WaMu Online Savings Account Rate Increase: 3.75% APY

WaMu was acquired by JPMorgan Chase in 2008 and this rate is no longer available. For the latest on bank rates, check out the best high yield savings account rates page.

I just received an email that Washington Mutual will be raising the interest rate on their online savings account from 3.30% APY to 3.75% APY. This beats the rates found at FNBO Direct and HSBC Direct. It’s also a sign that interest rates are headed up. (FYI, FNBO’s top rate isn’t a “promotional offer” and has no set expiration date, HSBC Direct’s rate is a promotional offer and is set to expire in September)

With inflation heading upwards, the rate was 1.0% in June 2008, it’s getting more and more likely that interest rates will also move upward to counter. The Fed doesn’t like high inflation rates and will counter with increasing the funds rate, which will in turn increase bank’s interest rates. Whether or not that’s good for your pocketbook in the long run remains to be seen, there are simply too many factors pulling at one another, but a higher bank interest rate is better than a lower bank interest rate.

Update: For some reason I thought FNBO and HSBC were at 4.50% and mis-typed 3.50%, they’re not, they’re at 3.50% and now they lag WaMu.


Best Online Banks: It’s Not Just About Rates

Hand Painted Piggy BankA few years ago, the only high yield online savings account available was ING Direct. Their rates blew people’s minds. Until then, the only way to get that type of interest rate on an essentially 100% risk-free asset was to lock it up in a 60-month CD. Even today, check out the rates for CDs of your local bank and you’ll be hard pressed to find one under 60 months that comes close to beating the rates of high yield online savings accounts.

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 Personal Finance 

Five Accounts You Absolutely Must Have (And Four You Don’t)

There are five finance related accounts in the personal finance world that I think every single person must have and they should get it as soon as possible. They run the gamut of the obvious, an accessible checking account, to the not so obvious, a high yield savings account (as surprising as it sounds, this is not obvious to most people because they are amazed when I tell them you can get 5% from a regular savings account). So, please enjoy this list of five accounts you absolutely must have and three that you absolutely must avoid.

These Five Accounts You Absolutely Must Have

1. High Yield Online Savings Account

Number one definite must have account is a high yield savings account getting you at least 4%, at the very very least. If you assume inflation at around 3%, anything less and you’re losing money. Take your pick of ING Direct, FNBO Direct, Emigrant Direct, Citi, and you’ll get over 4%. My recommendation is that if you have a Citi or an HSBC bank account, go with one of them because your transfers will be instant between accounts. If you don’t, I use FNBO Direct but both they and HSBC offer 5.05% APY.

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 Personal Finance 

What Is Your Everything Else Fund?

After you’ve funded your 401k, your Roth, and your emergency fund… where do you put the remainder of your savings? Do you just stick it in a high yield savings account where it can earn a respectable 5%+ interest or do you feel that it’s “wasted” there? Do you open up a brokerage account and slip the extra cash into a mutual fund, either actively or passively managed, so that it can get a shot at earning the market return, which is hopefully better than 5%?

That’s the situation I’m in right now. My fiancée and I currently have our emergency fund fattened up and sitting an FNBO Direct account, both of our Roth’s are fully funded for 2006, our 401k’s contributions are at least the minimum match, and we’re currently using a Vanguard account as our wedding savings fund with the funds invested in one of Vanguard’s target retirement funds. The question is, what do we do next? Just keep putting the rest into the brokerage account until we need it?

 Personal Finance 

What To Do With a Signing Bonus

So you just graduated and your new employer has given you a much coveted signing bonus – what are you going to do with it? If you’re a recent college graduate, any signing bonus feels like a windfall that you don’t deserve and you’re not going to think twice about spending it (I spent part of my signing bonus on junk, not enough to regret it but enough to realize I wasted some of it)… but resist the urge! You’re going to want to buy pitchers of Newcastle instead of Pabst Blue Ribbon on Thursdays – resist the urge! Don’t be a stingy bastard though, enjoy the money but here are some things that you might need to spend it on before that first paycheck comes in.

A New Place:
The first major expense of your new life will be a security deposit. Chances are you’ll be renting so you’ll want to research how much of a security deposit landlords are going to want. Sometimes you’ll get lucky and it’ll be a few hundred dollars, sometimes you’ll not be so lucky and it’ll be a month’s rent. Either way, you’ll be paying this before you start work so your signing bonus will have to soften this blow.

