WaMu Savings 3.75% APY: Should I Stay With A Struggling Bank?

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While logging on to my WaMu account I noticed (as did reader Alvin) that the WaMu savings account* is now paying 3.75% APY as of 7/31. Some pages still say 3.30%, but my account details confirm the 3.75% APY. (Login and click on “About this account”.) Or, click here and hit Apply Today, and you should see this:

Of course, if you read the news, you’ll know that Washington Mutual stock is being battered right now. Is this move a sign of desperation? If so, is this rate increase good news or bad news?

It’s All About The FDIC Limits
Well, if you have money over the FDIC insurance limits of $100,000 per titled account, I strongly suggest you stop reading right now and spread it out immediately. Your money is at risk. Here are some good options.


If you are under the limits, then your money is safe. The main things left to worry about are (1) easy access to money, (2) crediting of current interest earned, and (3) future interest rates. But hey, we already have two examples of struggling banks that give us an idea of what we might be in store for.

IndyMac Bank CD Example (FDIC takeover)
I believe that IndyMac failed on a Friday, and branches were closed that day. Over the weekend, branches were closed and the website was down. ATMs and debit cards still worked. By Monday, all the branches were open and the website was back up. Direct deposits, electronic transfers, and written checks went through uninterrupted.

All interest earned in accounts (under the limits) was still credited. Before the failure, IndyMac Bank also had some high interest rates on certificates of deposit (CDs). Upon takeover by the FDIC, an ideal scenario actually happened. For one, you had the option to withdraw your money from a CD with no early withdrawal penalty. Or, if you liked the rate, your CDs could continue to earn the same interest until maturity. This is an even better deal than if IndyMac stayed intact.

Countrywide Example (Bought by Bank of America)
Another struggling bank, this time merged with another existing bank. Currently they are still separate websites, with their own interest rates and products. Nothing really changed from the customer’s point of view. There was no downtime, or lost liquidity. You use the same checks, same debit cards, same website. CD rates and other terms remained the same. A slight bonus was that Countrywide customers could now withdraw money from Bank of America ATMs with no fees. [Merger Info]

So, Will WaMu Fail?
I have no clue. My PTI-style Toss-Up Percentage: 25% Fail, 75% No Fail. But even if it does, given it’s size, I can’t see it disappearing overnight like a small local bank might. It would have to be taken over by another (probably large) bank. In addition, there are so many moving parts that it will probably keeping run as-is for several months even if it does get taken over.

Taking all this into account, I will be sticking with Washington Mutual and happily take the increased interest rate.

* Reminder: This 3.75% rate is only available if you apply online and open a Free Checking account at the same time. If you go into a physical branch, they will deny deny deny! However, after opening you can use it at a branch just like any other savings account. More details.



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Comments

  1. Dont know why people would pull their money out and get all worried for nothing. Even if it does fail, you will still have access to your money and everything will resume just fine.

  2. Can you tell if FDIC has enough fund to cover a large bank bankruptcy like WaMu???

  3. Here is a blog post regarding the state of WM
    http://globaleconomicanalysis.blogspot.com/2008/07/death-spiral-financing-at-wamu-merrill.html

    Mish has been blogging a lot regarding the current states of the banks and why they are in trouble. He wrote an interesting article regarding Washington Mutual recently and the death spiral financing WM entered into.

    In short summary, there was a provision when WM raised funding last time that is making it difficult (if not impossible) for them to raise additional funding. Personally I moved my money from WM to ING/HSBC online savings. The additional 0.25% ~ 0.5% interest doesn’t seem to justify the risk.

    aa, to answer your question, there is roughly $6.84 trillion in bank deposits. FDIC only has $53 billion FDIC insurance to cover $6.84 trillion. The failure of IndyMac will use up approximately $8 billion of that. The real question is not whether you are insured but rather when FDIC will be able to re-pay the money if a chain of banks start to fail. There might be a delay when you get access to that money. Hence, if the money is needed in the short term time frame, this is a risk that should be factored in.

