NorCalSavant

Once upon a time, Joe the plumber (yeah the same one, our much bandied recent alter ego) had to pay his respects at a big tall building with expensive furniture otherwise known as the neighborhood bank and smilingly accept small fractions for interest rate on his savings account because that was all that was available.

With the wide prevalence of Internet banking today, there is no need now to be tethered to the awful puny interest rates offered by the traditional brick and mortar banks.

You can open these savings accounts online, sight unseen from the comfort of your La-Z-Boy recliner and get three to four times higher interest rates than those from the traditional banks.  These savings accounts are FDIC insured and are linked to your checking account at the traditional bank to allow easy online money transfer.  They come with the standard limits of no more than six withdrawal transactions a month.  You also have to plan for allowing at least four business days for the withdrawal from the savings account to show up in your checking account.

Best of all you can shop for the best rate online before opening the account.  Some web sites I have found useful during my research are Bankrate.com, eMoneyCentral.com, Bank Deals Blog, and MoneyAisle.

All of these sites provide rate information from a number of banks depending on the location, initial deposit, term, etc. for a variety of financial services and products including savings accounts, checking accounts, money market accounts, and CDs, etc.

MoneyAisle works on a very interesting auction basis.  You tell it the amount of your initial deposit for a savings account or initial deposit and term for a CD.  A number of banks then compete to get your account by offering a better rate than the winner of the last round in a series of many rounds.  This auction stops when there is just one bank left with the highest offer.  All this takes only a few seconds.  Only the winning bank’s name and information is displayed for you to follow up, which you have to do within a short time window.  Of course, you don’t have to take the offer up.  You can try again later, although the rates may change.

None of them guarantee the best possible return (in a worldwide or at least US wide sense), so you have to look through them all to find what appeals best to you.  I have compared offerings from all the above.  The table below summarizes the results of a search of best options for a $10,000 savings account and a $10,000 1-year CD.  As the table shows, the rates are pretty close.  The table reflects only the highest available yield.  It does not consider other factors like customer service or bank rating.  You can look through other listings at each site to decide where to put hard-earned money for the best possible return and customer service, and bank rating if you are investing an amount larger than the FDIC insurance limit.

Rate Comparison for a $10,000 Savings Account and a $10,000 1-Year CD on 11/11/08

If you are moving your money for better rates

If you are considering moving your money from a current account or rate chasing, here is a handy tool.  Depending upon your current and new interest rates and the number of days lost in money transfer, it can tell you the “break even” days or the approximate number of days you must keep your money at the new rate to make up for the loss of interest during money transfer, and the additional earnings accrued after one and six months.

Related posts:

1. Rewards Checking Accounts — Worth the Pain for A Lot Of Gain? If you have cash sitting in your checking or savings account earning a measly one-half percent, you might be able...