High interest: How to choose between checking, savings, and CDs

In a rocky economy, high interest rates are the holy grail of conservative investors, especially those who don't want to invest in bonds. But in this rocky economy, “high interest” hasn't really meant much: High-interest savings accounts are returning below two percent!

Get Rich Slowly readers are just like everybody else. A couple of times a week, I get e-mail from somebody looking for higher interest rates, but puzzled about where to find them. So, inspired by a recent article in Consumer Reports Money Adviser, I'm going to run down the top choices for finding high interest rates.

First, I want to remind you all of one thing: Interest rates aren't likely to rise until the economy improves. Capital One 360 doesn't hate you. Ally Bank isn't trying to rip you off. We're just not in a high-interest-rate environment right now. The government is keeping rates low because they don't want you to save — they want you to pump your money into the stock market or the general economy. Until things turn around, we won't be seeing the high interest rates that were around back in 2006.

So where can you go for high interest rates? Let's look at some options.

Note:

In February, I wrote about how to get the best rates on your savings — safely. That article mentioned bank accounts, but it also looked at stocks, bonds, and mutual funds. Today, I'm just looking at high-interest bank accounts.

High-interest checking accounts

Many small community banks and credit unions offer high-interest rewards checking accounts, which they provide in partnership with companies like BancVue. Different banks have different names for these checking accounts, but they all share similar features. These so-called rewards checking accounts offer high interest rates — if you meet certain requirements.

You usually have to:

  • Get your monthly statement online, not via snail mail.
  • Log in to your account at least once a month.
  • Make a certain number of debit-card purchases each month (usually around 12 — and ATM withdrawals don't count).
  • Make at least one electronic transaction per month, such as an automatic payment to the electric company.

If you meet these requirements, you may still find some credit unions and community banks where you can currently earn interest rates of up to about 5 percent on at least a portion of the money in your account. At some banks, you can earn this high interest rate on amounts up to $10,000; at others, it is $25,000. Any money above that cap earns a smaller return. And if you fail to meet the account requirements in any given month, that also triggers the lower interest rate. These rates most likely are offered only to individuals who reside in the local market area of the bank or credit union. (Credit unions require you to join as a member, so be sure to check if you meet the specific membership requirements of the credit union you are interested in.)

How can these banks offer high interest rates on checking accounts? According to the July 2010 issue of Consumer Reports Money Adviser:

Some account requirements — such as banking online and receiving electronic statements — provide cost savings to the financial institutions, while frequent use of debit cards generates fees. Those savings and revenue account for the higher rates.

These accounts are localized, and you will have to search for the best bank in your area. Here in Portland, for example, Advantis Credit Union is offering 1.75% APY on their Fusion Checking (for balances up to $25,000) as long as you meet the monthly requirements (Rate as of December 11, 2016). But you may be able to find higher interest rates elsewhere in the U.S.

Use this list at Money Rates to find a high-interest checking account in your area.

Note:

In the past, Kiplinger's Personal Finance has named the Charles Schwab High-Yield Investor Checking account its “best checking account of the year.” It currently offers a 0.06% variable APY, and must be tied to a brokerage account. But if a rewards checking account isn't an option for you, the Schwab account may be a good choice. (Rate as of December 11, 2016)

However, our current research also indicates that some credit unions are offering a higher APY on their rewards checking accounts. It might be worth a look.

High-interest savings accounts

If you don't want to jump through hoops, a rewards checking account may not be the best option; you may be better off with a high-interest savings account through either a traditional bank or an online bank.

As you search for a high-interest savings account, be sure to look at online banks.
Why? Consider the following:

  1. Though many traditional banks (like Bank of America and Wells Fargo) have a growing online presence, they generally have lower interest rates and higher fees than online-only banks like Capital One 360.
  2. Security concerns are the biggest thing that hold people back from banking online. But Consumer Reports Money Adviser claims that online banking may actually be safer than traditional banking because there is no paper trail and because your transactions are digitally encrypted.

In its July 2009 issue, the Consumer Reports Money Adviser stated:

“Online banking, despite a rocky start, is becoming the rule rather than the exception.” The newsletter cites research by Forrester Associates that predicts that 76 percent of American households with Internet access will be banking online by next year.

