My Money Blog is one of many personal finance sites that help its readers save money, invest wisely and plan for retirement. But this blog has an interesting twist in that the author openly tracks his own net worth, transparently showing readers where and how he invests his money and how his portfolios are doing on an ongoing basis. The site tends to focus more on cash savings and investments, helping users answer the question: “Where should I put my cash?”.
One of the recent posts on My Money Blog highlights the best rates for online savings accounts. The blog states the following:
“Here are accounts that represent the range of the best current rates.
Everbank is offering 2.51% APY for the first 3 months for new accounts (now 2.25%). This rate is higher than any 3-month certificates of deposit currently available, which being available for withdrawals at any time. The rate is guaranteed stay in the top 5% of competitive accounts.
Alliant Credit Union has a non-promo savings account rate of 2.00% APY. Membership is restricted to people with affiliation to a qualifying organization, but the cheapest way around this is to become a member of a PTA or PTO.
Ally Bank Online Savings offers their “no fine print” savings account rate to 1.49% APY as of 1/5/09. No minimum balances, no monthly fees.
Veteran online bank ING Direct holds up the lower end at 1.30% APY.”
It’s true these rates seem low, but that’s a reflection of the current interest rate market. When compared to traditional banks like Wells Fargo/Wachovia which are offering 0.9% on money market savings accounts, these rates are relatively good. The Everbank and Ally offerings both seem reasonable and straightforward, so what’s to choose between them?
Here are a couple of factors to consider when deciding on offers such as these.
Over a short period of three months, Everbank’s offer is clearly better at the promotional rate of 2.25%. The Everbank offering also looks to be slightly better when calculated over one year – it averages out at around 1.51% APY against the 1.49% offered by Ally. However, the Everbank promo rate applies to balances up to a maximum of $50,000. Additional funds attract interest at 1.25%.
On the other hand, the Ally offering has no cap, and applies to your entire balance. So the Ally offering will improve over the Everbank deal on larger sums of money over the longer term – that is to say, sums reasonably in excess of $50,000 and over periods longer than a year. It’s a relatively easy calculation to make depending on your specific circumstances.
So when deciding on which savings account to choose for your cash holdings, consider – among other factors such as fees – whether a cap applies to the promotional rate, how much money you wish to hold in cash and for how long.
And, finally, shop around. The Internet is a great resource for obtaining information on the best possible rates. As one of the readers on My Money blog noted, there’s an offer from Capital One/Costco at 1.65% APY. So if you’re a Costco member, that might be the way to go.
Jemstep has no affiliation with any provider mentioned in this article.
