5% High Yield Checking Account

[PreMD86]

Just wanted to share this with you guys:

http://www.effcu.org/default.aspx?id=1832

I have the same product from my local bank with 6% interest, but it is only available to MA and RI residents. This is the first account I've seen that's open to everyone. Cheers.

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[Ulquiorra]

How legit is this place? I see high yield accounts all the time, but lately I've become paranoid about the legitimacy of some of these. 5% doesn't mean much if either they 1) shut down and/or 2) run off with your money.

 

[PreMD86]

They're NCUA insured upto 100k. I'd personally be much more worried about having my money in an investment bank these days.

Btw, I've been very happy with the similar account I have with my local bank. Their interest stayed solid for months- There's hardly any other account that can claim the same.

 

[LADoc00]

this is HIGHLY fishy...fish fish fish....

 

[doctorloans]

Anyone done this yet? I can't imagine how/if they are giving 5%. That is just crazy. If it is true, they'll probably bring it way down after 2 months.

OP - this just sounds too good to be true, no offense

 

[PreMD86]

Anyone done this yet? I can't imagine how/if they are giving 5%. That is just crazy. If it is true, they'll probably bring it way down after 2 months.

OP - this just sounds too good to be true, no offense

No offense taken- I've been enjoying my 6% interest for months. Just thought I'd share.

http://www.dedhamsavings.com/index.php?option=com_content&task=view&id=169&Itemid=246

Their interest has been solid for over a year. According to them, the reason they can keep it so high is because of the 80/20 rule. If you read the terms, you'll notice you have to make 12 purchases with their debit card, and have 1 direct deposit a month. Apparently, 80% of people don't follow up with it, so the average interest they have to pay all customers avgs to 1.5% or so.

 

[The White Coat Investor]

No offense taken- I've been enjoying my 6% interest for months. Just thought I'd share.

http://www.dedhamsavings.com/index.php?option=com_content&task=view&id=169&Itemid=246

Their interest has been solid for over a year. According to them, the reason they can keep it so high is because of the 80/20 rule. If you read the terms, you'll notice you have to make 12 purchases with their debit card, and have 1 direct deposit a month. Apparently, 80% of people don't follow up with it, so the average interest they have to pay all customers avgs to 1.5% or so.

"What's the catch? There is no catch. Except you have to do 12 debit card transactions a month, for which we won't provide any rewards points."

 

[The White Coat Investor]

So this is how this works: Let's say you keep $5K in the account because of this high rate. That works out to $5000*5.01%/12=$20.88/month in interest. To do this, you use their debit card for your transactions each month. I will typically put $2-3K on a credit card per month, more if I'm going on a trip. My current CC rewards deal works out to somewhere around 1.5%-1.75% overall. So to get my $20.88/month, I have to pass up $3000*.015=$45/month.

Now that 5% doesn't look quite so hot does it? Especially if you consider if I didn't have this fancy 3% account, I'd have my money in Vanguard's Tax-exempt MMF which currently yields 2.33% (which in a 33% tax bracket is the equivalent of a taxable yield of 3.48%.) If I kept $2000 in a miserable little checking account paying 0.5%, I'd make 2000*0.005/12=$0.83 in interest. The $3000 in the MMF would pay a taxable equivalent of $3000*.0348/12=$8.70 PLUS the $45 from using the credit card. So I'd come out $45+8.70+.83-$20.88= $33.65/month ahead by not using this "no catch" account.

If it looks too good to be true....

 

[PreMD86]

.

 

[Stroganoff]

To LADOC00:

not fishy at all. Quite a few banks have offered high-yield checking accounts with the exact same terms as the OP's CU. Just a requirement to have one DD and 10-12 debit card transactions/month to earn 5-6% APY.

To ActiveDutyMD:

The way people have gotten around this (without losing this game) is to have everything automatic. The DD would be automatic, and the debit card transactions were to 10-12 different charities that allow donations as low as $1/month. If you search around on FatWallet or CreditBoards or other forums, these people already did their homework for you and made a list of all the charitable organizations that allow $1/month donations or $5 or whatever. So basically, looking at the bare minimum for this CU that the OP suggests, you would only have to donate $12/month. Thing is, this $12 is tax-deductible (if you itemize your tax returns), so it's not like you're "giving away" this money. So it's an additional $144/year you can deduct, and you can still save starving people/save rainforests/clothe babies/medicate puppies/etc and feel good about it.

It's all a game. Learn to play it.

To PreMD86:

This is borderline (OK, very) nosy of me, but as a 21-year-old pre-med college student, what are your secrets to having $100K? Are you a hotshot entrepreneur (I'm just now getting into this...wish I had started as a teenager) or have you worked full-time in college since freshman year? Wow, I admire your hard work. It's so impossible to balance full-time work with full-time school and so draining on one's health and sanity and safety, so kudos for amassing $100K by age 21. I'm just barely under that in student loans, and I'm working more hours than interns for less than half $100K at this point--evil. Your MDApplicants says you worked in retail and research: what kind of position pays that lucratively? Damn dude.

 

[plauto]

No offense taken- I've been enjoying my 6% interest for months. Just thought I'd share.

http://www.dedhamsavings.com/index.php?option=com_content&task=view&id=169&Itemid=246

Their interest has been solid for over a year. According to them, the reason they can keep it so high is because of the 80/20 rule. If you read the terms, you'll notice you have to make 12 purchases with their debit card, and have 1 direct deposit a month. Apparently, 80% of people don't follow up with it, so the average interest they have to pay all customers avgs to 1.5% or so.

it's down to 5%, just as I thought I'd open an account with them. I guess I'll keep the money where it is right now.

 

[zeloc]

Is NCUA insured as good as being FDIC-insured?

If you aren't willing to "play the game," bankrate.com has a list of banks with high interest rates, I think the maximum is around 3.5%.

 

[PreMD86]

it's down to 5%, just as I thought I'd open an account with them. I guess I'll keep the money where it is right now.

Yea, they told me last week they were going to drop it down to 5%.
When all other accounts give 2-3%, the 80/20 rule apparently gets closer to the 60/40 rule, so they have no choice but to drop it down. I doubt they'll do it again for a while,if at all. When the fed interest rate will rise, banks will raise their savings/checking account interests, which will make this account less competitive.