Where to Get High Yield Savings – Online Banks and US Treasuries

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This article topic was suggested by reader/commenter Gary Haas, and it?s a timely one. Barely two years ago, you?d have been lucky to get 1% on savings accounts or certificates of deposit (CDs). But rate increases in the past couple of years have changed that situation somewhat, and it?s now become a matter of where to get high yield savings.

You would think that wouldn?t be much of an issue. Logic dictates that all, or at least most, financial institutions would increase their rates in unison. But that’s not the way it’s working.

Where to Get High Yield Savings
Where to Get High Yield Savings

The Still Dismal State of Interest Rates at Your Friendly Neighborhood Bank

One of the complications is that higher rates generally aren?t available at local banks. They continue to pay some small fraction of 1%. But those continue to be the institutions where most people are holding most of their savings. In plain English, you’re getting screwed if that’s what you’re doing.

According to the Weekly National Rates and Rate Caps report issued each week by the FDIC, the interest rate picture at local banks looks like this:

According to my research, most local banks are paying rates consistent with those in the center column.

We should suspect there are two reasons for this lack of higher rates:

  1. Low rates on savings are profitable. The same institution that may charge you 6% on an auto loan, or 19.99% on a credit card, is making a fortune if they’re only paying you 0.09% on your savings account.
  2. Local banks are taking advantage of the brick-and-mortar factor. They know that, as a matter of convenience, most people will leave their money in low interest-bearing accounts for the benefit of local access.

From a depositor standpoint, you shouldn’t stand for this unbalanced arrangement. There are higher-paying options available.

High Yield Online Savings Banks

These banks have been coming up quickly in recent years. The major disadvantage is that they typically lack local branches. But it’s precisely because of that lack of brick-and-mortar branches, as well as the staff needed to run them, that they’re able to pay much higher interest rates than local banks.

You’ll find online banks paying 10, 20 and even 30 times the interest rates you’ll earn at your local bank, though checking accounts typically do pay very low rates.

Interest rates being paid on checking, savings, and money market accounts are variable rates. They’ll adjust with changes in prevailing interest rates. Some online banks may offer a minimum rate level, perhaps as long as one year. Even still, the absence of high operating expenses enjoyed by online banks practically guarantees you’ll get higher rates than you will at your local bank.

In the case of CDs, rates are naturally guaranteed for the term of the certificate.

Just like local banks, funds held in online banks are FDIC insured for up to $250,000 per depositor, per bank.

There are now dozens of high yield online savings banks available. Three examples of high yield online banks include (all rates as of January 28, 2019):

Ally Bank

Ally Bank. They?re currently paying the following rates:

  • Checking – 0.10% APY on balances under $15,000; 0.60% APR on higher balances; no monthly fees and no minimum balance requirement.
  • Savings – 2.20% APY on all balances, with no monthly fees and minimum balance requirement.
  • Money market – 0.90% APY on balances below $25,000, 1.00% APY on higher balances; no monthly fees and no minimum balance requirement.

Certificates of deposit. No minimum balance is required to open these Ally Bank CDs:

  • 3 month: 0.75% APY
  • 6 month; 1.00% APY
  • 9 month: 1.25% APY
  • 12 month: 2.75% APY (Now we?re talking!)
  • 18 month: 2.50% APY to 2.70% APR
  • Three year: 2.60% APY to 2.75% APY
  • Five year: 3.10% APY

The sweet spot on these CDs is the 12 month. It pays as much or more as the 18 month and three year CDs. And the slightly higher rate for the five year doesn’t justify tying up your money for such a small rate advantage.

You can access your money for free at one of 43,000 Allpoint ATMs.

CIT Bank

CIT Bank. They?re currently paying the following rates:

  • Savings Builder – 2.45% APY on a minimum balance of $25,000 OR a $100 minimum opening deposit, plus $100 monthly deposits; there are no monthly fees.
  • Premier High Yield Savings – 1.55%% APY on all balances, with no monthly fees and a minimum balance requirement of just $100
  • Money market – 1.85% APY on all balances, with no monthly fees and a minimum balance requirement of just $100.

Certificates of deposit. A $1,000 minimum balance is required to open these CIT Bank CDs:

  • 6 month: 0.72% APY
  • 12 month: 2.20% APY
  • 13 month: 2.25% APY
  • 18 month: 2.50% APY
  • Two year: 1.40% APY
  • Three year: 1.30% APY
  • Four year: 1.50% APY
  • Five year: 1.70% APY

The sweet spot on these CDs are th 12-, 13-, and 18-month terms. Ironically, rates drop on longer terms.

But you may also be interested in their No-Penalty 11-month CD. It’s currently paying 2.05% APY, with a minimum deposit of $1,000. The obvious advantage is that you can access your money before the certificate matures, and with no penalty. That may be worth giving up some interest for.

The disadvantage of CIT Bank accounts is that they do not come with debit cards (meaning no ATM access either). Funds can only be accessed by either electronic funds transfer, requests by mail, or using People Pay, which is a person-to-person payment method.

Capital One 360

Capital One 360. They?re currently paying the following rates:

  • 360 Checking – 0.20% APY on balances below $50,00, 0.75% APY on balances from $50,000 to under $100,000, and 1.00% APY on balances of $100,000 or more; no monthly fees and no minimum balance requirement.
  • 360 Savings – 1.00% APY on all balances; no monthly fees and no minimum balance requirement.
  • 360 Money Market -0.85% APY on balances under $10,000, and 2.00% APY on higher balances; no monthly fees and no minimum balance requirement.
  • Kids Savings – 1.00% APY on all balances; no monthly fees and no minimum balance requirement.

Certificates of deposit. No minimum balance is required to open these Capital One CDs:

  • 6 month; 0.60% APY
  • 9 month:0.75% APY
  • 12 month: 2.70% APY
  • 18 month: 2.70% APR
  • 24 month: 2.80% APR
  • 30 month: 2.80% APY
  • 36 month: 2.85% APY
  • 48 month: 2.90% APY
  • 60 month: 3.10% APY

The better rate opportunities begin with 12 month CDs. But one thing you have to like about Capital One 360 is that their CD rates increase at least slightly with longer terms. As you can see, with CIT and Ally that’s not always the case.

