Best Interest Rate Banks

Need a little trivia pick me up on this Labor Day shortened week? Check out these 50 Fun Facts About Banks!

I put together an FNBO Direct Squidoo Lens that contains some brief FNBO Direct and high yield savings account information that you may find useful.

It’s a work in progress type of project but it’s something that I hope to expand on in the future!

Are you worried about your assets at one of these online banks? If so, let me put you at ease, all of the banks listed on the homepage of this site (and likely anywhere on this site) is covered by FDIC insurance according to the FDIC’s Bank Find tool.

What’s this FDIC insurance? In a nutshell, banks pay for deposit insurance to protect your assets (since they lend out a large percentage of the money you deposit) and that insurance is called FDIC insurance, after the “corporation” that offers it. FDIC stands for Federal Deposit Insurance Corporation.

Your assets at a single financial institution are protected to $100,000 by this insurance. For the most part, you get $100,000 at every institution so if you have an account at FNBO Direct and one at HSBC Direct, you get $100,000 of coverage at each bank.

There are other ways to get additional protection but for most the $100,000 amount per bank is sufficient.

One of the nice things about a brick and mortar bank is that you can always go to a brick and mortar bank no matter what. When IndyMac bank failed and was taken over by the FDIC, you could at least go to an IndyMac branch. Sure the lines were long, the people were miserable, but your money was inside and you could get to it.

Actually, your money was not inside. Your money was in the ether, a series of 1’s and 0’s, and you couldn’t actually touch it unless it was locked inside a safe deposit box. Your money was with all the other money, a line item in an electronic register on the bank’s mainframe computers. It was just as safe as having it on an online savings account.

Your money is no safer at a “regular” bank than an entirely online bank.

The only thing that protects your assets at a bank is FDIC insurance. If the Federal Deposit Insurance Corporation is insuring the funds at your bank, and you can confirm this with the FDIC Bank Find tool, then your assets are protected up to $100,000 no matter what.

This means that you’re making a mistake if you don’t open an account at a bank like FNBO Direct or HSBC Direct because they’re just as safe and they offer much higher interest rates.

All online banks are able to be FDIC insured but that doesn’t mean that all banks are FDIC insured. High yield savings accounts at online banks aren’t any different than savings accounts at traditional brick and mortar banks, they are subject to the same rules and regulations of banks and thus are able to be FDIC insured.

Does that mean they’re all insured because they’re a bank? No. Just as you would any regular bank, you should always check that the bank is FDIC insured by using the FDIC’s Bank Find tool. A bank isn’t insured unless it’s listed in the FDIC Bank Find tool and has a certificate number.

For example, if you were looking for HSBC Direct, you wouldn’t find it under “HSBC Direct.” To find the official name, visit the website and look for it, usually at the bottom. On HSBC Direct’s homepage you will see this:

Issued by HSBC Bank USA, N.A. ©2008 HSBC Bank USA, N.A. All Rights Reserved.

That means you’ll want to find HSBC Bank USA in FDIC Bank Find, I just put in HSBC and found several hits, only one of which was “HSBC BANK USA, NATIONAL ASSOCIATION.” It’s located in Delaware and the FDIC Insurance certificate was #57890. You can click on the name for more information including office locations, main website, etc.

Too bad there isn’t anyway to search by certificate number, that would be a nice addition.

Sometimes you’ll see an interest rate followed by an APY. Sometimes you’ll see an interest rate followed by an APR. While the two look very similar, the two are actually very very different.

APY stands for Annual Percentage Yield and APR stands for Annual Percentage Rate. Again, they sound similar but they are very different.

APR is the annual interest rate without any consideration of compounding interest within that year. You calculate it simply by multiplying the periodic rate by the number of periods within a year. The periodic rate is simply how much interest is accrued per period on the funds.

APY is the annual interest rate with consideration of compounding interest within that year. You add one to the periodic rate to the power of the number of periods, then cut out the one.

A periodic rate of 1% with 12 periods works out to be:

• APR of 12% = 1% x 12;
• APY of 12.68% = (1.01^12)-1

Usually banks will say APY for the interest on a bank account, because it’s a bigger number, and then APR on loans, because it’s a smaller number. Clever huh?

When you see these high interest rate APY’s for these online savings banks, you might be wondering whether these rates are guaranteed. They’re not. The reality is that unless you’ve locked into a Certificate of Deposit, there isn’t any other account where the rate is guaranteed for any period of time. If you walk into your brick and mortar bank, the savings account rates and checking account rates aren’t fixed either.

But that’s OK. The fact is online banks are fighting each other for business and will always have the highest rates because they have the lowest overhead. If you don’t have to pay tellers and you don’t have to pay managers and you don’t have to pay rent on a building, you can pay your depositors higher interest rates.

So, rest assured that your money is getting the best rates possible when you pick a high yield savings account, even if it isn’t guaranteed.

We here at Best Interest Rate Banks like to keep things nice and simple. On our homepage, we list the best banks we know of along with all the important details you need to make a good decision on where to put your funds. All the banks listed will be online banks with a savings and/or checking component that will earn you the highest interest rates possible. You won’t find 1.0% APY interest rate banks, each is going to beat the federal funds rate by a healthy margin.

Here, in the articles section, we’ll discuss numerous issues pertaining to the banks, best practices, and any other ideas we believe are worth understanding when dealing with banks. Don’t lock yourself into a 3.0% APY certificate of deposit when you can just put it in HSBC Direct and get 3.50% APY plus the flexibility to move it wherever and whenever you want to.

That’s just a brief introduction to what you can expect here.