Here's another installment savings account. Pacific City Bank's version of this is called the Plus Installment Savings. Instead of making one initial deposit, you agree to monthly deposits. At maturity, the balance equals the sum of all the deposits plus the accrued interest. When you open the account, you specify the maturity balance (the contract amount). The Plus Installment Savings account rates listed at the bank's website as of 3/24/09 include:
- 3.30% APY 12 and 18 months
- 3.82% APY 24 months
- 4.34% APY 30 months
- 4.86% APY 48 months
- 5.23% APY 60 months
- 5.39% APY 72 months
- Interest rate in effect at account opening will be paid until maturity
- Interest will be compounded daily and credited quarterly
- Minimum contract amount $1,000. Contract amount can increase in multiples of $1,000 with no maximum.
- Minimum opening balance is the first month installment
- Early withdrawal penalty is 3 months of interest on the amount withdrawn.
According to the banking rep, a branch visit is required to open an account. Branches are located in Los Angeles, Artesia, Rowland Heights, Torrance and Buena Park, California.
Pacific City Bank has some fairly strong ratings for safety and soundness: 3.5 stars (good) at BauerFinancial (based on 12/31/08 data) and 4 stars (sound) at Bankrate.com (based on 9/30/08 data). The bank has been FDIC insured since 2003 (FDIC Certificate # 57463).
Thanks to the reader who mentioned this account in the comments.
Why Are Installment Savings Account Rates So High?
This is the third installment savings accounts that I've posted on this week, and all three have rates much higher than most regular savings account and CD rates. As in the case of Pacific City Bank, the top rate requires that you maintain a checking or regular savings account at the bank for the entire term of the installment account. Otherwise, you won't be able to make the installments, and the rates will no longer be guaranteed. That also forces you to maintain an adequate balance in the other account to prevent overdrafts. Those other accounts will likely have much lower rates so you'll lose some interest before the installments are debited. Also, the bank probably anticipates that a certain percentage of customers won't be able to maintain all of the installments. These factors are some reasons that the banks may be able to pay the high interest rate on these accounts.
Online savings accounts that allow automatic monthly transfers would come in handy. This would allow you to keep most of your money in the high yield online savings account without having to worry about missing an installment.
I've created a new installment savings label so you can view all of the previous accounts from this installment savings account page.