Less than a month ago, Washington Mutual increased the interest rate offered on the bank’s savings account to 4.0% APY. This came as the bank was trying to attract capital. Since then, WaMu was in danger of failing and was acquired by JPMorgan Chase.

On September 26, I wrote:

There is no need to panic or pull money out of these accounts unless you don’t want to become a customer of Chase. It is possible, however, that Chase will lower Washington Mutual’s attractive interest rate offering of 4.0% APY, but nothing has been announced about this particular matter.

As of today, the interest rate drop is official. As I discovered, thanks to Five Cent Nickel, the new interest rate yields only 3.0%.

With central banks around the world dropping their short-term lending rates, I expect more banks to follow. With 3.0% APY, WaMu/Chase may still be on top of the list, but for now, their interest rate is only average among other high-yield savings accounts (list to be updated shortly).

I suggest not moving money from one bank to another to “chase” high rates until it’s clear how the other banks will react to the drop of the target for the federal funds rate to 1.5%.

Late Thursday night, JPMorgan Chase confirmed that it has acquired the deposits (bank accounts), assets, and “certain liabilities” of Washington Mutual. The acquisition has created the largest depository institution in the United States, with over $900 billion in bank accounts alone.

WaMu branches will become Chase branches as the acquisition progresses over the next two years.

Those who have bank accounts at Washington Mutual will not have any problems accessing their funds through the same means they do so currently. There is no run on cash; all money in savings accounts will be available. In fact, even deposits above the FDIC limits will most likely be available, because the FDIC wasn’t involved in this transaction at all. (Clarification: the Office of Thrift Supervision closed WaMu, handed the assets to FDIC, and FDIC brokered the auction of the assets.)

As a bonus, Chase customers and Washington Mutual customers will be able to share each other’s ATMs without fees.

There is no need to panic or pull money out of these accounts unless you don’t want to become a customer of Chase. It is possible, however, that Chase will lower Washington Mutual’s attractive interest rate offering of 4.0% APY, but nothing has been announced about this particular matter.

Here are relevant excerpts from the Chase press release: Read the rest of this article »

Washington Mutual wants your deposits. I received word that starting tomorrow the bank will offer 4.0% APY on its online savings account, maintaining its position at the very top of the list of popular high-yield savings and money market accounts.

In order to receive this rate, Washington Mutual requires enrollment in a free checking account. The checking account has no minimum balance requirement (other than one cent). The bank will waive one NSF fee per year, but someone who manages their bank account shouldn’t have to take advantage of that feature. Mistakes can happen, and it’s good to know that WaMu has a policy in favor of the customer.

This rate beats many offered by CDs right now, so you may want to jump on it while it’s available. Washington Mutual is a member of FDIC, so your money should be safe despite the volatile economy.

As of today, the Washington Mutual banking application still lists the rate as 3.75%, but the bank will update the website to reflect the new interest rate tomorrow.

If you’re interested, apply here for the free checking and 4.0% APY savings accounts.

This morning, online bank HSBC Direct ended the extended promotion in which customers were offered a savings account earning interest of 3.50% annual percentage yield. This was planned; when the promotion was extended back in July, the company warned that after September 15, the interest rate would return to normal, which it has.

The interest rate is still competitive, at 3.25%. I don’t suggest chasing the highest rate at all times when the difference is only a few basis points, but if you’re opening a new account, it helps to weigh the interest rate with your need for excellent customer support.

With recent events, you may even want to forego high interest rates when the stability of the bank is in question. With FDIC insurance, it’s unlikely you’ll lose your money, but it helps to consider a bank’s stability to avoid any hassles or delays.

For example, Washington Mutual is currently offering 3.75%, one of the highest interest rates for a liquid savings or money market account you can find. But according to news reports, the bank is in trouble. Rates are high to attract capital, something WaMu needs at this point. If WaMu is acquired by another bank, a withdrawal during a conversion period may not be processed as quickly as you might expect. As long as you stay under the FDIC limits, your money will be there, but perhaps not at the precise minute it is needed.

FNBO Direct also offers a relatively high interest rate of 3.50% APY. The bank behind the online savings account, First National Bank of Omaha, has four stars out of five from BankRate and a Safe & Sound CAEL Rating of 2 (with 1 being the best).

I still have most of my cash at ING Direct, though I’ve begun spreading it around to other banks to take advantage of higher rates. ING Direct don’t offer the most interest but they are consistently not far from the top. Their website is simple and I’ve never had any problems with accessing my money. I hear their customer service is usually top-notch, but I’ve never had to use them.

If you have $250 to deposit, you can earn a $25 bonus by opening a new account at ING Direct.

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
3.00% APY as of November 2008

HSBC Direct has a track record of offering very competitive rates. 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
3.25% APY as of November 2008

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.