Here are some online banks to consider:

  • CIT Bank Savings Account offers a 0.95% APY on deposits of $100-$24,999 and 0.95% APY on any deposit of $25,000 or above. Henry Ittleson founded CIT in 1908 with a mission to provide financing for businesses. CIT has continued to grow, offering financing, lending and insurance to corporations in many different sectors. CIT Bank is an FDIC-insured institution, serving small businesses and consumers with CDs, savings accounts and custodial accounts. (Rate as of December 11, 2016)
  • Everbank Yield Pledge Money Market offers a 1.11% first-year APY and an ongoing rate of 0.61% APY on their money market account. Everbank is an online-only bank that has been named “Best of the Web” for five consecutive years by Forbes and was also named “Best of the Breed” for online banks by Money Magazine. Everbank requires a $5000 initial deposit requirement. (Rate as of December 11, 2016)
  • Sallie Mae Money Market Account offers a 0.90% APY with no minimum balance and no monthly fees, plus daily compounded interest. I don't know much about this account, but it may be worth a closer look. (Rate as of December 11, 2016)
  • Ally Bank Online Savings Account currently offers a 1.45% APY with no minimum balance and no monthly fees. Ally Bank is the reincarnation of GMAC Bank and was named the best high-yield savings account of 2009 by Kiplinger's Personal Finance. (Rate as of 09 February 2018)
  • Kiplinger's best high-yield savings account of 2008 was FNBO Direct, Online Savings Account which currently offers a 0.95% APY with no minimum balance and no monthly fees. FNBO has also been rated as one of the safest of the major online banks according to a study by BankRate. (Rate as of December 11, 2016)
  • And, finally, there's good ol' Capital One 360, Savings Account which offers 0.75% APY on their Savings Account (with no minimum balance and no monthly fees). This is the bank I chose a couple of years ago. I've remained with them even though their rates are no longer near the top of the heap. (Rate as of December 11, 2016)

In the comments, readers have also suggested Dollar Savings Direct (Savings Account 0.55% APY, $1000 minimum, no monthly fee. Rate as of December 11, 2016) and SmartyPig (Tier 1 rate is 0.80% APY in a special goal-oriented savings account with slightly different rules than most accounts. Rate as of December 11, 2016).

High-interest savings accounts are easy and safe. You don't have to worry about meeting any sort of minimum requirements (except perhaps a minimum balance) in order to earn the high interest rate. And many online banks (and some traditional banks, too) will let you open multiple accounts so you can save for individual goals. But high-interest savings accounts have one big drawback: They generally don't pay as much interest as a rewards checking account or a certificate of deposit.

FAQ: What about money market accounts? “Money market account” is just a marketing term. These accounts are basically souped-up savings accounts that sport higher interest rates and higher minimum balances. Because money market accounts have higher minimum balances, banks have more leeway to use the funds in your account. Other than that, there is not a lot of difference between them and regular savings accounts.

Certificates of deposit

A final option for earning high interest rates is to use a certificate of deposit (also called a CD). CDs are time deposits: You give your money to a bank and promise not to touch it for a specific amount of time. Opening a CD is very much like making a loan to the bank, which can invest the money however it wants during the period you agree to. In general, the longer you let the bank keep your money, the higher the interest rate you'll receive.

Unlike a savings account, once you put your money into a CD, the interest rate doesn't change. If, as I did in the CD above, you open a six-month certificate of deposit at 3.50 percent, and then interest rates drop to 1.00 percent (as they did after I opened this account), you still earn 3.50 percent for the entire term.

The catch is that CDs are less liquid than other accounts, meaning you can't move money in and out of them like you can with a checking or savings account. If you take your money out of a CD before it matures (that is, before the end of the term), you will be docked interest. And in some cases, you may even lose part of your principal!

Note: Here's a “gotcha” to watch out for with CDs. What happens when your CD matures depends on the arrangements you have made with the bank. Many CDs renew automatically, which may not be what you want. When your term is coming to an end, be sure you know exactly what is going to happen to the money. Don't be afraid to call and ask.

You may find the best CD rates online, but don't forget to check your local bank or credit union; my credit union often has competitive rates. You can learn more about certificates of deposit (including a few tips and tricks) in the GRS archives.

