Pseudo-Savings Option: GE Interest Plus Account
I received an email from a reader about the GE Interest Plus Account. This account functions like a savings account with limited check writing privileges, but there are some important differences to consider before you open an account.
The account offers high interest rates in tiers. For balances less than $15,000, you’ll earn 4.91%. For balances between $15,000 and $49,999, you’ll earn 5.17% APY. For balances of $50,000 and above, the account pays 5.43%. These rates handily beat ING Direct’s money market (savings) account and are competitive with HSBC Direct’s money market account.Banking Deal: Earn 1.40% APY on an FDIC-insured money market account at CIT Bank.
While the GE Interest Plus account allows you to write checks, they must be in amounts of $250 or greater in order to avoid a fee. Also, this account is not a savings or a checking account. If you “deposit” money, you are actually investing in GE’s corporate debt. It’s high quality debt, rated AAA (the best) by Standard & Poor’s, but this account is not insured by the FDIC like bank accounts.
GE also holds the right to redeem the notes at any time; this means they may close your account and return the funds to you via check or other method.
This might not be a big deal to you, but you have to acknowledge that the investment carries more risk than a bank account. Before you invest, you have to ask yourself if the difference in APY and the limited check writing capabilities are worth that risk.
Also, you should read the investment’s prospectus before sending your money. Before I’d invest in GE’s debt, or for that matter, the debt of any company, I’d also read (or perhaps just skim) through the corporation’s SEC filings to make sure I’m not investing in a company whose practices I don’t agree with.
The minimum to open an account is $500 (or $250 if you enroll in an automatic investment program). Right now, GE is offering a $25 bonus for opening a new investment account.