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Update on Wilshire State Bank Installment Savings Accounts - Available Nationwide

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Wilshire Bank
Wilshire State Bank continues to offer competitive rates on its Rainbow Savings Account. This is an installment savings account in which you make equal monthly deposits during the term rather than one initial deposit like a CD. However, like a CD the rate is fixed during the term. Installment Savings Accounts are intended to help you save, and they are common among Korean-American Banks.

Below are the current rates as listed at Wilshire State Bank's Rainbow Savings page as of 10/13/09. These rates assume you have automatic transfer from a Wilshire State Bank deposit account.
  • 4.34% APY 36 months
  • 4.08% APY 30 months
  • 4.08% APY 24 months
  • 3.82% APY 18 months
  • 3.82% APY 12 months
Maximum contract amount is $100,000 per customer. There's an online application for this Rainbow account, and I've been told by the CSR that it's available nationwide. I have more details about opening this account in my April review of Wilshire State Bank. Additional useful details are available in this Fatwallet thread. Please contact the bank for the latest instructions for account opening.

Wilshire State Bank also has a competitive online savings account called eLink Savings. The rate as of 10/13/09 is 1.75% APY. There's a $500 minimum balance requirement to avoid a $5 per month service fee. The account must be opened online, and it must be linked to one of the bank's checking accounts.

Readers have commented that you can use the eLink Savings account as the source of the automatic transfers that qualify for the higher rates. The nice thing about this is that you don't have to worry about losing interest as the money is transfered or sits in a checking account. The only issue is that you must also have a checking account, and all the qualifying checking accounts have minimum balance requirements. The best one would be the Regular Checking Account that requires only $500 to avoid a $7/month fee.

Comparison with CD Rates

Since the installment savings account is different than a regular savings account or a CD, it's a little difficult to compare rates. An installment savings account that has higher rates than a CD with a comparable maturity doesn't necessarily mean you'll do better with the installment savings account. The important thing to remember with the installment savings account is that you only have a small amount of the deposit earning interest during the initial part of the term. Each month, additional deposits are made to grow the principal and more interest will be earned.

A quick rule of thumb to determine the total interest earned is to divide the principal by two and multiple this with the interest rate to determine the total interest earned.

If you have a lump sum that you want to invest in a CD, the alternative is to use an installment savings account and a regular savings account. Most of the initial deposit would go into the regular savings account. Each month the installment would be debited from this regular savings account. So you would earn interest from both the installment savings account and the regular savings account.

I did another spreadsheet that is similar to the one I did in May with new rates for today. In the spreadsheet I assume one has $9,800 to invest into a 12-month CD. Instead of a CD, one invests that amount into Wilshire State Bank's eLink Savings account and the Rainbow Savings account. Each month the installment is debited from the eLink and is deposited into the Rainbow account. At the end of the 12 months, the Rainbow account has a total of about $10,000 (the contract amount). The eLink account was also earning interest. So the total interest in the eLink account would be added to the contract amount of the Rainbow account to derive a CD-equivalent return.

I came up with another quick rule of thumb, and that is to take the average of the installment savings account rate and the regular savings account rate. For this example, it would come out to be just under 2.80% which is a little less than what I calculated with the spreadsheet.

There are a few factors that could reduce your return in this combined installment and regular savings account. First, it assumes the regular savings account rate will remain the same during the term. As we've learned this year, this is probably not a safe assumption. Second, it doesn't take into consideration minimum balance requirements to avoid monthly fees. Third, it assumes that the money is always earning interest. There may be some periods of time during the transfers in which your money isn't earning interest.

Based on my calculations, I've calculated the following APYs which assume you have both the Rainbow Savings Account with the APYs above and the eLink Savings account with a 1.75% APY for the entire term.
  • 3.06% APY 36 month
  • 2.93% APY 30 months
  • 2.94% APY 24 months
  • 2.83% APY 18 months
  • 2.86% APY 12 months
As you can see, the rates for the shorter terms are much higher than current CD rates with comparable terms. The spreadsheet with the detailed interest calculations for a 12-month term is shown below.



Overview of Wilshire State Bank

You can also open the Rainbow Savings account at a Wilshire State Branch. Branches are located in Southern California, New York, New Jersey and Dallas, Texas.

The bank's ratings for safety and soundness continue to be strong: 4 stars (excellent) at BauerFinancial and 4 stars (sound) at Bankrate.com. Both ratings are based on 6/30/09 data. The bank has been a FDIC member since 1980 (FDIC Certificate # 23301).

