On-Line Savings Accounts--4 percent?
 

Someone recently mentioned in another thread that some on-line banks are offering FDIC-insured savings accounts with interest rates as high as 4 percent. I'm skeptical in view of the fact that neither CDs nor short-term treasuries are offering those yields, and I wonder if there's a catch. (I hope this isn't too off-topic for this homesteading board, but I feel that there may be other similarly-minded people here who have a need to retain their principal at all costs while maximizing (safely) the amount of interest income available to live on.) Thanks for your thoughts on this.

Beal Bank in Houston TX offers 1 yr CD's with an annual yield of 4.30%, FDIC insured. I've dealt with them for many years with no problems, I think you can bank by mail, too.
Here's the link:
http://www.bealbank.com/Content.aspx?ID=4

www.netbank.com
I don't actually know their rates without looking it up because they change quit often. I have had a money market account and CD's with them for at least 8-10 years. Their rates are usually right at top of what anyone is offering at the time, and easy to do business with. They also offer 2 types of interest checking with an optional debit card. They provide you with free post-paid envelopes for mail banking. Deb

My savings account is at INGdirect.com, which is awesome. It is currently 3.4% interest with no fees and no minimum balance requirement. I keep almost all my cash there, and just transfer the necessary amount to my local checking account when it's time to pay bills, etc.

I've had the account for a year and am really happy with it. Everything is done by web or phone, and the phone people have really long hours and are always really helpful and friendly. And, the interest rate keeps going up every couple of months! I think I started at 2.3% interest or something like that last summer.

I recommend it to everyone!

Emigrant.com offers 4% for ONLINE banking.

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caballo,

have you banked with Emigrant? Was it a good experience? How long have they had this 4% rate, do you know? It sounds like a good deal....

I have just started with ING direct, so far I am happy. Chose them over emigrant because they are a bigger bank and I got a referral for $25 from a friend.

I've been with Emigrant for a few months-so far I'm very happy!
It can take awhile to get your account totally setup, they snail mail you a letter with your account # and password, I got my letter in around a week, but have read about others who have been waiting for three weeks.
They raised thier rate to 4% last month, and the rate is guarenteed thru the end of the year. (the rate has gone up twice since I set up my account!)
Transfers into my account are complete in 2-4 days (usually 2). I haven't transfered any out yet.
They are FDIC insured (have been since 1934!).
I also have an ING account (has less than $50 in it), I signed up for the $50 bonus-but their interest rate is too low compared to other online accounts.
Fatwallet.com has a financial forum where the most popular online accounts have been discussed in detail-just do a search for the bank you're interested in.
Hope this helps!

I have also used ING Direct for several years now. I love them and have had no problems. Their rates sure beat me local bank's. In fact, my ING regular savings rates beat the rates I could get locally with a 4 year CD! ING raises their rates regularly. Easy to get money in and out.

Good information on this thread ... thanks for posting it.

Thanks, everyone, for all your input. Maybe it's true that in the absence of brick and mortar a bank saves enough to offer rates that beat even CDs.

This may be a dumb question, but how do you go about assuring that a particular on-line institution is legit and that you're not in fact sending your hard-earned money to some scamster's P.O. Box? Is there a way of ascertaining whether it is financially solid and that it is FDIC insured, as represented?

We had an account with netbank waay back when internet banking was just getting started..they were great.

"This may be a dumb question, but how do you go about assuring that a particular on-line institution is legit and that you're not in fact sending your hard-earned money to some scamster's P.O. Box? Is there a way of ascertaining whether it is financially solid and that it is FDIC insured, as represented?"

You can go to bankrate.com and search their bank ratings page for most any bank:


http://www.bankrate.com/brm/safesound/ss_home.asp

Why are you not with them now?

NetBank has been shut down, and is being taken over by ING.

BankRate shows Netbank is (was?) a "5", their lowest rating. ING is a "3".

There's also a thread in General chat about this:
http://homesteadingtoday.com/showthread.php?t=209240

--sgl

I work at a credit union and our rate right now for a 12 month CD, min deposit $500, is 5.21 dividend, APY is 5.31. We also have a program which pays 7.25% 7.5 APY on the first $500 in both savings and checking accounts. Check around... our 3 month CD rates are higher than 4%. 4% across the board is pretty darn good for a savings account.

I bank totally online at www.etrade.com, their savings account is paying 5.05% APY. I've never had a problem.

Local banks were offering 5.25% a couple of weeks ago, i think it's dropped to 4.8% and that's on 9mo.
I play the percentages with a certain percentage in cash,stock,bonds etc. Of course it all depends on each individuals age and acceptance of risk. it would take a lot of money, which of course would exceed FDIC insurance protection level, to get enough interest income to live off of.

paypal offers 5.4% in their mutual fund. its pretty simple. you have a paypal account and just have to sign up for the mutual fund then it is figured on the ending month balance. so you can use your paypal account as usual.

its not a bank so is not fdic insured though I don't think any mutual fund is?

Fidelity has a money market that is above 5% and there is no penalty for withdrawal nor is there a time requirement
http://finance.yahoo.com/q?s=fdrxx

You realize Netbank was just closed down and many poeple lost thier life savings right? http://money.cnn.com/news/newsfeeds/...0_FORTUNE5.htm

i like my paypal account i get 5.21% there i like is so far lot better than i get at most banks

Pay Pal has zero insurance though FDIC though and that scares me a bit.

