Hard as it may be to believe, there was a time when savings accounts were useful. You could get 2-3% on a regular savings account and I have more than once alluded to the bygone era where an ING online savings account paid a whopping 5%, good times.
More recently, Capital One offered a new beefed-up savings account that paid 3.5%. Of course, about a month after I opened that, interest rates sunk like a rock to the point where I was eventually making 0.4% on that same account. Now, credit where it's due, the fed raising interest rates has brought that up to 0.8%, which is significantly better, but still nowhere close to what it was.
I recently found out about Digital Federal Credit Union, an institution that pays over 6% (on the first $1,000 anyway) alas, they have certain eligibility requirements where you have to work for, or be associated, with certain organizations with which they are partnered. I was not. Would have been nice, but oh well. It was worth a shot.
Soon after, I found out about Current. An online financial institution (they explicitly say that they are not a bank) that offers 4% interest. Much like with DFCU, they only offer that up to a certain amount, in this case, $6,000 on what they call "savings pods". What happens after that, it doesn't specify. It's a little weird, especially since each pod can have up to $2,000 and you're limited to 3. Seems a little overcomplicated, but I suppose for a 4% interest rate, it's worth it.
While Current is explicit in its assertion that it isn't a bank, they are connected to one, thus the accounts are still FDIC insured, which is a nice perk. Another nice perk is the fact that there are no minimum balance requirements.
This is an app only operation. You can't log in through your computer like you would be able to with other banks. It might not bother some people, and I'll probably get used to it, but it is something to take into consideration.
One cool thing about this account though, is that the interest is applied to your account daily. I haven't seen this in action myself, as I only just opened the thing, but it is a pretty awesome perk. Not only does it encourage you to put money in, but it also helps with cash flow once you get to those higher balances. You can transfer the interest to your main account and fire it at other things. Being able to make small moves daily can really help build up momentum in the long run.
We'll see how this goes. I see no reason to be pessimistic at this point, but I'm in the very early stages. With everything going on, it would be nice to be able to point to this as a port in the storm.
Click here to open an E-Trade account
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