Other Installment Savings Accounts

Most banks that offer installment savings accounts require a branch visit. One is Hanmi Bank in California which continues to offer very competitive rates on its installment savings account (see account review). To find other installment savings accounts, refer to my Installment Savings Account Page. Be sure to check with the bank for the latest rates. If you've found any other bank offering an installment savings account, please leave a comment.

  Tags: New York, California, New Jersey, Wilshire Bank, Texas

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Comments
9 Comments.
Comment #1 by Anonymous posted on
Anonymous
The rate for 12 months is 4.6% at Hanmi bank. The rate for 24, 36 and 60 months are much higher that those at Wilshire Bank. I opened several accounts a couple of weeks ago.
$100,000 max. I don't know if they accept online application (I doubt it). I did a branch visit tho.

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Comment #2 by Anonymous posted on
Anonymous
"The only issue is that you must also have a checking account, and all the qualifying checking accounts have minimum balance requirements."

Not true. The "Simple Checking" account qualifies, and has no minimum requirement. You just need to do one ACH every six months to qualify.
https://www.wilshirebank.com/public/personal_simple.asp

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Comment #3 by Banking Guy (anonymous) posted on
Banking Guy
The Simple Checking would qualify you for the Rainbow Savings Account, but would it also qualify you to open their eLink Savings account?

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Comment #4 by Anonymous posted on
Anonymous
They require you to open a checking account (With $500 min balance to avoid monthly service charge) even although you have you eLink Saving account. I set up automatic tranfers from my eLink to my Rainbows leaving my checking account no use. But opening a checking account is ***mandatory*** Hope that helps!

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Comment #5 by Anonymous posted on
Anonymous
From my experience, Hanmi is 100K max per customer, not contract.

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Comment #6 by ctgottapee (anonymous) posted on
ctgottapee
i'm probably wrong and maybe someone can explain, but shouldn't the published APY rate they give actually reflect the actual yield and not the yield applied to each increasing installment amount? what i mean is, the published APY should equal what bankingguy figured for just the installment account, because that is the actual yield. the account has a contract amount, so the investment amounts and dates are predetermined, hence a real APY could be easily figured. the APR rate could be the rate they use, but the actual yield number they publish should equate to the real yield.


and technically you don't have to put the full contract amount into your elink account on day one. if you have another place to put the money and trasnfer it in before the day they due each transfer, you could do with that, although it takes some work.


also note that have a pretty decent 1 year flex CD at 2.00% and it allows 6 penalty free withdrawls and 7 free deposits. it is basically a highly restricted money market account.

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Comment #7 by Anonymous posted on
Anonymous
Wilshire will not allow opening of accounts in name of a Living Trust without going into a branch.

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Comment #8 by Anonymous posted on
Anonymous
Stopped at 2 branches today 10/26 (incl. Corp HQ) to verify info. Rates noted above are only good til 10/31. So if you're considering it, lock it this week.

As of 11/2/09, rates for accounts w/auto transfer from a WSB deposit acct will be more like:
12 or 18 mo = 3.0 apy
24 or 30 mo = 3.25 apy
36 mo = 3.75 apy

Rates for accts w/o internal WSB auto transfer look to be 0.25 less.

Neither CSR knew about their eLink savings, so seems to be a strictly online product. Thus, they couldn't verify the 1.75% rate. The only interest bearing they mentioned was the MMA (see rates below). Since all their other rates are dropping on 11/2, I figure eLink likely will too.

Neither CSR said a checking was required. They said a savings qualifies the higher internal transfer acct rate. Couldn't ask about eLink's relationship, since they didn't know about it, unless I didn't refer to it properly - I couldn't remember its title. When I asked about their internet savings acct, they both discussed online management of any account.

Neither CSR knew what a hard or soft pull was. Both said they verify info w/ChexSystems, so I told them that was soft pull. I asked whether they checked any credit bureaus, even gave the 3 names. Both said they only knew ChexSystems to open an account.

They were very nice. I felt the bank just has its own way of operating, such as w/installment savings. I'll probably open there, after I understand the options better.

They asked to bring a DL and SSN card, besides the funding.

MMA (but min. $2500 w/o fees) is:
<100K = 0.50%
100K to <500K = 1.0% (0.75 on 11/2)
500K to <1mil = 1.25% (1.0 on 11/2)
500K+ = 1.5% (1.25 on 11/2)

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Comment #9 by jwbodnar (anonymous) posted on
jwbodnar
Good luck trying to open an account online right now. The web app is not working, and no one at the corporate office seems to have a clue about this or how to work around it.

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