  4. I hope they don’t fail. I don’t have a bank account with them, but I have one of their credit cards. Their website keeps you updated on your Transunion score for free, and even sends you an e-mail alert if it’s changed more than 20 points in a given month.

  5. Steve H says:

    If WAMU fails, I’m not worried about losing my money but I don’t want the disruption. We started another checking account, mainly to have multiple bill pays and access to on line accounts. (treasury direct, ing, etc.)

  6. NoMoreWork says:

    WaMu has A LOT of cash on hand and should be relatively safe for the near term. The company execs continue to maintain that they have enough reserves to weather this storm. Also, the vast majority of this money is from customer deposits… Hiking the interest rate seems like a good way to attract more. But that’s just my 2 cents.

    I’m sticking with them, and smiling at the rate increase. Thanks for the info, I hadn’t noticed it yet!

  7. Stock price isn’t an indicator of solvency.

  8. Stock Year to Date:

    1. Washington Mutual (-64%) $4.96
    2. Wachovia (-54.85%) $17.31
    3. Citigroup (-37.53) $18.46
    4. Bank Of America (-20.75%) $32.93
    5. Wells Fargo .13% $30.46
    6. Union Bank of California 10.53% $54.02

    IndyMac liked the sub-prime business, I guess we know who else did too.

  9. jerry dill says:

    I wouldn’t be as worried as most people are. It might be in the back of my mind, but I’m not worried enough to be fretting about this issue.

  10. James Wilcox says:

    A lot of lenders fell into that subprime mess. At least your accounts are insured by the government (as stated up to $100k per account). I don’t bank through it everyday but I like taking payments via paypal and earning the interest there plus it makes it easy not to touch the money because a withdrawal takes several days to complete. At one time they had 5.65% interest rate.

  11. I don’t know about everyone else, but I have been swamped with credit card offers by WaMu of late. While zero percent offers have been hard to find, WaMu and BoA are still sending them to me amongst the rest of the different offers.. If they were in trouble, why would they be offering up zero percent offers? Or maybe it’s just the ship on autopilot?

  12. aa:

    FDIC has about $53 billion. IndyMac bail out will cost between $4B – $8B. The remaining, is it enough to bail out large banks? One or two, but anything more than that, it’s the FDIC itself will be in trouble.

    As far as WAMU’s solvency, I think if everyone starts withdrawing money, they’ll be in trouble for sure. It’s a self-fulfilling prophecy. I think they’ll be okay in the long run if people don’t panic although I think they will face major losses. They were pretty reckless in mortgage lending, but hopefully they’ll have enough reserve to weather the storm.

    I too have accounts with WAMU. I’m still keeping my money there although I make sure that it’s well below FDIC insurance limit, just in case.

  13. Probably the wrong place to ask this, but what the hay. For those of you with accounts already:

    1. With WaMu, can you initiate ACH transfers via the website?
    2. Are ACH transfers handled quickly?
    3. Can you initiate their famed free wire transfers from the website?

    Thanks!

  14. WaMu’s ACH transfers are painfully slow. An example, if you put in for a transfer on Tuesday to or from another institution, they will say it can’t even be initiated until Friday. Yes, you can use the website for the transfers. I don’t know about the wires.

    I pulled out about half of my WaMu money and sent it to Etrade when they started matching WaMu’s interest rate. Now I’m wondering if I should be an interest chaser and send it back to WaMu.

  15. Bob Brinker had a guy on from Chicago that couldn’t get his money out of Indy Mac because he didn’t have any local branches. He wasn’t getting a return phone, fax, email, or mail from Indy Mac. I don’t know if it is because they are backed up or what.

    He is going to fly out to California to make the withdrawal.

  16. @justin

    Why didn’t that guy from Chicago just write a check to himself? It’s less dramatic than flying out to CA, but I think it would have been easier.

    @Rhonda

    Thanks for the information.

  17. Next5Exits says:

    Almost a year since I wrote a comment in an another post about WaMu.

