Looking for more than $1/year interest on tiny nest egg

July 1, 2007 12:24 PM

How to evaluate/compare high-yield savings account offers online? This question is anonymous due to the relatively tiny dollar amounts described inside.

Due to serious medical issues, I only now have a bit of money (maybe $100/month, max) to set aside in a savings account, instead of everything washing in and out of a checking account. With $300 to start (and an extra $500 on the way after a security deposit is returned at some point), I could open up a free savings account at my bank for....less than 1% annual interest. (The only advantage would be the secured credit card they would offer, which could help build credit.)

Recently, however, I found bankrate.com, and the listing of savings account offers look too good to be true (so many banks offering no-minimum, no fee 4-5% interest rate savings accounts!). Each listing is marked with their "Safe and Sound" performance rating, but where can I find more information on where, and whether, it's a good idea to drop $500 (give or take) to open an account like this? Can anyone personally recommend any of these banks?

(Note: at my current place of employment, I do not qualify for 401(k) plans or anything similar; I'm not looking to ditch my current brick-and-mortar local bank for checking; I need something relatively liquid in case it needs to be withdrawn to cover health cost emergencies; and at some point I really, really hope to resume a B.A. once the medical issue is resolved)

Thanks again--severe financial ignorance here due to family background and never having more than necessary to live hand-to-mouth during independent adulthood due to medical issues.

posted by anonymous to work & money (29 comments total)

I have used ING Direct for several years. I think they are paying 4.5% now. It is easy to use and has a clean web interface. I can send you a referral link that gives you a $25 account-opening bonus; email is in profile.
posted by amber_dale at 12:37 PM on July 1, 2007

ING Direct's 4.5% isn't the best, but I've been very happy with them. Fast transfers and proactive security.

Emigrant Direct is at 5.05%, I feel like their transfers might take a day or so longer to Wachovia than ING.
posted by djb at 12:39 PM on July 1, 2007

If it is FDIC insured then you should be fine.

I have thus far been satisfied with ING Direct, Countrywide, and HSBC Direct. Unless you're an HSBC customer otherwise, I don't think there is a reason to prefer any of them other than who has the highest interest rate at the time.
posted by grouse at 12:46 PM on July 1, 2007

Because of your low balance, fees are a greater concern than interest rates. Consider that if you have a $1000 balance, a 1%/yr account would give you $10, and a great 5% account would give you $50, a $40 improvement.

A single low-balance fee at some institutions (or a bounced check fee) could easily add up to $40, wiping out the entire difference.

So, sure, look at interest rates, but at this point, pay much more attention to fees.
posted by zippy at 12:58 PM on July 1, 2007 [1 favorite]

Here is a comparison I found helpful when I was looking into opening a high-yield account.

I went with Citibank in part due to their brick-and-mortar presence in my area, and I've been happy with them so far.
posted by EmptyK at 12:58 PM on July 1, 2007

Also, you mention that liquidity is especially important to you. It may be best to keep all of your money in the 1% account for this reason. Consider shopping around at local credit unions - they often have OK interest rates and very favorable fee structures for low-balance accounts.
posted by zippy at 1:00 PM on July 1, 2007

I'm going to nth ING. They have a great return, easy to use website, and even offer a new checking account option with a high yield.

The only thing higher that I am aware of is Paypal (which is not FDIC insured because it is not technically a bank, if I recall correctly).
posted by ThFullEffect at 1:11 PM on July 1, 2007

I can send you a referral link that gives you a $25 account-opening bonus; email is in profile.
posted by amber_dale

I agree that ING is a good choice for online savings, but I think you should say that you also get paid a bonus if the poster uses the emailed link you're offering. Full disclosure and all....
posted by letitrain at 1:14 PM on July 1, 2007

I use E*trade and I'm quite happy with it.
posted by special-k at 1:24 PM on July 1, 2007

I'm something of a "rate chaser" and currently have my money at FNBO Direct, which is 6% through the end of September. Previously it was at HSBC.
posted by kindall at 1:49 PM on July 1, 2007

Also, you mention that liquidity is especially important to you. It may be best to keep all of your money in the 1% account for this reason.

