Feb 3rd, 2008
Are Online Banks Still My Choice After the Interest Rate Drops?
Those of us who have money in online savings accounts may have done so due to the promise of higher interest rates, but those rates have taken a beating the last few weeks. I have a few different online accounts, as well as a savings account in a brick and mortar local bank. Capital One’s rate on my savings account has dipped to 4%; Virtual Bank is at 3.05%; iGoBanking’s rate is down to 4.2%; ING Direct’s Electric Orange is (for me, since I have a balance there of much less than $49,999.99) is at 2.25%; and Pentagon Federal Credit Union (which I have only so I can have their Platinum Visa) lags behind at 1%. None of these, however, is nearly as low as the ridiculously anemic .25% rate paid by my local bank (that is not a typo–one fourth of one percent), but they’re all down a bit over the month.
I don’t have all these different accounts because I’m chasing performance; I have a few of them due to specials that were offered (like Virtual Bank’s $20 bonus and ING Direct’s $10 bonus); iGoBanking had the highest rate when I opened them (and still do); and Capital One has the check writing I need for certain situations. All of them offer decent online banking (aside from Pentagon FCU, more than decent in my opinion) and pay a minimum of four times the amount that my local bank is paying. Four times! iGoBanking is currently paying almost 17 times as much interest as my local bank.
Are there reasons to use a local bank? Sure. It’s easy to go into it (some of them even have weekend and evening hours) and time zones are not an issue. Some local ones actually do have competitive rates (although a credit union is much more likely to have these than a traditional bank) and decent online experiences (mine has neither). But for me, the only reason I have a brick and mortar bank account here is because my mother is a retiree of that bank. Aside from that, I’m fine with my online banking experiences, even with the recent dip in interest rates.
If you’re interested in trying to check out different rates, you can try BankRate or BankDeals. And if you’re interested, I still have ING Direct and Virtual Bank referrals available.
Wamu has a online saving @ 4.25. although i beleive they too will reduce it
My local bank has you beat. Well, they *used* to be local, before I moved across the country, but my account there is still open. Compass Bank (a brick-and-mortar) offers a whopping 0.1% (one tenth of one percent) interest on its savings account. Throw a thousand bucks in there, and in a year, they’ll give you a dollar. Woo-hoo!
My local credit union, Verity Credit Union in Seattle, has a 6.01% APY on their checking account. They require account holder to make 12 debit card transactions per month, receive paperless e-statements, and log on to online banking once per month. You must also “become a member of the CU” by opening a savings account (1% APY) with $5. I still like to keep my savings separate from my checking funds so I haven’t moved my savings from the ETRADE complete savings account yet. The folks at the CU tell me that the rate will likely fall but will remain “one of the most competitive rates in the Seattle market.” I believe that other cities will likely have similar offers. Oh, they also offer ATM fee reimbursements up to $25 per month. It’s nice to earn a high rate on my checking account balance.
yeehaa99,
I thought I read that WaMu already had reduced it. I’ll see if I can find that (might be moot by now);
Willfe,
That’s absolutely ridiculous.
Huffles,
That sounds like the deal that JD over at Get Rich Slowly was discussing awhile ago. I would have a lot of problems with that just because I never do debit transactions. I guess I could try if the offer was decent, but I don’t have a decent offer here.
[...] the other hand, the very low interest rate climate hurts savers. My online savings accounts that were paying rates in excess of four percent are just over one percen…–and I’m afraid to check what the regular passbook savings account that my mother uses [...]