Saturday, February 3, 2007

Is your bank robbing you?

According to Bankrate.com, of the 39% of Americans who have an emergency savings account sufficient to cover at least three months of living expenses, only 44% are earning an interest rate of over 3% on their savings.

The goal of a savings account should be to grow your money, rather than see it eaten away by inflation. If you are getting anything less than 5% APY on your savings, your bank is robbing you.

Okay, the word "robbing" is probably a bit strong, but at least I've got your attention now. A quick survey of the interest rates on a basic savings account of $1000 at a few California banks is revealing:

Bank of America: 0.20% APY

Golden One: 0.85% APY

US Bank: 0.20% APY

Washington Mutual: 0.25% APY

Wells Fargo: 0.10% APY

If you are currently getting one of these pathetic interest rates on your savings, I suggest you open an additional savings account. Get one that is FDIC-insured and yields at least 5% APY. There are many options you can choose from. Research them by checking out Bankrate's rate list or the Bank Deals blog.

Two options you might want to consider:

Amboy Direct: 5.25% APY

HSBC: 6% APY on new deposits thru 4/30/07 (5.05% APY regularly)

Be sure to compare restrictions, minimum balances, etc. Also, look for special promotions, as some banks will give you money for opening a new account (if you jump through all the right hoops).

Once you set up a new account, there's no need to close your old savings account. You can simply move money between your existing accounts and your new account electronically. Just be sure not to make my mistake of violating those silly federal regulations that limit you to 6 transfers out of your savings account each month.

2 comments:

Wolfe the Younger said...

David--Very good advice, considering America as a whole has actually had a negative savings rate over the last year and a half. A little frugality goes a long way. Also, Vanguard has very attractive money market accounts at over five percent, money that can be easily moved at some point towards a CD or IRA.

Rodney said...

Don't miss this (and the comments): Which Online High-Yield Savings Account is Best?