Still, in the current rising rate environment we’re in, you probably don’t want to tie up your money for any longer than 12 or 18 months. The higher interest rates paid simply don’t justify the longer-term investment.

You can access your money for free at one of 39,000 Capital One and Allpoint ATMs.

Some Factors to be Aware of with Online Banks

We’ve already discussed that online banks typically have no local branches. But there are also some other limiting factors.

One of the most prominent is that online bank checking accounts often don’t provide paper checks. That is of course an oxymoron when they?re called specifically ?checking accounts?. But at the same time, it has to be acknowledged that paper checks are disappearing from the scene quickly.

They?ve largely been replaced by electronic payments, which you can make by accessing your account either online or on your mobile device. They?re quick and easy, and most merchants and service providers prefer them over paper checks.

The other common access method is ATM cards. Even though many online banks don’t have their own proprietary ATM networks, they typically participate with national ATM networks. Those networks are usually several times larger than the biggest ATM networks of brick-and-mortar banks. You can use in-network ATMs for free, and some online banks also reimburse you for a limited number of out-of-network ATM transactions each month.

You can also link your local bank to your online bank account. That will enable you to transfer money in and out of each account effortlessly. For example, if you have a traditional checking account, with paper checks at a local bank, you can periodically move money into that account from your online bank.

Online banks should be seen primarily as places to park your money and earn much higher interest than you can at your local bank.

US Treasury Securities

US Treasury securities are typically held by institutional investors, like banks and brokerage firms, as well as wealthy individuals. But what most Americans don’t realize is that virtually anyone can invest in them. You can easily do it through the US Treasury Department’s web portal, Treasury Direct.

US Treasuries come in several different flavors:

  • Treasury Bills. These are short-term securities, with maturities ranging from one month to one year. They can be purchased in minimum denominations of $100. They’re sold at a discount. For example, you’ll purchase a 52 week bill with a $100 face value at $97.50. On maturity, you’ll be paid the full $100. The difference will be your interest income.
  • Treasury Notes. These are medium-term securities, with maturities of two, three, five, seven, and 10 years. They?re also purchased in minimum denominations of $100, and pay interest every six months.
  • Treasury Bonds. These come with a single maturity of 30 years, and also in a minimum denomination of $100. Interest is paid every six months. However, these do come with a major risk. If you purchase one today at an interest rate of 3%, and two years from now the going rate is 4%, the bond will drop in market value. You’ll still be paid the full amount on maturity, but if you try to sell early, you’ll lose money on principal.

Current Yields on US Treasury Securities

The main advantage to investing in US Treasury securities is on those with maturities of less than one year. They’re generally higher than the rates being paid on shorter-term CDs, as well as savings accounts and money market funds from online banks.

You may even decide to hold short-term money in Treasuries, while holding funds of one year or more in online bank CDs.

Recent rates on US Treasury securities are provided by the Department?s Daily Treasury Yield Curve Rates, and are as follows for January 25, 2019:

Stop Settling for Microscopic Interest Rates from Local Banks

As you can see from both online banks and US Treasury securities, you do have viable alternatives to your local bank, which is probably paying some small sliver of 1% on your savings or CDs.

Now there’s no question, even with the higher rates offered by online banks and Treasuries, you still won’t be making a killing. But with interest rates between 2% and 3%, you’ll at least be keeping up with inflation. (Or at least with the published rate of inflation issue by the Bureau of Labor Statistics, about which I have serious doubts). But that’s still much better than earning 0.09% at your current bank.

If you’ve never held money with an online bank or the US Treasury, it may take some getting used to. There are no bank branches, and there are usually no paper checks. But the world is changing rapidly, and everything is going online and electronic. Increasingly, bank branches and paper checks are relics from the last century.

If you’re not completely comfortable with moving all your money to an online bank or into Treasury securities, you can put the bulk of your savings into these vehicles. You can then maintain a checking account with your local bank, just for convenience and paper checks.

Have you considered moving your savings to an online bank or into US Treasuries, and what is your feeling about either?

( Photo by mikecohen1872 )

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58 Responses to Where to Get High Yield Savings – Online Banks and US Treasuries

  1. That’s pretty much what I do.
    Most of my savings in in Capital One 360 currently at 2% and I also got a $200 bonus when I first opened it a couple of years ago.
    I have an account with my local credit union for checking, but I was able to park my young girl’s money in a 19-month CD for 2.6% that I thought wasn’t too bad.
    Yeah, I know I should put it in some kind-of college saving vehicle, but I just don’t trust the market very much. I wonder if there is are 529 funds with treasuries like what you were talking about.

  2. Hi Kevin – I agree, the market is looking very unstable right now, and that’s why even though rates are still low by historic standards, it’s better to park a big chunk of your money in safe assets. A 20-30% decline in stocks will make a 2-3% safe return look pretty smart.

    I’m not aware of a 529 plan specifically for Treasuries.

  3. Had a large chunk parked with ALLY until one year ago. Then went to investment firm with stipulation of NO MANAGED ACCOUNT (do not try and beat the market) and 1% maximum buy-in fee. The most important directive was a TRUMP PROOF portfolio. 20 percent ended up in the market. 80 percent in 4% bonds and a few 5% 5year instruments. 40 to 50 percent would have been conventional portion allotted to the market with expectations of long term avg yield of 6% or so.

    Recently added another 50K in laddered short term CDs. 3 and 6 month. Those funds also went to the local firm since she could beat 2.05%, 13 month from a bank. These will bring 2.35 (and up)with no fee. Of course they are like a bank and take their cut from the rate, but I don’t have to juggle things every 90 or 180 days.

    The pundits concurred with my cursory research last year. The market was going to stall in 2019 – independent of any toxic Trump antics. Kinda curious how frugal savers had to pay for banking crisis 10 years ago and resulting ZERO interest rates that bolstered the stock market. However, picked up 50 shares of APPLE back then at $130. Never owned an Apple product and probably never will.

