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.
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.
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.
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.
"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."
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....
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.
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.
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%.
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.
