I’m still dragging my heels on moving a good portion of our savings to an online bank, where I can get better interest rates while not tying it up in a CD. So far, I’ve been all talk and no action. But I’m ready to change that in the next few days.
Our brick-and-mortar bank is a local community bank with a few branches. The savings interest rate we’re getting is only 0.85%, and a 12-month CD is 1.19%, which isn’t too shabby.
Right now, Ally has the edge, interest-wise: A savings account is getting 1.29% APR, versus ING Direct’s 1.10%. But rates are variable. ING Direct does offer a $25 bonus to new account holders, and a $10 referral bonus if you use a link through another account holder.
But there’s another choice — SmartyPig has an incredible 2.01% interest rate and works a bit differently than ING Direct and Ally, in that it’s more of a “social” savings account. This means other people can actually contribute money to your account. In another strange twist in the world of banking, SmartPig has a ‘reverse tier’ system, where accounts with MORE than $50,000 are severely penalized with a reduced interest rage of 0.50%.
Ally was formerly known as GMAC Bank, owned by GM, which received federal bailout money and is now, the federal government owns a majority stake in the company. This makes me wary, even though GM just posted its first quarterly profit since 2008. While I know my funds would be FDIC-insured, I don’t want to see a lowered interest rate anytime soon. (Oh, to be back in the days when I used to have 5.5% 6-month CDs. But I digress.)
With all these choices, I find myself just going in circles, rather than just picking one and sticking with it. Oy.
As for the amount to put into the higher-interest accounts, I have to keep in mind that I’m thinking about investing in the stock market for the first time. It would be a small investment (likely $500). Of course, I need to do some research. I’d like a stock that pays dividends and has a healthy balance sheet. My dad is pretty well-versed in how to compare the financials, so I’ll have to talk to him about it. This would be the next step in trying to get us on the road to a healthy retirement fund.
Readers: Do you use online-only banks? Of Ally, ING Direct and SmartyPig, which would you recommend?