I’m looking into moving most of my emergency/future house down payment fund into a high yield savings account, and was hoping to get some recommendations. I’ve just started looking into things, but I honestly don’t even know what websites claiming to rate or rank various accounts are reputable vs. just a sales pitch.
So how did you research your savings account, who do you recommend, and who did you have a not great experience with?
I’ve been using Ally Bank (which apparently used to be GMAC) for quite a while now and been happy with them. Their high yield savings account currently has an interest rate of 3.70%. I see they also have a 6mo CD at 4%.
Ally Bank was also my recommendation, but there are other online banks that also offer a better return than your local bank will. Do some research, and see what’s out there. It changes week to week.
I’ll offer a third recommendation for Ally. They’re very easy to work with, have some nice tools that let you organize your money for different savings goals, and also offer a checking account if you need that as well.
What websites do you recommend for research?
Here are two from 2 seconds of random googling. I’m sure you can do better than that.
If you already have an account with an investment firm, see if they have a savings account option. For instance, Vanguard has a Cash Plus account which is offering 3.65%.
The last time I went looking, I recall using bankrate.
Edit:
Thanks everyone, I think I am going to end up with Ally as well. There are some that offer higher rates but to actually get that rate requires things like direct deposit or minimum monthly deposits, which I am not wanting to mess with.
I’ve read a few articles about people getting screwed when these online banks have gone out of business. Is there FDIC protection? Any other kind of protection? I’m very nervous about the idea of online banks, especially in the current political climate and the Consumer Finance Protection Bureau being shut down.
That is actually why I came here for advice. Last year there were news stories about people’s money being tied up due to a bankruptcy and the entity wasn’t actually FDIC insured.
That’s why I went with Vanguard. I already have an IRA there and their cash sweep account is FDIC insured.
I’ve used CIT Bank for almost a year. It’s great. I have no complaints. I believe they’ve been paying me around 4% APY or more. Simple, quick, easy.
I originally considered SoFI but then quit when I realized how much red tape there was and hoops for me to jump through. They made it a hassle for me to get even simple things done.
Their VUSXX (Vanguard Treasury Money Market Fund) is at 4.26 percent. This is more than bank high yield savings. Plus, VUSXX interest is exempt from state and local income taxes, To me, if you have the $3,000 minimum, this is probably a better choice.
Negative: the associated checking account has a minimum of $250 for checks you write, and I do not think they offer an ATM card.
What about FDIC insurance? Maybe someone will think it reckless for me to say it, but I think VUSXX is basically as safe as an insured bank account. Here are the three conceivable risks I see:
(1) Government defaults on the securities VUSXX buys. But I cannot see how the government guarantee for these securities is less strong than the FDIC guarantee.
(2) Vanguard itself steals your money or goes bankrupt. Here you are protected by Securities Investor Protection Corporation (SIPC). Check the limits, but this seems to me similar to FDIC safety.
(3) Breeaking the buck risk. This is probably the closest to real, but this has only happened when the money market fund held commercial paper.
Interesting, I had not hear of or considered this type of fund. The state tax advantage also makes it appealing (although it’s not like it’s going to save me thousands, either).
Vio is who I use
I received a large-ish check as an inheritance that I did not have any immediate plans for, so I put it into an 11 month Certificate of Deposit at my local credit union. I am earning 4.74%, which is not bad for an insured account. I can take the money out anytime, with a penalty, of course.
I think that mostly had to do with Fintech startups, which are not actually banks. Some may have an FDIC bank acting as a third party to provide FDIC coverage, but due to the way they had the accounts set up many accounts were not actually insured.
Another vote for Ally. It is an FDIC insured bank. I’ve used them for years and have had no issues. They may not offer the absolute best rates, but it’s easy to use with good customer service.
Actually, I did encounter some slight difficulty wiring funds from Ally to other accounts. Nothing too bad, but they do tend to call and verify your information when you use a wire. Since you will be using the funds for a home purchase, this may be important to you.
If you don’t mind me asking, where do you currently have the funds?
Right now the money is in a local credit union and earning a ridiculously low rate. It wasn’t a big deal until recently because I needed instant liquidity last year to help a relative out. Now that everything has been paid back plus some extra savings, it’s a large enough amount that it isn’t just passing up on $100 in interest income like previously.