State of the High Yield Online Savings Account

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I’ve recently been getting a lot of emails asking what I recommend for folks looking to open a high yield savings account and, having not kept up to date with the APYs, I didn’t really have much advice other than that they should take advantage of the ING Direct new account referral bonus and then select either FNBO Direct or E*Trade for their main online savings account. (which actually turns out to be good advice)

Until recently, there were a couple folks in the high yield category, including Citi e-Savings, Emigrant Direct, and HSBC. However, just a few days ago the Citi e-Savings dropped their yield down to 4.75% so they are no longer in line with the leaders of the back (I define inline as within a tenth of a percent or so). Unfortunately, ING Direct hasn’t tried to keep up and Emigrant and HSBC are the current leaders in the clubhouse.

Now, HSBC recently announced that they’d offer a promotional interest rate of 6% for new funds until the end of April, giving you a little less than three months of interest earnings – not enough incentive for folks with existing accounts (you lose yield by moving the funds around because of the lag) but it’s a good reason for people without accounts to open one and put their funds there (assuming it will fall back to the 5.05%).

So, in a nutshell, here are where the major (in my mind) online savings accounts stand in terms of interest yield:

  • HSBC: 6% until 4/30, then 5.05% presumably. (if I didn’t have an account, I’d open it here)
  • Emigrant Direct: 5.05%
  • Citi e-Savings: 4.75% – One plus of this account is that you can link regular Citi accounts to it and transfer money very quickly.
  • Virtual Bank: 4.6%
  • ING Direct: 4.5%

ING Direct & Virtual Bank Referral Bonuses:
If you know someone who has an existing ING Direct or Virtual Bank account (I have both, please email me if you want a referral or go to the self-serve ING Direct $25 Promotion page), they can send you a new account referral and you can earn money for signing up. For ING, you’ll need to deposit $250 and you can get a quick $25 (the referrer gets $10). For Virtual Bank, I’m not sure what the minimum is but you get $20 for signing up (so does the referrer). Once you have an account, you can refer up to 25 people for ING and 50 for Virtual Bank.

Caveats to Online Savings Accounts:
With the high yields come some inconveniences that are consistent with savings accounts but that you may not be familiar with because of how you use savings accounts. For example, there is an FDIC limit of six transfers to and from any one particular savings account (reasons are in the linked post) and there is generally a nearly one week lag for moving funds. The one week lag is because the savings account generally doesn’t having an associated checking account, like you would normally, and so in order to access the funds you’d need to ACH it to another account – that ACH process can take five business days. A workaround is if you have a Citi e-Savings account because you can link it to a regular checking account and the transfer would be internal to Citi and immediate. So, with the higher rates, you have to suffer some inconveniences – it’s not as bad as a certificate of deposit though!

If you want to stay current, I recommend visiting Bank Deals, they do a great job getting the latest and greatest info out to you and they also do a weekly summary that has this sort of information, but in greater detail, which is linked to from their sidebar under Weekly Bank Deals Summary.

{ 9 comments, please add your thoughts now! }

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9 Responses to “State of the High Yield Online Savings Account”

  1. Chris Hynes says:

    E-loan is still at 5.25% APY (rate). Minimum deposit is 5k, but you only have to leave $500 in after that to keep the account open.

  2. HC says:

    The VirtualBank minimum is $100.

  3. Nick says:

    I just moved my savings from E-LOAN (5.25%) back to HSBC to take advantage of the 6%. Assuming E-LOAN’s rate slide doesn’t continue, they’ll probably get my money back again when HSBC’s promo is over.

  4. ciwood says:

    I prefer Vanguard Prime Money Market Account. They will always be one of the rate leaders because their expenses are among the lowest in the industry. Yes, the money is not FDIC insured but if you look at a list of investments, it is very, very safe. You can write checks to your checking account when you need money for $500 or more. They are currently paying 5.1%. See this website for top rates–Vanguard prime is always there year after year !!

  5. the same is also true for hsbc — if you have a checking account along with their online savings account, you can do an internal transfer and the funds are posted immediately.

  6. Dustin says:

    Have you heard of Zopa ( What do you think of that option?

  7. Martin says:

    iGoBanking – They have 5.30%, no minimums and no fees. They are fairly new, but it looks like a great high yield savings account.

  8. Tony says:

    Countrywide is what I got…for $10k-$35k gets you 5.25%…I like the “brick and mortar” name with the internet rates.

  9. Shane says:

    I recently opened an HSBC account. The nice thing besides the leading intiial interest rate was that it came with an ATM card. This is perfect for an emergency fund. No more needing 3-4 business days to clear.

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