Moving Expenses:
Second on the list is getting your junk, whatever you don’t trash because you’re a high roller now, from your dormroom to your bachelor pad. If your company is paying for your move, that’s good, you can buy a few more pitchers. Otherwise, you’ll want to save a little bit more of that beer money to pay for the move. At the bare minimum you’ll need a hundred or so dollars just to rent a deathmobile U-Haul truck.

Third, if you don’t have a car and you think you’ll need one, now’s a good time to start thinking about getting a new ride. Keep that poor college kid mindset and avoid getting a flashy new Mazda 6, go for something reliable and used (certified preowned) as your first car. Don’t get a piece of junk but don’t get something without at least a couple dents. If you’re living in a city, the preexisting dents will keep you sane as you learn no one knows how to parallel park. Use some of the signing bonus to make some sort of downpayment on this car.

Emergency Fund:
Lastly, you want to keep a little of that money in reserve to get your emergency fund started. I’m not saying you take all of it and put it into a high yield savings account like at FNBO Direct, but you should put a little bit to cover unforseen circumstances.

Some Bad News:
Sorry bring bad news on an otherwise happy topic (newfound money is always happy!), chances are you won’t see your signing bonus until your first paycheck which could be as far away as the end of the month so you might need to lean on a loan from the parents or a credit card to get you there. That… and the bonus won’t be as big as what the offer sheet says… Uncle Sam takes a pretty hefty bite.

Now go buy you and your pals a drink Mr. Moneybags, you deserve it.

Update: Beach Girl makes an excellent point that I missed the first time through, a big chunk of your signing bonus will be taken away by the government in the form of taxes.


Citi Rebate Home MasterCard Review – Mortgage Credits

The Citi Home Rebate Platinum Select MasterCard is no longer available.

Reader Steve H. sent me some information about a credit card that Citi is offering that will give you 6% cash back on a lot of home related utilities such as internet, television, various utilities, etc. for an introductory 12 month period and then 1% afterwards with no cap. It’s called the Citi Home Rebate Platinum Select MasterCard and while this card is being marketed towards homeowners with mortgages, this doesn’t exclude folks who don’t have a mortgage. You have the option of choosing to receive your cash back as a statement credit or a “Home Mortgage Rebate” that you can apply towards an outstanding mortgage principal (any mortgage company). As per most Citi cards, this one comes with no annual fee.

A good way to use this card is to apply for it, pay your eligible utilities with it for the first six months, and then parlay the credit limit into another 12 months of 0% balance transfer funds that you can put into an FNBO Direct or ING Direct account.

You get no additional benefit for putting it towards your mortgage, other than paying off the mortgage sooner, so mortgage holders don’t come out “ahead” of non-mortgage holders but they do come out ahead of themselves without the card.

If anyone has this card, we would all appreciate it if you could share your experiences with it.


Making Money With 0% Balance Transfers

I’m joining the herd, I’m going to do the often mentioned 0% balance transfer game where you request 0% balance transfer, put them in an online bank account, and earn a little cash on the side. I’ve written about the downsides in the past but since none of them concern me now, I figured it’s the best time to take advantage of these great opportunities before credit card companies stop offering these 0% rates.

My first card of choice? The credit card because it offers the 0% intro APR on balance transfers for a full 18 months, then the Regular APR, and no annual fee.” I applied entirely online and was approved for a credit limit of $6,600 which amounts to $280.50 (if I put it at FNBO Direct), or $316.80 if I open an HSBC account. (The actual earnings will be less because I’ll be paying taxes and a little bit of the balance each month)

Second card? A credit card that also had the 0% but this time only nine months, but again no balance transfer or annual fee. I was approved for a $4,000 limit which will net me approximately $127.50 pre-tax at 4.25%.

Other have done this and written about it extensively but this will be the first time I’m going to try it. And if you’re curious how these offers are bound to affect your score, Cap at Stop Buying Crap has tracked his FICO score while he’s done these offers.


Don’t Save, Pay Off Debt!

There are many debt reduction strategies out there but the idea is that you should be using your extra money to pay off the debt. I know there are people out there who are making the mistake of opening an FNBO Direct account, putting in extra money, and not paying off more than the minimum payment on a credit card bill. They want to believe they’re getting that 4% interest and the fact that their credit card is only increasing isn’t something that they consider. So let’s do something very simple, let’s figure out where your next dollar should go: savings or bills?

First step is the list all of your debt, its associated rate, and order them in descending order by rate (these are imaginary):
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