On September 23, 2008, WaMu has raised their online savings rate to 4%, which is the best online savings offer with no minimum balance.

To get the 4% savings account you will need to first open a free checking account and then link the savings account to it. This can all be done together online.

Washington Mutual, however, is a very troubled institution and is considered by many to be unlikely to survive. Depositors are therefore reminded that especially in this case to keep deposits below FDIC limits.

Please note that WaMu has not adjusted all of the copy on its site and may still be listing the rate as 3.75% APY in some places.

For more information, see the BestCashCow.com savings and money market rate tables.

The FDIC's insurance may lose 17% of its capital as bank failures have drained it. It's expected to to the point where the FDIC may ask other banks to pay more to replenish the fund.

Bloomberg writes:

"The pace of bank closings is accelerating as financial firms have reported almost $495 billion in writedowns and credit losses since 2007. The FDIC's ``problem'' bank list grew by 18 percent in the first quarter from the fourth, to 90 banks with combined assets of $26.3 billion. A revised list is due this month. The insurance fund had $52.8 billion as of March 31.

The FDIC estimated its shutdown of California-based mortgage lender IndyMac, which filed to liquidate its assets last month, might drain as much as 15 percent from the fund. Seven other banks will take $1.16 billion, or about 2 percent.

The potential $9.16 billion in withdrawals would be the highest since the insurance account was created in 1933, Diane Ellis, the FDIC's associate director of financial-risk management, said in a telephone interview. Bank failures pulled a record $6.9 billion from the fund in 1988 during the savings- and-loan collapse, Ellis said."

Many analysts expect a rash of bank failures of the next coupe of years as the mortgage mess continues to wreck havoc on bank's balance sheets. This will further draw down the FDIC.

What happens if the FDIC insurance fund is drawn down to $0? In that case, the Federal Government will step in and allocate more money as it did with the S&L crisis in the 1980s.

While your FDIC insured money is safe, we could all be paying more in taxes, bank fees, interest rates on loans because of the poor lending decisions over the last 10 years.

Update: September 26, 2008

Last night we learned that Washington Mutual (WaMu) was seized by regulators and then its deposit and loan business sold to JP Morgan Chase for $1.9 billion. Long term, the WaMu brand will disappear and all deposits in WaMu will be converted to Chase. Thus, if you are a WaMu account holder you will become a Chase customer. From a customer standpoint, this will look like a bank acquisition.

WaMu is open for business and is still offering some of the best rates in the country. A call to the bank verified that it is still offering its 4% APY savings account and a 5% APY 1-year CD. The 4% savings account is the top savings account rate in the country while the 1-year CD rate is also the best rate according to the BestCashCow rate table. As an added bonus, there is no minimum balance and you now get the security of Chase backing up your deposit.

To receive the high savings rate, you must open a checking account with the savings account. The checking account also doesn't have a minimum balance and is free. Both accounts can be opened together online. WaMu has received high marks for the ease of its account opening process.

>> Learn more about WaMu's 4% Savings Account here.

To see how this rate compares to other high yield savings accounts, please visit the BestCashCow.com savings and money market rate tables.