Best Interest Rates Update: 90-Day CD at 2% APY, 2-Year CD at 3% APY, 3-Year MYGA at 4% (Mid-June 2022)

Posted on June 22, 2022 // 15 Comments

Rates are still moving up, especially in the shorter maturities. Even the rates quoted below may become outdated quickly, but so here is a mid-month update for June 2022. As of 6/21/2022:

  • Brokered CD rates: 3-month CD at 2% APY, 2-Year CDs at 3.15% APY at Vanguard and Fidelity fixed income desks (non-callable).
  • Online bank rates: 1.61%-1.65% APY liquid, 3.05% APY for 3-year CD at Bask Bank, First Foundation and Rising Bank. Expect a lot of movement in this area.
  • US Treasury Bonds: 3-month at 1.85%, 2-Year CDs at 3.21% yield to maturity, secondary market. Interest from Treasury bills and bonds are exempt from state and local income taxes.
  • Fixed Annuity: 4% rate on 3-year MYGA from American Life (B++ Rating) on via Blueprint Income and Stan the Annuity Man (varies by state). Learn more about MYGAs here and here.

As always, be very careful with any app or website that does not clearly indicate FDIC and/or NCUA insurance. Verify yourself at FDIC.gov and NCUA.gov.

Just as the terms “natural” and “superfood” and not regulated in the food industry, the terms “asset-backed” and “stable” mean very little in the financial industry. An app called “Stablegains” promised reliable interest from “overcollaterized” and “100% asset-backed” loans… up on the day until your money disappeared forever.

Filed Under: Banking, Deals & Offers //

Best Interest Rates on Cash – June 2022 Update

Posted on June 6, 2022 // 13 Comments

Here’s my monthly roundup of the best interest rates on cash as of June 2022, roughly sorted from shortest to longest maturities. We all need some safe assets for cash reserves or portfolio stability, and there are often lesser-known opportunities available to individual investors. Check out my Ultimate Rate-Chaser Calculator to see how much extra interest you’d earn by moving money between accounts. Rates listed are available to everyone nationwide. Rates checked as of 6/6/2022.

Significant changes since last month: Rates moving up a little. 4% APY on up to $6,000 for liquid savings at Current with no direct deposit requirement. Liquid savings 1.25% APY w/ no cap + up $325 bonuses on SoFi w/ direct deposit. Brokered CDs and US Treasury bonds now slightly above 3% for 5 years. 1-year CDs and Treasuries slightly over 2%. 9.62% Savings I Bonds still available if you haven’t done it yet.

Fintech accounts
Available only to individual investors, fintech companies often pay higher-than-market rates in order to achieve fast short-term growth (often using venture capital). “Fintech” is usually a software layer on top of a partner bank’s FDIC insurance.

  • 4% APY on $6,000. Current offers 4% APY on up to $6,000 total ($2,000 each on three savings pods). No direct deposit required. $50 referral bonus for new members with $200+ direct deposit with promo code JENNIFEP185. Please see my Current app review for details.
  • 3% APY on up to $100,000, but requires direct deposit and credit card spend. HM Bradley pays up to 3% APY if you open both a checking and credit card with them, and maintain $1,500 in total direct deposit each month and make $100 in credit card purchases each month. Please see my updated HM Bradley review for details.
  • 3% APY on 10% of direct deposits + 1% APY on $25,000. One Finance lets you earn 3% APY on “auto-save” deposits (up to 10% of your direct deposit, up to $1,000 per month). Separately, they also pay 1% APY on up to another $25,000 with direct deposit. New customer $50 bonus via referral. See my One Finance review.
  • 3% APY on up to $15,000, requires direct deposit and credit card transactions. Porte requires a one-time direct deposit of $1,000+ to open a savings account. Porte then requires $3,000 in direct deposits and 15 debit card purchases per quarter (average $1,000 direct deposit and 5 debit purchases per month) to receive 3% APY on up to $15,000. New customer bonus via referral. See my Porte review.

High-yield savings accounts
Since the huge megabanks pay essentially no interest, I think every should have a separate, no-fee online savings account to accompany your existing checking account. The interest rates on savings accounts can drop at any time, so I list the top rates as well as competitive rates from banks with a history of competitive rates. Some banks will bait you with a temporary top rate and then lower the rates in the hopes that you are too lazy to leave.

  • SoFi is now offering 1.25% APY + up to $325 new account bonus with direct deposit. You must maintain a direct deposit each month of any amount. Convenient if you already have a relationship with them. SoFi now has their own bank charter so no longer a fintech by my definition. See details at $25 + $300 SoFi Money new account and deposit bonus.
  • Bask Bank is up to 1.25% APY with no minimum balance requirements.
  • TAB Bank is up to 1.26% APY with no minimum balance requirements.
  • There are several other established high-yield savings accounts at closer to 0.80% APY. Marcus by Goldman Sachs is on that list, and if you open a new account with a Marcus referral link (that’s mine), they will give 0.50% extra for 3 months, or 1.35% APY for your first 3 months (add 0.10% with AARP membership). You can then extend this by referring others.

Short-term guaranteed rates (1 year and under)
A common question is what to do with a big pile of cash that you’re waiting to deploy shortly (plan to buy a house soon, just sold your house, just sold your business, legal settlement, inheritance). My usual advice is to keep things simple and take your time. If not a savings account, then put it in a flexible short-term CD under the FDIC limits until you have a plan.

