New online bank with 3.75% APY but there's a catch
Filed under: Banks, Saving Money
Earlier today I found out about a new entrant to the high yield online savings market on CNN which is offering a savings account with an interest rate of 3.75%. Dollar Savings Direct boasts that this new savings account has America's highest rate* a full quarter of a percent above its nearest competitor. While the new entrant is FDIC insured and not new to the banking industry the new high yield interest rate doesn't come without a catch.Getting the 3.75% rate isn't difficult but unless you already have some savings built up you can't open an account at Dollar Savings Direct which requires a minimum of $1,000 to open an account. If you have less than $1,000 in the account at any given time, the interest rates drops to 1% APY, which is dismal, especially for an online savings account. I'm not a huge fan of the drop in interest rate but if you have trouble dipping into your savings for non-essentials it may be enough to keep your savings in the bank.
I'm a huge fan of online savings accounts, especially those which pay me well for building up my savings. I currently use HSBC where I was able to open an account with only a dollar and I am currently earning 3.5% APY on the emergency fund we have built up over the past year. The real benefit of a high yield savings account with no minimum deposit is that it isn't a huge challenge to open and combined with direct deposit is an excellent way to start an emergency fund. If it wasn't for HSBC's no minimum savings account I'm positive that our emergency fund would have been squandered on electronics and Taco Bell.
Watching Your Plastic
United States Attorney W. Walter Wilkins speaks to reporters outside the Clement F. Haynsworth Federal Building and U.S. Court House after Esther Reed pleaded guilty to identity theft in Greenville, S.C., Tuesday, August 19, 2008. Reed pleaded guilty Tuesday to stealing the identity of a missing South Carolina woman to attend an Ivy League school in what her lawyer called a bid to escape a painful past. (AP Photo/Patrick Collard)
AP
Defense attorneys Ann Marie Fitz, left, and Ryan Beasley, speak to reporters outside the Clement F. Haynsworth Federal Building and U.S. Court House after Esther Reed pleaded guilty to identity theft in Greenville, S.C., Tuesday, August 19, 2008. (AP Photo/Patrick Collard)
AP
This handout photo courtesy of the Boston Police Department shows suspect Clark Rockefeller. FBI agents on August 2, 2008 arrested a man accused of abducting his seven-year-old daughter, who was visiting from London, sparking a national manhunt and fevered speculation over the flamboyant fugitive's identity.The Federal Bureau of Investigation in Boston, where Clark Rockefeller allegedly abducted his daughter Reigh Storrow Boss from his ex-wife a week ago, said the fugitive was arrested in Baltimore, Maryland, and the girl freed. Rockefeller is now likely to face charges including kidnapping, assault, and possibly identity theft. However, police are no closer to resolving who the man they have in custody really is. He has reportedly used a number of aliases, including J.P. Clark Rockefeller, Clark Mill Rockefeller, as well as plain Michael Brown. Police at first thought he was about to flee to Bermuda or Peru on a yacht docked in Long Island, near New York. Some reports had him already in the Caribbean. AFP PHOTO/BOSTON POLICE DEPARTMENT/HANDOUT=RESTRICTED TO EDITORIAL USE =GETTY OUT= (Photo credit should read HO/AFP/Getty Images)
AFP/Getty Images
Homeland Security Secretary Michael Chertoff speaks during a news conference at U.S. Secret Service offices in San Jose, Calif., Tuesday, Aug. 5, 2008. The Department of Justice announced Tuesday that it had charged 11 people in connection with the hacking of nine major U.S. retailers and the theft and sale of more than 41 million credit and debit card numbers. It is believed to be the largest hacking and identity theft case ever prosecuted by the Department of Justice. The charges include conspiracy, computer intrusion, fraud and identity theft. The indictment returned Tuesday by a federal grand jury in Boston alleges that the people charged hacked into the wireless computer networks of retailers including TJX Cos., BJ's Wholesale Club, OfficeMax, Boston Market, Barnes & Noble, Sports Authority, Forever 21 and DSW. (AP Photo/Paul Sakuma)
AP
Homeland Security Secretary Michael Chertoff speaks during a news conference at U.S. Secret Service offices in San Jose, Calif., Tuesday, Aug. 5, 2008. The Department of Justice announced Tuesday that it had charged 11 people in connection with the hacking of nine major U.S. retailers and the theft and sale of more than 41 million credit and debit card numbers. It is believed to be the largest hacking and identity theft case ever prosecuted by the Department of Justice. The charges include conspiracy, computer intrusion, fraud and identity theft. The indictment returned Tuesday by a federal grand jury in Boston alleges that the people charged hacked into the wireless computer networks of retailers including TJX Cos., BJ's Wholesale Club, OfficeMax, Boston Market, Barnes & Noble, Sports Authority, Forever 21 and DSW. (AP Photo/Paul Sakuma)
AP
Homeland Security Secretary Michael Chertoff speaks during a news conference at U.S. Secret Service offices in San Jose, Calif., Tuesday, Aug. 5, 2008. The Department of Justice announced Tuesday that it had charged 11 people in connection with the hacking of nine major U.S. retailers and the theft and sale of more than 41 million credit and debit card numbers. It is believed to be the largest hacking and identity theft case ever prosecuted by the Department of Justice. The charges include conspiracy, computer intrusion, fraud and identity theft. The indictment returned Tuesday by a federal grand jury in Boston alleges that the people charged hacked into the wireless computer networks of retailers including TJX Cos., BJ's Wholesale Club, OfficeMax, Boston Market, Barnes & Noble, Sports Authority, Forever 21 and DSW. (AP Photo/Paul Sakuma)
AP
Secretary of Homeland Security Michael Chertoff leaves after a news conference in San Jose, California, August 5, 2008. U.S. authorities charged 11 people from five countries with stealing tens of millions of credit and debit card numbers from major retailers, including TJX Cos Inc, in one of the largest identity-theft schemes on record. REUTERS/Kimberly White (UNITED STATES)
Reuters
Secretary of Homeland Security Michael Chertoff attends a news conference in San Jose, California, August 5, 2008. U.S. authorities charged 11 people from five countries with stealing tens of millions of credit and debit card numbers from major retailers, including TJX Cos Inc, in one of the largest identity-theft schemes on record. REUTERS/Kimberly White (UNITED STATES)
Reuters
Secretary of Homeland Security Michael Chertoff speaks at a news conference in San Jose, California, August 5, 2008. U.S. authorities charged 11 people from five countries with stealing tens of millions of credit and debit card numbers from major retailers, including TJX Cos Inc
Reuters
Secretary of Homeland Security Michael Chertoff speaks at a news conference in San Jose, California, August 5, 2008. U.S. authorities charged 11 people from five countries with stealing tens of millions of credit and debit card numbers from major retailers, including TJX Cos Inc
Reuters
Reader Comments (Page 1 of 1)
8-27-2008 @ 3:15PM
Sandy said...
