(Updated) A high yield savings account is a bank account, often online, where you can earn a small, but safe return on your cash. Unfortunately in the last few years savings account rates have fallen to record lows. 2012 May see an uptick in rates, but even then your APR % is going to be historically low. Anything above or near 1% is great right now. I’ve got most of my liquid cash savings at ING Direct, and Lending Club.
High Yield Savings Account Rates
Here are the best companies that offer high yield savings accounts. The rates change constantly, but this rate table is updated hourly.
With most savings accounts earning under 2%, you might look into a little different type of liquid investment. LendingClub.com offers high interest rate notes that you can invest in with as little as $25. The average return is over 9%.
Why primarily online. Online banking is far more fluid than a bank with branches, paper statements etc… Therefore lower yield. ING and E*Trade are great examples of being 100% online and maintaining a lot of liquidity. The trade-off is you have to most of the work yourself. You don’t have a broker working for you like you would at an investment firm etc… If you are a brick and mortar guy check with your existing bank. The reason many of these high yield savings accounts are now online, is because there is not a lot of work involved when you just want to move money and let it sit.
What are the requirements for a high-yield savings account?
Commonly, you have to meet at least four requirements in order to receive a high yield savings account. Make a sufficiently large enough initial deposit, keep a high balance over time, limit transactions in and out of the account, and have other banking relationships along with the high-yield account.
Most banks will ask that you have a checking account with them so that it is easier for you to transfer and affectively change anything as a “total” banking customer with them. Banks have followed a credo that implies high yield savings accounts “only” to valued customers.
What should I do now?
Speak with your current bank and ask where you can get a higher yield rate. If they don’t know, look online and there will be reputable banks that pop up or places with lists like man that will help you pick and choose your best option. A high yield savings account can greatly benefit you in the long run. If you have a growing amount of revenue, or your savings account just doesn’t seem to blossom, think about a high yield savings account. It can greatly benefit your monetary gains.
High Yield Is Dead
The online savings account is dead.
Where are people supposed to put their money right now and earn a decent return? The stock market? Good luck with that. Might as well put it all on red.
The so called “high-yield” savings accounts are anything but. The banks are desperate for deposits to shore up their balance sheets, yet rates keep dropping faster than condo prices in Miami.
I have a business account with ING Direct that’s earning….wait for it….1.7%. I hardly call that “earning” anything. There are higher rates out there of course, especially for personal accounts, but they still suck.
I setup a 2nd account (you can have two max) as a business account at Lending Club. I’m going to start moving some of my savings into notes there.
I’m not the only one starting to see the value of Lending Club as a replacement for CD’s and online savings accounts.
What is a Money Market Account?
A money market account differs from a traditional savings account or a certificate of deposit (CD) in certain fundamental and important ways. They offer certain advantages that certain individuals may wish to take advantage of, but understanding their peculiarities is an important first step. During this period of extreme economic uncertainty, securing additional yield is important wherever possible, and a money market account is one such option.
In the U.S., the money market describes the market for investments with maturities under one year. This market includes treasury bills (T-Bills), corporate paper, overnight repurchase agreements (repos), and Eurodollars. Each of these instruments matures in less than a year and are considered highly liquid. The return they offer, which must be compounded over the course of the year (the capital must usually be invested multiple times to achieve this rate), is slightly higher than the rate offered in a traditional savings account. In most cases, an individual has a number of choices of what type of money market fund they wish to invest their money in as the underlying investment of the account. These funds manage the aggregate cash position as a pool which allows the manager to account for regularly changing cash needs of the various participants.
Other features that are common to money market accounts include the ability to change easily from one type of money market fund to another, minimum balance requirements, and the ability to write a limited number of checks from the account each month. As with most mutual funds, most money market accounts allow the account owner to make adjustments to the investment fund on a daily basis. These accounts usually require a minimum balance of $500 or more – these requirements may differ in cases where the account owner sets up monthly direct deposits into the account. Furthermore, in most cases, the account owner can write up to two checks per month out of the account at no additional fee – in this respect, a money market account is different from a traditional saving account which rarely has check writing ability and pays lower rates of return.