  4. Thanks for the great article as usual Kevin. I’ve been doing a bit of research on my own, since asking you to write this. Reviews of some of these bank’s customer service are all over the board. I often struggle to understand the terms and conditions, as they aren’t well published. If you can believe the online reviews, some online banks only guarantee the 2.40% rates they advertise as being only an “introductory rate”, not sure how long that is. For some it is only for 30 days, which leaves you in a quandary as what the rate will be after the introductory period. After calling some online banks with the higher 2.5% to 2.00% banks, even if you are able to reach someone, they are not someone I would want to deal with which leaves me to believe some of the rotten reviews they get. The most reliable that I have found are in the 1% down to 0.75% which is still way better than my local Credit Union of .01% on cash just sitting there doing nothing and earning nothing. Sweep cash in my TD Ameritrade is again less than .01%, but at least it is better than losing in a stock market which has become untrustworthy. I’ve invested in REITs, which pay anywhere from 4% upto 6%, but losing 12% to 20% of your invested principle, with a market drop, leaves a really bad taste.

    Thank you again for the fantastic article, and I hope many of your readers write in about their experiences with how they have dealt with this crazy cash money dilemma. I hope it is not costing me 2% just to have someone at my bank treat me nicely, but as you said a loan cost 12% to 14%, which used to be called usury when they pay only .01%.

  5. Hi Gary – With more financial services going online, customer service is a growing problem. The main point behind online is the elimination of staff. That leaves fewer people to answer the phones. I see this only getting worse. It’s being packaged and marketed as a streamline system for the benefit of the customer. But I dare to think something else less kosher is at play. This is also part of why we all seem to have less time. If you think about it, everything that goes fully online requires more do-it-yourself.

    This is the price we’re all paying for the “Walmart economy”. We want everything cheap, and we need cheap so we can survive in a world of limited income and rising prices. It makes me wonder if the day isn’t coming when people will begin withdrawing money from the system. It all relies on trust, and once that’s gone, it isn’t easily restored. Trust disappears when you you have a problem and you can’t get someone on the phone.

  6. Hi Kevin. I’m not investment savvy, so I keep money in a money market account at our local bank earning around 1.5%. It’s a low rate, but it’s safe. And it’s the kind of place “where everybody knows your name” so to speak. I can call my bank, ask for the person who handles our accounts, she knows me, I know her, and I like it that way. When I walk in to do my banking, the tellers greet me with “Hi Bev.” To me, that’s priceless. I guess that makes me old-fashioned, but I’m good with that label. I sleep well. I do have other retirement investments in the market, but I see them going nowhere but downhill lately. I cringe and wonder if this is the way it’s supposed to be and if anyone else feels like I do.

  7. Hi Bev – You’re not cringing alone. This whole retirement euphoria of recent years is built largely on a perpetually rising stock market. But every time it has a hick-up, everyone’s in a panic. That’s why it’s good to be talking about high interest savings.

    There’s much to be said for the banking arrangement you have. It may be worth giving up some yield for the relationship. We can never know what’s coming down the road.

  8. Did I miss the words CREDIT UNION? Credit Unions are a great place to park your money for a secure investment. My credit union, in WA state, Qualstar Credit Union, offers a high rate Money Market account at an APY of 1.75%. They also have the best member service out there. You can still get a great investment rate and great service (it that’s a thing for you.)

  9. Hi Michele – You didn’t miss it, I didn’t include it. Like banks, some credit unions pay high rates, but others don’t. For example, mine pays 5% on the first $1,000, then much lower on any excess. But they’re certainly worth checking out.

  10. My daughter uses an online bank for checking and savings. When she has a problem, its a major hassle getting it straightened out. My accounts are local so its easy to go a block and actually talk to a person face to face. The online sevices just arent worth it to me.

  11. Hi Rick – We seem to be developing a consensus here. Maybe it’s that these accounts work best for younger people who don’t remember the days when customer service mattered. Maybe that’s why so many online services are aimed squarely at Millennials.

  12. After reviewing some options, I thnk I?ll just keep my money in my checking account and call it a day. I?m at the point of wanting to just withdraw all of my investment money and keeping it under my mattress! Seriously, though, I have a bad feeling about where this country is heading and, being 56 years old with a 62 year old husband, I feel very uncomfortalbe having my money anywhere that will quickly reduce the interest rate on me or start charging fees that eat up the interest. I?m just tired of being taken and feel better just keeping my money with me or in a good old checking account. Call me crazy but after 2008 and this past December, I?m tired of seeing money disappear when we need it for retirement and putting it in money market accounts or savings accounts with strings attached and/or watching that interest rate decline once there, no thank you. Every time I thought a found a good deal I?d read reviews that said how horrible their customer service was or that they started charging fees for transfers or some other sad story. Great idea and great article, but after researching, I?m just not feeling it.

  13. Hi Linda – It’s interesting no one has anything positive to say about these banks. The web is treating them like the greatest innovation since the electric lightbulb. And I suppose they are if interest rate is all that matters. Maybe they’re also a generational thing, who knows?

  14. I am about 5 years away from retirement. Between deferred income, interest/dividend income, a small pension and social security (waiting on that until 70), I expect to have a very comfortable retirement. With that said, I have taken a portion of my portfolio and have built a 5 year ladder of CDs/treasury notes for my SWAN (sleep well at night) account. It is also part of following the advice of William Bernstein when he says ?If you have won the game, stop playing?. Each year I will roll over the maturing CD/Treasury note when I don?t need the funds. I will only access these funds when a) I need to money b) the market has dropped and I don?t want to liquidate some my holdings during the down period (offsetting the sequential risk). I have accounts at Fidelity, Schwab and Vanguard and I ompare the rates. Right now, I am looking at 3.3% on a 5 year CD.

  15. Hi Jim – I love that quote, “If you have won the game, stop playing”. A few aging athletes, business leaders and politicians could use to follow that advice. 3.3% is the best I’ve seen on a five year CD, do mind if I ask where you’re getting that?

  16. Schwab has it. It would be through Goldman or Citibank. The rates change almost daily with Schwab, Fildelity and Vanguard. Just a few months ago, I picked up $50k at 3.5% on a Barclays CD through Schwab. I also find that I have to split the business between the three investment firms because they each have a limited number of issues per bank and I need to keep under the 250k threshold.

  17. In checking other options, you would have to go with an AA or A-rated Corporate Bond to get something higher. As an example, There is A Geico bond paying 3.6 to maturity. If you are in a higher bracket, the 5 year treasury is at the same rate as the 3 year (resales) which is 2.57%.

