Update 1/05/09: The CD rate has fallen to 3.50% APY. The savings account yield remains at 4% APY.
Emigrant Bank's DollarSavingsDirect is still offering 4% APY on its online savings account for balances of at least $1,000 (as of 12/23/08). However, I doubt this will last too much longer. If you want to lock in 4%, DollarSavingsDirect is also offering 4% APY on a 16-month certificate of deposit. With last week's historic Fed rate cut, this CD is now quite competitive. Emigrant Bank's old online bank, EmigrantDirect has already lowered its rates. EmigrantDirect's savings account APY is now 2.75% and its 16-month CD APY is 3.00%.
Details about DollarSavingsDirect's CDs are provided in this FAQ and in the account disclosure. A few important points regarding the CD include:
- Must already have DollarSavingsDirect savings account to open CD (The savings account has no minimum balance fees so there's little downside to this)
- $1,000 minimum balance is required to establish a CD and to earn the APY disclosed
- Interest will be compounded on a daily basis and credited to your CD on the last day of the month and at maturity
- Early withdrawal penalty for a 16-month term is an amount equal to 180 days interest (whether earned or not)
- You may withdraw your posted interest at any time by transferring the money back to your linked funding account
- 10 calendar day grace period at CD maturity in which you can close the CD without a penalty
- If you choose to close your CD Account, no interest will be earned during the grace period
DollarSavingsDirect and EmigrantDirect are divisions of, Emigrant Bank which has been FDIC insured since 1934 (FDIC Certificate # 12054).
The bank's financial ratings for soundness have gone down in the last few months. It has dropped from 3 stars to 2 stars (problematic) at BauerFinancial and from 2 stars to 1 star (lowest) at Bankrate.com. These latest ratings are based on 9/30/08 data (old ratings based on 3/31/08 data). As I recommend with any bank, it's best to keep below the FDIC limits.