Author Topic: How to choose a high interest savings account (or an alternative)?  (Read 2409 times)

EpicCrawfish

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My wife and I sold our house in April and have the proceeds sitting in a USAA savings account earning .3% APY. This feels very low. We'd invest the money, except that we will likely need it in 2 to 5 years for another house purchase. It seems like we could at least find a high-interest savings account and make more like 1.5-17.5% APY.

I'm skeptical of things that seem like free money, so my question: What should we be on the lookout for when choose a high-interest account / what criteria should we be considering?

Or, is there some other instrument we should be considering? We're well invested otherwise, so it feels okay to keep this money is something conservative considering that it's basically earmarked.

Thanks!

Orin!

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Re: How to choose a high interest savings account (or an alternative)?
« Reply #1 on: July 15, 2018, 07:57:50 PM »
Discover has a 1.75% interest savings account. They also have year a 5 year CD for 2.9%.

Those are no risk options.

Other savings accounts and CD rates with various banks are listed here:
https://www.doctorofcredit.com/high-interest-savings-to-get/

Radagast

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Re: How to choose a high interest savings account (or an alternative)?
« Reply #2 on: July 15, 2018, 08:24:02 PM »
Vanguard's money market account is at 1.84% right now, invests in short term US government bills which are actually safer than FDIC accounts, and is a handy platform for launching into more profitable long term investments.

In addition to many others depending on your tax rate, there are also:
Ultra-short term bond 2.43%
Limited term tax exempt 1.91%
Short term corporate bond 3.37% (this one looks pretty good now, as if I would know)
etc.

CrispKale

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Re: How to choose a high interest savings account (or an alternative)?
« Reply #3 on: July 16, 2018, 11:40:49 AM »
Another vote here for the Discover online savings account, I've had them for about 4 years and highly recommend them.

appleshampooid

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Re: How to choose a high interest savings account (or an alternative)?
« Reply #4 on: July 16, 2018, 01:30:48 PM »
I've had Discover bank, good as noted above. Lately I had been using Barclays US as they had similar rates to Discover (slightly higher when I switched, I think now they are almost always in lock step).

But I am moving away from the online savings accounts in favor of dumping that cash into my Vanguard account using a money market fund. The default settlement fund is currently at 1.84%. You can also buy in to the Prime money market fund (VMMXX) which is just over 2% right now.

These are not technically FDIC insured, but the risk of loss seems minimal. And as another poster noted above, easy to transfer into more aggressive long-term investments if the situation warrants it.

ginjaninja

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Re: How to choose a high interest savings account (or an alternative)?
« Reply #5 on: July 16, 2018, 03:41:20 PM »
I really have been happy with CapitalOne...Discover and CO seem to be competing for rates.  CapitalOne has a 1.75% money market for an account with a balance greater than $10,000.  They have given me a rate increase 4 or 5 times since the account has been open for less than a year.  I have a sneaky suspicion in has to do with the Fed interest rate.

If you have a credit card with discover or CapitalOne I would go with the bank that you have the card with!

Also if you decided to go CapitalOne I can give you a referral link that will get you $100 for opening an account.  #shamelessplug but actually I have been really happy with their service.

DreamFIRE

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Re: How to choose a high interest savings account (or an alternative)?
« Reply #6 on: July 16, 2018, 03:55:55 PM »
VG PR MM compounded YLD 2.07%
2 YR CD YLD 2.8%

daverobev

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Re: How to choose a high interest savings account (or an alternative)?
« Reply #7 on: July 16, 2018, 06:33:08 PM »
I like Alliant Credit Union. They seem to raise their rates in a timely manner.

I think they are giving 1.7% now.

But still, if you have a particular timeframe, get the highest rate you can for that length of time. I believe there are periodic sign up bonuses for Discover.

In fact, you may find you do better going for sign up bonuses even if the rate is lower. Lock up a few k for a few months and get $300 or whatever.

DavidAnnArbor

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Re: How to choose a high interest savings account (or an alternative)?
« Reply #8 on: July 16, 2018, 08:46:09 PM »
ICSH ETF (2.44%) if you get free trades somewhere.

MrUpwardlyMobile

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Re: How to choose a high interest savings account (or an alternative)?
« Reply #9 on: July 16, 2018, 08:59:36 PM »
Marcus by Goldman Sachs is a 1.80% APY FDIC insured savings account. I think CIT Bank is offering 1.85%

tralfamadorian

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Re: How to choose a high interest savings account (or an alternative)?
« Reply #10 on: July 17, 2018, 11:27:40 AM »
ICSH ETF (2.44%) if you get free trades somewhere.

Thank you for posting this. ICSH is a new one to me and would be perfect for parking some funds for the short-medium term.

