Chasing the Online Savings Rate
When does it make sense to chase that interest rate? Currently, I’m considering the following:
- ING Direct: 4.15%
- HSBC Direct: 4.65%
- Emmigrant Direct: 4.65%
Currently, we are with ING but they’re just not keeping up with the other banks. When the fed increased the interest rate by say .25%, ING will only bump up by a fraction of that, essentially pocketing the difference and not sending that down to their clients. To me, this is getting to be unacceptable and I’ve stuck with ING b/c I believed they would make things right, but it’s not happening.
Currently, Citibank E-Savings product is offering 4.75% but you have to be banking with Citibank or have one of their checking accounts to qualify. This kind of removes them from the list b/c we already have another bank for our checking.
Based on this rate chaser calculator and using HSBC as an example, I woud lose roughly 2 days in lost interest, however it would only take about 17 days to break even and after that, it’s “money in the bank”. At this point, it really seems like a no-brainer and the only reasons for considering HSBC over Emmigrant is that I’ve heard of HSBC before.
[edit: The Citibank E-Savings/EZ Checking Account actually has three conditions in which to avoid the monthly charges:
- Direct Deposit Into the Checking
- Conduct 2 monthly bill pays
- A combined average balance of $1,500
Personally, option 3 is a winner for me. Since the main focus of the account is for savings, I feel it would be quite easy to keep a minimum of $1,500 in the account.
So, what will the difference in interest rate pay off?
With a balance of say $10,000, the yearly interest would be
- 4.15% APY = $415
- 4.75% APY = $475
Not too shabby for letting the money sit. That’s roughly a month’s internet/tv bill for some! A good option for those wanting to keep a safety blanket of 6 months’s worth of expenses in a liquid account.