    The only thing that has improved between then and now is, that they now allow single sign on for Credit Card and Bank Accounts. You don’t have to login twice like before.

    However, their bill payment (4 days invariably for nearly all payees) and funds transfers are painfully slow, not counting the hold they put on deposits.

    I still prefer DCU for day to day banking, which eats WaMu for lunch in terms of features and convenience; the coolest new feature with them – ability to scan checks from home to deposit from our existing $10 scanner. Awesome.

  18. do you guys thits a good time to buy wamu stock ?

    cause its gotta go up even if it gets bought out and 4.90 is a bargain

  19. bigmouth says:

    We have a local credit union (federal chartered) is advertising 6.01% APY checking account with limit up to 100,000. I am tempted to join but not sure what’s the catch. I mean, are they equally secured like FDIC insured banks?

  20. Narcissus Black says:
  21. Bigmouth –

    Most credit unions are federally insured by the National Credit Union Administration (NCUA), which is analogous to the FDIC for banks. It’s a standard $100K per member, but coverage can be increased by adding qualified beneficiaries, joint owners, etc. IRAs and other accounts are insured separately.

    I work for a local credit union and we’ve had a nice refresher on the Insurance Fund for the NCUA, the NCUASIF. πŸ™‚

    Hope this helps!

  22. It just occurred to me that my retirement fund is not FDIC insured. I mean, I kind of knew that, because it’s not in a savings account, but it never really occurred to me that I would have to worry about that. Are there any types of insurance on pension funds?

  23. Emigrant direct savings is now 3.00%…too little too late. I am in the process of switching from Emigrant to Everbank. I was hesitant at first but after reading so many positive responses in here I decided to switch. I hope they stay within the top 5% as they say they will.

  24. […]

  25. One thing with Wamu is really bad: whenever you deposit a check over $5K, they hold the $5K for 5 business days (except the first $100 that is available immediately) and the remaining balance for 10 business days, even if your check is from a local bank.

    In comparison, when I deposit a local bank check of over $5K in Citibank, they hold the above $5K balance for one day and sometimes all balance (if under $10K) becomes available immediately. So, if you want, you can use the money one day before it enters into your account with another bank.

  26. Wonder what investing options one is left with these days
    1. Stock market – down
    2. House as an investment – down
    3. Putting money in banks for long term CDs – not reliable with banks going bankrupt.

  27. Tapan,

    Actually, that means:
    1. Stocks are on sale – good time to buy!
    2. Houses are cheap – good time to buy!
    3. Banks want cash – FDIC insured CD’s have decent yields!

  28. @ Dan

    Haha πŸ™‚ That’s a great assessment!

    I’m still a little burned on stocks, but it definitely seems like a great time to invest in a house—especially towards the end of the year when sellers are getting desperate.

  29. Dan,
    You are right. Those things really depend on how long you want the money to be tied. This is a good time to get into stocks as I had in my blog but thats if you do not need your money in a less than 2 years.
    Tapan

  30. @Bob –

    Is online banking available if a bank is taken over by the FDIC?

    The caller said he had absolutely no way of getting his money without access to the brick and mortar building.

    I was actually curious if this was true.

  31. justin,

    when netbank was shut down last year by fdic, its online banking was locked soon after that for a while. in a few month or two, ingdirect suddenly transferred my former netbank saving account and its balance into a new ingdirect saving account (called “orange saving” account) and i was able to access the account immediately. later on, ingdirect sent me a letter to explain it.

  32. Don Pratt says:

    what happens to my mortgage is Wamu goes under? Right now I have automatic withdrawals, does whatever bank takes it over continue the withdrawals or will I have to manually change it?

  33. Andy,

    Are you sure netbank was shut down for that long? Just about every article I’ve read said it was only a few days that customers couldn’t access their money. Here’s one:
    http://www.productivity501.com/fdic-insurance-when-banks-fail/375/

  34. joelkton says:

    Great time to buy a house? You wouldn’t be a RE agent would you, Dan?

