As I mentioned yesterday, Washington Mutual has leapfrogged ahead, raising the interest rate offered on the bank’s online savings account to 3.75% APY. I’ve updated the list of highest online savings account interest rates to reflect the current rate leader.

Here is a summary of the highest interest rates on well-known banks currently offered, as of July 31, 2008.

Washington Mutual Online Savings Account
3.75% APY

The Washington Mutual Online Savings Account is only available online, not in WaMu bank branches. If you also sign up for a WaMu Free Checking Account, you will avoid a monthly service charge of $4.00. This fee can also be avoided by maintaining a balance of at least $300 each day of the monthly statement cycle.

There is some concern about the stability of Washington Mutual considering the company’s recent losses. In fact, the bank’s need to attract capital is probably a strong driver behind the bank’s decision to raise interest rates and attract more savings customers. I wouldn’t say your money’s at risk if deposited here; the FDIC has you covered if you stay within the limits.

Some of WaMu’s deposits are held at Washington Mutual Bank fsb (Utah) with a CAEL rating of 1 (best), while some deposits are held at Washington Mutual Bank (Nevada) with a CAEL rating of 5 (worst). This rating is used to determine a bank’s stability, but a rating of 5 doesn’t guarantee a collapse and a rating of 1 doesn’t guarantee against one.

If you are interested in Washington Mutual’s Online Savings Account, apply here.

HSBC Direct Online Savings Account
3.50% APY

HSBC Direct is currently offering a “promotional” interest rate of 3.50% APY through September 15, recently extended beyond the original expiration of August 15. HSBC Direct has a track record of offering very competitive rates, and I believe that will continue when (and if) the “promotional” period ends. I have been adding more to my HSBC Direct account to take advantage of their habit of high interest rates.

Unlike Washington Mutual, HSBC Direct requires no minimum balance and has no recurring account fees.

If you are interested in HSBC Direct’s Online Savings Account, apply here.

FNBO Direct Online Savings Account
3.50% APY

FNBO Direct is a newcomer to the online banking arena having launched a little over a year ago, but the bank behind the online presence, First National Bank of Omaha, has been around since 1857 and currently has 38 branches in Nebraska, Iowa, and Texas. First National Bank of Omaha has a CAEL rating of 2 (1 is the highest rating, 5 is the lowest). This means that even though the online account is a new offering, the bank is in good shape and most likely won’t fail like others have recently.

If you’re interested in FNBO Direct’s Online Savings Account, apply here.

ShoreBank High-Yield Savings
3.50%

This account is a newcomer. ShoreBank requires no minimum balance and charges no account fees for this online account. An appealing feature is the bank’s attitude toward community development and the environment. Like most banks, ShoreBank turns a portion of deposits into loans. This bank focuses on “loans for projects that promote the efficient use of materials, resources, or alternative sources of energy, that promote the elimination of toxins, and that protect or revitalize land or water.”

If you’re interested in ShoreBank’s High-Yield Savings Account, apply here.

ING Direct Electric Orange Savings Account
3.0% APY

No list of the top online savings accounts is complete without ING Direct. They are no longer the interest rate leader, offering only 3.0% APY. In fact, it’s been some time since ING Direct has been at the top of any interest rate list, but there are several reasons to include them here. They were one of the first banks to popularize the idea of high-yield online-only savings accounts. ING Direct still maintains one of the strongest presences thanks to a vast customer base, good customer support, and a sensible and simple website.

Even though the advertised interest rate is lower than others, new customers can greatly increase their effective interest rate by grabbing a $25 bonus for opening an account. The bonus will work for anyone who opens the account with $250 and leaves at least $250 in the account for 30 days. If you deposit that initial $250 and nothing else for the year, the interest you earn, because the bonus is considered interest income, will amount to 13.3% APY. I can bet you that rate is unbeatable. Of course, that’s 13.3% on only $275. If your initial deposit is higher, or if you add money throughout the year, your effective interest rate will gradually decline back down towards 3.0%.

ING Direct has no minimum balances or account fees.

If you’re interested in ING Direct’s Electric Orange Savings Account, apply here. However, if you want to see if you qualify for a $25 account opening bonus, find out here.

Starting tomorrow, Washington Mutual is increasing the interest rate offered on its online savings account to 3.75% APY. This jump will put this account on top among the best-known online savings accounts. This is a wide enough margin over ING Direct to convince me to open an account and give it a try even though I’m far from a “rate-chaser.”

