January 17, 2011

A smarter savings account

A lot of folks use a checking account to handle the day-to-day cash flow and use a savings account to accumulate wealth and generate interest.  Unfortunately savings rates these days are trivial...oftentimes lower than 1%.  The alternative might be to put the money in a mutual fund, money market account, or a certificate of deposit...something a little less accessible.  Most folks don't like this option as their savings are also their 'rainy day' fund.  If you're one of those folks, here's how to keep your money close while getting a better interest rate:

Ally Bank's high-yield CDs have terms from 3-months to 5-years.  What catches my attention is the 5-yr 2.39% APY account (rates in the post as of 1/15/2011).  Though 2.39% may not seem great for such a long term, it is steady, reliable, and it's better than the 0.3% you're making now...7 times better, in fact!  I know, nobody wants to tie their money up for such a long time period...well here's the deal:

Ally's CD early termination policy is 60 days of interest...that's it.  If you're confident you can keep your money in there for longer than two months, it's probably worth considering.  If you can keep it in there for 12-months, you're netting a 2% return (much nicer than the 1.29%; 1-yr CD).  For a lot of folks...the 'rainy day' never comes, and money sits in these low-yielding savings accounts for years.  That could be hundreds or thousands of dollars lost over the years!  Consider a high-yield CD with a simple, low-cost early termination penalty.

Ally's just one option. Visit www.bankrate.com to compare current market rates. Do your homework, and don't be afraid to call and have a customer service rep explain the details of your new account.

Moving forward...keep an eye on your accounts and current market rates.  If 12 months from now you can get a 4% CD, it might be worth moving your money around again. You are in charge of your money.  Don't let rain day fears keep you from earning interest on money...get a smarter savings account today!


  1. This strategy works for many people but only if large amounts of money are involved. As always, it is important to find out if there are any charges involved in switching to a different account and if it makes financial sense to do so.best savings account

  2. Rather than sticking with one bank that may not consistently be offering them the best rates, savings account holders should periodically research financial institutions to discover those that offer the highest saving bank account rates.guarantor loans