Tip: There is another option for earning high interest rates, but it carries greater risk. Consumer finance companies are subprime lenders who borrow money from folks like you and lend it out at high interest rates to people like my friend Michael, who just filed for bankruptcy. You can get a great return on your money through these places, but your deposits are not insured. I'm not willing to put my money in one of these places, but you might be. My neighbor — the real millionaire next door — has a chunk of change at a local finance company, and it's paying him 4.09 percent. He loves it.

Choosing a high-interest account

So, which of these options is right for you? You are the only one who can make that call. As always, the key is to shop around for an account that fits your current needs.

  • Choose a high-interest checking account if you use your debit card frequently and feel comfortable ditching paper statements. Once you open the account, pay attention. If you find you are not able to meet the account requirements, don't hesitate to switch to another option.
  • Choose a high-interest savings account to build your nest egg slowly but surely without any restrictions on how you can use the money.
  • Choose a certificate of deposit if you know you won't need the money for a specific amount of time — or maybe to prevent you from touching the money until you need it. (I like this advice to use parallel CDs or a CD ladder as easy insurance.)
  • If you want a higher interest rate and are willing to place your money in an uninsured account, explore the world of consumer finance companies. (But be very careful if you do.)
  • If you are looking for higher potential returns, can stomach more risk, and are familiar with the world of investing, then look at other options, such as bonds or stocks that pay dividends.

You are probably already familiar with my own set-up. High-interest checking accounts don't work for me. I tried one for about a year and my spending habits just didn't meet the requirements. I don't think I once qualified for the high interest rate. Since learning how to use them two years ago, I have used CDs from time to time. Right now, for example, I have the money for our upcoming trip to Europe tucked in a CD, where it's earning a bit of interest until I need the money. But, as I have mentioned many times, most of my savings is with Capital One 360. (That is not to say that you should choose Capital One 360 — there are plenty of other great options out there.)

As always, I am interested to hear what you folks have to say. Do you concern yourself with finding high interest rates? Do you switch banks to find better rates? What sort of system have you found to balance your need for better yields while still letting you use your money the way you want? (And has anyone had success with personal loan sites like Lending Club?)

Checkbook register photo by lemonjenny.

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Sam
Sam
10 years ago

“High” interest savings account at ING and CD ladder at ING (interest rates between 2.5 and 4.0% on CDs). I have looked at many of these high interest checking accounts and feel like I should make an effort to earn more money on our emergency funds (presently in ING) but I don’t have the energy right now to make this move and then jump thru the hoops. I probably should make more of an effort since I’m leaving money on the table, but my emergency funds are not an investment they are emergency funds so earning more on them is… Read more »

Everyday Tips
Everyday Tips
10 years ago

I had been using Etrade Complete Savings because of the interest rate, but that is now down where everyone else is.

I definitely need to start looking at where to put my cash again, so thanks for this post!

DonB
DonB
10 years ago

Ally has been offering 2.99% on their 5-year CDs. That rate is more competitive when you take into account that there is only a 60-day interest penalty for early withdrawal. So if you only hold the CD for 1 year, you are still getting better than the 1 year rates anyone is offering (including Ally).

This relationship generally holds for any term up to 5 years, so the Ally CD seems like a pretty good deal.

DonB
DonB
10 years ago

Oh, and dollarsavingsdirect.com just eeks out ING for online savings account rate, at 1.20% currently. I’ve got an ING account too, but I moved my balances.

Dollarsavingsdirect.com consistently offers (very slightly) better rates than emigrantdirect.com and ing.com.

Chickybeth
Chickybeth
10 years ago

I’m really surprised you didn’t mention SmartyPig. They have great service and their rate is 2.15% up to $50k (to encourage smaller savers to save more).

PMT
PMT
10 years ago

I try to maximize my accounts in that I every account I own is a no fee account and is either interest bearing or at the very lest accumulates points. I bank with ING and went with them initially because of their high interest rate and eventually signed-up for the Electric Orange Checking a few years ago. While their rates have dropped I’m still with them for a couple of reasons: 1) Convenience! It is a hassle to switch banks and given that they have an ok rate, an easy to use online interface, and great customer service I see… Read more »

Milkman
Milkman
10 years ago

No mention of SmartyPig? 2.15% APY savings accounts, no fees, no minimums, FDIC-insured, top-notch online experience. The site is focused on saving for goals, but it’s just as easy to save, say, an emergency fund. It’s probably not the best choice if you withdraw from savings often (more than once a month, maybe), but in that case you might be better off with a checking account anyway.