DavidAnnArbor

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Re: How to choose a high interest savings account (or an alternative)?
« Reply #11 on: July 17, 2018, 11:35:50 AM »
I too was thinking of parking some funds there for the short term in my Fidelity brokerage account.

RWD

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Re: How to choose a high interest savings account (or an alternative)?
« Reply #12 on: July 17, 2018, 12:49:55 PM »
Lot's of good options. We use Ally's savings account which is currently at 1.75% with no minimums.

EpicCrawfish

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Re: How to choose a high interest savings account (or an alternative)?
« Reply #13 on: July 17, 2018, 01:03:45 PM »
Thanks for all the input! It also occurs to me that given my timeline (12-24 months) a CD might also be a reasonable choice. Most of the same high interest banks mentioned here have 12 month CDs at ~2.3%. It seems like that would be a good choice if I was going to be conservative and go with a savings account in the first place... any other opinions?

FrugalFisherman10

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Re: How to choose a high interest savings account (or an alternative)?
« Reply #14 on: July 18, 2018, 01:55:34 PM »
ICSH ETF (2.44%) if you get free trades somewhere.

Thank you for posting this. ICSH is a new one to me and would be perfect for parking some funds for the short-medium term.

I'm looking into this too.
I have "discounted trades available" at Vanguard, in my Brokerage Account. So it would cost me $7 to make a purchase of this ETF. If I were wanting to just move my emergency fund there (say $7k or so), I could buy this ETF once, pay my $7 and then earn 2.44% interest over the next year, right? Then I'd just have that amount that sits in the ICSH ETF 'earmarked' as my emergency fund. That would earn me $170 over the course of a year, which I'm realizing is not as good as one of those banks offering a bonus.

...Maybe I should look into that more..but that's more work  haha

How much do you expect the rate on something like that to fluctuate over time?

DreamFIRE

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Re: How to choose a high interest savings account (or an alternative)?
« Reply #15 on: July 18, 2018, 04:39:12 PM »
Thanks for all the input! It also occurs to me that given my timeline (12-24 months) a CD might also be a reasonable choice. Most of the same high interest banks mentioned here have 12 month CDs at ~2.3%. It seems like that would be a good choice if I was going to be conservative and go with a savings account in the first place... any other opinions?

The OP said 2 to 5 years, which is why I suggested the 2 year CD.

Radagast

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Re: How to choose a high interest savings account (or an alternative)?
« Reply #16 on: July 18, 2018, 05:42:21 PM »
ICSH ETF (2.44%) if you get free trades somewhere.

Thank you for posting this. ICSH is a new one to me and would be perfect for parking some funds for the short-medium term.

I'm looking into this too.
I have "discounted trades available" at Vanguard, in my Brokerage Account. So it would cost me $7 to make a purchase of this ETF. If I were wanting to just move my emergency fund there (say $7k or so), I could buy this ETF once, pay my $7 and then earn 2.44% interest over the next year, right? Then I'd just have that amount that sits in the ICSH ETF 'earmarked' as my emergency fund. That would earn me $170 over the course of a year, which I'm realizing is not as good as one of those banks offering a bonus.

...Maybe I should look into that more..but that's more work  haha

How much do you expect the rate on something like that to fluctuate over time?
Vanguard also has an ultrashort bond fund. Though, it looks like it is not exactly the same. Vanguard's takes a little bit more credit risk (moderate vs high) and owns slightly longer term bonds (duration of 1 year vs 3 months, maturity of 1 year vs 10 months).

FrugalFisherman10

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Re: How to choose a high interest savings account (or an alternative)?
« Reply #17 on: July 19, 2018, 07:07:28 AM »
ICSH ETF (2.44%) if you get free trades somewhere.

Thank you for posting this. ICSH is a new one to me and would be perfect for parking some funds for the short-medium term.

I'm looking into this too.
I have "discounted trades available" at Vanguard, in my Brokerage Account. So it would cost me $7 to make a purchase of this ETF. If I were wanting to just move my emergency fund there (say $7k or so), I could buy this ETF once, pay my $7 and then earn 2.44% interest over the next year, right? Then I'd just have that amount that sits in the ICSH ETF 'earmarked' as my emergency fund. That would earn me $170 over the course of a year, which I'm realizing is not as good as one of those banks offering a bonus.

...Maybe I should look into that more..but that's more work  haha

How much do you expect the rate on something like that to fluctuate over time?
Vanguard also has an ultrashort bond fund. Though, it looks like it is not exactly the same. Vanguard's takes a little bit more credit risk (moderate vs high) and owns slightly longer term bonds (duration of 1 year vs 3 months, maturity of 1 year vs 10 months).
are you referring to VUBFX?

Are you saying VUBFX takes less risk because it doesn't have a "Cash and other equivalents" Component like the ICSH one does?


katsiki

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Re: How to choose a high interest savings account (or an alternative)?
« Reply #18 on: July 19, 2018, 08:10:17 AM »
I like Alliant Credit Union. They seem to raise their rates in a timely manner.