HSBC offers an ATM card with their high-yield savings account. (The bonus for me is that I can use it at HSBC's other divisions abroad without having to pay an ATM fee.)
posted by oaf at 1:56 PM on July 1, 2007

bankrate rocks and so does the fatwallet finance forum. try the HSBC online savings account, it currently gives you 5.05% and doesn't charge any fees.

truth be told ... the difference to the ING is minimal for the money you'll be making. at 5.05% you'll be making $50.50 of every $1000 you put in per year.
posted by krautland at 2:13 PM on July 1, 2007

HSBC also offers free bank-to-bank transfers (they wire money into your checking acct and vice versa without charging any fees). it takes 3-4 business days but works like a charm.
posted by krautland at 2:14 PM on July 1, 2007

I LOVE the 5.30% that I get with my GMAC Bank money market account. It comes with a check card and checks. I also have an ING Direct account, but I much prefer GMAC because of the higher rates.

There aren't any fees if you maintain a $500 minimum balance.
posted by roomwithaview at 2:20 PM on July 1, 2007

Which brings up the obvious question - how can FNBO afford to pay quite a bit more than CDs which require much higher minimum payments and much longer terms?
posted by TheRaven at 2:24 PM on July 1, 2007

I just today opened a WAMU "Online Savings Account" that is apparently going to give me 5% APY. You have to either already have a Washington Mutual checking account, or you have to open one there. But there are no fees if your balance is over $300 all the time.

I think you have to do it online, though. YMMV.
posted by rossination at 2:27 PM on July 1, 2007

letitrain: I assume that's also true of the referrals in EmptyK's link. But it's a good bank regardless. Now that I think about it, though, having an ATM card is a big convenience, especially if you might need the money quickly (transfers take a couple of days). So go with HSBC.
posted by amber_dale at 2:29 PM on July 1, 2007

What roomwithaview said, re GMAC.
posted by lumosh at 2:30 PM on July 1, 2007

Watch out for money market accounts. Some of these get higher rates because they are not FDIC ensured.
posted by grouse at 2:32 PM on July 1, 2007

HSBC's account opening process will (or at least used to) take a couple weeks of waiting for things in the mail, and their transfers are still on the slower end. However, you do get the ATM card, and if you can handle waiting up to (I think) 3 business days for an electronic transfer otherwise, it would be fine.

HSBC and ING are both huge financial groups, and savings accounts are FDIC insured to $100,000 anyway: don't be afraid of the high interest rates. Go for the bank most convenient (branches nearby, maybe?) to you with a rate over 5% and no minimum balance fee, and you should be set. I can personally say I've had no significant trouble with ING, Emigrant, or HSBC's online savings.
posted by deeaytch at 3:30 PM on July 1, 2007

n-thing ING direct, I've had an account for years now, I've also started using their Orange Checking as well. No meaningful feedback on that yet.

These days I don't bank with anything other than ING and USAA, there are plenty of threads around here extolling the virtues of USAA. If you qualify try an account there. Always real live humans on the other line who honestly enjoy their jobs and want to work with you for whatever you need... it's as if you're a customer...remarkable. similar experiences with ING for this level of service.

I haven't used HSBC yet for banking but have used them for a couple of auto loans, no problems so far on that front.

I cannot stress how dissatisfied I am with WAMU. They have screwed up multiple checking accounts, savings accounts AND a mortgage for both me and my wife. , prompting us to move the mortgage over to USAA simple for the peace of mind.

Avoid WAMU like it has the cooties.
posted by iamabot at 4:02 PM on July 1, 2007

I have an online savings account with HSBC, and the interest rate is somewhere around 5%. I can transfer $ from my local checking account into it for free, etc. I have no fees. It's dreamy.
posted by iguanapolitico at 4:11 PM on July 1, 2007

I have had savings accounts at ING Direct, Emigrant Direct, and HSBC. I've had no problems with any of them -- no fees, good rates. Currently, I use HSBC since it had a better rate last I checked.

In comparison of ING and HSBC, I've noticed ING seems to be a bit quicker in transfers -- average of 2 days instead of 3 days in my experience. This hasn't mattered to me, though.

