For those who have enjoyed high-yield savings and checking accounts, get ready for a difficult time keeping up with inflation. ING Direct announced just minutes ago that the bank is dropping the interest rate on the first $50,000 per person deposited in their Electric Orange checking account to 0.5% APY. The interest rate is based on tiers, if your balance is above $50,000 and under $100,000 you will earn 2.85% APY and if your balance is above $100,000 you will earn 3.05% APY. I don’t know anyone who would keep that much in a checking account when a savings account earns more and balances can be easily transferred to the checking account if needed. Most people will be earning the 0.5%.
From one point of view, customers can be thankful they’re earning any interest in a checking account. This latest change is a 67% drop in interest rates, and it’s hard to justify calling this account a “high-yield” checking account at this point.
With the target federal funds rate now between 0% and 0.25%, I expect savers will increasingly struggle to find good liquid investments.
Updated December 19, 2008 and originally published December 17, 2008.