Chasing the Online Savings Rate

May 30, 2006

When does it make sense to chase that interest rate? Currently, I’m considering the following:

  • ING Direct: 4.15%
  • HSBC Direct: 4.65%
  • Emmigrant Direct: 4.65%

Currently, we are with ING but they’re just not keeping up with the other banks. When the fed increased the interest rate by say .25%, ING will only bump up by a fraction of that, essentially pocketing the difference and not sending that down to their clients. To me, this is getting to be unacceptable and I’ve stuck with ING b/c I believed they would make things right, but it’s not happening.

Currently, Citibank E-Savings product is offering 4.75% but you have to be banking with Citibank or have one of their checking accounts to qualify. This kind of removes them from the list b/c we already have another bank for our checking.

Based on this rate chaser calculator and using HSBC as an example, I woud lose roughly 2 days in lost interest, however it would only take about 17 days to break even and after that, it’s “money in the bank”. At this point, it really seems like a no-brainer and the only reasons for considering HSBC over Emmigrant is that I’ve heard of HSBC before.

[edit: The Citibank E-Savings/EZ Checking Account actually has three conditions in which to avoid the monthly charges:

  1. Direct Deposit Into the Checking
  2. Conduct 2 monthly bill pays
  3. A combined average balance of $1,500

Personally, option 3 is a winner for me. Since the main focus of the account is for savings, I feel it would be quite easy to keep a minimum of $1,500 in the account.

So, what will the difference in interest rate pay off?

With a balance of say $10,000, the yearly interest would be

  • 4.15% APY =  $415
  • 4.75% APY =  $475

Difference: $60

Not too shabby for letting the money sit. That’s roughly a month’s internet/tv bill for some! A good option for those wanting to keep a safety blanket of 6 months’s worth of expenses in a liquid account.


2 Responses to “Chasing the Online Savings Rate”

  1. lifegivingsword Says:

    ohhh my heeeead….

    finances make my head hurt instantly. itd be easier to recite acupoints from memory or the names of famous chinese masters than to figure out anything fiscally oriented.

  2. wujimon Says:

    haha.. I’m actually quite a bit fan of personal finance and such. Be warned, that more on this topic may be coming 🙂

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