I foresee more interest rate increases in the near future.

I received an email to inform me that HSBC Direct has extended its “promotional” interest rate on the online savings account of 3.5% APY to September 15, increasing this promotion by one month.

I’m not sure what the difference is between a “promotional” rate and any other rate; as always, interest rates on savings account are subject to change at any time. Perhaps HSBC Direct has simply planned when it will lower its rates while other banks generally keep that information private until the change occurs.

3.5% is the best rate you can get right now for internet-based savings accounts backed by major financial institutions. This rate would put HSBC Direct at the top of the list, but I’m keeping them listed with their last known non-promotional rate.

HSBC Direct does not offer a referral program, however. When you open an account at ING Direct, you can earn a $25 bonus immediately (accessible after 30 days) simply using a referral link generously offered by Consumerism Commentary readers (and one-time visitors). Keep in mind you need to open the account with an intial deposit of at least $250, and keep your money there for a month.

I’ve updated the list of referral links to include some new ones as each link can only be used once.

I wouldn’t suggest becoming a member of Costco just for this particular benefit, but if you are already a member and looking for a place to stash your cash, you can consider Capital One. Capital One’s direct banking department is offering a 3.2% APY compared to 3.0% APY for non-members on the bank’s money market account.

Membership costs $50, so unless you intend on earning more than that on the 20 basis point advantage, signing up for Costco membership to earn this higher rate doesn’t make sense. Even if you are already a member, there are a number of banks offering higher interest rates.

If you are an “Executive Member” of Costco, a benefit that costs $100 each year, you would qualify for this rate plus a $50 bonus if you deposit more than $5,000 into the Capital One money market account.

Following E*trade’s announcement that they were slightly increasing the interest rate on their Complete Savings Account to 3.15%, I’ve updated the list of savings and checking account interest yields. There have been a number of changes since the last update, including the following.

• UFB Direct dropped from 3.35% to 3.01%.
• Kirkpatrick Bank’s Savings Square dropped from 3.25% to 3.05%.
• E-Loan increased from 2.75% to 3.01%, plus they are offering a short promotion for new money at 3.75%.
• Presidential Bank decreased from 2.75% to 2.6%.
• VirtualBank decreased its entire hierarchy of rates with the lowest level down to 1.77%.

Due to popular demand, I’ve added iGoBanking to the list. This bank’s savings account is offering 3.28% APY currently, placing them towards the top of the list, below only OneUnited and Washington Mutual.

Consumerism Commentary visitor Diane asked about the bank that is currently topping the list of high-yield savings accounts, OneUnited, which is currently offering 5.30% APY.

I wonder about that Unity Gold E-Savings at OneUnited at the top of the list. That is 1% better than Emigrant where I am now, which translates into $500/year. Have you heard anything about it? If I understand the website correctly they only credit the account quarterly. Anyone have any dealings with it?

I have no experience with OneUnited, so if anyone else does, please feel free to leave a comment. I’ve read that people have had poor experiences with customer support and ACH transfers are often delayed beyond the standard 3-day period. The account requires a $1,000 minimum initial deposit and interest is only earned when the balance is above $1,000. They do credit your interest quarterly, so you could end up losing a substantial amount of interest if you close at the “wrong time,” like right before the interested is credited.

How important is that? Are you willing to deal with poor customer service in order to receive one of the highest rates?

Thanks to Ross who wrote in yesterday about FNBO Direct’s latest interest rate drop. With this information, and with a reader emailed suggestion of tracking the rates over time, I redesigned the list of high-yield savings and checking accounts. Additionally, I’m also including accounts not insured by the FDIC, like money market funds, though I am still gathering information on those.

The new table is a Google spreadsheet that is embeddable in web pages. So if you’d like to embed the spreadsheet on your own web site, let me know, and I’ll send you the code to do so. View the list of high interest accounts here.

Now, here are some interesting articles from around the web. Read the rest of this article »

As expected, ING Direct was the first bank to lower savings and checking interest rates today in response to the Federal Reserve Board’s interest rate reduction.

ING DIRECT’s Orange Savings Account has changed to 4.20% APY.

The rates for the Electric Orange Checking Account have changed as well. The new tiers are:

• $0-49,999.99 earns a 3.25% APY
• $50,000.00-$99,999.99 earns a 4.75% APY
• $100,000.00 or more earns a 4.90% APY

I expect more banks to follow