I think they are giving 1.7% now.

But still, if you have a particular timeframe, get the highest rate you can for that length of time. I believe there are periodic sign up bonuses for Discover.

In fact, you may find you do better going for sign up bonuses even if the rate is lower. Lock up a few k for a few months and get $300 or whatever.

Alliant is great.  +1  I also like them for other products.  They are a good CU.

For CDs, check out Andrews FCU, 9 month 2.75% CD.

Radagast

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Re: How to choose a high interest savings account (or an alternative)?
« Reply #19 on: July 19, 2018, 09:28:13 AM »
ICSH ETF (2.44%) if you get free trades somewhere.

Thank you for posting this. ICSH is a new one to me and would be perfect for parking some funds for the short-medium term.

I'm looking into this too.
I have "discounted trades available" at Vanguard, in my Brokerage Account. So it would cost me $7 to make a purchase of this ETF. If I were wanting to just move my emergency fund there (say $7k or so), I could buy this ETF once, pay my $7 and then earn 2.44% interest over the next year, right? Then I'd just have that amount that sits in the ICSH ETF 'earmarked' as my emergency fund. That would earn me $170 over the course of a year, which I'm realizing is not as good as one of those banks offering a bonus.

...Maybe I should look into that more..but that's more work  haha

How much do you expect the rate on something like that to fluctuate over time?
Vanguard also has an ultrashort bond fund. Though, it looks like it is not exactly the same. Vanguard's takes a little bit more credit risk (moderate vs high) and owns slightly longer term bonds (duration of 1 year vs 3 months, maturity of 1 year vs 10 months).
are you referring to VUBFX?

Are you saying VUBFX takes less risk because it doesn't have a "Cash and other equivalents" Component like the ICSH one does?
I looked at the Morningstar website to compare the two, hopefully it is accurate. I saw that the Vanguard fund has more risk all around (but still tiny compared to most common bond funds, even more so stock funds). "Cash and equivalents" should be very low risk.

grandep

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Re: How to choose a high interest savings account (or an alternative)?
« Reply #20 on: July 19, 2018, 01:20:16 PM »
Consumers Credit Union offers 3.05% interest on checking accounts, FDIC insured, only a few hoops to jump through to qualify for the higher rate. This is better or equivalent to the yield on most bond-funds, with zero principal risk or interest-rate risk.

zazpowered

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Re: How to choose a high interest savings account (or an alternative)?
« Reply #21 on: July 19, 2018, 01:31:44 PM »
I'm using PurePoint at 1.90% APY 10k min. That's the highest I've seen without some sort of state requirement or other requirements https://www.purepoint.com/

One

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Re: How to choose a high interest savings account (or an alternative)?
« Reply #22 on: July 19, 2018, 02:05:22 PM »
My wife and I sold our house in April and have the proceeds sitting in a USAA savings account earning .3% APY. This feels very low. We'd invest the money, except that we will likely need it in 2 to 5 years for another house purchase. It seems like we could at least find a high-interest savings account and make more like 1.5-17.5% APY.

I'm skeptical of things that seem like free money, so my question: What should we be on the lookout for when choose a high-interest account / what criteria should we be considering?

Or, is there some other instrument we should be considering? We're well invested otherwise, so it feels okay to keep this money is something conservative considering that it's basically earmarked.

Thanks!

US treasuries, buy short term 1 to 2 year at auction through vanguard, no fee. Better than cd because no state tax.
2 year is 2.6 percent

Here's the rates
https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield

Radagast

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Re: How to choose a high interest savings account (or an alternative)?
« Reply #23 on: July 19, 2018, 02:06:58 PM »
Consumers Credit Union offers 3.05% interest on checking accounts, FDIC insured, only a few hoops to jump through to qualify for the higher rate. This is better or equivalent to the yield on most bond-funds, with zero principal risk or interest-rate risk.
I looked really hard at this. Ultimately I decided not to because I would have to spend a lot of time buying $.50 Amazon gift cards to get the rate. I would essentially get paid $1 every time I bought one, but I'd have to do it at least 10 times a month regardless of what was going on in my life. I realized that it made sense even from an hourly pay perspective, but it was not what I wanted to spend my time on.

Right now I would personally choose something in a brokerage account I already had because that would give both a higher rate and greater simplicity.

grandep

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Re: How to choose a high interest savings account (or an alternative)?
« Reply #24 on: July 19, 2018, 02:30:01 PM »
I looked really hard at this. Ultimately I decided not to because I would have to spend a lot of time buying $.50 Amazon gift cards to get the rate. I would essentially get paid $1 every time I bought one, but I'd have to do it at least 10 times a month regardless of what was going on in my life. I realized that it made sense even from an hourly pay perspective, but it was not what I wanted to spend my time on.