  18. I’m not a fan of bonds, due to the interest rate risk factor (a bond broker told me maturities of greater than 15 years have about the same risk level as stocks, plus the possibility of default). What are the brokers charging for the purchase of those CDs?

  19. I haven?t had to pay a fee yet. Not sure if that is factored into the rate or if it is because of the size of my accounts.

  20. Could be either, but I do know on fixed income investments, the broker usually takes a small sliver of the price of the security (the spread). Not sure how that works with CDs, but willing to bet they’re not offering them for free. But still, those are outstanding rates even if the broker is taking a small piece.

  21. No such thing as an investment firm that doesn’t generate fees. Short term bonds are the only way to go. I never inquired about the brokers cut on the CD’s. She had access to best rates so if I’m getting 2.35 and they are paying 2.5 on 3 month that’s better than any local banks which ranged from 1 percent to 2 percent. Why do some banks need 1 percent more than next door bank. Does that significant range indicate most banks are too greedy. Most were were 1 percent. ALLY consistently has impressive customer service ratings and good rates. My experience with them was positive.

    Banks are like funeral homes. The on-line banks and funeral homes incur less expenses. Face to face cremation contract is 2K vs 1,200 for on-line arrangement.

    copy/paste
    In practice, government bonds are treated as risk-free bonds, as governments can raise taxes or print money to repay their domestic currency debt.

  22. Hi George – You’re the first one to say anything positive about an online bank. I like your analogy of local banks as funeral homes, it’s right on the money (ewe, really bad pun there!). They’re funeral homes for your money. While I think part of if is greed by the banks, they’re also taking advantage of the fact that most people will put their money there just because they’re local. I read once that the first qualification of any bank is proximity to the average depositor.

    On government bonds, the shorter term ones are generally risk free for all the reasons you’ve given. But longer term notes and bonds do have interest rate risk if you want to sell out early. Also, inflation can hurt them as well. If you lock into a 10 year note at 3%, and inflation ratchets up to 7% a year later, you’ll be losing 4% every year you hold the note.

    But then I’m pretty sure no investment is ever completely risk free. Not CDs or bank deposits, government securities, precious metals, stocks, real estate, cryptocurrencies, or cash under the mattress. That’s why they invented portfolios. The whole concept of risk-free investments is largely a fantasy.

  23. CORRECT KEVIN !! The abysmal choices seemed to be; local bank security and paltry returns, on-line with better-than-nothing or take the leap and try to score 4 percent or so avg return with mixed bag portfolio with minimal stock content. At my age (66) wasn’t inclined to put too much faith in the market and stay put for 20 years with fingers crossed. Next decision will be stashing the cash when this property is sold. Then it’s cross country in DIY conversion RV. The last great adventure with spiffy battery assist mountain bike.
    Inspiration abounds……….
    ?Twenty years from now you will be more disappointed by the things you didn?t do than by the ones you did do. So throw off the bowlines, sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover.? —author unknown—

    Recap 1: Eat living, wild foods. 2: Drink unprocessed spring water. 3: Breathe air from nature. 4: Expose yourself to sunlight. 5. Go outside.
    —Dave Asprey, Biohacking guru——–

  24. Long ago I realized the biggest regrets are what we don’t do, and I’ve made it a practice to do any reasonable thing I think I should or feel led to do. It’s been working, and I have few regrets in life. It’s one of the major reasons this blog exists.

    I also think you’ve got it right George with having some money in stocks even in retirement. But I really like the emphasis on “some”. Everyone needs to invest for growth, including retirees, if only to keep up with inflation. But with this market being so high and looking so shaky, it’s best not to over-commit.

    So for those who wanted me to write a post on investing, George just summarized my thoughts/strategy in one comment. If two of us are thinking in that direction, there must be merit to it.

    BTW, I think that’s also good advice for younger investors. Even if I was in my 20s or 30s I wouldn’t have 80-90% of my money in stocks right now (though I would after a crash, when the high risk has been flushed out). A 50% fall could more than wipe out five years of 10% gains. This is a good time for caution. Not fully abandoning stocks, but recognizing the reality that stock markets go in both directions, and after a massive run up like we’ve had, a reversal is more likely.

    As a professor I had in college was fond of quoting, “Little pigs become fat pigs, and fat pigs get slaughtered.” Brutal wording, but it makes the point nicely.

  25. Hi , I just remembered that Kevin had referred me to this article he wrote about savings accounts and interest levels while I was reading an article from Skimm. Yeah I know that blog/newsletter is primarily geared to a younger crowd of women, but it helps to see the similarities across the board in all women. Back to this article, my main problem in any facts discussed is the assumption that one has that $25,000 readily available to move around freely. For some of us that amount is 75% of our yearly income pre-tax dollars. I would hope that some of the commentators here would have directions for how to save effectively starting with smaller amounts with the goal to achieve a nice amount. I am going to comment on a few of the suggested items. Treasury bonds?these are usually brought at a reduced price of the full value?$59 for a $100 bonds. Prior 2000 you would have been able to get full value plus interest after 10 years, and they gained interest for 30 years after that nothing. But now they gain ?interest ? and value based on that initial costs and maybe you might get the full value after 30 years. So if you are the type of person who squirrels away small amount of money this is safer than just hiding it under your bed. I know that there?s a big trending to do everything online including banking accounts which is great for bill paying and any electronic activity. But if you are making a large monthly payment (like a rent check), you want a better verification of that payment process other than what your bank online statement shows because those transactions are posted on banking/business hours (9-3 regular business days Monday-Friday). You have nothing showing (not even processing) on non-business banking hours. The same thing occurs with how ?interests? is actually applied to money in the accounts. One of the comments described some of problems associated with having online only accounts, which again Kevin mentions, that you are not dealing with humans but a computer AI system which doesn?t deal effectively with non-normal account activities. Again I am going to make my point based on my access needs because I don?t have large amounts of ?spare? money to just put away and leave in place.
    Interest rates for savings, have fallen to barely making any difference even for the large money accounts, but do effectively make impressions on credit card debts. That ?small ? increase given last year has just made getting rid of debt harder, since that interest is compounded daily on entire amount of the debt.
    This was an interesting article about the options available for large sums of money to get better interest rates but you also give up access to that money for a designated time period to achieve that. I have a small, compared to the others here, 401K account which I have barely 2 and1/2 years before I have to make those RMD deductions, whether I want to or not because of that requirement. I would have preferred to get information on the best way to not have to pay tax on that small amount and where to put that money to best use. Everything in this article only addresses large amounts that not used by individuals but always left in investment income, which is great but any losses are minimal for those accounts. I would like to know what someone who working with smaller amounts can do to increase their money without losing.

