UFB Direct has launched a new money market account with a very competitive rate. Last summer Bank of Internet USA (now called BofI Federal Bank) started UFB Direct. The new money market account has a 1.15% APY (as of 5/30/2012) for balances of $5,000 to $250,000. The account pays no interest for balances under $5,000. There is a $10 monthly maintenance fee, but it can be avoided by maintaining an average daily balance of $5,000. The account details and the rates are listed in the money market section of UFB Direct.
Comparing the Money Market with the Savings Account
Many readers will probably remember UFB Direct and its Airline Rewards Savings Accounts. I first reported on this account last August when the savings account was paying a very competitive yield of 1.30%. This top rate held steady for about 6 months. The rate started to plummet in January. The yield is now 0.80% which puts it in the middle-of-the-pack as compared to other internet banks.
Based on the savings account history, it's likely this money market rate won't hold up over the long run. However, if it holds up for at least 6 months, that can still be a good deal. I was told that current UFB Direct savings account customers can open this money market account as long as they meet the minimum initial deposit requirement of $5,000.
One important downside of this money market account as compared with the savings account is it has a $5,000 minimum balance requirement to earn interest and to avoid a $10 monthly fee. The saving account has no minimum balance requirements or monthly fees. So when the savings account rate dropped, you could move your money without having to worry about fees. It will be more difficult to do the same with this money market account.
If the rate falls too low, you can always close the account. I don't see any closure fee in the disclosure. However, according to the money market savings account terms, "if you close your account before interest is credited, you will not receive the accrued interest to the date of withdrawal."
On the positive side, accounts with minimum balance requirements often have higher rates than those with no minimum balances. So the rate may remain a little more competitive than the savings account over the long run.
In addition to the higher rate, another reason that someone may want the money market account over the savings account is that it offers limited check writing and online bill pay. As required by regulation, withdrawals by check are limited to 6 per statement cycle.
UFB Direct's Online Banking Features
UFB Direct does offer some nice banking features such as online check deposits (called MyDeposit), mobile banking and free postage-paid envelopes. However, the bank-to-bank ACH transfer service has low limits. Please refer to my UFB Direct savings account review for more details. If you have seen any changes in their ACH transfer service, please leave a comment. You should be able to initiate transfers using another bank's ACH service.
UFB Direct & BofI Federal Bank Overview
BofI Federal Bank is putting a lot of resources into UFB Direct. It should be noted that the site's main focus is airline rewards which can be earned primarily with the checking account.
Deposit accounts held at UFB Direct are FDIC insured through BofI Federal Bank (formerly called Bank of Internet USA). BofI Federal is one of the oldest pure internet banks. Its financials have remained strong. Currently, it has an overall health score at DepositAccounts.com of 4 stars (out of 5) with a Texas Ratio of 9.52% (above average) based on March 2012 data. Please refer to our financial overview of BofI Federal Bank for more details. The bank has been a FDIC member since 2000 (FDIC Certificate # 35546).