  35. I’ve also been getting TONS of WaMu no-fee balance transfer no-interest for 18 mos. offers lately. They must really be counting on the interest from these offers from people who screw up. I had never received offers from them previously, maybe they freed up some of their capital for more lending???

  36. Dan,

    After my netbank online banking was locked, within a week or so, I received a letter from Ingdirect that said they would transfer my netbank saving account to Ingdirect. So, I stopped checking my netbank online account. I am not sure how long they kept my netbank online account locked. I kinda remembered it was locked for at least a week until I received the letter.

    One point to clarify: my netbank’s online banking was locked but my MONEY there had NEVER been locked. The netbank checks were always valid. Even after Ingdirect set up my transferred accont after a month or so (I saw it online before I received the letter) and then wrote me a letter to officially inform me, their letter gave me a deadline (about one month after my account was transferred) that I could still use my netbank checks.

    Remark: I opened in Year 2001 a netbank saving account and the netbank gave me check books (no ATM card) to access the saving account.

  37. Andy, thanks for the clarification.

    joelkton, LOL. No, I’m not a RE agent. (Nor a stock broker or bank employee.)

    But 20% down is looking a lot less intimidating now than it did a few years ago, when my friends were all telling me I should buy and I thought it was a bad time. πŸ™‚

  38. CJ,

    I am wondering why Wamu sent you such great offers? What kind of Wamu/Providian credit cards do you have?

    Since last year, I have been receiving at least once a month Wamu Credit Card’s balance transfer checks (and online offers via emails) constantly. Their offers are almost always the same: 0.99% APR or 1.99% APR for 8-month or 1-yr with balance transfer fee 3% or max $199.

    I have a Wamu/Providian Master card and a Visa card. They upgraded my Master card last month to a new type — I have not used these two cards for about a year. But if I received their offers similiar to yours, I’d take advantage of it, I think, after I read carefully to make sure it has no pitfalls. Balance transfer offers sometimes has pitfalls that even escape the most prudent users.

  39. Dan, you did well to hold out. Keep waiting!

  40. Andy,
    I don’t have a WaMu credit card. It’s an offer to lure me into opening an account. I take advantage of these on a regular basis, just like Jonathan. Every 12-18 mos I open a new card with 0% interest and keep cash in my high-yield savings. Now I just have to worry about cancelling some of them without affecting my credit score too much. It’s kind of a balancing game.

    I’ve never gotten “caught” paying interest on these offer. Yes, you have to be very careful and aware of the exact terms. But I usually pay them off a month prior to the 0% offer expiring just to be sure. Otherwise they hit you with the accrued interest from the balance you’ve held for all the months it was at 0%.

    Good luck!

  41. I do the same thing…take advantage of all the 0% interest rates while leaving my money in savings. Plus the fact that the cards I use pay me cash back or rewards. I also pay my cards off one month early, just to make sure. I get higher cash back rewards with the ones I have to pay off every month, so I have those going, too.

    WaMu has been sending me offers like crazy, but I’m waiting for the 0% transfer fee. They’ve got the 0% interest, but I want the no transer fee deal.

    I wonder if you can develop a reputation for never having to pay credit card interest, thus they can’t make any money off of you?

  42. Another question…I used to close credit card accounts, but now I’m hearing that the more unused credit you have, the better your credit report looks. Suzie Orman talks about this. Any ideas?

  43. Nice one. I just open one online. However, I did not see online saving account showing up. I only see the free checking account. What’s going on? Is it normal? I have sent emails to WaMu, and hope it get solved soon.

  44. If I remember correctly, they offer you the online savings when you open the checking online.

    I opened one online checking with savings, then wanted another savings account. They automatically opened another checking account to go with that savings, which I did not need. Every online savings has to have it’s own free checking account.

    When I opened the savings for success account, they immediately opened up yet another sweep savings account. Looks like this would make it harder for them to keep up with, too. It sure has made things more complicated for me!

