Curious if anyone has experience with many of the online banks that offer high yield savings / money market accounts?
There are several that are rated and reviewed by BankRate and Investopedia, but I wanted to know of any real world, anecdotal experience. The four that I’m considering opening accounts with are:
UFB Direct, a division of Axos Bank out of California - current APY 5.02%
Popular Direct, a division of Banco Popular out of Puerto Rico - current APY 4.40%
CFG Bank, a division of Capital Funding Group out of Maryland - current APY 4.70%
Bask Bank, a division of Texas Capital Bank, out of Texas - current APY 4.35%
Anyone have any experience with these institutions?
They will all be FDIC insured institutions. It is effectively mandatory. I think there a few rare exceptions that are covered by some other form of insurance and are allowed to do business. You can double check on this FDIC site:
Basically most of these type banks work well, but occasionally have customer service issues–so I strongly recommend you also maintain an account at a local institution, for example a credit union.
The second issue is the high rates often don’t last–so while those may be the highest rates today in a few months they could well rank lower in the rankings.
As an alternative you might look at Schwab Value Advantage Money Fund – Investor Shares ([SWVXX], 7-day yield (with waivers) as of 03/13/2023: 4.48%
That fund is very safe. While almost all the big brokerages have comparable funds, this is usually close to the highest interest rate among them.
The OP list seems to be of banks that are paying more at the moment, but not always near the top of such lists.
I use Synchrony Bank and the Wealthfront Cash Account. Wealthfront interest rates seem to go up and down the quickest. Synchrony seems to try to be less volitile. But I don’t know that one has higher rates on average.
Also, the Wealthfront Cash Account puts your money in a basket of FDIC accounts where they apparently negotiated a good rate. According to Wealthfront, this gives you a much higher FDIC insurance limit (somthing irrelevant to me).
While Weathfront is reputable, maybe the complexity of the Wealthfront scheme makes someplace like Synchrony a better recommendation.
We’ve had a HYSA at CIT Bank for a couple of years now. No problems at all but, to be fair, we don’t demand a lot of it. When my wife was working, it was where we kept our “reserve” cash; our rainy-day fund, whatever you want to call it. Now that she’s retired it’s a stash we draw on just because it’s there.
So, we basically have one deposit into it per month, and two or so withdrawals a month. Super-simple and better interest rates than at any of the usual banks.
Yep. Once this fund started getting north of 3.5%, I pulled a lot out of our Wells Fargo savings and put it in SWVXX. I’ve never invested in a money market fund before. I see that the monthly payment of interest varies, which surprised me. One month was a hefty payment, and the next month’s was kind of puny. Still learning.
Thank you. I hadn’t considered a brokerage money market fund. While Schwab is probably very low risk. It’s not covered by a federal insurance program. But I’m not that concerned about it to assuage me if the return is high enough.
SWVXX though is a prime fund. It’s not insured at all, except in the sense that SIPC insurance probably covers you if your broker collapses so you can still get your shares of the fund back. It’s extremely unlikely to break the buck, but as noted, its monthly dividend rate can go up and down even if its nominal 7-day SEC rate stays steady since not all their investments are guaranteed winners.
SWVXX is probably Schwab’s flagship fund, but unlike Vanguard and Fidelity, Schwab brokerage accounts do not have their cash automatically invested in it or any other money market fund, so you have to actively keep trading the fund to keep your idle cash all earning the maximum it can. This is fine if you’re trading other mutual funds because you can do sell and buy combined orders with them, but doesn’t work with ETFs or anything else. Vanguard and Fidelity automatically have your idle cash in their government money market funds, which don’t yield as much as SWVXX but are as safe as investing in short-term treasuries and since the majority of their income (2/3 or so) comes from repos backed by treasuries, you can get a better yield with them than you could directly investing in short-dated treasuries.
They’re shady about actually letting you withdraw funds. She said it takes days or a week to get your money, and theorized it was because they didn’t have to pay you interest once you gave notice to withdraw, so they’re sucking up that weeks’ yield at your expense.
Apparently, and I’m failing to google up a cite so salt grains required, UFB’s parent is associated closely with financing Trump loans. But it was the former issue that first caught her attention, and she heard about the latter afterwards.
Not sure what to think of this, but I’d definitely want my liquid funds to be, you know, liquid.
I also have my primary savings in Ally, and have no complaints.
Interest rates do fluctuate, and other online banks may offer somewhat higher rates at any given time. During the height of the pandemic, Ally’s rates went down to something like .5% or thereabouts.
But I’m not going to jump from one online bank to another to try to get the absolute highest interest at the moment. I’m not comparing Ally’s interest rate to other online banks. I’m comparing it to brick and mortar banks.
Before I switched to Ally, I had my savings in Chase. Their interest rate on savings accounts is 0.01%. At that rate, if I kept a balance of $10,000 in that account, at the end of a year I would have earned a whopping $1 in interest. That’s absolutely abysmal.
Even when Ally was at .5%, that same $10,000 would have earned $50 interest. At it’s current rate of 3.6%, it would be $360 interest.
There are some downsides with online banks. There’s usually no good way to deposit cash, so if you do a lot of that they might not be for you. It can take one business day for transfers to process, so it’s a little slower than a brick and mortar bank would be. But for the most part I’ve been very satisfied.
I didn’t start with Ally, I originally started with ING, and I did at time when my US Bank savings account was giving me .25% and ing was at something like 4 or 5%. It was well worth the switch, but for the amount of money I keep there, it’s hardly worth it for me to bounce money all over the place chasing a fraction of a percent.
High Yield savings accounts also general restrict the amount of transactions you can make. I assume it’s to keep their costs lower by keeping people from treating it like a checking account.
If everything is obvious to you and other people are so dumb, why did you start this thread?
My reply began with “if”, and I highlighted the word treasury to make clear that I was suggesting an alternative, since you were worried about FDIC insurance. All brokerage firms also offer treasury funds and allow you to buy treasuries.
This month’s interest payment (dividend?) just came in for SWVXX. It’s a nice fat one. I’m so glad I moved a batch of savings over; nothing Wells Fargo offers can compete.
It’s interesting what is posted upthread about CEOs of various large banks being pressured to up interest rates. We were in our local branch of Wells Fargo recently on some other business, and we pointed out to the bank officer why we moved a lot of money out. He sort of sheepishly pointed out some WF CD and money market account rates that he thought might tempt us, but they were laughably low.
For my cash, I’ve been using Capital One for a few years. While it might not be the highest, it’s always been close’ish and I don’t have to constantly be moving money around. Their online savings rate is 3.4% now and their 11 month CD rates are 5%. We auto-move money into the savings account, and then I also have monthly CDs we either renew or cash out if we want to buy something large like a kitchen remodel (coming up soon).
