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).