I’ve been using SmartyPig for a couple years and I love it.

Edit: Dang, Chickybeth beat me to it!

J.D. Roth
J.D. Roth
10 years ago

Thanks for the suggestions for additional accounts, everyone, especially SmartyPig. I cribbed my list from my book (shh! don’t tell), and SmartyPig didn’t make it into Your Money because I didn’t want to have to explain how it’s unique. But I can just link to my post explaining it here, right? I’ve added it and Dollar Savings Direct to the article, and will add others as people suggest them. But not until later. I’m off to the gym, followed by a trip to the doctor and then shopping. So, it may be five or six hours before I’m able to… Read more »

tylerwillis
tylerwillis
10 years ago

I moved most of my savings into a local credit union’s reward checking account at the end of last year. Unlike JD, I’ve not had trouble doing the requirements. The set-up was a bit of a hassle, but that was a one time thing. The ADH requirement is set to run automatically each month – no need for me to do anything. I have to log in once a statement period. I just set a reminder (rememberthemilk.com) to log in every 2 weeks. Takes 1 minute, tops. The other requirement is to use the debit card as a non-ATM transaction… Read more »

Chris
Chris
10 years ago

Having had an Everbank account, I’ll clarify their interest rate policy. Your three-month bonus seems to be guaranteed, but you can’t tell, because you only get a statement every quarter. After that though, your interest rate is not, what the one-year interest rate is when you signed up, but what their one-year interest rate is *for that month.* I watched that rate go down steadily over nine months when I had been under a different impression when I signed up. That, and it taking the full five business days for deposits to show up in my account, and only quarterly… Read more »

Linda in Chicago
Linda in Chicago
10 years ago

I opened accounts with FNBO last year when their rates were among the highest of the online banks. Since then, the rates have dropped but I’m not sure it would be worth my time to move funds to a higher yield online account. The only other downside of FNBO is that I’d still have to pay fees to use ATMs since they don’t have any in this area. Like J.D., the high interest checking accounts don’t work with my habits. (I don’t use debit cards and instead charge everything I can to my Discover card for the cash back rewards.… Read more »

Chris
Chris
10 years ago

I’ve seriously considered doing rewards checking, but my hesitation is not in meeting the requirements. It’s my concern about the banking institution’s financial stability. The credit unions around here that offer that option have low rankings with Bankrate.com. My concern isn’t so much that I’d lose my money with a regulatory takeover, but that the bank taking the bank/CU over will just eliminate the rewards checking … all within six months of my moving over my checking. One bank is more stable, but it has no local branches (they’re closer to where I grew up). They pay back ATM fees,… Read more »

Holly
Holly
10 years ago

@ tylerwillis:

Pretty clever! Didn’t realize setting up ACH (?) transactions would count toward the requirement (many think they need to swipe the card).

Matt
Matt
10 years ago

JD, you should encourage your neighbor to read this article about an Ohio consumer finance company whose owner “borrowed” a couple hundred million of its cash, and now the investors are left with nothing.

http://www.ibj.com/article?articleId=10719

tylerwillis
tylerwillis
10 years ago

Oops. ADH –> ACH. For that I just set up a looping transfer from my old IGN account. (Transfer $1 back and forth.) That doesn’t count for the 12 transactions. I use the debit card (Mastercard logo) for the elec bill. Using the card thusly is not a ACH transaction but counts as a debit card transaction. No need to physically swipe the card.

