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. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.