With Rates Dropping, What Are We Doing With Our High-Yield Savings Accounts—E*TRADE, ING Direct, and One United?

As I mentioned in a previous post on high-yield savings accounts, we have online savings accounts at E*TRADE Bank, ING Direct, and OneUnited Bank (and were seeing certain advantages and disadvantages with each). In the one month since that post, the APY on all three accounts has been plummeting.

E*TRADE Bank has dropped from 4.10% APY to 3.01% APY; ING Direct has dropped from 3.40% APY to 3.00% APY; and OneUnited Bank has dropped from 4.60% APY to 4.00% APY. It’s so bad, by the way, that I started writing this post yesterday—and had to edit it this morning to account for E*TRADE dropping from 3.25% APY to 3.01% APY last night (at least as far as their website showed)! And it sounds fairly plausible that rates may go lower still. Check out this recent post at Bank Deals implying that they could fall again with the next Fed rate cut or this recent post at Wise Bread titled, “Savers suffering as rates fall—what to do.”

Both posts mention CDs, and the Wise Bread post also suggests shopping around (“There are banks paying more than ING Direct”) and considering savings bonds. Its explanation of I Bonds is quite helpful and worth your time if you are thinking about savings bonds at all.

We’re probably not changing anything though.

If you have a high-yield savings account and it’s one of your main saving and investing vehicles, it’s more important for you to chase the best yields. That’s a pretty conservative personal-finance strategy though. But you also might have money in a high-yield savings account that you want relatively liquid and safe, though you don’t need it that soon. Maybe you would have already had this money in a CD or savings bond if the yields on savings accounts hadn’t been so high. Until now. So it’s probably high time to look at moving that money to something with a better yield.

For us, our high-yield (or formerly high-yield) savings accounts are a specific and limited part of our personal-finance strategy. They’re for short-term cash (and maybe some medium-term cash, whatever the heck “medium-term” is…). Obviously, we want to earn as much yield as we can on that money—but we want it to be fully liquid and carry essentially no risk (aside from the effects of inflation). The vast bulk of the money in these accounts is money we are planning to spend relatively soon. That’s part related to construction and landscaping projects we have going on at our house; and that’s part for our coming tax bill. We do have another chunk that’s just a hedge—money we can access quickly if we have an unanticipated expense, for instance. We look at that portion of the savings accounts periodically and will move some into the stock market here and again.

We could do more shuffling between the three accounts—for instance, to try and get more money under the highest yield (currently, OneUnited). But E*TRADE’s speed in allowing us to get money out makes things a lot easier for our cash-flow management; and its ability to hold the account in our living trust is important for how we’ve set up our estate planning. We’re also relatively new to OneUnited—so I guess you could say the trust that we fool ourselves into believing is warranted after nothing more than the passage of time hasn’t quite kicked in yet.

What are other people doing, and what other ideas or tips do you have on this?

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