  45. If there is no physical WaMu branch in my area (central ohio), would it still be beneficial for me to open a savings and checking acct on line? would there be any reason for me to need a physical branch? I’m new to this online banking. I would appreciate any information and advice anyone could give me. Thanks.

  46. I kept my BoA checking account and hooked it up to my WaMu. That way if I have checks to deposit I can put them in BoA and then transfer the money to WaMu online. If you can set up direct deposit, there is very little reason to ever go to the WaMu branch. My WaMu branch is only a mile from me, but I still rarely have a need to go there, and really wouldn’t have to at all. I do it all online. One thing you have to watch is the number of outgoing online transfers you do from your WaMu savings. The limit per month is six and they will charge you if you go over the limit. That limit doesn’t apply to withdrawals you make at the physical bank. There is no limit on deposits.

  47. Thank you Rhonda for answering me so quickly. I’ve just recently discoverd these high yield online savings accounts. I never knew they existed till a couple weeks ago. I’m very excited about opening one. I just dont know which one. I’m considering HSBC or WaMu. Both because of their low minimum to open and of course decent % yield. I like WaMu’s 5% CD promotion, which I know might be ended by time I could get an acct open with them. But maybe I’d get lucky and the promotion will still be good. Everbank caught my eye too, but, I’ve just about dismissed them cause of their $1,500.00 minimum maintain balance. Not that I would be taking the money out, I just dont have alot to play with, and emergencies always pop up! I believe both HSBC & WaMu branches are not available here in Ohio. So I didn’t know if that would be a problem for me after opening an acct. Thank you for information on a fee for going over 6 outgoing transfers. I think I would be ok there. The little bit of money I have(less than $8,000) has been sitting and growing (measley .75%) in my credit union savings acct for years. I rarely touch it except for emergencies. I used to keep most of it in my checking acct (.15%) till I discovered the savings acct paid more interest (.75%). So I moved most of it to savings. HA! Imagine my surprise when I discoverd these online high yield savings accts! So, now I have to decide which online account will work best for me. I really plan on not touchching the money and just let it keep growing interest, but, if I needed to take money out of the new high yield savings acct, which would be the best way? Transfer it back to my credit union acct and withdraw at the local branch, or just write a check for cash from the new high yield checking acct? I’m like a kid in a candy store right now, just don’t know which store to go in! I dont really like the idea of having to open a checking acct with the MaMu acct, but, I understand that’s part of the package. And if I understand it correctly, the checks are free. I hardly write checks now, now that our credit union has online bill pay. Any ways, any more information anyone out there can send my way I’d welcome. I really appreciate all your time and experience. Thanks again. J

  48. I found out about the online high yield savings accounts about 3 years ago, and was just like you…a kid in a candy store. I did a lot of research. At the time, Emigrant Direct offered the highest rate, so I opened an account and put what I could in every payday. From then until now, someone is always offering a better interest rate, then it changes. Etrade was higher than WaMu for quite a while, then WaMu went back up, so I transfered my money back to WaMu. I actually have too many online savings accounts open, but most of my money is in WaMu since they are very competitive these days. I looked at the other savings accounts you mentioned, but there was something that wasn’t convenient for me…can’t remember what.

    The good thing about having a checking account linked to your savings is that you can transfer money immediately, and write a check if something you are paying for won’t take online payments.

    If you don’t have WaMu ATMs close by, I would leave some emergency money in your credit union and put the rest in WaMu savings. Only put a small amount of money into the WaMu accounts to start with. It takes a while to have access to your money at first.

    Besides the 5% CD, WaMu also has a Success savings account where you make monthly automatic deposits that earns 5% also. You can’t touch it for a year from when you open it, but you don’t have to make a big commitment all at once like with a CD. It’s listed under their savings accounts when you click on compare savings.

