DollarSavings Direct Cuts Savings Rate to 3.5% APY But Still Competitive

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DollarSavingsDirect's savings rate finally succumbed to gravity as the bank cut its rate from 4% APY to 3.5% APY.  That rate is still significantly above the BestCashCow savings rate average of 2.99% APY.

As the graph below shows, DollarSavingsDirect bucked the decrease in overall rates since mid-October.  Even though it has dropped its rate by half a percentage points, it's still well above the average of the top bank savings rates in the US and is now third on the BestCashCow rate tables. 

Will it stay at the top of the rate tables?  History suggests it might not.  DollarSavingsDirect was started by Emigrant Bank, the parent of another online bank EmigrantDirect.com.  As we discussed in an earlier article on the launch of DollarSavings, it was odd that the company started another online brand.  The motive seemed to be a desire to not have to reprice the rates of all of the deposit money sitting in EmigrantDirect.  The biggest difference between the two online divisions other than rate is the $1,000 minimum balance requirement for DollarSavingsDirect.  Emigrant Direct as a $1 minimum balance.

In general, DollarSavingsDirect has received favorable reviews for the ease of its account opening process (see comments at bottom of linked article).

Whether DollarSavingsDirect cuts its rate further depends on its need for deposits and the competitive environment.  Several other banks that offer savings rates include Clear Sky Accounts at 3.75% APY, Bank of Internet at 3.51% APY, and CNB Bank Direct at 3.5% APY.

Time will tell if DollarSavings remains competitive but as we've seen in the past, when one bank decides to cut rates, other banks are ready to move up to the top.


Etrade Offering $25 to Open Savings Account and Fund with $1

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Etrade is offering $25 to open a new online savings account and fund it with $1. The $1 minimum deposit required to receive the $25 is as low as they get.

Etrade is offering $25 to open a new online savings account and fund it with $1.  The $1 minimum deposit required to receive the $25 is as low as they get.  Etrade's savings account pays out a decent rate compared to the best savings rates on the BestCashCow rate table.  The bank has also received high marks for the ease of its account opening process and its money movement tools.  I have an Etrade account and have never had a problem.

As a company, Etrade is hurting.  It has received 0 out of 5 starts for safety and soundness according to Bauer Financial as of their Dec 09 bank reviews.  It's stock is trading at $1.20, down from nearly $25 two years ago.  If you decide to deposit money in Etrade, be sure to stay below FDIC insurance limits.

Compare the best savings rates on the BestCashCow rate tables.


Opening Online Savings and CD accounts is Winning Strategy, but Am I Killing My Credit rating

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I've recently stepped up my opening of online bank accounts, but now I am getting concerned that while the process makes sense to keep my savings growing, I may be killing my credit rating.

Some time ago, I opened online accounts with EverBank, HSBC and ING.  Since opening these accounts, I have purchased and sold real estate and gained loans without any problem.

Last summer, as rates began to fall, I opened CDs between 1 year and 18 months with IndyMac, Chase, Amtrust, Corus and ELoan, using BestCashCow.com as my guide.  I don't regret any of these moves as it enabled me to keep some of my cash growing through this difficult low interest rate period. (I am not sure that CDs make too much sense today as rates have come down).

Like many, I am now struggling to figure out what to do with all of the cash that I have lying around as a result of selling Treasuries and seeing my agency bonds be called.  My choice is clear - leave these monies in money market funds earning around 2% and likely to fall or move them into higher yielding online accounts (the risk being that the rate falls dramatically and quickly and that I am just wasting my time).  I recently opened accounts in the amount of $250,000 with the four leading savings rate accounts on BestCashCow.com (all earning between 4% and 3.5%).  I intend to close these accounts, or at least reduce the balances before December 31, 2009, unless FDIC insurance limits remain at $250,000 (I'll close them more quickly if the rates fall dramatically).   I figure that, if the rates do not fall (or fall by the same amount as money market funds) these four accounts will enable me to earn somewhere between an additional $15,000 and $20,000 on this $1 million that I would otherwise not make if I were to just keep my money in the money markey market funds. 

I've thought about continuing down the list and opening a couple of more savings accounts with some other banks in the 3 to 3.5% savings range, but suddenly I am starting to get nervous about what I do not understand.  It is the following - when credit rating agencies see this history of all of these banks pulling my credit information in a very short period of time, are they likely to get scared, and am I likely to find myself trying to explain the reason to some guy in India in vain when I next need a loan to buy a house?

Any thoughts or information on this would be helpful.