Right now I would personally choose something in a brokerage account I already had because that would give both a higher rate and greater simplicity.

Fair enough. For anyone else who may be interested, one of the requirements to get the ~3% interest rate with CCU is to make 12 debit card transactions per month, which you can do by buying 12 $0.50 Amazon gift cards to your own account (that is what Radagast is referring to). For reference, it takes me probably less than 2 minutes to do this, but yes it is one more thing to have to remember to do each month and it is a bit annoying.

Orin!

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Re: How to choose a high interest savings account (or an alternative)?
« Reply #25 on: July 19, 2018, 03:45:11 PM »
I just got an email from Discover that they are offering 12 mo CD for 2.25%. For a no risk investment short term this sounds pretty good.

I personally am more adventurous and like some risk and go with vanguard total stock index. But that is not what this iriginal poster is asking for,

pdxvandal

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Re: How to choose a high interest savings account (or an alternative)?
« Reply #26 on: July 20, 2018, 12:04:43 AM »
I did a no-penalty CD at CIT Bank for 1.85%. I had the money in there for 2 months, then pulled it out, no questions asked. FDIC insured and no fees. Vanguard federal MM also a good option, but I had 150k in there, so felt slightly safer with FDIC.

dustinst22

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Re: How to choose a high interest savings account (or an alternative)?
« Reply #27 on: July 20, 2018, 11:37:55 AM »

I looked really hard at this. Ultimately I decided not to because I would have to spend a lot of time buying $.50 Amazon gift cards to get the rate.

Really?  This was your barrier?  This takes me less than 30 seconds.

By the way, if you're going to bother with getting set up with Consumers, its really worth it to go for the full 4.6% return (up to 20 K balance) as opposed to their lowest rate.  To me, this was the only way it was really worth it.  I think it's the ultimate "emergency" and cash fund.
« Last Edit: July 20, 2018, 11:40:25 AM by dustinst22 »

eraserhead97

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Re: How to choose a high interest savings account (or an alternative)?
« Reply #28 on: August 02, 2018, 01:29:11 AM »
SallieMae is currently paying 1.90% for online savings.

wirednuke83

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Re: How to choose a high interest savings account (or an alternative)?
« Reply #29 on: August 02, 2018, 06:23:09 AM »
I just signed up for the Discover account at 1.75%. They also gave me a 250$ bonus for depositing 20,000. Customer support has been great so far, and I like their App.

jpdx

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Re: How to choose a high interest savings account (or an alternative)?
« Reply #30 on: August 03, 2018, 10:07:24 PM »
Can someone outline the pros/cons of using a online Savings account vs a Vanguard Money Market fund or similar alternative? I understand the savings account would be FDIC insured, the MM fund would not, but please elaborate.

grandep

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Re: How to choose a high interest savings account (or an alternative)?
« Reply #31 on: August 06, 2018, 03:13:41 PM »
Can someone outline the pros/cons of using a online Savings account vs a Vanguard Money Market fund or similar alternative? I understand the savings account would be FDIC insured, the MM fund would not, but please elaborate.

What other elaboration do you need? A MM fund has a slightly higher interest rate for the slight additional risk (lack of FDIC insurance).

MustacheAndaHalf

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Re: How to choose a high interest savings account (or an alternative)?
« Reply #32 on: August 07, 2018, 02:06:44 AM »
When comparing CDs, pay attention to the early withdrawal penalty.  Some companies have severe penalties, others reasonable ones.  I'd recommend you compare other companies against Ally, which has low penalties of 2-5 months (depending on length of the CD).

I sometimes find longer CDs better despite paying the withdrawal penalty.  Take Ally's 9 month CD and 18 month CD, if you only hold it 9/12th of a year:
9 month CD 1.25% x 9/12 = 0.94%
18 month CD 2.15% x (9/12 - 2/12 penalty) = 7/12 * 2.15 = 1.25%

You can actually make more money off an 18 month CD - and cancelling it after 9 months - than if you pick the 9 month CD.

dkb140

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Re: How to choose a high interest savings account (or an alternative)?
« Reply #33 on: August 13, 2018, 01:40:34 PM »
Depending on how much you're looking to park, 2.25% at Northfield Bank ($0 to $100,000) or Customers Bank ($25000 - $500000) might be a good place to start.

https://www.bankrate.com/banking/savings/best-high-yield-interests-savings-accounts/
https://www.doctorofcredit.com/high-interest-savings-to-get/

OurTown

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Re: How to choose a high interest savings account (or an alternative)?
« Reply #34 on: August 15, 2018, 01:02:32 PM »
SallieMae is currently paying 1.90% for online savings.

This is where I keep my "spending" account.