The 3.75% sounds good enough, but consider that your account isn't locked in at that amount for any particular length of time. The interest rate can change at any time, unlike a CD which guarantees a certain rate for a definite period of time.
Reply
8-27-2008 @ 3:28PM
Brady said...
Sandy: You are right on...a yr. or so ago I opened an online acct. with 5.2%...a pretty large amt., and it was no time it was down to 2%...I don't know what it is now. I'm waiting for the economy to recover and I will move it immediately.
Reply
8-27-2008 @ 4:07PM
Nise said...
Citizens and Northern bank offers an EZ Money checking account with 4.25% interest rate on up to $30,000.00 amounts above $30,000.00 earn 1% interest. No minimum balance, no minimum deposit to open.
The only catch, you have to sign up for electronic statements, and you must have one direct deposit or debit each month and 10 ATM transaction.
I've had the account several months and am quite pleased with the interest I've earned.
Reply
8-27-2008 @ 4:32PM
Ace said...
FYI, I heard on one of the Cnn financial shows that banks can actually change (decrease the amount of interest on their CD's), but then you have the option of canceling the CD's without penalty to you.
Reply
8-28-2008 @ 8:06AM
Michael said...
A CD's rate is locked in for the term of the CD. Whether it be a few months or a few years, it is locked into the rate that was provided to you when you opened it up. They can only lower it once the term has expired and then you can withdraw the funds at that point without a penalty if you wish. As long as the CD is active, you can not withdraw the funds without a penalty and the Bank can't adjust the rate on this product.
8-27-2008 @ 7:34PM
JOHN said...
I OPENED A SAVINGS ACCT., W/"ING DIRECT", AND THEY GAVE ME A FREE $25 SPOT, NO MIN'S, NO FEES, NO HASSELS, AND ITS A 3.75%
ALSO, MY OWN BANK WACHOVIA, HAS A "WAY TO SAVE P[ROGRAM", CUTE, HA?? EVERYTIME U MAKE A VISA/MC PURCHASE, 1, EXTRA DOLLAR, GOES INTO THAT SAVINGS ACCT., THE ONLY OTHER WAY TO MAKE DEPOSITS, IS TO HAVE A CERTAIN AMOUNT, COME OUT, AT THE SMAE TIME, EVERY MONTH, ALSO WHEN U MAKE DEBIT PURCHASES, NO DOLLAR, GETS TRANSFERED OVER!! AND THAT ACCT., IS AT 5.00% INTEREST, FOR THE FIORST YR, SO HOW COULD U SAY NO??
JOHN
Reply
8-27-2008 @ 7:34PM
eddie said...
there is no guarantees of anything, if it sounds to good to be true, then it must be, I've learned my lesson and almost lost it all.
Reply
8-27-2008 @ 7:35PM
Greg F said...
A catch..lol..no kidding------------Greg------------http://us.imdb.com/name/nm2734923/
Reply
8-27-2008 @ 7:41PM
Duane said...
Just another bait n switch campaign from white collar criminals that steal money. Welcome one n all ......come to the light there is good in the light ....shessh.......all are welcome lol
Reply
8-27-2008 @ 7:46PM
GAThomas said...
and with all the banks closing who would be stupid enuf to put their money in an UNknown bank????
Trust me, at age 59 I have learned, if it sounds to good to be true..dont do it!!
Reply
9-01-2008 @ 8:16AM
DCarroll said...
Just keep under 100,000 in each bank that is FDIC insured. It might be a pain, but if the bank goes belly up you will get your money back.
9-18-2008 @ 4:10PM
JosephSBK said...
ShoreBank, the bank that I represent, offers a High Yield Online Savings Account with a competitive 3.50% APY and $1 minimum balance. It has 24 hour online accessibility, allows you to link up to six of your accounts for electronic transfer, and is FDIC insured. The rate is not adjustable because of this $1 minimum balance. The other great thing about this account is that while you watch your money grow you are able to benefit from knowing that you are helping to fund profitable, environmentally sound, and socially responsible projects like the Urban Green House in Chicago's South side neighborhood of Bronzeville. This 3 bedroom residential property is setting new standards for green living with such innovative cost-saving green features as central lighting shafts, cooling floor slabs, and a thermal rock bed and garden. For more information about ShoreBank and our High Yield Online Savings Account please visit http://www.shorebankdirect.sbk.com.
Reply