For those newcomers who are getting into the online savings account business, this is the way to get attention. E-LOAN just launched a new online savings account that pays 5.50% APY on all balances. Based on E-LOAN's FAQ, it looks like a typical online savings account. The one downside compared to some others is a minimum opening balance requirement of $5K. However, there appears to be no monthly fees if the balance falls below $5K. Here's a summary of the FAQs:
Important general points about the savings account:
- E-LOAN is a subsidiary of Banco Popular North America (BPNA), a New York state chartered bank insured by the FDIC (E-LOAN mentioned in annual report)
- Minimum opening balance for a Savings Account is $5,000
- Absolutely no fees (assume no fees for small balances or ACH transfers)
- They only accept funds by ACH through your linked account. Deposits in the form of checks, wires or cash will be returned.
- You can designate a beneficiary while opening your account.
Important Points about the linked account:
- Your account can be linked to checking or savings accounts at another financial institution.
- The typical trial deposit method is used to establish the linked account
- For security purposes, they do not allow any withdrawals from your E-LOAN account to be made by an outside institution.
- For your security, you may only change your linked account once every 30 days (use to be 4 times per year.)
- Deposits and withdrawals pass between your linked funding account via the ACH, which usually takes 2-3 days to clear transfers.
- Savings account withdrawals are limited to six per calendar month. However, you are free to make unlimited deposits into your online account from your linked account.
- Only one link to an external account can be set up.
- No fees for ACH withdrawals
Here are some additional points about the savings account that I received from the CSR:
- No hard credit inquiry. The CSR said that they only use Experian to check for identity.
- No inactivity fee or small balance fees.
- If balance falls below $500 for 90 days, they may close your account
- No IRA accounts for savings or CDs
- No sign-up bonus
In addition to savings accounts, E-LOAN is also offering high yield certificates of deposits. These have a minimum deposit requirement of $10K. The 6-month CD APY is 5.60%. The one-year APY is 5.70%. All longer term CDs have an APY of 5.75%.
Bankrate.com gives Banco Popular 3 out of 5 stars for its safe and sound rating (performing). It is a major bank with over $12 billion in total assets.
It's nice to see a new major player in the online savings accounts. It's hard to say how long E-LOAN will remain on top of the interest rates. When Emigrant launched its online savings account in early 2005, the interest rate was way above its competitors at that time. But after a year, it started to lag others. I would think E-LOAN wouldn't have to stay on top too long since it already has name recognition. Building trust shouldn't be as difficult.
Even if E-LOAN doesn't stay on top, the more banks with high yield savings accounts, the better it will be for savers. It will put pressure on others to raise their rates. The only potential problem is that most people may have grown tired of opening a new savings account whenever a new rate leader comes forward. There are concerns with hard credit pulls which lowers credit scores. Also, there's concern about having your personal data in yet another financial institution which increases a chance that a mistake will be made in which your personal data will be compromised. But if we want to see rates staying competitive, we have to be willing to move. At least, these savings accounts are easy to set up and easy to move your money.
Thanks goes to Scott who mentioned this new savings account in the finding deals post.
[Edited on 6/06/07: 5.25% is current yield. Updated policy on change frequency of linked accounts.]
[Edited on 9/30/06: 5.50% now applies to all balances.]
[Edited on 9/27/06: Added details received from CSR.]