Best Interest Rate Banks

Many of your bills can be paid annually, whether it’s your renters/homeowners insurance or your property taxes, or your trash collection fee or something else; some of those services will give you a discount if you pay them in a lump sum rather than over every month or quarter or six months. For example, my homeowners association fee will bill me every year and give me a 5% discount if I pay in one lump sum rather than two half-year payments. In some cases, the recipient is hoping to earn a little extra interest in your money but oftentimes they are simply looking to reduce their administrative overhead. Either way, you can save money simply by saving up the funds to make one lump sum payment.

The easiest way to do this is to set up recurring monthly transfers from your main checking account, where your income is deposited, to a savings account you have earmarked for this purpose. It’s simple to open up additional accounts at ING Direct, you could even name it “Annual HOA fee” and simply transfers $50 each month (in our case), then transfer that out whenever payment needs to be made.

If it’s not as important for you to have separately named accounts, I recommend FNBO Direct instead as it has a higher interest rate at 3.50% APY.

I was messing around in my ING Direct account today, opening an 18-month CD at 4.50% APY, when I saw that ING has a rollover bonus on their Certificates of Deposit. If you set your CD to non-renewing, they pop up a link next to the CD as it nears maturity with an offer of a Rollover Bonus.

The Rollover Bonus is 0.10% above the listed rate. So with the current Orange CD rates where they are, you’ll get 4.10% APY for the 12-month CD and 4.60% APY for the 18-month CD.

I’ve heard that some other banks offer this as well but this is the first time I’d seen it.

ING Direct just upped the interest rate on their 18-month CD to a very competitive 4.50% APY. If you look at the ING Direct CD rates, you’ll notice that only the 18-month term CD has been changed.

ING Direct’s Orange Savings Account hasn’t had a high interest rate in quite some time so it’s a welcome change to see their CDs starting to lead the way compared to other banks.

Some notes about their CDs - there is no minimum and an early withdrawal penalty of 6 months (this is true for CDs above 12 months).

HSBC Direct announced today that their online savings account interest rate would be falling from 3.50% APY to 3.25% APY. While this isn’t enough to cause anyone to withdraw their funds to put it in another bank, it’s enough to change where people will put their next dollar. FNBO Direct’s rate is still 3.50% APY and WaMu has a 3.75% APY rate, though recent concerns about their liquidity has damped people’s enthusiasm for them.

On the flip side, if you want a good rate from your funds at HSBC Direct, they do offer a 6 month CD now for 3.75% APY.

A couple months ago, Washington Mutual offered 5.00% APY on their year-long certificates of deposit. It was a rate that was very very juicy considering it trumped many of the rates offered by other banks. Bankrate’s own overnight CD rate monitor currently says 12-month CDs are offering 3.69% APY, so WaMu is beating that by a full percent. ING Direct’s rate is 4.00% and HSBC Direct’s rates aren’t even close in the 12-month CD, so WaMu’s rate is certainly something to consider if you’re looking for some short term interest.

You don’t have to use any of WaMu’s other services, you can just opt for the CD and manage it entirely online (you have to manage it online, you can’t visit a branch to open). The CD has a minimum of $1,000 and no fees according to their fee sheet.

One option that some are saying is that you should open their checking/savings combination so that you can take advantage of the 3.75% APY if you ever cash out the CD and need to figure out what you want to do. I will be taking this route because the 3.75% is much higher than my current checking account rate of 0.00%. There’s certainly no cost to opening (the savings account will charge fees if you have less than $300 in the account) so you might as well take advantage.

I mentioned in a post last week that online bank sites can sometimes go down without any warning and that one way to mitigate that risk is to establish bank transfer links in both directions. Another way to mitigate this risk is to simply open two accounts and spread your assets across both of them.

Right now, Washington Mutual is offering 3.75% APY, FNBO Direct and HSBC Direct are offering 3.50% APY; that’s three banks offering 3.50% to 3.75% APY for total coverage of $300,000 FDIC insurance. If you have over $300,000 in assets you are putting in savings accounts, you should talk to a financial advisor. Otherwise, you’re like us and can safely spread it across those three banks and mitigate the risk that any one of those accounts could become inaccessible without giving much interest.

HSBC Direct recently went down for the count for a few days because of technical issues, I hardly noticed because I had my assets spread across multiple banks such that in a dire situation I can still access my cash. I also happen to have external links to my HSBC Direct account and could initiate a transfer out if necessary (the bank was fine, online access was just shaken up).

So, if you’re wary about online banks, diversify this small risk by spreading your money across different accounts.

This little public service reminder is for all the folks who have an account at HSBC Direct. HSBC Direct’s rate of 3.50% APY is set to expire on September 15th, 2008. We don’t know yet what the new rate will be but the expiration date is a mere week away. The last time they extended the rate, they announced it at least a week ahead of the expiration date, so it stands to reason that the rate may slip from that 3.50% APY number.

While no high yield interest rate on any savings account is set in stone, they aren’t CDs, the other banks with high rates include Washington Mutual with a savings & checking combo offering 3.75% APY and FNBO Direct’s savings account offering 3.50% APY.

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

One of the first things you do when you open a new online bank account is to establish an external transfer link between your new account and an existing account. When I opened my FNBO Direct account, I immediately linked it to my daily checking account so that I could pull some money in and get that hot 3.50% APY. For most, the process stops there. If you ever need money to go into FNBO Direct or to go back to the checking account, you can simply log into FNBO and initiate the transfer.

99.999% of the time, that’s perfectly fine. But for that 0.001%, if the FNBO website is down, you will have no access to those funds via the Internet. If you can’t log in, you can’t transfer your funds. You could always call and initiate the fund transfer that way, but oftentimes the site itself is down and you’ll have to scrounge up the number some other way. You’ll also have to get your account number somehow too.

Here’s a better way, establish the link from the other side as well. So if you have a link between FNBO Direct and ING Direct but it’s only created on the FNBO Direct side, just create it again on the ING Direct side if you can. ING Direct is picky about their links but other banks won’t be, so establish a link out that way you can still get access if you need it.

99.999% of the time, the sites will be fine. But you never know when a little hiccup can put you in a bad spot.

ATM fees are insidious. You’re stuck in a bad spot, you need some cash, and the only thing separating you between much needed money and you are two ATM fees. When you use an out-of-system ATM, one that isn’t linked to your account by either the network or the bank, you will often pay two ATM fees. The first is a fee to the ATM owner and the second is a fee to your bank to initiate the transfer. The ATM machine only notifies you about their end of the fee, so that $3 or $4 is just part of the story. When you check your balance, you’ll often see that your bank has charged you its own fee.

Here are some tips on how to avoid these fees (outside of the obvious of not using the ATM in the first place).

No ATM Fee

Some banks will not charge a fee if you use an ATM that isn’t there. The downside of this is that you only avoid one side of the ATM fee, your bank’s side. You are still on the hook for the ATM side. Some banks will refund you all the fees, including the ATM fee, so try to find a bank that offers that and you’ll be in the clear.

Use A Huge Bank

By huge I mean a bank with a wide geographic presence, such as a Bank of America, as your primary checking account. By having a large coverage area, you’re often near a bank ATM and so you avoid those pesky fees. Simply link up that checking account with a high yield savings account of your choice and you can earn high interest rates but still retain the flexibility of wide ATM access.