Aug 22nd, 2008
Basics: High Yield Savings Accounts
One of the things that we all need is a safe place that earns some interest in which we can park some money; this is typically “chicken money”, money we need in case of emergencies and cannot put at any stock market risk. For these, a high yield savings or money market account are likely the best choices. Sometimes these accounts allow check writing and have automatic teller machine (ATM) cards for easy access; they also often require minimums but pay comparatively high yields.
Where to find these accounts? Here are some ideas:
Your local bank: the obvious place to look would be your local bank, assuming you have one. Unfortunately, this may also be the worst place to look. While not its money market account, my local bank pays–get this–0.25% on its regular savings account. Yes, that’s right, one fourth of one percent. I can’t imagine its money market rates will be thrilling. The one big advantage a local bank has is that they are, well, local–meaning you can walk in and get your money when you need it.
Your local credit union: Credit unions for decades have been alternatives to traditional banks that tend to pay higher interest rates. They also are local to you, and many have liberalized their rules as far as membership goes–for instance, the Hawaiian Tel FCU here lets anyone on island join. The question is whether or not they’re higher enough versus some of the other alternatives.
Your memberships: Perhaps you’re a Costco member or belong to an auto club or professional organization; it’s worth checking to see if you can get any kind of special rates. Costco, for instance, has an arrangement with Capital One Direct. Even your employer may qualify you for something.
Online: Bankrate.com provides easy comparison of interest rates. You may also want to consider an online bank; Virtual Bank, ING Direct, iGoBanking, Capital One Direct, and many others are offering higher rates of interest than you would typically find in a local bank or credit union, often with no or low minimum initial deposits.
Consider all of these options when looking for a home for your chicken money. We all need a safe place to put some of our money; we may as well try to get the best interest rate we can in the process. For what it’s worth, if you’re interested in opening an account at either ING Direct or Virtual Bank, I still have some referrals which will get the two of us a bonus when you open a new account! Contact me if you’re interested.
I guess the main thing to look out for if you want to be safe with your money is to see if the account you open is FDIC insured. And up to what limit is the high yield account insured.
If you have all your money in one bank…even if it is in different high yield and low yield accounts within the same bank…. the bank will usually only insure you up to the limit of the total amount invested in the bank.