4.65% @ FTEXX is more volatile (ie frequency of rate changes) imo than a major bank’s online savings rate, and it swings much more in amplitude. So even though the rate is better today, i’d probably shy away from it for larger or longer term investments. Just my 2 cents.

  35. Muni money market funds were also temporarily higher than their taxable equivalents earlier this year. The rate difference didn’t last very long. On 9/10 the yield was only 1.65%. On 9/17 it was only 2%. I can only imagine it going down as fast as it went up.

    It might be worth a swap if you are already using a Fidelity/Vanguard brokerage account with another money market. However, if you have days of lost interest by moving to/from an external bank, any potential profit might be wiped out.

    Rate Chaser Calculator

  36. Money-Making-Machine says:

    I know WaMu sounds like a good deal but we all know it is on the brink of failure. I think a better choice is Everbank. They pay 3.5% on their savings vs 4% at WaMu, but they pay 2% on their checking vs 0% at WaMu. Plus they are a much more stable bank financially. So with the interest on the checking you most likely will come out ahead at EverBank, and can sleep at night.

  37. That’s only if you have any money in your checking account. Ours is never above $1,000 and usually around $500, so the interest lost is fairly negligible. It’d be better to put all liquid funds in the WaMu savings account and make transfers to checking as needed. You would maximize your interest earnings that way.

  38. Is it a indirect way to collect more cash and helps to float longer, instead of bankrupt soon. Watch out, stay under FDIC insured limit

  39. dmann: corp has the same insured limit as personal accounts, see http://www.fdic.gov/deposit/deposits/financial/categories7.html#association

  40. JPM is buying WaMu.
    I am sure the days of 4% is numbered, but at least, FDIC is saved!

  41. JPMorgan to acquire WaMu deposits, some of its branches


  42. I figured JPM Chase would be a good fit, given their current geographical footprint vs. WaMu. Savings rates are always subject to change, but if this is a purchase, will they honor the 5% 12-month CDs?

  43. Anyone know what happens to WAMU CD/account holders now? Would JP close out accounts? Of course, no one at WAMU is answering the phone.

  44. Money-Making-Machine says:

    With the JP Morgan purchase you can kiss the 4% savings rate goodbye soon. I’m glad I stayed with my EverBank setup, 2.26% for free checking and 3.51% for savings. However, I did lock $25K into 13 month CD’s at WaMu paying 5%. JP Morgan will have to honor the CD rates, but they will drop the 4% savings rate soon. What is ironic is that my $25K in WaMu CD’s is from 0% BT at Chase (JP Morgan). So they will be paying me 5% for borrowing from them!

  45. no way they offer that 5%, but of course previous payments of interest and principal will be paid

    and bye bye 4% – JP Morgan and its multiple trillions in assets has no need for that ridiculous rate

  46. Jonathan it is absolutely reckless of you to be recommending banks on the basis of a couple 10ths of percent in yield… WaMu is up in smoke, with more to follow.

  47. Up in smoke? JP Morgan Chase just bought all the branches. The branches will open tomorrow. Your account number stays the same. No interruption in money transfers, payments, etc. Only difference is there might be a plastic sign saying “Chase Bank” put up soon.

    Yawn. 🙂

    Like any other bank, rates may change. If they stink, we should all move our money out. Simple as that.

    Now just to wait for the big press release and info about CDs.

  48. It’s curious how some people sound the alarm about one bank when all the banks have the same backing. As long as you stay under the FDIC limits your money has the same safety in any bank. Worst case is some delay in accessing your money if a bank goes under. But normally it is as you described Jonathon, the bank gets acquired and all that happens is they put a different name in the window.

  49. savingeverything says:

    “Feel the Whoo-hoo!”?–from WaMu’s logos. Early Thursday 9/25/08, as well as premier style checks, money orders, official checks, travelers the Office of Thrift Supervision shut down the bank as a failure and named FDIC as receiver. Later, after bidding process, JPMorgan decided to acquire their assets, deposits and some liabilities. Sadly, their checking accounts arent great… ie. ChaseFree checking (free with direct deposit or 5or+ debit card purchases per statement period), Chase Better Banking (free with 1500min or 5k combined, no fee for money orders, official & travelers checks and gift cards, no service fees on linked Plus savings, higher rates on their low CD’s, no chase fee for 4 non-chase atm uses), Premier Checking (free with 15k min, no fee for premier personal checks; no fee for money orders, official and travelers checks, gift cards, no service fees on linked Plus savings, higher rates on their low CD’s, no chase fee for 4 non-chase atm uses). When JPM officially does the conversions, no more to fee-free outgoing domestic wire tranfers, no more free Identity Theft services, and their WaMu Free Checking and receiving free check images on monthly statements mailed to you.

