Best Interest Rate Banks

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.

Less than two weeks after their last rate increase, ING Direct has updated and increased their CD rates once again, with their 12-month Certificate of Deposit going from 3.70% APY to 4.00% APY:

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!

Washington Mutual has a hot new Certificate of Deposit offer - 12 months at 5.00% APY interest rate with no catches, gimmicks, or other shenanigans. This is a 1.25% APY bump from their WaMu high yield checking/savings account and the two can be linked together for easy transfers.

Other details:

• Early withdrawal penalty of 90 days interest
• Open entirely online
• $1,000 minimum deposit

If you’ve ever linked online accounts together, chances are you’re familiar with the nine-digit ABA routing transit number. On a personal check, it’s usually the first in a series of three numbers at the bottom of a check. On a business check, it’s usually the second in a series of three numbers. The three numbers are the same on both, they’re just in a different order.

Personal Check

Business Check

The ABA routing transit number identifies the bank and tells the recipient’s bank where to obtain the funds. The system itself is quite complicated but the numbers are quite easy to decipher. The nine digits are separated into three sections. The first four digits designate the Federal Reserve Routing Symbol, the next four is the ABA Institution Identifier, and the last digit is a checksum digit.

Federal Reserve Routing Symbol

The first four digits are separated into two sections, the first two digits and the second two. US Government checks always begin with 00 whereas digits 01 through 12 designate one of the twelve Federal Reserve Banks. If the transaction is electronic, it’s given a 61 through 72 that follows the same order as below (61 is Boston, 72 is San Francisco).

• 01 - Boston
• 02 - New York
• 03 - Philadelphia
• 04 - Cleveland
• 05 - Richmond
• 06 - Atlanta
• 07 - Chicago
• 08 - St. Louis
• 09 - Minneapolis
• 10 - Kansas City
• 11 - Dallas
• 12 - San Francisco

ABA Institution Identifier

This is a unique four digit identifier for the bank.

Checksum Digit

This digit is used to ensure the numbers are properly formatted. It follows an equation:
(3(d1 + d4 + d7) + 7(d2 + d5 + d8) + 1(d3 + d6 + d9))mod 10 = 0

There you go, that’s how that 9 digit numbers works!