Endless Gibberish

Money Lessons: High Yielding Bank Accounts

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I believe every dollar in your possession should be working for you. Working how? Earning more money. This is where high yield bank accounts come into play. In the past, most banks required a hefty minimum balance to earn decent interest. Today, that’s no longer true with the advent of accounts being offered by ING Direct, HSBC Direct, etc., which require no minimums to earn a great rate. I always try to convince try to convince friends and family to embrace the savings account in particular offered by these banks. HSBC Direct and Emigrant Direct pay 5.05% APY as of date. I mean if their money is just sitting there, why not put it to work? Here’s some reasons why a lot of people haven’t embraced these online high yielding bank accounts.

• They swear “there’s gotta be a catch”. Well, there isn’t… and that’s the beauty of it. No minimums, great rate, access to your funds easily and that’s it!
• They feel safer with Bank of America even if they pay 0.5% on their accounts. Bank of America accounts are as equally insured by the FDIC as ING Direct, HSBC Direct, etc. etc.
• They don’t realize inflation diminishes the buying power of their money as it sits in a savings account earning paltry interest. If you can get a rate like 5% today, then you’re allowing your money to keep up with inflation and then some. Your buying power doesn’t diminish and slightly grows year after year
• Some people really don’t care because they’re actually in debt!
• and the list goes on…

A high yield savings is one of the best places to stash your emergency funds. Your money keeps up with inflation over time AND grows beyond that. So as the years past, an emergency fund designed for say 6 months of expenses might grow to cover many more months of expenses if the occasional ever arises.

Although ING Direct doesn’t offer the most competitive rate at 4.5%, it’s where I refer most of my friends and family members. In addition to the $25 sign-up bonus, there’s the extremely easy user interface. A great user interface is a big plus when it comes to people like my parents who aren’t particularly computer savvy. My parents still do think there’s a catch, but I’m willing to bet they’ll get over it sooner or later.

For people that always need the security of instant access to their funds via ATM. I think HSBC Direct is the best way to go in that HSBC supplies you with an ATM card that’s fee-free at any HSBC branch. As of date, HSBC Direct pays 5.05%.

edit: For some reason the credit card post was here. That’s been fixed and changed.

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“Money Lessons” is a series of posts published every wednesday on various subjects that detail what I’ve learned or how I view that certain subject. View all “Money Lessons” posts.