For several months, Salem Five Direct had been offering the top online savings rate in the US at 1.25%.
For those that did not open an account previously, the rate has now been lowered to 1%.
Those who had previously opened an account received a note explaining that their rate would still be 1.25%, but cited an “interest rate environment in constant flux” and made no commitments on how long the rate would hold.
The 1% rate for new depositors remains among the most competitive for online savings accounts. In addition, the bank continues to offer the rate to a maximum deposit of $500,000 for those depositors who are comfortable relying on the Massachusetts DIF insurance for deposits over the $250,000 FDIC limit. BestCashCow covered DIF insurance several years ago and it is still true that no depositor covered by the fund has ever lost money.
There are plusses and minuses to a Salem Five Direct Online Savings Account. Besides the attractive rate, the account has some nice security features including required text coding and callbacks to finalize money transfers in and out. On the negative side, the bank has some restrictive limits on money movement, limiting outbound ACH transfers to $2,000 per day and charging a $20 fee per transfer. Inbound ACH transfers are limited to $5,000 per day and $25,000 per month. The bank also assesses fees to receive inbound wire transfers, as well as to execute outbound ones.
The rate is still attractive but many savers might find the transfer limits and fees to be a non-starter.