I haven’t blogged much about money market or high rate savings accounts because, in our current low interest environment, there’s not been much to get excited about.
And quite frankly, there still isn’t.
Out of curiousity I took a look at Bankrate to see what local money market and savings account rates are. They list three local banks: Territorial Savings Bank, Bank of Hawai’i, and First Hawaiian Bank.
The results? Territorial is the winner paying 0.20% interest. Bank of Hawai’i and First Hawaiian are paying 0.05%.
Just like the title to this post says, for putting money away in a bank locally, you’ll get something–but not much. Check credit unions or Internet only banks to see if there’s a better deal to be had. I’m sure there are.
It’s official. I have to take over my mother’s finances.
My mom is 76 years old this year and her hearing is pretty poor, but recently her memory has been getting worse. She’s fine to be home by herself, but recently she’s been bouncing checks.
This past year she’s bounced a few checks, which in and of itself is a little concerning, but her checkbook reconciliation is the concern–she’s added where she’s needed to subtract (fortunately as a bank retiree I think the bank has decided not to charge her any fees). But today she told me that she saw someone at the bank yesterday and they told her in four or five more years that the mortgage was up and the family would lose the house–which makes no sense to me on many levels, but especially because the mortgage isn’t even at the bank!
So I spoke with my sister and today decided I’d take over the finances from her.
It doesn’t thrill me, but it has to be done.
It’s tax time and I am trying to gather my tax forms from a few different financial institutions, some of which I have accounts that are either untouched (emergency fund money gaining a small bit of interest) or on autopilot (making regular investments every month).
In the process, despite having passwords I am sure are correct, I have been locked out of two accounts and have to call to get access restored. The most hideous offender in the overly secure account category is Treasury Direct, where I have now been locked out three times; I used to be very happy with them but awhile back they started using an onscreen keyboard with somewhat randomly placed keys in combination with a bizarre plastic security card where you had to play what was like a virtual game of bingo to get your account accessed.
If there was a better alternative to them I’d use that. While I appreciate the need for making sure people’s money is safe, there’s nothing more annoying than an overly secure account–resulting in a lockup.
I have to get this fixed soon, not just so I can make sure I still have the proper buys scheduled, but to get my tax forms.
While I do talk a lot about investing, the reality is that we all need a place to put “chicken money”–money that we really can’t afford to lose. These include emergency funds, for instance, or money that we need to pay bills at the end of the month.
One of the things that’s happened with the low interest rate environment we’re in–where mortgages are in the 5% or lower range–is that money market or high yield savings accounts are paying next to nothing in interest.
Capital One Direct, where I have an online savings account, is paying 1.60%; ING Direct’s Electric Orange checking account is paying 0.24% on amounts under $50,000; iGoBanking is paying either 1% on its checking or 1.67% on its savings; and Virtual Bank is paying 0.80% under $10,000.
These are not making me want to save–it’s making me want to spend or borrow.
Which is exactly what they’re supposed to do, but I still need to have some kind of area where I save a little.
I wish I could find some accounts that would pay a little better interest. Please?
The practice of “kiting”, using the “float” time between when a check is deposited in one bank and the check is cashed in the other to artificially inflate a bank account’s balance, is considered a form of fraud and is illegal. That said, it wasn’t all that unusual–I did it for a long time on a small scale. On a more notorious note, Mary Winkler, convicted in the death of her husband, Matthew Winkler, was believed to have fallen financial prey to Nigerian scammers and was believed to be attempting to use check kiting.
A few years back, what was known as “Check 21″, the Check Clearing for the 21st Century Act, became law, making it potentially much faster for checks to clear. It appears that, finally, in 2009, it really is becoming faster.
For instance, a bank on the east coast (Netbank) where I had an account would typically clear a check I deposited in a Hawai’i account two business days later back in the early part of this decade; that means if I deposited a check drawn on Netbank on a Thursday morning, it wouldn’t clear the Atlanta branch until Monday.
Today, Netbank is gone. But a different bank on the continent, Capital One, now clears my checks the next business day. So if I don’t want a check to clear until Monday, I need to wait until Friday to deposit them locally.
Soon it’s possible the clearing will be measured in hours rather than days. But in any case, the loose float that used to make check kiting possible is essentially gone, floating out to sea, so before you use a check, make sure you actually have the money to pay it!
One of my coworkers told me this during a lunch break. Knowing her, I was not surprised, although I’m not sure if there’s much of a way to help her:
“My husband is convinced housing prices will drop to the point we can afford to buy a house. But we’re not saving anything.”
This looks like a missed opportunity waiting to happen. The days of the freewheeling mortgage brokers are gone; it’s so much harder to get a loan now than it was when the housing market was booming it’s as if everyone has done a complete 180. Granted, it really needed to be harder than it was, because the way we got into this mess is by lending people who had no chance of paying it back–and who may have been a lot less than honest about their financial situation when applying for the loan–a lot of money. Turns out they couldn’t pay it back, so now the lenders are gunshy and wanting everything verified to the nth degree.
