Online Banks Are Healthy, Growing, & 100% Safe

Hiding Piggy BankSo far, 145 banks and thrifts have been closed by regulators since the start of the credit crisis in 2008. One hundred a forty five. Every Friday, when the FDIC usually announces closures, for the last two years, we’ve expected at least one bank to fail… sometimes two. Last week, five banks failed, bringing the 2009 total to 120.

Scary huh?

So you might be surprised to learn that not a single one of those failures was an online bank. In fact, the last time an online bank failed was back in 2007 when NetBank of Alpharetta, GA was closed. It was acquired by another online bank, ING Direct. Many people would have you think that your money is safer earning 0% at your local bank than 2% at an online bank.

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Best High Yield Savings Accounts Rates

These days, the best way to help your savings grow is by saving it in an online high-yield savings account. With interest rates as low as they are, you simply can’t get anything by putting it in your neighborhood bank. Online banks, with lower overhead, are still the best place to earn a much higher yield with absolutely no risk. After years of managing this list manually, we’re now happy to offer up this table that is updated daily with the highest rates you can find anywhere. The table is powered by Bankrate, an industry leader, and hundreds of banks are surveyed each time to ensure that the highest rates are displayed. Lastly, all of the banks on this list are FDIC insured so you know your money is 100% protected.

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 Bank Deals 

WTDirect $150 Account Promotion Bonus

WTDirectWTDirect is offering a cash bonus of up to $150 depending on how much you deposit initially.

  • $150 bonus for $50,000 balance
  • $100 bonus for $40,000 balance
  • $75 bonus for $30,000 balance
  • $50 bonus for $20,000 balance
  • $25 bonus for $10,000 balance

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Best Money Market Account (MMA) Rates

(Updated 9/1) In the world of banking products, you are always trading off interest rate for flexibility. Typically the higher the interest rate, the less flexible the account. Take CD rates for example, they are often higher than savings accounts and they are less flexible. You decide how long you’re willing to keep your money locked up and then pick a bank that offers the best rate for that term. If you wish to get your money early, you pay penalty. On the other end are checking accounts. Checking accounts have the worst interest rates but offer the most flexibility. You can get your cash whenever you want it, write as many checks as you’d like, and visit your own ATM without penalty. For that flexibility, you earn very little, if any, interest.

Where does that leave money market accounts?

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Everbank Priority Club Points Promotion

Are you a Priority Club member? If so, Priority Club and EverBank are running a promotion where you can get up to 10,000 points by opening accounts at EverBank. EverBank is probably one of the best banks out there because they have four stars from BankRate’s Safe & Sound ratings system, are FDIC insured, and offer a very good interest rate. The current interest rate offering is 3.51% 3-month Bonus Rate followed by a 2.73% 1st year APY up to balances of $50k – among the best of online banks. A great rate plus a 10,000 point bonus offer equals a solid promotion.

You can earn the maximum 10,000 points by opening all three accounts, here’s how it breaks down:

  • Yield PledgeSM Money Market Account – 5,000 points
  • FreeNet® Checking Account – 2,500 points
  • Yield Pledge Certificate of Deposit – 2,500 points

Read the terms and conditions carefully because you need to meet some conditions before you get the points. With the Money Market Account, you need to open with a minimum of $1500 and then maintain an average monthly balance above $5,000 for at least one statement period during the first three statement periods after the account opening. The conditions are very straight forward and very easy to accomplish, just be sure to check them out.

Curious what 10,000 points can get you? It varies from locale but you can look it up on the Priority Club Redeem points page.

Thanks Matt, for clueing me onto this promotion in the first place!


