Interest-ing

I don't know about you guys, but I've been watching the Fed raise short-term interest rates, and have been waiting for the interest rate paid by my bank to creep up. After all, it crept down every time the Fed dropped rates.

But nothing has changed. 0.5%. .5%? That means that due to inflation, the money in our savings account is worth less than it was a year ago. Granted, it's not a ton of money to begin with.

Back to the interest. In order to attract savings customers, some banks started offering "online" savings and money market accounts. ING, Vanguard, Emigrant, Citibank, and many others, to name a few. These accounts have been paying around 4.5% and above. The trick is that you don't get a statement in the mail, you can't talk to a teller, so you do everything online or by mail or ATM.

You can find a number of these banks over at BankRate.com, they list the interest rates and current "deals". Some of these banks will even give you referral fees if you refer a friend ($20/each). This guy has some more info on referrals.

Our bank happens to be located over 2,000 miles away to begin with, so I don't exactly talk to a teller on a regular basis. I was about to yank all [most] of our savings out of our current bank, and sock it into one of these online accounts. Then I stopped, and thought maybe.. just maybe.. our bank has jumped on the "online high-yield" bandwagon.

Whaddya know, they have. It's a fairly new offering, it wasn't even listed on all of their account comparison pages. So we just opened a new savings account, at the same bank, which earns 4.6%. They limit the withdrawals you can make to 3 per month--which is good, since it's a savings account. The nice thing is all of our accounts are at the same bank and linked together for easy transfers.

To illustrate, here is a comparison of the return on "one large" over the course of a year, compounded daily:

Anemic Savings^TM, 0.51% APY: $6.02

Internet Money Market, 4.71% APY: $48.22

Well worth the 15 minutes it took to complete the online application.