The past few months I’ve made a conscious effort to make sure that my little bit of savings I have right now is at least making the most interest it can without losing money.
If you live in MN, perhaps you’ve heard that commercial on the radio where the guy is opening a bank account and before he signs the paperwork, the banker says “hold on, let me update the paperwork” or something along those lines. Then the customer says “You just crossed out the ‘r’ in ‘free checking’!’”
Normally, that would just make me laugh and think it’s an obnoxious attack ad, but not with my recent experiences banking. Instead I laugh and think “That’s so true.”
I’ve been with my primary bank for over 20 years. I’ve never had a problem with them and they have branches everywhere, so it’s very convenient. So, the first thing I did in my quest to earn as much interest as possible while staying liquid, and without risk was change my basic savings account to a Money Market savings. This multiplied my interest rate 5x. I went from .03% to .15%. I was pretty excited about that. On a side note, I don’t pay any fees here.
A month or so after switching to my Money Market account, I opened an additional savings account at another bank. They offered me $100, an interest bearing checking account with (supposedly) no fees, and a .5% interest rate on my savings account, how could I say no? I was of course hesitant about this still, because I was taught that if something seems to good to be true, it is. Turns out the old adage is true.
I got my $100 opening bonus, as promised, but not until I jumped through the unmentioned (until all paperwork is signed) hoop of having to use my check card for 10 purchases… Not a big deal, but annoying. My interest earning checking account earned interest for a month, I think. Then that benefit was removed from the account when they “updated” their rates, this is also when the $10 per month maintenance fee was added. At least I had a .5% APY on my savings! Just kidding! That was only for 2 months. Now it is at .15% just like my account at the other bank. So the only difference between my original bank and this new bank is that at the new bank I pay $10/month and my interest only compounds quarterly.
The obvious plan here is to move all the money back to the original bank and close some accounts. I promise the latter, but instead of moving that savings back in with my other savings, I’m moving it to an online bank. You’ve probably heard of a few of these such as ING Direct or Ally. Ally has the best commercials. They both have very similar checking and savings accounts. I can’t think of what the differences were. I remember that out of those 2, they both had a current interest rate of 1.0% APY, and from what I’ve read in customer reviews, that’s kind of low for them.
I opened an account about 1 month ago to get away from my free fee checking. Now I have a new online checking account that is earning interest without monthly fees, and a savings account that has no fees, and an APY of 1.0% compounded monthly. Also, I got a $25 opening bonus and I didn’t have to jump through any hoops! The only downside I’ve noticed so far with the online bank is that depositing money takes longer than just going to the bank and depositing money. With the online bank, you need to go to a brick and mortar bank that you have an account with, make your deposit, and then transfer the money online. So, it takes about 3-4 days for a cash deposit to show up in your account. However if you’re using direct deposit for your paychecks it’ll show up as expected in any bank account.
To make this long post short, I like online banks. I recommend getting a totally free account at a brick and mortar to deposit cash and checks, and link that account to a much higher interest rate online bank.