However, that said, it’s not impossible to get a loan–all that has to happen is that you need a strong credit score and a reasonable down payment.
My friend is in grave danger of missing the boat here. As evidenced by my mortgage refinance not long ago, rates are very low historically (even if it’s become impossible to get the 4.25% we did), and home prices are still coming down. But without saving for a down payment, there’s no way my friend is going to be able to get a new house when she and her husband think prices have come down enough.
Despite all of the changes over the years, the reality is still this: the basics for buying a house are good credit and a down payment. Without these–especially now–there’s no way to do what she and her husband want to, and without saving, they definitely won’t be able to get the house they’re hoping for anytime soon.
The overall effects of interest rates on the economy can be summed up pretty quickly–low interest rates encourage borrowing and help those who owe money; that encourages spending and therefore economic growth. On the other hand, high interest rates benefit those who like to save, as they’ll get better return on their money, and discourages spending, therefore discouraging economic growth. That said, on a micro level, who actually benefits from low interest rates?
The people who benefit most from low interest rates are those who owe money or are looking to borrow money. For instance, with the incredibly low interest rates on 30 year fixed mortgages available earlier this year, I refinances the mortgage on the house from the very decent 5.85% obtained a few years back to 4.25%, shaving hundreds of dollars off of the monthly payment. Also, if I wanted to borrow money to say, start a business, I could likely get a much better rate than I would have a couple of years back.
On 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 percent now–and I’m afraid to check what the regular passbook savings account that my mother uses at the local brick and mortar bank is paying (not long ago it was paying a quarter of a percent when the online accounts were still above three percent). Folks who are looking for certificates of deposit as safe places to park money are having difficulty finding interest rates at three percent for almost any term (Bankrate says it’s possible to get 3.06% on a five year CD).
Remember that in recent years inflation has been about three percent per year, which makes it pretty clear that locking in a paying rate for a long period of time is a real risk if inflation shows up again with a vengeance; on the other hand, it’s a great time to refinance debt or buy a house if you can come up with a nice down and really can afford it over the long run. In any case, we all benefit from low interest rates if we owe money (or are looking to borrow), but all hurt by them if we’re saving somewhere.
I have quite a few online only (or close to online only) accounts. Some of these I have because they pay a higher rate of interest than I can find locally; others I have because they offered (or continue to offer) bonuses for starting a new account. In the case of brokerage accounts I may have them due to low cost or convenience. In any case, here’s a quick list:
Capital One, ING Direct, iGoBanking, and Virtual Bank: I have savings or checking accounts at these institutions. This is where I keep short term money and pay bills.
Treasury Direct: I buy I series savings bonds–which has recently been one of my best investments–through this account.
ShareBuilder: Now owned by ING (formerly part of Wells Fargo), this is an account that regularly invests money into a selected stock or stocks (or ETFs). It’s like dollar cost averaging, but is really just regular investing.
Firstrade: I have three accounts here–a regular, taxable brokerage account, a Roth IRA, and a traditional IRA. The low costs associated with this account make me quite pleased.
Vanguard: The folks who run my 403(b) chose Vanguard as the place to hold this large sum of money, and I’m very happy with them.
This is a lot more accounts than I thought I had! Suffice it to say I’m pretty happy with all of these. Are you using any great online financial services?
Not a full on “State of the Blog” address, because I’ve been too swamped to get as solid a handle on it as I typically need to get to do such an address, but I thought I would let folks knew a few things.
I’ve been pretty preoccupied with a 10 day stretch at work, followed by a couple of evening events, some work related and some not, as well as a Tweetup and the Ford Island Bridge 10k. In addition, I started a new blog about diabetes and exercise (and I have another in the works), so even though I’ve not missed any days of posting, I’ve been spread a little thin. In fact, I’ve been so crazy I’ve not been able to enter (or until hopefully later today, acknowledge and link back to) any blog carnivals recently. That, hopefully will change.
Link Payday is missing from about a week ago. It will resume later this month.
And finally, I not only have referral links (as mentioned previously) for ING Direct and Firstrade, I also have some for Virtual Bank (open an eMoney Market account with $100 or more, you get a $20 bonus and I get a $20 bonus). If interested in any of these, please contact me!
In the win-win department, here’s a couple of referral offers I can make to readers of Uncommon Cents:
Firstrade, the online brokerage with low fees that I’ve used for years for my IRAs, has a referral program for new accounts. If you would like five commission free trades, I’ll refer you to them; in addition, I receive a $50 referral bonus.
Additionally, ING Direct still has bonuses available for new customers. If you open an Orange Savings or Electric Orange account with ING through my referral, you’ll get a $25 bonus and I’ll receive a $10 referral bonus.
These are both great deals for you and me, and if you’re interested in either, please contact me!
Full disclosure: while I do not have a sponsorship from either of these institutions, I have used them for some time and been largely happy with them. I’m just trying to give readers an opportunity to benefit from these offers, and benefit as well.
