Another Rate Cut at UFB Direct - Issues To Consider for Rate Chasers

Less than a month since the last rate cut, UFB Direct once again cut its money market rate. The yield fell from 1.05% to 0.95% on Monday. It was only 8 weeks ago when this money market account had its first rate cut since it was launched last May. When UFB Direct launched this money market account in May with a very competitive rate, I was worried that the rate wouldn't hold up over the long run. It actually fell faster than I had thought. When BofI Federal Bank first launched UFB Direct in August 2011, the savings account had a very competitive yield of 1.30%. That lasted almost 6 months before the first rate cut. The first rate cut for the money market account took only about 3 months. Below is the rate history for both the money market account and the savings account:

UFB Direct Money Market Rate History

• 05/30/12 - 1.15% APY (launch)
• 07/14/12 - 1.25% APY
• 08/06/12 - 1.30% APY
• 09/04/12 - 1.10% APY (~3 mo from launch)
• 10/10/12 - 1.05% APY
• 10/29/12 - 0.95% APY (~5 mo from launch)

UFB Direct Airline Rewards Savings Rate History

• 08/04/11 - 1.30% APY (launch)
• 01/18/12 - 1.10% APY (~6 mo from launch)
• 02/01/12 - 1.05% APY
• 02/07/12 - 0.95% APY
• 02/13/12 - 0.90% APY
• 02/22/12 - 0.85% APY
• 02/28/12 - 0.80% APY (~7 mo from launch)

Issues To Consider Before Moving Your Money or Closing the Account

When you're considering a new savings or money market account, one thing to consider is how easy it will be to move your money or close the account if the rate falls too low. Unfortunately, the UFB Direct money market account has some features that complicate an easy transfer or closure.

First, it's important to remember that the account has a monthly maintenance fee of $10 if the average daily balance falls below $5,000. If you decide to just move your money without closing the account, you be aware of this fee. This is one reason to choose a free account even if you can easily meet the minimum balance. A free account makes it easier to move your money.

Second, UFB Direct doesn't make it easy to transfer a large amount using its ACH bank-to-bank transfer service. Transfer limits are small. Here is what I was last told about ACH transfers initiated from within your UFB Direct account:

standard inbound and outbound limit is $2,000 daily and $5,000 monthly. Once you are with UFB Direct for 90 days and have used the standard inbound, had no NSF incidents and have maintained the account in good standing, you can fall in the standard high limit: $15,000 daily and $25,000 monthly.

There should be no dollar limits on UFB Direct's side when you initiate transfers from another bank. Also, the money market account has limited check writing, so you can always write a check to yourself without worrying about the ACH limits. These methods would be a better way to move a large amount of money.

If you want to close the money market account, you have to be careful when you do it. According to the money market account disclosure:

If you close your account before interest is credited, you will not receive the accrued interest to the date of withdrawal.

If you transfer out all of your money leaving a zero balance, UFB Direct will also close the account:

If you bring the account to a zero balance, leaving the account at a zero balance without notifying the Bank, the account will close and accrued interest will be forfeited.

This is common at most banks even when the bank claims to have no minimum balance requirements. You should never drop your balance to $0 unless you intend to close the account.

Other Savings & Money Market Account Options

If you did not open the TIAA Direct savings or money market account earlier this year, you may be on the lookout for another account. TIAA Direct is still paying 1.25% APY on its accounts, but it stopped accepting new customers in July.

Bank of Internet USA, another division of BofI Federal Bank, continues to offer 1.25% APY on its Rewards Checking account. This rate has held since July 2011. This rate is low compared to other reward checking accounts, but it applies to all balances (there's no balance cap). Now that the rate is higher than any non-promo savings account rate, this rewards checking account is looking more appealing. My last review of this account was on its one-year anniversary.

EverBank is still offering an intro rate of 1.25% for the first 6 months. This is only for new customers who open the checking and/or money market account. I last reviewed these accounts in June.

You can still get a non-promo yield of 1.05% from 5 other internet banks. I reviewed these in my last weekly summary. None of these 5 banks guarantee how long this rate will last. So be sure to consider the issues that I discussed above.

UFB Direct & BofI Federal Bank Overview

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 8.24% (above average) based on June 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).

Finding the Best Savings, Money Market & Checking Account Rates

You can use our rate tables to search for the best rates available nationwide and in your state:

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• money market account rate table
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• reward checking account rate table