  26. Actually MariaRose, some of the accounts listed here require only $100 or less, so it’s not just those with $25,000 and up. And by depositing funds in savings accounts and money market accounts, you can have immediate access.

    The RMD situation is restrictive, and there are no options I’m aware of to eliminate that tax liability. RMDs were built into retirement plans to force the money into taxability. So for decades the IRS allows you to defer income on the accounts, but at 70.5, the law requires distributions, which are then taxable. It’s kind of the “contract” on these accounts.

  27. The most attractive vehicle I found at local bank was 2.05 percent CD for 13 months. Don’t believe it had a minimum. I learned it does not always require large amounts to achieve same return. This was confirmed when I met with financial advisor who created a long term portfolio before I wanted a few CDs.

    I’m with Stiefel. They were referred by local business owner. Chances are you can arrange no obligation sit down with a counselor, even if it only involves less than 5,000 to place in short term CD. They make their $$ on the spread by finding a CD for 2.5 and giving the client 2.35. I was going to go with the 2 percent CD from local bank for 13 months but advisor found better return on 3 and 6 month CD. Better rate and shorter time period. 40K in a couple CDs is bringing in (drum roll) about $80 per month !!

    I would really like to find a time machine on Amazon or eBay.
    10,000 CD in 1982 was fetching 14 percent.

  28. WHEN IN DOUBT ASK QUESTIONS when meeting with a banker or broker, particularly involving fees !!

    Banks do not charge a fee for their CD and you don’t even need an account I was told, but they were creating revenue by giving customers 1 percent on a CD with a greater return.

    Two GOOGLE search topics in my files

    Bank certificates of deposit vs. brokered CDs

    Certificate of Deposit Calculator

    Understanding compounding methods and interest rates on different CDs can be confusing. Use this CD calculator to compare different CD products and understand them better. The annualized percentage yield (APY) takes both into consideration and makes comparison much easier. Determining the interest earnings from a particular CD is helpful in evaluating potential investments

  29. OOPS !! $60/month is more accurate total from 2 CDs. Not $80. 20K in 3 month CD. 20K for 6 month. The broker will set aside $60 per month until the total reaches 1,000. $1,000 is minimum CD purchase I believe.

  30. What’s really sad George is that $60 is dinner for two at a moderately priced restaurant, and that’s all a $20k investment buys – at the high end. It’s not really income, especially at today’s price levels. It makes you appreciate that some people lose interest in investing, and put all the money into a safe deposit box or under the mattress. I don’t see that as a viable strategy on a number of fronts, but it’s the kind of thing that happens when people feel they’re being taken advantage of and choose to take their marbles home.

    Back when I was doing accounting, I’d see retirees withdrawing principal because they couldn’t live on the interest. And that was on six figure accounts! And it’s weird, you mentioned 1982, when you could get 14% on CDs. The economy seemed a lot more stable back then. I’m not saying 14% is better for the economy, but maybe 6% to 8% would create a better balance. But then I confess I no longer understand the economy. In this day in time, the Federal Reserve and financial manipulation seem more important to the “economy” than real business activity. I’ve been watching the financial world uncoupling from the real economy for the past two decades with a combination of fear and bewilderment. These still ridiculously low interest rates are part of that conglomeration.

  31. I just received a letter from American Express “Personal Savings”. They are advertising 2.1% no fees, no minimum balances, 24/7 account access on the phone and web. Several online customer reviews give both Personal Savings and Ally bank money market 5 star reviews. Even though the Personal Savings is not part of the Amex Credit card, they must be reliable in to use the American Express name. I personally just opened the Ally account which advertises pretty much the same rate since George stated his satisfaction with Ally. So to MariaRose, this would be a good fit for the lower balance accounts. I plan on only starting with $4k on this account to see how well their customer service before jumping in full blast.

  32. That’s probably a good strategy Gary. From what I’m seeing, customer service is in decline all over. You either have to go online or navigate the phone maze to get any help, and there’s not always a human being just a few minutes away. In the faceless, increasingly online world, maybe we just need to get used to this.

    In other articles and threads we discuss the decline in job opportunities. But this is related. The whole online/phone maze arrangement is set up to allow companies to operate with fewer people. It doesn’t benefit the customer at all. So the lack of customer service is the same reason a person can’t get a job. Talk about a vicious cycle.

    I know that sounds like a depressing assessment, but when you connect the dots you begin to see why things are playing out the way they are, and why we increasingly don’t always have a choice.

    It’s either that or I’m in desperate need of therapy 😉

  33. I’ve been using Synchrony for several years now. Currently it’s at 2.2% and tracking rate changes very quickly. I recommend them as an alternative vendor. Comparing last year’s interest statements on similar balances between my local bank and Synchrony account, it’s been VERY worth transferring money online. It’s all automated monthly for me so it’s not a lot of maintenance or anything. I’ve also been able to immediately get account balance statements to help me with real estate purchases (I try to buy one investment property per year).

    I think my biggest complaint is the time requirement for transfers. My ACH transfers take 3 days, which is just goofy. But the key is this – keep enough local and liquid for urgent issues, and put everything else online to take advantage of 22x the interest rate of the local brick and mortar. It’s absolutely been worth it, to the tune of >$1K difference last year alone!

  34. Hi Joel – I think your strategy (keep enough local and use online banks for the rest) is solid. As to the three day transfer situation, I’ve experienced the same thing. Since I earn my living online, much of my income is received through PayPal. While my credit union accepts transfers from PayPal the next business day, my brick-and-mortar bank was waiting at least three days to complete the transfer. The money would leave PayPal immediately, then sit somewhere in cyberspace before my bank would complete the transfer. They’ve recently reduced it to the next business day. But each bank has their own policy on that. There are federal rules on transfer times, and some banks wait on the maximum. Others are more customer focused and do it in less time.

    In a fully electronic world, transfers should be instantaneously, and not even take one business day. PayPal’s like that, but then they aren’t a bank. But realistically, any money in an online account should be money you won’t needed immediately.

