Sallie Mae Bank just increased the rate of its money market account from 0.90% to 1.00% APY. This applies to all balances. There was no change to the savings account yield which remains 0.80%. In July, Sallie Mae Bank had increased the money market yield from 0.85% to 0.90%.
It's nice to see a rate increase in today's awful interest rate environment, and it's nice to see another money market yield that is at least 1.00%. Another thing to note is that unlike some internet banks, this rate increase applies to all customers, not just new customers. Thanks to the readers who emailed me news of this and posted on it in the discussion forum.
Sallie Mae Bank isn't alone in hiking rates. We have seen several internet banks increase their savings and money market rates over the last few months. Last week it was American Express Bank which increased its savings account yield from 0.85% to 0.90%. Before that we have seen rate increases at Ally Bank, UFB Direct, Incredible Bank and Union Federal Savings Bank. Competition must be the primary reason we're seeing these rate hikes. Hopefully, this will continue to put pressure on the internet banks to keep their rates competitive.
Money Market vs. Savings Account
It should be noted that Sallie Mae Bank did not increase its savings account rate. That remains 0.80%. This savings account has been around since Sallie Mae first launched its internet bank in March 2010. In 2011 Sallie Mae added this money market account, and the rate was the same as the savings account rate. That changed early in 2012 as the savings account rate fell more than the money market rate.
Like the savings account, the money market account has no minimum balance and no monthly fees. Also, it has no tiers. The one rate applies to all balances.
One advantage with the money market account is that you can write up to 6 checks per month. The savings account doesn't offer check writing.
The only advantage I see with the savings account is its link with the Upromise Rewards program. I described this benefit in my Sallie Mae Bank savings account review.
Sallie Mae Bank's ACH Transfer Service
One nice thing about Sallie Mae Bank is a decent ACH bank-to-bank transfer service. Unlike some internet banks, Sallie Mae doesn't limit the dollar amount of the transfers. The transfer service isn't perfect, however. I was told today that there's a limit of 3 linked accounts. This means you can link up to 3 different accounts at other banks to your Sallie Mae savings or money market account. Two years ago I was told that the limit was 6.
Another downside is a long hold period for deposits. According to the FAQ, the hold on deposits after the initial deposit is 5 business days for $5K and under and 10 business days for over $5K. Note, you will still be earning interest during this time, but you just won't be able to withdraw it. I was told by the CSR that if the transfer is initiated from another bank, there will be no hold.
Sallie Mae Bank has an overall health score at DepositAccounts.com of 5 stars (out of 5) based on June 2012 data. Please refer to our financial overview of Sallie Mae Bank for more details. The bank has been a FDIC member since 2005 (FDIC Certificate # 58177).