American Express Bank's Internet Savings Accounts and CDs - Updated Review

Update 11/24/2011: The High-Yield Savings Account rate has fallen to 0.90% APY.

It has been just over a year since American Express Bank launched its internet savings account and CDs. Since that time the rates have remained competitive. As of the morning of 7/14/2010, the savings account rate is 1.30% APY. The most competitive CD rate is 2.00% APY for the 2-year term. Also competitive are the 1-year CD (1.50% APY) and the 18-month CD (1.65% APY). Neither the savings account nor the CD has a minimum deposit requirement.

Savings Account Features

Readers have provided several favorable reports on the internet bank. Two features that have impressed readers are an easy account opening process and a fast ACH bank-to-bank transfer service. Here's an excerpt from a reader's review:

Easiest and fastest account opening I've ever experienced. The test deposits were in my linked account on August 20. After verification, my initial deposit was posted to the Amex account on August 21. Added two additional external accounts and those test deposits were posted the following day as well. Transfers are posted the next business day following the initial transfer request.

One reader reported that he initiated an ACH deposit on a Monday, and it was credited to his Amex account on that Monday and debited from his external account on Tuesday.

One minor downside to Amex external account verification is that they debit the two small test deposits. So if you're linking to a savings account, 2 out of your 6 allowed monthly withdrawals will be used.

The Amex savings account has several features that make for a good hub account including fast ACH transfers, easy linking process and a large maximum transfer allowance (up to $250K per day). However, it does have two downsides:

1) Links for ACH transfers are limited to 3. If you need to link to another bank, you would have to delete an existing link before you can add the new link.

2) Hold time is fairly long. According to the FAQ:

Funds from electronic deposits to your account that you have initiated through us will generally be available for withdrawal on the sixth business day after the deposit is initiated. Funds from electronic deposits to your account that you have initiated through a person other than us will generally be available for withdrawal on the day we receive the deposit.

Note, even though the funds may be on hold, interest is earned from the day they receive the deposit.

For more details about why a hub account is useful and the features that make for a good hub account, please refer to my post Best Internet Banks to Use as Your Hub Account.

Certificate of Deposit Features

Since my review from last year, the bank has added one nice feature that makes the CD opening less worrisome. The CD rate is now locked at the time you submit the online application. Here is what the FAQ states:

When a new CD application is submitted, the interest rate and Annual Percentage Yield (APY) that are provided to you when you submit your application are the rate and APY that you will receive, provided that: Your account is funded within 30 days after we approve your application.

One thing that has changed for the worst is the early withdrawal penalty. Last year I had reported that the penalties were just 3 months of interests for terms of 1-year and under, and 6 months of interest for terms of over 1-year. The latest disclosure now includes what it calls the Cost Recovery Value (CRV) which may increase the penalty to be more than just 3 or 6 months of interest.

For more details of the savings account and CDs, please refer to my June 2009 American Express Bank review.

American Express deposit accounts are FDIC insured under American Express Bank, FSB (FDIC Certificate # 35328). It's a sizable bank with $32.98 billion in assets and $13.6 billion in deposits.

The bank's ratings for safety and soundness are above average: 3½ stars (good) at BauerFinancial, 4 stars (sound) at Bankrate.com and an overall health score of 5 out of 5 at DepositAccounts.com (see our financial overview for American Express Bank). These ratings are based on 3/31/10 data except for Bankrate which is based on 12/31/09 data.