The big name online banks (ING, HSBC, etc.) are legit and do indeed offer nice rates. The advantage of their savings accounts over various financial products like CDs and mutual funds is the flexibility.

CDs usually lock you in for a given time span where you cannot do anything lest you get charged a withrawal penalty or at the very least, you get no interest for the time spent.

On the flipside, keep in mind that the fine print on those FDIC insured accounts only insures you up to $100,000.00. Anything more than that an you are SOL. However, there is nothing to stop you from splitting your money into several 100K account at different banks.

Then, for those TSHTF folks out there, FDIC is only good as long as the US government still has money to back the insurance. If the country collapses into chaos and turban-wearing terrorists with AK-47s roam the streets, you are SOL.

I also heard an interesting comment on C-Span radio that the average local bank only has about $80K in cash onhand on any given day. So if the stock market crashes, you're good if you're the first person at the bank. Otherwise, just wait til recovery and hope the red white and blue is still flying.

My brick and mortar bank (citibank) also offers an internet savings account with APY over 4% (I think my is at 4.17%right now.) I can't withdraw money from that account at a real bank, though I can transfer for free to one of my other citibank accounts online, or use the ATM. No Min. balances, and no fees on this account.

That's the same as investing in Fidelity or the other mutual funds. Greater return but no insurance. You can make a lot, but you can loose it, too. Just like investing in individual stocks.

Ken in Glassboro, NJ :)

Here's an update on Netbank for those with accounts there:

NetBank Files for Bankruptcy After Regulators Take Over Unit

By Bill Rochelle

Sept. 29 (Bloomberg) -- The parent of NetBank, a pioneer in Internet banking, filed for bankruptcy protection after the savings-and-loan became the first in three years to fail.

The filing in U.S. Bankruptcy Court by NetBank Inc. in Jacksonville, Florida listed assets of $87.2 million and debt totaling $42.4 million.

The bankrupt holding company plans to sell real estate it owns in Columbia, South Carolina and its captive reinsurance subsidiary M.G. Reinsurance Inc. The Chapter 11 filing occurred after a sale of the savings-and-loan fell through and it was taken over by the Federal Deposit Insurance Corp. following a shutdown of the unit by U.S. regulators.

Federal law prohibits the savings-and-loan subsidiary from filing for bankruptcy protection from creditors like its parent. Federally chartered banks cannot be reorganized and must be liquidated by the FDIC.

NetBank was founded in 1996 and went public in 1997. The bank had 286,000 customers and $4.8 billion in assets in 2005 before online competition from national and regional banks eroded the business.

The bank's failure this year was the result of margin compression from an inverted yield curve, fewer mortgage originations, and demands to repurchase delinquent loans, according to a bankruptcy court filing.

As part of the FDIC takeover, ING Bank announced it is assuming $1.4 billion of the failed bank's deposits and 104,000 of its customers while EverBank Inc. acquired $700 million of NetBank's mortgage assets.

The savings-and-loan subsidiary had $2.5 billion in assets and $2.3 billion in total deposits as of June 30, according to the FDIC.

NetBank said in filings with the Securities and Exchange Commission that its executive offices are in Alphafretta, Georgia while the bankruptcy petition listed Jacksonville as the main office.

NetBank's stock closed Sept. 28 at 7 cents a share, down 1 cent in over-the-counter trading.

The case is In re NetBank Inc., No. 07-04295, U.S. Bankruptcy Court, Middle District Florida (Jacksonville).

To contact the reporter on this story: Bill Rochelle in New York at wrochelle@bloomberg.net .
Last Updated: September 29, 2007 16:06 EDT

Ken in Glassboro, NJ :)

from the article:
"The FDIC also said, though, that NetBank had $109 million in 1,500 deposit accounts that exceeded the federal deposit insurance limit."

Presumably, that $109 million was not covered by FDIC and hence lost. Spread out out among the 1,500 deposit accounts, thats an average of $72,700 per affected deposit account. Perhaps not "life savings", but probably at least a dent in the ole' christmas shopping list.

They had a total of $2.3 billion in total deposits, so the $109 million lost is 4.7% of the total deposits.

(Actually, the money isn't "lost" quite yet. The banks assets will be liquidated, and those depositors will be creditors along with all the banks other suppliers, and will be paid from the proceeds of the liquidation. How much they actually lose won't be known for months.)

--sgl

If you read the article you will see that only 1.5 billion of the 2.5 billion they had will be covered and transfered. Thats a billion dollars that people lost! EEEPP! Not to mention any one with over 100,000 dollars is out that money. :help:

I have had one with them for two years, I prefer banking in person and I guess I am lucky my local arvest bank (walmart owned) has a money market account that you can make up to 3 with drawls a month from min is 2,500 but it pays 4.5% I am pretty sure,

ING has also started an online checking account now, and I pay most of my bills through that account. You can make interest even on your checking account! Much better deal that I was getting at my credit union. I still use my credit union for many things, especially when I need money out of there immediately, but most of our cash is in ING.

My only beef with the ING savings is that you are only allowed to make so many transfers out of your savings accounts per month. Since I split my savings into several "sub-savings", I sometimes get a warning letter than I have made too many transfers.