Despite the consistent downward trend in CD rates over the last several months, online savings accounts have (at least momentarily) stabilized. In fact, a select few have even seen their rates increase, albeit from abysmal levels to begin with. Etrade, for example, was providing a yield of 0.60% APY for a few months this past summer and has since seen it’s interest rate rebound to 0.95% APY.
Online savings accounts, in general, function the same way as money market accounts do and are sometimes even synonymous. The most notable benefits of online savings accounts are their flexibility, lucrative returns, and FDIC protection. Most people, especially those who carry a large balance on their checking accounts, tend to opt for these particular accounts in order to have their idle cash earn some extra interest.
Top 3 FDIC insured online savings accounts (November 2009):
EverBank has an online savings account yielding a promotional 2.51% APY which will be paid on all balances for the first 3 months. After this period, an interest rate of 1.77% APY will be paid on balances up to $50,000. One thing to note about this account is that a monthly fee of $8.95 will be imposed if your balance falls below the $5,000 mark. The minimum opening balance is $1,500.
WTDirect has an online savings account yielding 1.51% APY on all balances above $10,000. WTDirect is based out of Baltimore, Maryland and is a subsidiary of Wilmington Trust Bank which has been in business for over 100 years. While this is a variable interest rate (as with all online savings accounts) it’s yields have been consistently high when compared to competing banks.
ING Direct was one of the first online banks around. It realized long before it’s competitors it could operate without a brick and mortar and was able to save on the associated costs. They then passed these savings along to the customers in the form of higher interest rates. Their online savings account is currently yielding 1.30% APY. They are also known for having a very easy to use online interface.
If we have left out your online bank which happens to provide an exceptional interest rate, please share by leaving a comment!
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November 6th, 2009 at 8:39 pm
Well HSBCs Online Savings account is 1.35% right now so that beats ING Directs. You can also have their Online Payment Account (checking) that is earning a nice 0.85%.
I have banked with them for a few years now. I even like that they gave me 6 foreign transaction free withdrawals when I told them I’d be opening a Capital One Money Market (no foreign fees) for that purpose. I guess, I’m a little biased, but HSBC has consistently been a great bank.
Not for promotions though. Which is also nice, in that I can keep my account there and not have it be on of those I close and re-open every 6 months for a bank promo
November 7th, 2009 at 4:18 am
Thanks for the informative response Zach! That is nice to hear HSBC was willing to work with you on the foreign withdrawals… sometimes mentioning a competitors name can have great benefits:)
November 7th, 2009 at 11:22 am
Actually, the 1.77% overall first-year rate at EverBank reflects a COMBINATION of the initial 2.51% (3 months) and the subsequent 1.50% (9 months). In other words, after the 3-month bonus rate, the rate falls to 1.50%. See http://www.everbank.com/002Rates.aspx
They have taken a little heat (justified, IMO) for being deceptive in how they state the rate. Still, with rates so low generally and not that far apart, it’s not a huge deal.