  35. It’s been interesting reading the comments.
    I was taught a whole different way of investing and saving. It’s amazing what we consider good anymore. I know personally, I couldn’t sleep at night dealing with these financial instruments that are talked about on here. That’s me though.
    I don’t want to give out advice. ( Nobody listens anyway) I will say in the case of Maria. If your somebody with maybe 5,000 or 10,000 in savings and that is what you have, there is not really anyplace you can earn on it that would be worth it. I would also venture to guess if you had an emergency that is what you would turn to. I wouldn’t tie it up at all for any length of time. I don’t trust any bank so online for me is out. I just keep enough in there to pay any monthly bills I have anyway. If it closed tomorrow I could care less.
    Not much else to offer here.

  36. I have to agree Tim. If you have a few thousand dollars, it’s best to keep it close to home, easily accessible, and not subject to bureaucratic whim. These accounts are really for those with more than a few thousand dollars. Though George’s example of earning $60 a month on a $20,000 CD did cause me to question even that assumption. But we do need to do something to maximize earnings on savings. Otherwise we’re losing to inflation.

    I don’t think there’s a right or wrong strategy here, only personal comfort levels. That’s pretty much how I view all investing. The predominant investment methodology today is to focus on the numbers. But if you don’t feel comfortable with where they want you to invest, you don’t need to be there. Money is as much an emotional issue as it is a financial one.

  37. It sure is. I’m kinda of a monetary history buff. I have read countless hours of the 2008 recession. The depression. The fiscal policies of the last twenty presidents.
    The destruction of the dollar. Inflation. LOL, you name it.

    History repeats over and over. It’s only a matter of time before the fiscal debt destroys the currency of the U.S.
    There’s no way out now. We will see QE4 and 5. interest rates cannot be allowed to rise. They tried already and have already backed down on it.
    I don’t believe we can ever keep up with inflation. It’s much higher than the official number.
    The recent shutdown was an eye opener for me. It showed me how desperate and broke people really are. 30 days and your in a food line?

    Your right when you say, The numbers have completely detached from reality.

    I have no comfort level when it comes to banks, government or any instrument. Only hard assets. Land, precious metals and investing in my business.

  38. You’re preaching to the choir with me Tim. We’ll tool along in relative normalcy for a time, but sooner or later the s&%$ will hit the fan. But we do have to manage between now and then, working with what we’ve got. You know from my previous posts and comments that I believe the country and the world are under enormous pressures that don’t get openly discussed, because no one knows what to do about them.

  39. I hear you. The signs are everywhere. Most countries are broke. Italy, Rio, Venezuela, Argentina.
    You have the mayhem at the boarders. Ever wonder why? Where are these people coming from or better yet what are they fleeing?
    The stories I have read from Venezuela about people selling their hair at the boarder so they can cross to wig makers. Eating zoo animals because they are starving. Mines caving in on people who are digging for gold illegally.
    That’s the face of hyper inflation and corrupt governments stealing or looting the people.

    The only thing that has saved us so far is we are still the world reserve currency. That’s going away slowly. Countries are already trading between them in there own currencies.
    You have the brexit fiasco, people protesting all over france.

    The signs are everywhere of a meltdown. It is only like you say a matter of time, here.

    You turn on CNN and what do you see? Not any of that. People screaming about a wall. Or some other nonsense that is a mass distraction so you will look the other way.

    I understand what your saying. Yes, in the meantime we have to do what we have too.
    I always hope people are reading the signs but I fear they are not. Especially here.
    I turn on the TV and what do I see? Celebrity big brother, endless superbowl talk yada yada

    You get a five minute story on some real issue and twenty minutes of Tom Brady.

    I’m rambling. Sorry what was the topic? LOL, kidding

  40. Incompetent government policy set the plate and greedy banks enjoyed a trillion buck feast. I recall in the early 90’s a home shopper was sweating finding a loan if their ONLY credit blemish was a $200 unpaid medical bill !! The lending process functioned as it should. In 1990 CDs were 8%.

    copy/paste……..

    >The 1992 ?GSE Act? mandated that a specified percentage of Fannie Mae and. Freddie Mac purchases come from under served populations.

    >The acronym NINJA stands for no income, no job, and no assets. Often, I hear this described as lenders willing to make mortgage loans to borrowers with no income, no jobs, or no assets. Technically, this is not correct. NINJA loans were mortgages where the borrower did not have to supply verification of income, job, and assets.

    > We first heard the term sub-prime mortgagee in 2007. But the fact is that since Carter the NINJAs basically had to be given a mortgage and if he didn?t get one he could get legal assistance from Obama, the solicitor, to get his right to a mortgage. The banks found a way of selling on sub-prime mortgages as securitized bonds (mortgages are securitized loans as the lender has his name on the title and can reposes the asset and sell it if the mortgagee fails to pay).

    >$1.4T of quanitative easing * saddled taxpayers with debt. Another $4.3T of toxic assets were eventually put on the FED books

    >Alan Greenspan, the former Federal Reserve chairman, said on Thursday the credit crisis had exceeded anything he had imagined and admitted he was wrong to think that banks would protect themselves from financial market chaos.

    *Quantitative easing is an unconventional monetary policy in which a central bank purchases government securities or other securities from the market in order to lower interest rates and increase the money supply.

  41. We can go on and on with this. I was in the mortgage business in 1993 when Henry Cisneros, then HUD secretary I believe, said “it’s the right of every American to own a home”. I knew that was the beginning of the end. That was the signal to open the floodgates to give anyone with a pulse a big mortgage and the keys to a house they really couldn’t afford. The real miracle is it took 15 years for the crisis to strike. But as long as you keep loans cheap and available, things do tend to work. That is why I think rates are still artificially low. If rates were to go to normal levels we’d have a massive financial collapse. So if anyone’s waiting for higher rates on savings, you can forget it. Right now might be as good as they get.

  42. That’s alot of the issue for me Kevin. You knew because you were in the business. I didn’t know this till many years after. Like I said in previous posts I sold five houses I owned in 2007 on gut instinct and one little comment I heard from Bush. I got lucky.

    All these bills and legislation are passed without any real knowledge or understanding by the very people it effects the most.
    Then 15 years later all these people are sitting here saying WTF happened?

