Tuesday, April 3, 2012

Money - Online bank for savings

I have used several online banks. I have used ING, Emigrant Direct, and am currently using Ally bank. Why am I using Ally bank over the other two? Well, the interest rates as of today is the best that I have found.  Currently paying 0.84% Annual Percentage Yield (APY). ING's rate is 0.80% and Emigrant Direct is at 0.60%. The other reason why I am using Ally bank was because I was having trouble accessing ING because I forgot my username and password. Could I get access? Sure, I could call or send in a request by mail. However, I hate calling customer service. Unless ING starts earning more money, I'll stick with Ally.

So, what's the big deal? Interest rates are so low is it worth shifting money around? If you like money...and want to maximize your savings...then my answer is absolutely. What is the difference in how much you would make if you had $1,000? Let's check out the results:

  • Ally - $8.40
  • ING - $8
  • Emigrant Direct - $6
  • Non-interest earning account - $0
So, yes you aren't going to become a millionaire investing such a small amount at these low rates.  First of all, putting money in the bank isn't investing.  That isn't the point. The point is that you should be thinking about the best way to earn money with what you have available. This means with whatever knowledge and experience that you possess, you want to make financial decisions based on the information you have. Knowingly putting your money in a non-interest bearing account when other more profitable accounts are available is a bad financial decision.

The function of a online savings account is to save money to make a purchase.   The purchase can be to buy a new TV, car, investment or whatever.
The other function would be a place to store emergency funds. With many investments they require a minimum threshold to purchase. With U.S. savings bonds you need to save $25. With a U.S. Treasure Note the minimum is $1,000. Many mutual funds requires $2,500 unless you start some kind of automatic investment into the fund monthly.  Lastly...if you can find a local bank that pays you a higher interest rate than an online bank, do it.


The savings account is not your money making account.  However, try and get in the habit of maximizing your dollars. This will help you in becoming a Military Millionaire.

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