Leah
Leah
10 years ago

I just recently switched from Wells Fargo to my local credit union (Advantis, listed above) which has the 2.5% interest checking. I wasn’t too worried about the debit card transaction requirement, as I use my debit card a lot. But, I’ve been trying to decide if I should open up a savings account somewhere like SmartyPig in order to start building up an emergency fund. I’ve just finally started working again after over a year of unemployment so my savings are nil and my credit card debt is high, since I was not prepared before the layoff happened. The interest… Read more »

Chickybeth
Chickybeth
10 years ago

Gotta love the Pig! 🙂 Their monthly contest to win $100 is today at 12 noon EST on Facebook and Twitter. You can read the rules at their blog:
http://blog.smartypig.com/read/june-2010-twitter-and-facebook-contest

Nicky
Nicky
10 years ago

As a former Personal Banker I’d like to chime in on something regarding CD’s. JD- if your interested I’d be happy to write a full article about it. One way to get the most out of your savings it to use CD’s as savings accounts. The “penalty” isn’t as bad as many people would think, and you can often lock in a good rate going for the long term (3-7 yr CD) and even after the early withdrawl penalty come out way ahead of returns if you’d just deposited it for the <1-3 yr rate.

mm
mm
10 years ago

Discover Bank – offers a 1.50% APY on their online savings accounts. I think the rate is 1.35% for the minimum. It also garners a 4-star rating from Bankrate.

And for those of you who want to preserve your wealth through tangible rather than fiat, I recommend you take a look at SilverSaver – https://silversaver.com/share/43JNH/.

It’s an incredibly easy way to accumulate silver in your emergency fund through systematic monthly or bi-weekly investments.

Steve
Steve
10 years ago

Does the “consumer finance” even count as a cash equivalent investment? I don’t know why it’s even in this article (unless it’s just to warn people away from it?)

Jacque
Jacque
10 years ago

Another consideration when choosing between these accounts is whether or not they are FDIC insured -especially in a rocky economy.

Stephan
Stephan
10 years ago

im not really into hunting for the highest interest rates and switching banks every few months to take advantage of it. i dont think its worth the hassle for teh few extra dollars per year(i dont have a ton of money in the bank). i m however a big fan of the CD ladder that gives me a decent return and also frees up money every 6 months in case i need to make a bigger purchase!
Preferred Financial Services

Erica Douglass
Erica Douglass
10 years ago

J.D., still not sure why you don’t talk more about Lending Club on here. I put $25,000 in a little over a year ago. It’s now grown to over $27,000 and is returning just over 9%. Sure, there is some work involved (you have to pick out the loans you want to invest in.) But it’s a great high-return, non-stock/bond asset play. It’s also fairly liquid thanks to their note trading platform.

I don’t invest in CDs. I have some cash in an ING Direct account and the rest is in stocks and Lending Club.

-Erica

Brent
Brent
10 years ago

I’ve been using a local bank NMB&T with the rewards checking. I didn’t get my interest one month out of the 12 I’ve had it. They are less generous with their offer though. 4.01% just became 3.01%, 15 credit like transactions on the card, and only up to 20K. I just really want rates to start heading up before I save up that 20K.

Shara
Shara
10 years ago

Regarding security:

Though it make the news when there are security breaches of online banks and retailers, the likelihood of being a victim of online theft/identity theft is much smaller when compared to old reliable paper. Most mail boxes are FAR less secure than online transactions and take no real skill to violate. Every person I know who has had theft from a personal account has been because of physical interactions: writing a check, handing over a credit card, etc.

I have been a victim twice, once by mail theft and once by credit card sleight of hand.

Kathryn
Kathryn
10 years ago

A combination of “high” interest online savings, and a rewards checking account with a local brick and mortar bank. The rewards checking earns me 3.25% APY, PLUS one point per two dollars spent using my debit card. I tried keeping some of the “savings” dollars in the rewards account to earn more interest, but my self-control was not working up to par and ended up chipping away at the balance. It’s back in the online savings account now, earning less interest, but I’m not spending it, either!

Jacob
Jacob
10 years ago

Just a FYI I have been banking with Everbank since about 2000 and its a great bank, I love the 24 hour service and the free envelopes the give me to make my deposits.

But they recently raised there minimum to 8k insted of 5k.

But now you dont have send in your atm recipt and they have online check deposit with a scanner.