Money market accounts differ from a CD in that CDs have minimum investment periods before which large penalties are assessed. This allows for smaller denominations because the bank knows that the capital will remain in place until a specified date; for this reason, CDs tend to pay slightly higher rates than money market accounts. While all three options have advantages, a money market account provides a good blend between flexibility and return.
You can also check out my list of the best free online checking accounts.
What ING Direct Alternatives are there?
With the planned acquisition of ING Direct by Capital One still looking like a go, I’ve been asking myself, “Do I want to keep my savings at ING Direct come 2012?”
I doubt I’ll switch, but just in case they really change the service I want to be proactive in looking at ING Direct alternatives in case I do.
I don’t do online checking with ING, just savings, but if I did, I’d have a look at my list of online checking account for an alternative option, including the soon to launch BankSimple.
My favorite feature of ING Direct is their super fast withdrawals. 2 business days, almost every time, just 2 days. Which is fantastic. So any alternative would need to be able to match that speed.
There is of course the old/new player in Ally Bank. Unfortunately, they wouldn’t approve me for a simple savings account last summer because of my credit history. Lamesauce.
There is HSBC, which has a decent interest rate right now, but still below ING. Honestly though, it’s not so much about the rate since every rate is abysmal right now. It’s more about transfers, customer service and ease of use of their online banking aspect.
Man, if I had a cool 10 million or so, I’d totally start a strait-forward, no frills online savings account only bank. No branches. No checking accounts. Just simple savings.
What ING Direct alternatives would you check out?
As long as I can recall, I’ve had a savings account. My babysitting money or my birthday money went there and sat.
Later, it became my “Just in case a check bounces” fund.
Now it’s the “major auto repair, tow bill or gigantic medical bill” fund. The sad thing is, I’m not very good at discerning planned but not budgeted expenses from emergency expenses. Well, that is to say, I wasn’t. I’ve gotten much better.
At the beginning of the year I discovered Smarty Pig
Smartypig.com is about the easiest, smartest and cutest savings method I’ve ever seen! Smartypig allows you to set a goal, and save towards it automatically. For instance, we just adopted our daughter, but there was one bill left to pay–the legal fees for her “readoption” in America. I set up a SmartyPig account and told SmartyPig the date that I would like to have saved the money by (August 2008) and it calculated that I needed to save $13 a month.
Opening a SmartyPig account requires an inital balance of $25, so it automatically withdrew $25 and then $13 every month thereafter until my goal was met.
The Account is completely free and offers very high interest rates for a standard savings account. As of this writing it’s at 2.78%, though it was higher when I first started saving. Another thing about SmartyPig is that it’s completely free.
Say you’re saving $1200 for a fancy computer or an entertainment system? You can cash out your goal with a SmartyPig preferred provider and get the money on a gift card with an extra percentage thrown in. Saving up for hunting gear? I noticed that Cabellas’ throws in another 3% towards your purchase. Cool beans!
If you’re still nervous about online banking, you don’t have anything to fear with SmartyPig. They’re tested daily and backed by the 115-year-old institution West Bank (NASDAQ: WTBA).
We’ve saved for and met two goals now with SmartyPig, and just today I began our emergency fund savings account (which we expect to fully-fund by May, but I extended the date out to keep inital deposits low).
SmartyPig is especially smart about it’s customer service. Their telephones are always promptly answered by a live person, with a domestic accent. They’re helpful and patient. SmartyPig has even answered questions via twitter (Follow @Smartypig). Their social media features include Web and Facebook widjits and buttons that you can share. You can even share contributions for a fund (Sally’s ballet lessons and the grandparents want to chip in? You can send an invitation for them to contribute.)
SmartyPig’s message and mission are both fresh and cheerful. The site is easy to use and the company provides excellent customer service, a great product and no fee. If you aren’t saving–here’s the way to start!