CD Deals Summary
Fed Holds Rates Steady For Second Straight Meeting - Strategies for Savers
New November Savings Bonds Rates - I Bond Fixed Rate Rises to 1.30%
Fed Meeting Preview and Deposit Rate Forecast - Oct 25, 2023
UFB Direct Cuts Top Savings Account Rate
UFB Direct lowered the rate of its savings account by 15 basis points to 1.10% APY. This applies to balances of at least $25,000. The rate remains at 0.20% for balances below $25,000.
The 1.10% APY is still very competitive, so customers may want to hold steady and hope UFB Direct won’t do any more cuts. If UFB Direct does cut the rate again, you can always move your money. The account has no minimum balance requirement and no monthly maintenance fee. However, UFB Direct doesn’t make it easy to move your money. There’s no online banking external funds transfer service. The easiest way to initiate a transfer is to pull the funds using another internet bank.
When UFB Direct raised its savings account rate to 1.25% last October, I was concerned that the rate wouldn’t last. Since the new UFB Direct was launched in August 2011, its savings and money market account rates have fluctuated from very competitive levels to very uncompetitive levels. Based on its history, I’m afraid there’s a good chance we’ll see further rate declines. Below is the rate history of UFB Direct’s savings and money market accounts.
UFB Direct 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)
- 04/23/13 - 0.20% APY (~21 mo from launch)
- 10/09/14 - 1.25% APY
- 03/02/15 - 1.10% APY
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)
- 11/19/12 - 0.80% APY (~6 mo from launch)
- 04/23/13 - 0.20% APY(~11 mo from launch)
As you can see above, UFB Direct typically keeps a top rate for three to six months. After the first rate cut, further smaller cuts are made within one to three months.
This is one downside to rate chasing. Banks often use the strategy of attracting customers with temporary promo rates. They hope that many customers won’t take the time to move their money when the rates drop.
For more information on UFB Direct’s savings account and online application, please refer to my October UFB Direct savings account review.
UFB Direct Overview
One thing that's important to note is that this new UFB Direct has no connection with the old UFB Direct. That old UFB Direct had its deposits held by Waterfield Bank which failed in March 2010. The old UFB Direct stopped operating when Waterfield was shut down.
This new UFB Direct is a division of BofI Federal Bank (formerly called Bank of Internet USA). Thus, deposits that you make to UFB Direct will be held by BofI Federal Bank. This is the oldest pure internet bank, and it has always been financially strong. It's also part of the public company, BofI Holding Inc.. BofI Federal Bank has an overall health grade at DepositAccounts.com of an "A" with a Texas Ratio of 7.50% (excellent) based on December 30, 2014 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).
https://www.depositaccounts.com/blog/2015/02/agfed-credit-unions-nopenalty-certificate-specials.html
This UFB rate cut highlights yet another advantage of the AgFed deal: While you can withdraw your AgFed funds at any time, AgFed CANNOT cut the rate of interest you are earning. This avoids these kinds of UFB games, where you do not know from one day to the next what interest rate your liquid funds will be earning.
Ken: Thank you!
As for UFB, I'm betting this is not the last of their rate cuts!!
However, let's "honor" the AgFed deal for what it is, rather than what it is not.
The AgFed deal only allows one to make a ONE-TIME penalty-free withdrawal from their CD. Any further withdrawals beyond that will be subject to the normal early-withdrawal penalty of 180 days of interest - in other words, like a normal CD.
Also, with the "AgFed deal" even if the first, penalty-free withdrawal is only a partial withdrawal (for example, let's say only 10% of the total cash deposited to the CD is withdrawn), that means that ANY subsequent withdrawals - no matter how much or how little - are subject to the entire, normal early-withdrawal penalty of 180 days of interest. In other words, like a normal CD.
These facts are included in the same link that is provided by the poster immediately above.
By now we all should all understand that the interest rate on a deposit account such as the UFB Direct savings account (which by law must characterize itself as a liquid account) is, well, liquid, therefore fungible.
A key to the AgFed deal was that AgFed does not limit the number of CDs a member is permitted to open. This fact effectively circumvents the problem with partial withdrawals. My own approach was to make effort to be reasonable with my granularity. But I did this voluntarily, not at the request of AgFed. I opened fewer than ten individual CDs, in different denominations, to cover myself should (in effect, partial) withdrawal ever be necessary. I could go into more detail, but I think most of Ken's readers already did this for themselves and do not need me to tell them what they already know, and what they view as obvious, self-evident, and frankly boring.
Bottom line, the AgFed deal was easily liquid enough for government work, with never a penalty to be paid, and with a guaranteed high interest rate to boot. ;-)
This surely knocks the tar out of anything at UFB, or anywhere else for that matter, where liquid funds are concerned.