I received an email from a reader about the GE Interest Plus Account. This account functions like a savings account with limited check writing privileges, but there are some important differences to consider before you open an account.
The account offers high interest rates in tiers. For balances less than $15,000, you’ll earn 4.91%. For balances between $15,000 and $49,999, you’ll earn 5.17% APY. For balances of $50,000 and above, the account pays 5.43%. These rates handily beat ING Direct’s money market (savings) account and are competitive with HSBC Direct’s money market account.
While the GE Interest Plus account allows you to write checks, they must be in amounts of $250 or greater in order to avoid a fee. Also, this account is not a savings or a checking account. If you “deposit” money, you are actually investing in GE’s corporate debt. It’s high quality debt, rated AAA (the best) by Standard & Poor’s, but this account is not insured by the FDIC like bank accounts.
GE also holds the right to redeem the notes at any time; this means they may close your account and return the funds to you via check or other method.
This might not be a big deal to you, but you have to acknowledge that the investment carries more risk than a bank account. Before you invest, you have to ask yourself if the difference in APY and the limited check writing capabilities are worth that risk.
Also, you should read the investment’s prospectus before sending your money. Before I’d invest in GE’s debt, or for that matter, the debt of any company, I’d also read (or perhaps just skim) through the corporation’s SEC filings to make sure I’m not investing in a company whose practices I don’t agree with.
The minimum to open an account is $500 (or $250 if you enroll in an automatic investment program). Right now, GE is offering a $25 bonus for opening a new investment account.
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9:23 am (reply)
That’s a fascinating way for a company to reduce their debt expense. It’s basically a money market account, complete with some of the restrictions on check writing (I bet most MM accounts hold a lot of short term GE paper). Accordingly, there is concentration risk here, so I would hope to make more from GE than from a standard money market account. However, I still think that a tax free money market account is still the way to go for those in high income tax brackets. For instance, the Vanguard Tax Exempt money market fund is currently yielding 3.64% after tax, or 5.43% pre-tax for those in the 33% tax bracket and 5.05% for those in the 28% tax bracket.
9:24 am (reply)
And I was right, they do pay more than an average money market (which is good—you need to be compensated for credit concentration).
“Rates will always be greater than the most recent seven–day average yield (non-compounded) for taxable money market funds in the United States as published in Money Fund Report™ a service of iMoneyNet, Inc. (Formerly IBC’s Money Fund Report).”
10:48 am (reply)
Hmm, seems interesting, but I wonder how much of discount you might be getting in comparison to investing in GE Commercial Paper directly (not that most individuals would or should).
8:28 am (reply)
I have been with them since inception and find it to be a great place to invest. Always higher rates than C.D’s, and you can withdraw any amnt at any time. Sure there is some risk, but I havent lost a dime in over 20 years with them…...