  49. Thank you so much Rhonda for your advice. I believe you when you talk about the different banks out there and there ever changing %. I was just thinking, this could drive ya nuts seeing all those rates go up, and you’re at a different bank! He He

    I do remember reading about that ‘success savings’ acct with WaMu, but for some reason wasn’t sure exactly how it worked. I will read up on it more. That sounds interesting to me too. I think I could handle a monthly deposit there for 5%. Gives me more access with my money as apposed to putting it all in a CD right away. But, with a CD, at least I know I’m committed and can’t back out. All sounds good.
    I think you have just about convinced me to start a WaMu acct.

    Have you heard about that promotion that Suze Orman and TD Ameritrade has? I just found out about it bout 2 weeks ago. It’s been out awhile I guess, started out as $50 monthly deposits for 12 months and they give you $100 if you dont make any withdrawels and make all 12 mothly deposits. Well now it’s $100 monthly deposits for 12 months and they give you $100. Anyways, I signed up for that.

    I’ve got to start somewhere to make my money work better for me.
    I’m just an average Jane, no college degree, don’t make the big bucks. So, I gotta be creative and make what I do earn work better for me.

    By the way, does WaMu count transferring money between their savings/checking/success savings acct as a transfer out? Do they count towards the 6 free transfers out?

    Thanks again for all your advice. And if you hear of any other great promotions out there that you think I could take advantage of (with limited $$) please let me know.

    j

  50. I am just a regular gal, too, so I am always looking for more ways to stretch our money. Although I’ve done many hours of research, most of what I have done for the last year I have found out about through this web site. There were so many great opportunities out there that I started to realize that I had too many accounts open to keep up with. Now I really have to stop and think if I should open another account. I did get the Quicken starter edition to help me keep up ($30), and it has been well worth it.

    Yes, I did the TD Ameritrade thing about 5 months ago with a $50 monthly deposit. It’s a great deal. Also, I don’t know if they are still doing it, but ING Direct was paying $25 within 30 days if you opened their Orange savings account. I cashed in on that.

    Now I am in to the world of credit cards that give you cash back or gift certificates. I leave my money in savings until the payments are due, then pay them off. I have a couple that are 0% interest on purchases for a year, so I make the minimum monthly payments and put the rest into savings until they are due. It’s fun knowing that I COULD pay off all my cards, but instead I am leaving the money in savings. You have to be really responsible to do that kind of thing so that you never have to pay interest. I just cashed in $200 worth of gift certificates to Lowes that I earned on my discover card, and got some much needed lawn equipment totally free! I went from trying to get totally out of debt to making credit cards pay me, and the great thing is, the money they give you back isn’t taxable. I found out about all of the great offers on this web site, so I check it every day.

  51. I’ve read some of the articles about using credit cards to earn cash or gift certificates. I’m not ready to get into that just yet.

    I’m not sure how you get the cash from the card to put in your savings acct when you sign up for a 0% promotion card. I understand how you can use it for purchases and not have any interest added to your bill for the length of the promotion. But, how do you get, say, $1,000.00 cash, put it in your high yield savings acct., earn your interest, then pay it off at the end of the promotion?

    I remember reading a little bit about ‘quickens’ and some of those programs. I’ve never used one to track my bill paying. I have no idea how they work or what exactly they do.

    I haven’t been able to find the ‘success savings’ page yet since you mentioned it. All I find under the ‘savings accts – compare savings’ is ‘statement savings’ and ‘online savings’. But I’m sure I read about it. Maybe I’m thinking about an option at one of the other bank sites. Maybe I’m just not looking in the right place. There’s so much information on these sites, you could have a dozen pages open. I get lost!

    I think Ing Direct is still offering that $25 for opening an Orange acct. I believe I read about that in the past few days. There was something about it (can’t remember what) that made me think it wouldn’t be worth all the effort. I might have to go back in there and reread it.

  52. Jayne: Regarding how to get cash from cards at 0% to put in a high yield savings account… Go to the top of this page and under “Popular Posts” click on the link for “Free Money – 0% APR Balance Transfers.” It’s probably the best explanation on the internet.

  53. Thanks Dan,
    I will read up on those “Free Money 0% APR balance transfers” articles some more.

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