    That’s why I keep my powder dry and do what I do. I have such little real knowledge of the comings and goings of all these policies and legislation. It’s all done without many people noticing. Like I said, most people are too caught up in the smoke and mirrors of metoo or gender bathrooms or some other non issue.

    How can you trust it when we have no real knowledge.

  43. Thanks, Kevin and Tim for your helpful comments for someone like me who works with a smaller amount to put into savings. It reminds me of the comparison, I used to have to endure as a manager of a department that had smaller sales growth to deal with which made every cost affect the bottom line and the same department in another location with high sales growth, same cost controls. The percentage with a lesser amount of sales has a higher effect. So low or minimum interest means a great deal more to a lower amount of money because the only reason you have the account is to eliminate bank fees. Thanks again.
    What is concerning me right now is rumors (I Hope) of bank seizing bank account funds to cover their over investments. (like what they did to cause the bank run in 1929). Hopefully, there’s legislation in place to prevent banks from denying people access. The only time, we had a problem here in my area had to do with the headquarters of the specific banks being damaged when the Towers of the World Trade Center came down. Like the conversation here, the only concern the banks have is themselves, so sometimes it pays to not give them all your money but keep some in reserve, like buying silver and gold coins.

  44. Hi MariaRose – What you’re describing may have to do with negative interest rates. That’s where you pay the bank to hold your money. It’s happened in a few countries, mainly in Europe. Also, Cypress limited the amount of their equivalent FDIC insurance, cutting it down so some people did lose part of their savings.

    I don’t THINK that will happen here (famous last words) because I don’t THINK (more famous last words) we’ll see negative interest rates. In the meantime I wouldn’t spend much time worrying about it, until you start seeing some clear smoke signals. And by then, some of the blogs (including this one) will be buzzing about it.

  45. Banks rely on covert/innovative scams to steal customer money, and when exposed they have little to fear from the “regulators”. Once associated with the 12 largest bank in the US after leaving the IRS. Within a few month uncovered mega-million dollar fraud.

    The bank conveniently forgot to document proof of insurance submitted by customers for vehicle loans. This “oversight” allowed them to apply overpriced coverage. The charges carried extreme interest rates. Usury. None of the many regulatory agencies alerted by this whistle-blower appeared anxious to confront the 800lb gorilla. The Fl Dept of Insurance representative contacted knew something was going on due to numerous complaints would later deny ever speaking to this bank employee!! Newspapers obviously did not want to conduct an investigation and alienate big advertising account. The Attorney General and Comptroller were equally impotent.

    Last resort involved contacting a few class action law firms. Several years after the state of FL should have halted the practice after receiving my inside information, the fraud was stopped by class action remedy. 300,000 victims. The 16,000,000 settlement was probably 1/3 of illicit profits realized by the bank. It was CYA time now and the paper tiger regs accepted bogus excuse by bank identifying the matter as SOFTWARE GLITCH! Even I was surprised when 5 other banks stepped forward and admitted to engaging in the same practice.

  46. George – After the TARP bailout in 2007-8, when the Fed bailed out the banks, who then continued to foreclose on homeowners, I’ll believe anything. One of the major corruptions in our country right now is this obsession by the government that that the banks are too important, too big to fail. But if a few of them would be allowed to fail, it’ll make them come face-to-face with the consequences of their own actions.

    If you think about it, while we may all be happy with FDIC insurance, it’s making us so comfortable we become complacent. We don’t worry what the banks are actually doing, content with the knowledge our money is safe.

    Otherwise everyone would have pulled their money out of Wells Fargo and closed their accounts after their fiasco, and millions would pull their money out of banks paying .09% interest. The perception of safety is causing the public to look the other way, and all the government/regulators care about is that the public perception is that all is well. And when you get people working for the banks ending up in regulator jobs, the rose colored glasses are everywhere.

    And one thing I think is pure evil is that if an employee gets caught with their hand in the cookie jar, they get hauled off in cuffs and sent to prison. But if a bank systematically engages in illegal behavior, the bank gets a fine that’s a small fraction of what they earned from the scam, and none of the officers who make the policy decisions faces any criminal prosecution. Higher ups are protected, but underlings are prosecuted to make an example out of them.

    It’s like we’ve reverted to the Roman Empire, where patricians were protected due to their status, while the plebes (everybody else) could be flogged, beheaded or fed to wild beasts. It’s amazing how despite our education, technology and history, we keep doing what people have been doing for thousands of years. It’s just one of the reasons I don’t believe in evolution.

  47. Can anyone explain to me the advantage of buying silver and gold coins? I picture myself wading through a financial collapse and the banks are keeping my money. What do I do with silver and gold coins? Will I be able to use that to buy food or pay bills? What will they be worth? That is one area I’m really confused about.

  48. Hi Linda – That’s a complicated question, and the answers are speculative. I do believe gold and silver will skyrocket during a major financial crisis as they have in the past. If there’s a currency collapse, they could well become common barter, which is a role they’ve filled for thousands of years.

    What I’m not sure of is how well it will work. So few people own them that it’s unlikely they’ll be common. You’d pretty much have to own them before things start falling apart. But in a world of electronic money and commerce I’m not sure how convenient they’d be. Unless things get REALLY bad, I don’t see them being used to buy food and gasoline.

    That said, the free market has a way of working out those pesky details. It may be that precious metals become backing for cryptocurrencies or local currencies (which is what gold and silver did for centuries). That would solve the convenience issue. But as complex as the economy and financial situations are right now, I personally don’t have a strategy on this. For example, there’s always the possibility that the government finally reaches a point where it can no longer borrow or print more money into existence. If it reaches that point, will it confiscate precious metals to build up the treasury, or even to keep it from competing with the dollar? We can’t know, but that’s exactly what they did in 1933.

    People often say such things are for the history books, but desperate governments can do all kinds of crazy, hostile things. Just look at what’s happening in Venezuela right now. But we’d have to have a crystal ball to know how everything’s going to play out.

    My own opinion is to hold some gold and silver if you believe you should, but I disagree with some of the hardcore doomsday crowd who hawk gold as insurance against a complete economic collapse. Gold and silver won’t protect you from everything that can go wrong. For example, finding a way to make a living will be even more important, since you can eventually spend out your metals on paying living expenses. And I have no idea what making a living will entail in such an environment.