Amanda
Amanda
10 years ago

I wish I could invest in prosper.com or the lendingclub.com. In TX, it is not lawful and I heard other states are pretty restrictive on this practice as well. For instance, I heard of a state that will not allow investing in personal loans if your annual salary is less than $70K. A couple years ago, I was a lender in prosper.com while I was a resident in MN and it worked out pretty well. In fact, in states where it is legal, I highly recommend people who have family and friends who want to borrow money from you establish… Read more »

Budgeting in the Fun Stuff
Budgeting in the Fun Stuff
10 years ago

We use a brick and mortar bank in order to have a place to deposit actual checks from both of our hobby jobs, but ING is our main bank and Smarty Pig is where we keep our emergency fund money and tax account money.

I’ve been thinking about opening a 3.6% interest checking account with First Community Credit Union, but I just hate using debit cards…I’m still trying to talk myself into it…

chacha1
chacha1
10 years ago

The Lending Club kind of thing interests me more than chasing interest rates, but right now my focus is on a) keeping my financial arrangements as simple as possible and b) increasing earned income.

I’ll certainly look for the best interest rate once our debt is paid off and we’re actively saving for a retirement residence! We will never get as good a bank rate of return as we do from paying off debt, though. Looking forward to the day …

brooklyn money
brooklyn money
10 years ago

I am currently rocking two high interest checking accounts. I just buy a lot of little things to meet the combined 22 transactions per month. Also, not all the high interest checking accounts are local. When they are starting up, a lot of times they offer them nationally.

marie
marie
10 years ago

I keep an eye out for the interest rates but don’t chase them or switch just because of a rate. My first high interest accounts were the two I opened up with HSBC when they were one of the highest. I still have those accounts but shuffled the purposes around a few months ago when i also opened up a SmartyPig account (with multiple goals). I’m also a big USAA user so i use their reward checking and their rewards credit card. Not the greatest rewards program but its something extra while using a bank that i really like with… Read more »

LW
LW
10 years ago

I have looked into rewards checking accounts, and the high interest rates are enticing, but I have not signed up for one because I don’t like using debit cards. Debit cards are very insecure. Your account could get compromised very easily and the entire balance withdrawn. The more you use the card, the more chances there are for your account to get compromised (read up on “skimmers”). Because these rewards checking accounts often require 10 or more debit card transactions a month, that is over 120 transactions a year. Couple that with the fact that you are inclined to hold… Read more »

The Best Money Blog
The Best Money Blog
10 years ago

Good breakdown of different types of accounts. I really enjoy my accounts with Ally. Everything is so simplified so it makes saving easy.

Jason
Jason
10 years ago

JD,

You mention that the Govt is keeping interest rates low to encourage us to spend. How about doing an article on what are some “good” things to spend our money on in lieu of saving?

LK03
LK03
10 years ago

@DonB (#3) and @Nicky (#18),

Just wanted to say *thanks* for the tip about using long-term CDs to get higher interest rates even if you have to incur the early-withdrawal penalty. I had never thought of this before. At my local CU, it turns out I can get twice the interest rate for a 5-year CD as for a 6-month CD, and the penalty is 3 months’ interest. So, if I hold the 5-year for as little as 6 months, I still break even, and anything longer is better!

Sheila
Sheila
10 years ago

After reading this, I started looking at my accounts. I use Ally for CDs, Capital One for savings, Smarty Pig for goal-oriented saving, a rewards checking from my CU plus a savings account there for easy access and a non-interest checking in a “big bank” where a govt. check is deposited monthly and flows out to Smarty Pig almost immediately. I started thinking about changing that, but I think it would be such a hassle, and I hardly keep any $ in that account anyway. When I first signed up for rewards checking, I didn’t think I would qualify, but… Read more »

Wilson
Wilson
10 years ago

I have my emergency fund plus some additonal cash in a high-interest account with USAA that went from 4.8% to .8% interest in the last two years. I’ve considered placing some of that amount in CDs but the interest rate is not significantly higher to justify tying my money up for several years. Ex – for 2 years the interest rate is only rougly 1% higher so for every $1,000 I invest I get a whopping extra $10. Not worth the illiquidity for me so I’ve placed part of the money in short-term bond funds and have had an almost… Read more »

Rob
Rob
10 years ago

I have all of my funds at ING. Yeah the rates aren’t that great and it would be nice to get a little extra money, but it is still better than a “big bank” that gives almost no interest on any account.

the other Tammy
the other Tammy
10 years ago

I am a personal banker too, and I just helped a girl who was very tired of jumping through hoops to get a good interest rate…she could never meet the requirements. So she switched to a no-hoops-to-jump, slightly lower interest rate checking/savings combo, and I think she is much happier. I personally think it is hard to save money if you have to use your debit card 12 times a month!

