market folly

Every once in a while, we like to dive into the lesser talked about topics of personal finance and we like to examine what the average saver/spender is seeing in terms of options. After all, it can affect many of their decisions going forward. Over the past month or so, we've gotten a lot inquiries about where to put 'cash' since there is still uncertainty out there. Right now, there are a few institutions that are providing meager yields compared to what they used to be. And, obviously that is due to the fact that the Federal Reserve is at 0%. However, you do still have better options than placing your money in a money market fund where you'll earn a paltry 0.40%. We've decided to check out what is out there and present some alternative ideas to at least get something out of all that cash on the sidelines.

All Rates Effective 06/29/2009

Ally Bank: 1.75% Savings Account, 2.00% 1 year CD

By far the highest yielding savings account we've found right now is that of Ally Bank. Their savings accounts are paying out 1.75% APY and their CDs are at 2.00% APY for a 1 year CD. They are FDIC insured, are part of the GMAC parent entity, and the Ally name is an effort to rebrand the business going forward. This could be a cause of concern for some, but we'd also highlight that as long as your account is FDIC insured, you're protected (which Ally is). So, make sure you stay within the FDIC imits ($250,000) and you're good to go. Their savings account and CD yields are the highest out there at the moment (and as far as we can tell have no fees or minimums). So, if you think the Fed won't be juicing up rates over the next 12 months, you can lock in at a 2.00% CD with no monthly fees and daily compounded interest.


WT Direct: 1.76% Savings Account

Upon researching all the options, WT Direct seems to be well known among various personal finance bloggers out there. The yield on their savings account is 1.76%, slightly lower than that of Ally. However, you need to deposit $10,000 or more to get that APY. WT Direct is FDIC insured and is part of Wilmington Trust, who has been around 105 years. This might offer a little more stability for those concerned about Ally's ole GMAC relationship.



HSBC Direct: 1.55% Savings Account
ING Direct: 1.5% Savings, up to 1.63% Checking

Two of the most well-known savings accounts that personal finance savants have sworn by in the past are ING Direct and HSBC Direct (both institutions are FDIC insured.). While they may be 'big time' and mainstream options, their yields have certainly fallen by the wayside. HSBC Direct is yielding 1.55% on their savings while ING Direct is yielding up to 1.63% on their checking accounts (with $100,000 or more deposit) and 1.5% on their savings. The thing with ING is you essentially have to put a lot of money into the account to get a good rate. If you're putting less than $50,000 in, don't bother with them as you'll earn a paltry 0.24%. All of the other institutions mentioned above have no minimums to get the good rate (with WT Direct being the exception at a $10,000 requirement). Another negative regarding ING is you cannot link it to your brokerage account (hat tip to a reader for that info). I guess the HSBC and ING choices would be sacrificing yield for 'peace of mind' as they are bigger institutions? Doesn't seem worth the tradeoff to us, but maybe it is for some.

FNBO Direct: 1.5% Savings Account

Another lesser known option is FNBO Direct. After digging through the personal finance blogosphere, we've found that this bank was also recommended for cash placement. Their savings account is yielding 1.5% currently, so below that of both Ally and WT. FNBO is an affiliate of First National of Nebraska and they are also FDIC insured.


After doing some research, all of the above seem to be some of the most popular savings accounts in personal finance blogger circles. Those of you with overweight cash positions can look at either money market accounts, online savings accounts, or CDs and that's really it if you want to stay within the 'cash' classification. In the end, everything is a bit weak in terms of yield. But, we can thank the Fed for that. If you want to take on a little more risk for much bigger yields, we'd suggest checking out investment grade corporate bonds, high yield bonds, or a combination. That's obviously a topic for another discussion, but it could be worth looking into.

Any other major options we missed? Where does everyone have their cash at these days? Let us know so we can monitor rates going forward. For more info on rates and all that good stuff, bankrate is a good resource for monitoring.


(Database of FDIC Insured banks available here).