Interest rates are still pretty low as we enter 2010, but I remind people that high nominal rates aren’t always better. Would you rather earn 3% with no inflation or 7% with 5% inflation? In any case, most of us have a chunk of cash and we should still try to earn the most no matter what the rate environment is like right now.
High-Yield Reward Checking Accounts
These are checking accounts that are still fully insured and pay a very high interest rate, as long as you jump through certain hoops each month. This also means that if you make a mistake you’ll forfeit virtually all your interest for that month, so it can be tricky. But for the very diligent, their rates are still averaging around 3-4% APY up to a certain balance limit. Here are a couple of the highest current account available nationwide:
- Royal Bank of Missouri has their Majestic Checking paying 4.30% APY on up to $25k, which requires 10 check card purchases each month, a direct deposit or ACH transaction per month, and online statements only.
- Sierra Reward Checking at 4.09% APY on up to $25k, which requires 12 check card purchases each month, a direct deposit/auto-withdrawal, one BillPay per month, and online statements only.
Online Savings Accounts
These accounts pay a yield that at least a full percentage point (1%) higher than any current money market fund, while still providing easy access and safety with minimal hassles. The primary drawback here is that you are limited to a maximum of 6 withdrawals per month, as it is a savings account. Here are account that represent the range of the best current rates.
- Everbank is offering 2.51% APY for the first 3 months for new accounts. This rate is higher than any 3-month certificates of deposit currently available, which being available for withdrawals at any time. The rate is guaranteed stay in the top 5% of competitive accounts.
- Alliant Credit Union has a non-promo savings account rate of 2.00% APY. Membership is restricted to people with affiliation to a qualifying organization, but the cheapest way around this is to become a member of a PTA or PTO.
- Ally Bank Online Savings offers their “no fine print” savings account rate to 1.50% APY as of 1/2/09. No minimum balances, no monthly fees.
- Veteran online bank ING Direct holds up the lower end at 1.30% APY.
Certificates of Deposit
If you are willing to restrict access to your money for a while, your yield can go a bit higher, but not that much. On the other hand, if you think rates will stay low, it may be worthwhile to lock some rates in. Keep an eye on the early-withdrawal penalties if you do think you’ll need to withdraw.
- 12-month CD at Ally Bank will get you 1.84% APY. (3-mo. early withdrawal penalty.)
- 3-Year CD at Pentagon Federal Credit Union will get you 3.0% APY. (6-mo. early withdrawal penalty.)
- 5-Year CD at Pentagon Federal Credit Union will get you 3.5% APY. (6-mo. early withdrawal penalty.)
