Washington Mutual Lowers Online Savings Rate To 4.75% APY

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It had to happen eventually… WaMu appears to have lowered the interest rate on their online savings account from 5.0% to 4.75% APY:


This brings them back in line with other online savings accounts, but I still enjoy having a local bank as the core of my bank account setup and being able to do things like deposit my paper checks directly into my savings account (to a real human!). More details about the actual perks in my review of this WaMu Checking/Savings combo.

My cash savings are now earning less, but mortgage rates are still rising. Bah humbug!

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  1. It is always nice that they lower the rate on your savings but don’t follow with the mortgage rates. That’s kicking some people twice.

  2. Ultimate Money Account at Citi is down to 4.5% with two online bill payments and 3.75% without bill payments.

  3. Like you,
    I also love the idea of having an walk-in bank. I can’t say that I love WM’s customer service. On some occasions, I would get these letters asking for an email update, when they already had my email information. Next week it would be the same story. In all, you can’t be the free checks…

  4. Great, and I opened an account a couple weeks ago just for the 5%.

  5. At least they didn’t immediately drop the rate with the last rate cut like everyone else did.

  6. It’s time to investigate the tax-free money market.

  7. Ted Valentine says:

    Hey look, VMMXX, currently at 4.96%, is still within about 2% of where it was a few months ago! ING, HSBC, WAMU have all dropped 20% – 30% in the same time frame. This is why rate chasing for a few more % is usually a waste of time and energy for the small change. Just go with something solid and be done with it.

  8. Vanguard is at 4.32% year to date. The 4.96 is not current

    Also VMMXX have a 1000 minimum with $20 annual fee for accounts less than $10,000

  9. I am staying put at Emigrant Direct at 4.75% . I was thinking to go to some Florida Credit Union (whatever their exact name) for 6.01%, but Nah. It just too much work and they are not going to stay at 6% for a long time anyway.

    One per cent difference for a few months not going to make me rich. I need to focus my energy in other areas, like designing my portfolio. THANK YOU, Jason on starting your portfolio thread! Good stuff, yammmy…. LOL

  10. BoredWealth says:

    I have most of my money at Emigrant Direct and was considering moving it to Wamu, but Capital One direct banking was offering 4.66% (lower than ED), but they have a rewards program. On another site some guy calculated that the rewards gives you .60%-.72% higher interest rate, which is not taxed 🙂

  11. Our Debt Blog says:

    FNBO Direct still has 5.05% Not sure how long that will last…

  12. Oh Man, SCRATCH THAT, I mean THANK YOU JONATHAN! Not Jason. Who is Jason???? LOL.. I have to get some sleep before I post.

  13. Since MMFs have an average maturity of ~60 days, they will be slower to adjust to rate drops. But I suspect it will drop eventually.

  14. well yeah… their stock tumbled 17% yesterday to a 7 year low…. not surprised.

  15. Citibank Online Ultimate Money Account lowed APY from 5% to 4.5% two days earlier than Wamu.

  16. that’s not a big drop compared to others and with the recent combined .75 point interest rate drop

  17. Does WaMu allow ACH transfers from outside banks? If so, how long do the transfers take?

  18. To Jim

    WAMU does allow ACH transfers. ING is the fastest, about 2 days and etrade is the slowest, up to 4-5 days

  19. I do partially agree with Ted that the money market funds seem to track the fed funds rate more favorably than banks do, but it’s fair to want FDIC insurance, especially now that we know various money market funds have been dabbling in (what we now know is) risky paper… and some are close to breaking the buck. Vanguard seems pretty clean however.

  20. sfordinarygirl says:

    Etrade lowered their rates I think to 4.5% shortly after I got their promo in the mail for 5.05% APY + $25 signup bonus.

    I’m keeping the WAMU setup you described. It’s still easier to move money between accounts quick and easy. And it’s safer to deposit 100+ rebate checks in person instead of the mail.

  21. Can anyone shed some light on the interest formula that WaMu uses for this account?

    I’ve used their online savings account as the core holder of my money for about the last four months. During that time I’ve never made any withdrawals, only deposits. However, my September interest payment was significantly larger than my October interest payment.

    I called WaMu’s customer service twice to inquire and each time was assured that my interest payment was calculated correctly. That may very well be, but neither representative or a teller at my local branch could tell me how the interest was calculated.

    I’m not a investment fiend. In fact, I’m quite a newbie. Any insight would be appreciated. Thank you!


  22. Hey Jonathan,

    What’s your take on the various high-interest bearing checking accounts such as the Bank of Toledo? Do you think it’s also a matter of time before they pull the plug on the current rate of around 6%?
    Of course the catch with these banks is all the hassle you have to put up with such as 10 debit transactions, direct deposit and so forth.

