Best Interest Rate Banks

This week the Federal Reserve, after their FOMC meeting, announced that they would be raising the federal funds target rate from a 0.00%-0.25% to 0.25%, which essentially raising the federal funds rate. IAt a time when interest rates have been falling very very quickly, with some banks seeing their rates fall several times last month, this cold be a sign that interest rates will slow their fall. While I still reiterate the recommendation that you try to lock in rates with CDs, this is certainly a good sign for savers out there looking to get something for their good behavior.

In other Fed related news, the FOMC also said they’d be buying $750 billion more agency mortgage-backed securities, which would bring the total purchases up to $1.25 trillion. It would also buy up $300 billion in longer-term Treasuries to help credit markets and expand the TALF (Term Asset Backed SEcurities Loan Facility) to include other assets.

The allure of a high yield savings account with a reputable online bank can be very strong. One of the biggest risks of banking online has to do with the fact that you’re banking online! The internet, while secure in some respects, is still a dangerous place. There are software programs that will record everything you type and send it off to a thief’s computer. There are malicious emails floating around that are designed to trick you into entering your username and password on a fraudulent site.

Here are a few helpful ways you can protect yourself:

• Use a bank with strong protections: A username, password, and special picture is only the beginning. Banks have begun adding a plethora of special login procedures ranging from passcode fobs to dozens of questions to on-screen keyboards. HSBC Direct has a somewhat annoying login requirement that you click buttons on an on-screen keyboard in order to log in. While annoying, that on screen keyboard nullifies key-logging programs because you don’t enter in that special password.
• Never click on an email: If Bank of America mails you a special message, type bankofamerica.com directly into your browser and log in there.
• Don’t ever call a phone number in an email: Another common phishing technique is to tell you to call a special number, which goes to the thief or one of his associates. If you need to call someone, call the number on the back of your debit card or off their site. They can transfer you to somewhere else.
• Use FireFox or Chrome: IE is notoriously bad about security, you can do better with FireFox or Google’s Chrome browsers.
• Don’t use an insecure network or computer: If you’re in a Starbucks or Panera, don’t use do any sensitive banking; wait until you get home. Don’t log into anywhere at the hotel’s business center. If it’s not your personal computer, don’t use it.
• Update your anti-virus and anti-spy-ware software packages: That funny video you watched last week may have installed some bad stuff on your computer, keep your anti-virus and anti-spy-ware software applications up to date at least once a week if not more.

Thieves are getting more and more clever, but by taking some simple precautions you make yourself a much harder target.

It looks like the best days of the high yield savings account may be behind us, to be replaced by high interest reward checking accounts. Reward checking accounts are often offered by smaller local banks and sport yields of close to or above 5% APY. They’re able to give such phenomenal returns, given our current rate environment, because they have requirements that are a little tougher to fulfill. The standard reward checking account will often require that an account holder:

• Make 10-12 debit transactions per month,
• Sign up for paperless statements,
• Setup a direct deposit.

The only requirement that ever gives anyone trouble is the first one, 10-12 debit transactions a month. Unless you are sure you can make it, I wouldn’t sign up for an account because if you don’t make 10-12 transactions, the interest rate often falls to 0% (or some other small number). Another gotcha they have is that you can only deposit a certain amount of money into the account, usually a limit of $25,000 or $50,000. Of course, that’s a lot of money, but it’s good to be aware of those limitations.

How can they offer such great rates? The transaction fees on those debit transactions. You, the consumer, don’t pay a penny extra, the fees are taken from the store you buy from; so there’s no catch for you. Also, banks save a lot of money when they don’t have to mail you statements (they save trees too!), so that’s additional cost savings they can pass along to you. Finally, the direct deposit isn’t a money making ploy on their part, that’s to increase your affinity with them and keeps you from leaving as easily.

All in all, I wholly recommend reward checking accounts.