    Since WaMu was failed, and JPM Chase is the open bank acquirer, they take responsibility of all deposit accounts, and it’s still up in the air about whether and how much they will change the interest rates on CD’s, savings, etc. Given history with Bank of America /Countrwide, and Indy Bank, rates will go down.

  50. I knew about FDIC coverage when they take over a bank, but I was confused as it sounded like JP had taken over WAMU directly. I was worried that without FDIC intervention first, consumers would be out on a limb like WAMU shareholders. Good to know that’s not the case. Sure would be sweet if JP honored the 5% rate but sounds unlikely.

  51. Jonathan, more reckless advice… WaMu FAILED.. yes, they were taken over by JPM and all deposits will be covered etc. If you think this is a “yawn” and everything should continue as normal then you don’t have your head on straight.

    This -could- end up as a cascade failure of banks. Ordinary people are withdrawing all their savings. If this continues it will accelerate.

    The prudent reader of your blog should do the same now before everyone else does. Why chase 0.25% more interest or whatever? The risk/reward ratio is too high right now. First rule of panic: panic first.

    Remove your money now and put it back when things calm. Interest rates given by the banks (~4%) are so low that taking it out for a few months will not significantly dent your income.

    At the LEAST, under no circumstances should you be above the 100k FDIC limit.

    WaMu went up in SMOKE, and JPM bought all the assets and certain liabilities for a song.. banks disappear. Just because the website still says WaMu or whatever doesn’t mean nothing’s changed…

    When JPM lowers the rates (watch them), there will be a mad rush of yield-chasers withdrawing as they have no reason to leave it there.

    JPM was itself bailed out quietly during the failure of Lehman Bro’s. They needed 138 billion from the fed to buy down the counterparty trades they were involved in. JPM is not “safe and sound”.

    Keep your eyes open is all I ask. Be smart, not a yield-chaser, in times like these.

  52. Hey.

    I noticed this in the fee schedule for the online savings account: ‘Monthly Service Charge: $4.00’

    But then I see this, which makes it reasonable: ‘The Monthly Service Charge waived if Online Savings is opened with a WaMu Free Checking™ account online or opened and linked to an existing WaMu checking account online. If the linked checking account closes, standard monthly service charge and minimum daily ending balance requirements apply.’

    However, this makes me nervous: ‘Accounts with daily ending balances of less than $300.00 on any day of the monthly cycle are subject to the Monthly Service Charge.’

    Does this $300 thing make it basically so that there’s actually that $4 monthly charge if I don’t keep it at $300, even if I have the linked WaMu cheque account?

    Any ideas on this?


  53. Looks like our Wamu CD interest rate is safe until the contract matures.

    From the FDIC web site:

    6. Will I continue to earn interest at the same rate?
    JPMorgan Chase accepted Washington Mutual’s interest bearing accounts including CD’s at the contract rate; therefore, they are not waving early withdrawal penalties.
    Back to top


  54. I opened a savings account with WAMU some time back when it was offering 5 percent. With your suggestion, I checked to see if it was still at 5 percent. NOT.

    I guess the bottom line is, “Here today, gone tomorrow.”

    By the way, I only have $1.87 left in WAMU. Didn’t want to take the chance that I wouldn’t have access to funds.

  55. I’ve had an account with WaMu for the longest time. I kept my money in the savings account and will move it if they adjust the rates. I don’t think they will for quite a while though.

  56. -Maintain a minimum balance of $300.00 each day of the monthly statement cycle to avoid the monthly service charge amount of $4.00.
    -No monthly service charge when you open Online Savings account with WaMu Free Checking™ account online, or link a new Online Savings to an existing active WaMu checking account, as long as checking relationship maintained.

    As long as you have ONLINE savings with WaMu checking, you will have no monthly service charge, no matter what your balance is. There is no minimum balance if you have ONLINE savings + WaMu checking. There is a service charge if you have ONLINE savings WITHOUT wamu checking.

  57. Looks like those rates dropped today, not good. 🙁

  58. That rate seems to reduce to 2.5% for NYC residents.

    F Wamu.

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