With some anticipating rate increases from the Federal Reserve, we might start seeing more banks increasing the interest rates offered on savings account. E*TRADE Bank is ready, and they’ve announced an increased from 3.15% to 3.30% APY starting tomorrow, July 2.
I keep my company stock purchase plan investment with E*TRADE, though not by my choice. I haven’t had any problems with the investing arm of the company. When I sell more company shares, I plan on opening an E*TRADE Bank savings account. I’ve held shares for the last nine months or so, waiting for the company’s stock to head upwards.
Consumerism Commentary reader Allison wrote in to let me know about Savings Square, a high-yield savings account offering competitive rates. The account is offered by Kirkpatrick Bank, FDIC insured. I hadn’t heard of the account until today. Here’s what Allison wrote about her experience with the account so far:
When I first set up my account, there was a problem with my first transfer of cash from my regular debit account to Savings Square. I finally called their HQ, and a wonderful representative explored reasons for the stall, called back multiple times exactly when she said she would, offered alternatives for getting the money to the account while the problem was being corrected, and followed up a few days after the correction to make sure I was happy with the end results. I’ve called them a couple more times with random questions, and they’ve always offered excellent service. At this point, there’s not much that will make me move my cash.
There are other positive reviews online, though most disappointment stems from the timing of transfers. While a 10-day hold on initial deposits is normal for the industry, customers have seen spotty performance with other transfers that should be executed within three days or one day.
Savings Square’s current APY of 4.8% puts them towards the top of the pack of high-yield savings account.
Update: Washington Mutual and HSBC Direct lowered the APY offered on their savings accounts, and I expect more to follow as the Fed lowers interest rates again tomorrow.
Hyperdrive, also known as warp speed or a number of other terms in science fiction, refers to traveling faster than light. While theoretically impossible for objects due to the special theory of relativity, moving at this incredible pace is possible for your money. While you have a savings account earning continuous interest, you are becoming slightly richer not every second, not every microsecond, but every infinitesimal portion of time. That’s fast.
If your money is earning 0.25% yearly interest in a standard brick-and-mortar savings account, you are not making the most of your money. For no more risk you can be earning up to 20 times as much. Savings, whether in a high-yield account or not, is among the safest of all investments. Here is the first tip for putting savings into hyperdrive. Keep in mind that the terms “savings account” and “money market account” (not “money market fund”) are interchangeable.
1. Open a high-yield savings account. Many banks are getting away with murder. They know that most customers are fine letting their money sit without looking for better alternatives. Comfortability plays a role.
If you’ve been with a bank for 15 years, you feel comfortable with them and are less inclined to feel the need to shop around. This is acceptable behavior as long as you understand that you could be missing out on significant interest income. Take a look at this list of high-yield savings accounts or look for the lists on BankRate.com.
Many of the banks that pay the highest interest do not have brick-and-mortar branches. These branches are expensive to run. Without having to manage branches, banks can theoretically save more income and pass that savings onto account holders in the form of interest.
There is no reason to feel nervous about opening an account with a bank that only exists online. As long as they are insured by the FDIC — and all the banks listed here are — you have the same protections you have with a traditional bank. Also, you’re safer sending your information over a secure, encrypted internet connection than you are traveling to a branch with your money.
Opening a high-yield savings account is a no-brainer. With a $10,000 balance at the beginning of the year and no further deposits, a savings account with an annual percentage yield (APY) of 4.5% earns $450 in interest, $425 more than the typical savings account offering 0.25% APY.
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