Also of note is ING's Electric Orange checking account. It currently has 4% APY. It is a checking account, but it's different; everything is done online, including writing checks. They have "electric checks," in which you transfer money electronically, and paper checks, which are mailed the next business day. You get a MasterCard Debit Card, also. The only fees are ATM fees if you don't use an ATM in the Allpoint network. I'm a fan.
posted by mathlete at 5:34 PM on July 1, 2007

I've got the HSBC 5.05% fixed (with the 6.0 intro rate that's now over). I don't put much away either, call it $100-$150 a month, but here's what I like about this account:
1. Interest pays monthly...so each month you earn interest off your interest the month before. Compounded interest is the hotness.
2. No fees. None, at all. Unlimited withdrawals, transfers, no min balance, nothing.
3. Option for a free debit card...I declined it though, because this is my NO TOUCHEY account.

It takes 2-3 days to transfer money either direction. I'm quite happy so far, but then I've only been a customer since uhm...March or so.
posted by TomMelee at 6:11 PM on July 1, 2007

Three options, all mentioned upthread, that I can vouch for:
ING Direct
HSBC Direct
Washington Mutual

I have ING Direct, with 4.5% interest, and I highly recommend it. It's secure and easy to use, and when I needed to transfer money to my regular bank account recently it went smoothly and was easy to do. I'm "only" putting $200 a month in, and was putting less in until quite recently, so I think your belief that $100 per month is tiny is a bit silly. You're saving what you can afford, good for you.

My husband uses HSBC Direct. His interest rate is moderately higher than mine -- 5.05 -- but the HSBC interface is more confusing than ING, it took two days longer for his recent savings-to-checking transfer to go through than mine, and HSBC has generally been more difficult to deal with, customer service-wise. It is still a legitimate FDIC-insured bank, though, so if slightly more interest is worth

I also have a Washington Mutual online savings account, which has a 5 percent APR. WaMu has slightly less security about its web site than ING or HSBC, and that makes me a bit nervous, but it's a real bricks-and-mortar bank, so you can yell at a real human being if you have any issues. I actually find online customer service with WaMu to be more helpful and more responsive than in-bank.

None of these banks has fees, all are FDIC insured legitimate banks. Washington Mutual gives you instant-access to your cash, if you live near one, whereas you could have to wait 2-3 days with the other two.
posted by croutonsupafreak at 6:52 PM on July 1, 2007

iamabot, how did Wamu screw up your mortgage? I have one with them as well and I'd like to know what to look out for.
posted by any major dude at 7:13 PM on July 1, 2007

any major dude:

Not to threadjack, but here you go:

Wamu about 6 months in to the loan started applying our payments to the wrong loan number despite the correct loan number being either written on the checks or referenced in the automatic payments, then upon discovering this foul up they sent a note of apology that they hadn't applied the payments to the correct loan but didn't move the funds to our loan and instead sent us delinquent notices and tried to forclose on us.

It was an utter and complete nightmare all because they couldn't keep their own loan numbers and systems straight, the worst part was we had a letter from WAMU detailing how they screwed up yet it took a month of us explaining on the phone what happened and re-faxing/mailing copies the letter they sent us to get it fixed. The only thing that saved us was USAA working with us and them to provide proof every payment was made on time to the correct loan number.

About a week after we got our credit restored and the funds applied to our loan I converted it to USAA and haven't looked back. This is just one of the issues we've had with WAMU, we've had branch managers freeze our checking accounts mistakenly, where they intended to freeze another customers, it goes on and on with them.

We're not sure if it's the branches that have problems or the main bank itself, but at this point, we don't trust them.

Back to the main threads point, I don't think you can go wrong with the majority of suggestions people have tossed out, you may just want to try an account one place, see if you like the service and rates and if not move on. Aside from the pain that it can be to set some accounts up, there's no reason not to move your money if you're unhappy.
posted by iamabot at 11:50 PM on July 1, 2007

I used ING Direct (Canada) as my savings account. I think there are higher-paying online banks, but ING Direct has been efficient, and the customer service is excellent. Transfers in and out are 2-3 business days, maybe 4 maximum, so liquidity isn't bad. I try not to pull money out, though--it's a savings account. I pay no service charges, and they've earned my affection.

Every new month I pop in and peep at my interest earned and smile. And I'm by no means wealthy!

Putting away $100 may not seem like much, but it is--you will be so glad you did it.
posted by Savannah at 8:50 AM on July 2, 2007

...putting away $100 monthly may not seem like much, rather.
posted by Savannah at 8:51 AM on July 2, 2007