    I’m not anti-gold and silver, and think they should be part of a balanced portfolio/personal financial makeup. But I don’t believe they’ll be a cure all. A help maybe, but not a cure all.

  49. I’m a huge gold person as you know Kevin. However, I can agree with you that making a living will be just as important.
    One of the biggest issues during the great depression was their was no where to work.
    I have been buying gold for 20 years. Like I have said many times, land, precious metals and investing in your own business are the only place I will invest.
    However, my business just like most is tied to the economy. So I fully expect it to fail if we got to that point.

    I have also invested in building a bigger and better garden.

    I don’t want to tell anybody what to do. I do what I feel comfortable with.
    I do not trust banks or any financial instrument that comes from a bank.

    I just encourage people to study paper money and realize what it is and why it always ends up failing in the long run.

  50. I agree Tim, if you have doubts about the future integrity of paper/digital money, gold and silver should be investigated. I’d also add cryptocurrencies, but the history on those isn’t deep. As far as paper/digital money, I think it will always be around. But the question is, what will it be worth? That’s a compelling reason to look at alternatives.

  51. Who knows what will happen. We are in uncharted territory with the levels of debt, not just here in the U.S. but all over the world.
    Never before has this much paper money been dumped into the system. There is no real growth behind it.

    I honestly don’t think the federal government cares at all anymore about the deficit. They put on a show for the public but they gave up a long time ago caring about paying any of it down anymore. They know it will never be paid down.
    It’s impossible now. So who knows how long this can or will last.

    I know one thing, the public gets hurt the most and will pay the most. We will be the ones starving, standing in bread lines, eating zoo animals for food and killing each other. The people in the castles won’t.

    I have always liked the commodities and things that I can touch and feel. I like knowing what I own. Not just numbers on a computer screen.

  52. Personally, I think government stopped worrying about deficits back in the 1980s when it became clear the Federal Reserve would prop up the economy by printing as much money as it takes. The Fed makes deficits and the national debt irrelevant. Until it can’t any more. That day will come, but I don’t know when or exactly how. But one thing I do know as a student of history is that while reality can be held at bay – often for longer than we think – eventually it always asserts itself. The real question is when it happens, will people know what the real cause of the crisis is, or will blame be assigned to some other force or factor? If no one sees or admits to the truth, the sins of the past will just be repeated. And a money printing agency is just too convenient.

    The existence of a government agency that can literally print money out of thin air makes government effectively omnipotent. That’s why so many people think the government can fix all our problems by spending more money. And it removes any incentive to do anything real, or to embrace fiscal discipline.

    Which brings us back to gold and silver… But again, my bigger question is, what will we all do for a living when the SHTF??? Most jobs and businesses are closely tied to the propped up, artificial economy. And for that matter, so are the pensions. That’s what really worries me.

  53. Yes, Mine is tied to it like everybody else.
    I can last a while probably more than the average guy but it will run out at some point. Plus by that point, you will have anarchy in the streets. Unless I’m heavily armed I won’t get out the front door with an ounce in my pocket.

    The other thing about Gold & Silver also is, let’s say we have hyper inflation. If gold shot up to 10,000 an ounce. I personally don’t ever think it will but there are people out there who say it will. What good is it if a loaf of bread is 2,000 dollars and it cost 3,000 a month to heat my home.
    The only thing it might get you are things on the black market.

    Realistically I don’t think it will matter by that point. Everybody will suffer.
    So it probably won’t matter one way or another. If you have CD’s or stocks or whatever you’re comfortable with.
    I’m just more comfortable with hard assets.

  54. Tim, I don’t know if you remember this, but in 2008 the price of both gold and silver fell in the middle of the financial meltdown. Charles Hugh Smith gave the most reasonable explanation, that gold was falling with every other asset class because people, mostly smaller investors, were liquidating their assets to pay their bills in the face of rising un/under-employment. That could happen again. Of course, we know it went on to record highs by 2011. But the question then becomes, what will last longer, you or your gold? This is why I say it isn’t possible to predict outcomes when things come unglued. While I think gold and silver may be important to have, it has to be part of a more comprehensive strategy.

  55. This is all so thought provoking and informative–thank you everyone for your thoughts! One more thought I had speaking to Tim and Kevin worrying about the deficit and our government making money and never actually worrying about the deficit: I think our final collapse may come if one of these yahoos get voted in who want free everything for everybody. That’s exactly why they are pushing for that. Millennials are so on board with that because they don’t understand the implications. That, I think, may be the final nail in the proverbial coffin. We could never sustain free healthcare and free college and jobs for all. Our taxes will skyrocket to the point of insanity. I don’t think gold and silver will help much at that point, but I am keeping some in my portfolio regardless…

  56. Hi Linda – I think holding some metals is good because we don’t know what’s going to happen, and those will protect you from certain problems. But I think your scenario is on point. The younger generation is so used to the “deficits don’t matter” narrative, and we’re now getting “let ’em eat cake” politicians, who are getting elected on candyland promises. That’s an unholy marriage. It’s even possible they won’t raise taxes much, relying instead on borrowing and printing, with the belief there’s no end to how far they can go with both.

    I’d actually like to see income taxes raised to the point where they cover the entire federal budget. It would take an increase of about 25% to make it happen. But if it did, people would finally see that all these goodies cost REAL money and not funny money. Then we might get intelligent debate over how to cut both taxes and spending.

    No way that happens when people think they can get something for nothing from the system.

  57. Treasuries are probably the safest asset. If we have a complete collapse, No assets, including precious metals will be worthless. The only things having value would be related to personal survival, including food.

    The greater threat to most people is inflation. Awell diversified portfolio is your best option as well as having funds that are accessable during down turns, so that you don?t have to withdraw money from investments when valuations are low. There are some good articles on bucket investing.

  58. That’s solid advice Jim. I don’t know if they still exist, but in the past there have been “governments and gold” mutual funds. They invest in the two asset classes likely to weather deflation (treasuries) and inflation (gold). I don’t know if they’re still around, but you can easily build your own portfolio. But you’re right, items related to personal survival will be most important. I don’t know if we’ll ever get to that point, but I wouldn’t bet against it either. There are too many tsunamis gathering at once, and it seems like it’s just going to take the wrong hole to burst open the dam.

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