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Ken Tumin founded the Bank Deals Blog in 2005 and has been passionately covering the best deposit deals ever since. He is frequently referenced by The New York Times, The Wall Street Journal, and other publications as a top expert, but he is first and foremost a fellow deal seeker and member of the wonderful community of savers that frequents DepositAccounts.

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Have You Opened a New Internet Savings Account in 2012?

POSTED ON BY

With some of the recent rate hikes at internet banks like UFB Direct, SmartyPig, CIT Bank and EverBank, rate chasing is starting to look more attractive. Has the bump-up in rates caused you to open a new internet savings or money market account this year? Or have you decided that it still hasn't been worth it to open a new liquid account this year?

As interest rates fall, it can get harder to justify rate chasing. Internet banks may be advertising their savings accounts have 5x higher rates than the average brick-and-mortar bank account. However, if the average is only 0.15%, the 0.75% rate at the internet bank won't provide much in extra earnings. For example, if someone has a $10,000 balance, that extra interest rate would only result in an extra $60 for the year.

Another question is if the higher rates will last. As we have seen over the years, few banks and credit unions have remained a rate leader for two or more years. Some recent examples include Alliant Credit Union and Incredible Bank. If your bank remains a rate leader for a year or more, you should consider yourself lucky.

When I asked a similar question in 2010, readers said they were putting more emphasis on non-rate features like customer service and ACH transfer capability. As we have learned, strong ACH transfer features are not common even at new internet banks.

Even though it may be hard to justify opening a new savings account for higher interest rates, there are benefits that are harder to quantify. The more of us who move our money to the banks offering the best rates, the more pressure banks will feel to keep rates competitive. Perhaps that why we have seen rate hikes this year at several internet banks. If too many of us decide it's not worth moving our money, banks will have less incentive to increase rates or at least to avoid rate cuts.


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Comments
15 Comments.
Comment #1 by Anonymous posted on
Anonymous
I agree!  We should squeeze them for higher interest rates any way we can, just as they stick it to us with bogus fees.

4
Comment #2 by Robert (anonymous) posted on
Robert
I voted no, with no with no plans.  To clarify: I haven't opened new accounts, but I did move a bunch of money from one already existing account to another already existing account when the 2nd account rate became higher.  I think that counts as "rate chasing"

 

5
Comment #3 by Geoff (anonymous) posted on
Geoff
I opened a TIAA account (with absolutely no problems) when they announced their 1.25% rate.

8
Comment #6 by Sandra posted on
Sandra
I moved some money out of savings accounts and into new CD's.

3
Comment #7 by Anonymous posted on
Anonymous
I don't feel confortable with internet banks.  I've read all the problems encountered by others.  I do on-line banking, but if there's a problem I always can drive to a branch to get it resolved.

4
Comment #8 by Anonymous posted on
Anonymous
I have not opened any new accounts this year.  In fact, I plan to consolidate and close a few of the accounts that have dropped to near 0%.  Most of the accounts to be closed will be moved over to existing accounts paying at or near 1%.  I might also consider taking some of that money and buy individual bonds.

1
Comment #9 by EnronLoveChunk posted on
EnronLoveChunk
I used to chase rates with saving and money market accounts but they kept changing so much I decided to open that premier notes with duke energy. I'm just hoping that the company doesn't fail. I'm getting happier to see rate hikes. If that keeps up I might go back to rate chasing. I use www.apydirect.com to compare my current rate with the new rate to see if it's worth the trouble.

2
Comment #10 by Mike B (anonymous) posted on
Mike B
Yes. This blog helps me find rates I would not have otherwise found myself.

 

4
Comment #11 by bbug (anonymous) posted on
bbug
I opened accounts with both TIAA and Amboy Direct, but with new money (insurance proceeds). Both pay 1.25%, with the latter guaranteed until the end of 2012. If one rate becomes better where a switch is worthwhile, I'll switch.

The TIAA account permits writing checks, but the Amboy does not. Amboy does provide the advantage of their headquarters being one mile from my house, and they accept transactions at the headquarters in addition to online.

5
Comment #12 by tightwad posted on
tightwad
Only one this year-- BankFirst Financial. What a huge PITA it has been. Over 2 weeks going through the process and I still do not have online access. All for 2%, that will probably drop by the time I get it opened. I would say steer clear unless you are close to a brick and mortar physical location.

1
Comment #13 by Anonymous posted on
Anonymous
bbug, I opened an Amboy 1.25% account too. I was told it's online ONLY. Is the HQ transaction availability a secret you came across by accident? Or do you have your account linked to another Amboy BRANCH checking where you can do tranfers ONLY and then wait the 2-3 day float period before you can actually get available funds.

I can't imagine you can make cash / check deposits and ESPECIALLY withdrawals directly from the online account INSTANTLY while at the HQ branch. But that would be nice to know even though I'm not as close to HQ as you but within driving distance.

Look forward to a reply.

1
Comment #14 by Patron posted on
Patron
I do not feel comfortable doing anything financial (other than researching) over internet.  If they make a mistake on a CD, I want to be with them to point it out and get it corrected asap. 

2
Comment #15 by Anonymous posted on
Anonymous
In response to #13.

They have a receptionist that has forms for completion. I deposited a check to fund the account.

As it turned out, that was premature because the account wasn't officially opened yet. They held the check until the linked account was confirmed and then made a transfer the same day.

I'm not sure what you can or can't do at the reception desk. For example, I don't think you could withdraw cash.

In case you don't know, their headquarters is at 3590 Route 9 South in Old Bridge, New Jersey.

2
Comment #16 by Anonymous posted on
Anonymous
Thx 4 the follow-up #15.

1
Comment #17 by ctgottapee posted on
ctgottapee
i always love how people don't trust a computer/online which has no capability of ill will, but will blindly trust a minimum wage bank teller with all of their information.

an in person visit just places a another person between you and the keyboard, and trades gas for a stamp

3