Another thought on CD’s…CD’s are not suitable for long term money. If you’re thinking over 5 years, you should be looking at something else, IMHO.

Cheapskate Sandy
Cheapskate Sandy
10 years ago

I’m using a mixture of things. My emergency fund is in ING’s Savings account at 1.10% right now. I have about $1,000 face value of zero coupon bonds that mature 20 years from now. I also have have about $500 in Prosper loans earning an average of 9.5%. With the Prosper account it’s all about how risk tolerant I am and I’m not so I don’t have much there. My pay goes into a reward checking account and since I know what I’ll be spending on bill payments, I try to charge things like the cell phone bill and car… Read more »

Doug Warshauer
Doug Warshauer
10 years ago

For transactional cash, I don’t think it’s worth the time or effort to worry about chasing the best interest rate. If you are keeping an average balance of $10,000 in cash, improving your interest rate by 1% only generates $100 per year pre-tax.

For short-term savings, I’m partial to short-term bond funds.

Mike
Mike
10 years ago

Is there any downside (credit score or otherwise) to having multiple checking/savings accounts?

I currently have a checking and savings account with a local bank and an ING savings account. I keep thinking about going with an online bank for checking but am hesitant. Would opening another checking account (and maybe savings account with same bank), while keeping my current accounts, have any downside?

Kathy F
Kathy F
10 years ago

I just opened a rewards checking account with First Bank and Trust in SD. I live in VA. The account will pay about 4% interest up to $25,000. I only have to have direct deposit, paperless statements and 10 debit (non-PIN) transactions per month. I did not use a debit card for purchases before this, but I have carefully figured out out to meet the 10 transactions per month. Four of these payments I can make online for my Comcast, Verizon, ECG (telephone long-distance) and Netflix bills. That is, I have auto bill-pay set on each of the accounts where… Read more »

Paul in cAshburn
Paul in cAshburn
10 years ago

Strongly recommend you check the Weiss Bank Ratings before choosing a bank. Choosing a Grade D or E bank would not be as safe as choosing a Grade A, B, or C bank.

David
David
10 years ago

If you have any debt then it makes no sense for you to invest in CDs. It doesn’t benefit you if you are losing 12 percent on your credit card and earning 2 percent on your CD.

Maybe JD would say that it is better to pay off debt than to invest. If you have a mortgage then it is better to pay it off because 6 percent beats your 2 percent CD any day.

Eddie
Eddie
10 years ago

On money market accounts, I think it’s always good to point out that money market savings accounts-which are, as described, basically just souped up savings accounts with all the protection a “regular” bank account has- differ from money market funds, which are very unlikely to fail but don’t have the benefit of FDIC/NCUA insurance. Under normal circumstances, the trade off is you often get better returns with the fund, but right at the moment most funds are returning less then the savings account suggestions above.

fetu
fetu
10 years ago

Forget the banks…..save with your local little credit union. they will give you much better interest on savings accounts and CDs. My credit union also offers a Santa account….giving 4% interest….can not take it out but in Sept it is moved into your savings acccount. If you do not want to spend it for xmas you can move it into a new santa account the very next day. $2500 limit though.

David/MoneyCrashers
David/MoneyCrashers
10 years ago

I’m gettin’ 4% from a bank out of Texas, Viewpoint Bank.

I’d jump on the Charter Bank deal here in GA, but I don’t like the direct deposit qualifier.

I pay my bills out of another account.

I guess I could switch, but I think I’ll stay put for just an extra 1%.

Glenn
Glenn
10 years ago

I have 2 rewards checking accounts. It is super easy to get the 10-12 transactions. Most banks don’t put a minimum on the debit card purchase. I go to the gas station once a month and do 10 transactions, pay at the pump style. It only takes about 5-10 minutes to push that many transactions through for .10 each and I am done. The direct deposit is automatic, and I sign into the account at least once a month to pay bills. One thing to note though, I always to go the gas station when it is slow, so I… Read more »

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