What We Are Doing With High-Yield Savings Accounts—E*TRADE, ING Direct, and OneUnited

We might have too many bank accounts. Part of this is legacy. We had different banks before we got married—and after we got married, we just kept them both. So we have two “bricks and mortar” banks—banks that we can actually walk into and that have plenty of ATMs in the areas where we work and live.

Though we have accounts at both of those banks that are offered as their high-yield savings accounts, our primary strategy for parking short- and medium-term cash has been online savings accounts that generally offer higher yields. That started with our first ING Direct account; and that came with a $25 bonus for opening the account. Woo hoo!

We became more and more comfortable with the idea of an online bank, so we’ve branched out along the way. In addition to the ING Direct account, we also have accounts at E*TRADE Bank and OneUnited Bank. (I’m going to call E*TRADE an online bank because that’s how I think of it and use it, though it now has physical branches too.) In order of yields: OneUnited has its “Unity GOLD E-Savings” account currently at 4.60% APY; E-Trade has its “Complete Savings” account at 4.10% APY; and ING Direct has its “Orange Savings” account at 3.40% APY.

A great place to check out national and local yields on savings accounts (and rates in a lot other areas) is bankrate.com. The Get Rich Slowly blog also has a post on “Which Online High Yield Savings Account Is Best?”—which thoughtfully includes updates with more current rates. That post is really a great place to read a lot of specific feedback about specific banks—there were 567 comments on the post as of today!

Past ours, there are several other banks that seem to be popular in that commentary for high-yield savings accounts. From my quick scan, I particularly noticed a lot of mentions of HSBC Direct (3.55% APY as of today)—and quite a few mentions of FNBO Direct (3.85% APY), UFB Direct (4.00% APY), and Emigrant Direct (3.60% APY). I did not notice any mentions to one of our three mentioned banks—OneUnited—which has the highest current yield I’ve been able to find.

Here are a few thoughts, based on our experiences using the three online banks I mentioned:

• It’s not hard to get to your money. Our three online banks—and I believe most of these online banks—allow the ability to transfer between the online savings account and most any of your other banks. You may have to go through a few additional steps to get the accounts all connected though.
• It can be slow to get to your money. Our three online banks—and I believe most of these online banks—have some appreciable lag before your money posts to another account outside of those banks (such as your local bank). In our experience, E*TRADE is by far the fastest on this measure.
• Rates change. The bank that has the highest yield today may not tomorrow. I’ve already seen these kinds of fluctuations relative to our three online banks— including as compared to our two local banks. Many of these online banks have no or low minimum account balances. So having high-yield accounts at more than one bank may be a good idea.
• You could consider watching rates closely and shuffling your money around, but keep in mind that savings accounts are more restrictive than checking accounts. Most have limits on the number of withdrawals (or transfers out) you can make. From memory, the number in my head is three per month. That should be confirmed with your individual bank, of course.
• FDIC insurance has limits. Generally, I understand the limit to be $100,000. I think it is more than $100,000 for certain types of accounts. (I have not really tried to figure that out. Does anyone already know?) This could be another reason to have high-yield accounts at more than one bank.

One final note: of our three online banks, only E*TRADE allows you to own the account in the name of a living trust.

(Please see the comments for updates here and again on the interest rates being offered.)


April 5, 2008 Addendum

As you may know, rates have been changing quickly these days—and not for the better (at least from the savings-account perspective)! Providing updates on the yields through comments seemed sort of Stone Age... and I'm glad to report that it is. Fortunately, the great personal-finance blog Consumerism Commentary offers a better path. The spreadsheet below appears courtesy of and is updated courtesy of Consumerism Commentary (so make sure you are checking them out regularly, if you aren't already!). It's a little bit wide for our post set-up here, so use the scroll bar at the bottom to show the most recently posted rates).