Opening an Everbank Yield Pledge Money Market Account

EverBankAfter closing my Emigrant Direct account last week, I figured I’d add to my paperwork and open up a new bank account! This time I turned to a bank I’ve talked about in the past but never dealt with personally – EverBank. They have all the characteristics I look for in an online bank – FDIC insured, competitive interest rate, and informative website. They’ve been been in business for many years, as a mortgage lender, before they started taking deposits in 1998 (when they were FDIC insured). Since then, they’ve won a ton of awards such as Money Magazine “Best of the Breed” in 2007 and Kiplinger’s “Best Checking Account” in 2006. Most importantly, they don’t appear to be too affected by the credit crisis… all good things, so I opened an account today.

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 Personal Finance 

High Interest Savings Accounts Profiles

Make bundles at high interest savings accounts!The high interest rates of online banks may be appealing, but before you open an account, it pays to do a little research to learn more about the bank itself.

When Dollar Savings Direct first appeared with its amazingly high interest rate, I know I was one of the first customers to sign up. The 4.00% APY savings account was amazing, as other banks dropped to 3% or lower. I saw the FDIC emblem, I saw that it was affiliated with Emigrant Direct and Emigrant Bank, but I never confirmed it. I did a little bit of research and discovered that it was once branded Banco Fortuna, Emigrant’s aborted attempt into the Spanish-speaking market. I was satisfied and opened an account. Thankfully, astute readers investigated further, even calling up the FDIC, and we learned that Dollar Savings Direct was FDIC insured but shared that protection with Emigrant Direct. In other words, having a Dollar Savings Direct account, for FDIC insurance purposes, was the same as having another Emigrant Direct account, the combined assets would be protected up to $250,000. I did not know that when I opened the account and while it wouldn’t have affected me, I should’ve known.

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How I’m Reacting to the Rate Cut

Fed Cuts Rate to 0-0.25%The Fed announced in their December FOMC that they were lowering their target federal funds rate “range” to 0.00% to 0.25%, a drop from the former target of 1.00%. While it was seen as mostly a symbolic move, since the actual federal funds rate was much lower than 1.00%, the language surrounding the numbers made it sound like the Fed was willing to do anything to pump up liquidity, including doing something its never done before called quantitative easing. I don’t want to get into the technicalities of everything because for most people, the biggest part of that announcement was that interest rates are going lower.

When the Fed cuts interest rates, the first thing that happens is interest rates on all banking products will go down. As you may remember, savings rates aren’t guaranteed and are variable, they can change at anytime. The same is true for the interest rates on checking accounts, money market accounts, etc. The only rate that is ever guaranteed is on a certificate of deposit (CD) and that’s only locked for the term of the CD.

Emergency Fund

I currently have our emergency fund laddered in CDs at ING Direct so there will be no changes there. I’ve been slowly rolling over CDs each month into an FNBO Direct CD because their one year rates are half a percent higher (FNBO Direct 12-month CDs are 4.00% APY vs. ING Direct 12-month CDs at 3.50% APY), but it’s been slow going since only one CD matures per month. If you don’t have your emergency fund locked into a CD ladder, you should consider it.

Mortgage Rates

Mortgage rates are falling hard. My friend emailed to let me know that his broker has rates for 30-year loans at 4.50% and Wells Fargo has 4.75% listed on their list of today’s rates. Under 5% for a thirty-year loan is absolutely ridiculous. While we’re not in the position to buy another home, if you were waiting on the fence, now is a fantastic time to start looking because the rates are so low. If and when we do have the ability, I hope that these low rates are still around.

Regular Savings

The only rates that will stick are those promotional rates guaranteed by banks. The best example I can think of is Everbank, they’re guaranteeing their 4.01% bonus rate for three months but then they’re going to drop you back down to whatever it is the rates will fall to. Does that mean you should rush out and open an Everbank account? Not necessarily, because we won’t know what the rate is afterwards but that’s the type of high yield savings account that will guarantee a rate for a specified time and still give you the flexibility of moving your funds around. If you don’t lock it into a CD, your rate can change at anytime.

Who knows what will happen in the next few months to the next year with regard to our economy, but the one thing you can be sure of is that banks will be lowering interest rates in the short term.

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