    But even with all these hassles, it seems having one of these accounts is looking more & more appealing as other interest-bearing accounts and money-market/e-savings accounts are becoming less and less attractive.

    Curious to know what you think of all this. Thanks!

  23. Thanks to Steven H. Do you know how long the WaMu ACH transfers take?

  24. I used to transfer $5K through Wamu ACH transfer. It took 10 days. Wamu also needs 10 days for large check deposit of $5K or above.

    Citibank Online and HSBCdirect take exactly 3 days regardless of the transfer amount. Citibank takes 1 or 2 days for large check deposit if it is a local bank’s checking account.

  25. I don’t know what you are talking about Steve, my E*Trade is fast as hell for ACH in and out. You might be talking about the funds availability.
    ACH in from WAMU to ETRADE, same day. ACH out to Grand Yield Direct from ETRADE 1 bus day.

  26. Ted Valentine says:

    Jen — You need to go back and look again. YTD is for 10 months, and is not an APY. The compound yield today (APY equivalent after all fees) is 4.95%.

    The $20 fee is waived for signing up for electronic statements. If we’re talking about

  27. Oh, you’re right. Thanks, Ted. Definitely seems worth it now! I think I’ll buy their money market fund for my long term (down payment) savings then.
    Good point, Jonathan about the local bank. It it weren’t for the benefit of physically going to a branch, I wouldn’t have been able to get my stone-age parents to take their .2% apy savings to an online savings account.

  28. I live in California and use WaMu for checking and online savings accounts.

    Most of my emergency reserve, though is in VCTXX. Compound yield is 3.24%, but in my bracket it works out to 4.79% taxable-equivalent. It was paying siginificantly better during the last month, but since the average maturity is 32 days it’s fallen hard in the past week.

  29. FNBO Direct is still at 5.05%.

  30. Heather, I asked WaMu the same question: How could I have earned less interest in October than in September when I had more than $1,000 in my account during October?

    It’s not like they can claim that there were fewer business days in October than September for the money to earn interest — because there weren’t. There were 23 business days in October compared to only 20 in September.

  31. Davide interest compounds everyday, even on weekends. If the amount was the same for Sept and Oct, you should have made more in Oct for the 1day + interest earned from end of Sept.

  32. Countrywide Savingslink is still at 5.35% They need strong deposits to make up for their poor portfolio of defaulting mortgages.

  33. Wamu has a 5% APY 6month online CD.

  34. The rates at Amtrust Direct still haven’t dropped… is there a reason they’re mentioned so much less than the others?

    They seem reputable and FDIC insured, but are still at 5.36% and have been consistently on top of the lists for a while. Their site’s not great, but I’ve been slowly shifting money from HSBC to Amtrust as HSBC’s rates have fallen…


  35. Davide, was WaMu able to offer you any reasoning?

    As I said, my September interest payment was a good deal larger than my October interest payment. I’ve never deducted any money from my savings account and I also deposited about $1500 between the September and October interest payments.

    I don’t get it. :/


  36. Just wanted to let you know that WAMU is currently offering 5.00% APY online CD’s for 6 month terms.

    Might be a good option if you want to keep that rate.

  37. I see the same thing re: interest calculation. I have had a CD with Wamu since July. The interest paid has gone DOWN each month. It should be going up due to compounding. I am going to pull out my calculator (or maybe Excel) and check it.

    Does anyone know whether Wamu uses a 360 day year or a 365 day year?

  38. I just tried to calculate using the following formula: APY=(1+r/365)^365

    rate=0.0522 and APY=0.0535 , which is what was advertised.

    I could not get each of the first three interest payments to work out correctly. Interestingly, when I calculated for the current balance in the account, using 92 days for the first three months it did come within 10 cents of what my balance said. Balance=initial_deposit*(1+r/365)^92

  39. Heather, when I called WaMu customer service this weekend I got the call center in the Phillippines, and one agent came close to explaining how the interest is calculated — although her reasoning about how they take one’s average daily balance and divide that by some other number didn’t make sense to me. She told me to call back today (Monday) and talk to another department (one that is based in the United States) that would go over the process with me step by step.

  40. Wamu does not pay interest until your deposit clears. If you deposit a check with a ten day hold, you lose ten days of interest. I asked a superintendant “how long is the hold on an ach transfer”. He said to me he could not tell me. I said to him you just lost my business.

  41. As long as you have or build up a history of depositing checks (without them bouncing I suppose), your limits get upped and you’ll get virtually no holds if you deposit at a teller. Your receipt will tell you each time how much is being held and for how long.

  42. Shraz: I, too, thought interest on this account was compounded daily, but a customer service rep and his supervisor both told me on Tuesday that deposits earn interest only on business days and not on weekends or holidays. I was shocked to learn that.

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