  • No Penalty CDs offer a fixed interest rate that can never go down, but you can still take out your money (once) without any fees if you want to use it elsewhere. CFG Bank has a 13-month No Penalty CD at 1.22% APY with a $500 minimum deposit. Ally Bank has a 11-month No Penalty CD at 0.85% APY for all balance tiers. Marcus has a 13-month No Penalty CD at 0.90% APY with a $500 minimum deposit. You may wish to open multiple CDs in smaller increments for more flexibility.
  • Connexus Credit Union has a 12-month certificate at 2.26% APY Note that the early withdrawal penalty is 90 days of interest. Anyone can join this credit union via partner organization for a one-time $5 fee.

Money market mutual funds + Ultra-short bond ETFs
Many brokerage firms that pay out very little interest on their default cash sweep funds (and keep the difference for themselves). Unfortunately, money market fund rates are very low across the board right now. Ultra-short bond funds are another possible alternative, but they are NOT FDIC-insured and may experience short-term losses at times. These numbers are just for reference, not a recommendation.

  • The default sweep option is the Vanguard Federal Money Market Fund which has an SEC yield of 0.71%.
  • Vanguard Ultra-Short-Term Bond Fund currently pays 1.91% SEC yield ($3,000 min) and 2.01% SEC Yield ($50,000 min). The average duration is ~1 year, so your principal may vary a little bit.
  • The PIMCO Enhanced Short Maturity Active Bond ETF (MINT) has a 1.80% SEC yield and the iShares Short Maturity Bond ETF (NEAR) has a 1.61% SEC yield while holding a portfolio of investment-grade bonds with an average duration of ~6 months.

Treasury Bills and Ultra-short Treasury ETFs
Another option is to buy individual Treasury bills which come in a variety of maturities from 4-weeks to 52-weeks. You can also invest in ETFs that hold a rotating basket of short-term Treasury Bills for you, while charging a small management fee for doing so. T-bill interest is exempt from state and local income taxes. Right now, this section isn’t very interesting as T-Bills are yielding close to zero!

  • You can build your own T-Bill ladder at TreasuryDirect.gov or via a brokerage account with a bond desk like Vanguard and Fidelity. Here are the current Treasury Bill rates. As of 6/6/2022, a new 4-week T-Bill had the equivalent of 0.88% annualized interest and a 52-week T-Bill had the equivalent of 2.20% annualized interest.
  • The Goldman Sachs Access Treasury 0-1 Year ETF (GBIL) has a 0.67% SEC yield and the SPDR Bloomberg Barclays 1-3 Month T-Bill ETF (BIL) has a 0.45% SEC yield. GBIL appears to have a slightly longer average maturity than BIL.

US Savings Bonds
Series I Savings Bonds offer rates that are linked to inflation and backed by the US government. You must hold them for at least a year. If you redeem them within 5 years there is a penalty of the last 3 months of interest. The annual purchase limit for electronic I bonds is $10,000 per Social Security Number, available online at TreasuryDirect.gov. You can also buy an additional $5,000 in paper I bonds using your tax refund with IRS Form 8888.

  • “I Bonds” bought between May 2022 and October 2022 will earn a 9.62% rate for the first six months. The rate of the subsequent 6-month period will be based on inflation again. More on Savings Bonds here.
  • In mid-October 2022, the CPI will be announced and you will have a short period where you will have a very close estimate of the rate for the next 12 months. I will have another post up at that time.
  • See below about EE Bonds as a potential long-term bond alternative.

Prepaid Cards with Attached Savings Accounts
A small subset of prepaid debit cards have an “attached” FDIC-insured savings account with exceptionally high interest rates. The negatives are that balances are severely capped, and there are many fees that you must be careful to avoid (lest they eat up your interest). There is a long list of previous offers that have already disappeared with little notice. I don’t personally recommend nor use any of these anymore, as I feel the work required and the fees charged if you mess up exceeds any small potential benefit.

  • Mango Money pays 6% APY on up to $2,500, if you manage to jump through several hoops. Requirements include $1,500+ in “signature” purchases and a minimum balance of $25.00 at the end of the month.
  • NetSpend Prepaid pays 5% APY on up to $1,000 but be warned that there is also a $5.95 monthly maintenance fee if you don’t maintain regular monthly activity.

Rewards checking accounts
These unique checking accounts pay above-average interest rates, but with unique risks. You have to jump through certain hoops which usually involve 10+ debit card purchases each cycle, a certain number of ACH/direct deposits, and/or a certain number of logins per month. If you make a mistake (or they judge that you did) you risk earning zero interest for that month. Some folks don’t mind the extra work and attention required, while others would rather not bother. Rates can also drop suddenly, leaving a “bait-and-switch” feeling.

  • Quontic Bank is offering 1.10% APY on all balances. May be useful for those with high balances. You need to make 10 debit card point of sale transactions of $10 or more per statement cycle required to earn this rate.
  • The Bank of Denver pays 2.00% APY on up to $10,000 if you make 12 debit card purchases of $5+ each, receive only online statements, and make at least 1 ACH credit or debit transaction per statement cycle. If you meet those qualifications, you can also link a Kasasa savings account that pays 1.00% APY on up to $25k. Thanks to reader Bill for the updated info.
  • Presidential Bank pays 2.25% APY on balances between $500 and up to $25,000, if you maintain a $500+ direct deposit and at least 7 electronic withdrawals per month (ATM, POS, ACH and Billpay counts).
  • Evansville Teachers Federal Credit Union pays 3.30% APY on up to $20,000. You’ll need at least 15 debit transactions and other requirements every month.
  • Lake Michigan Credit Union pays 3.00% APY on up to $15,000. You’ll need at least 10 debit transactions and other requirements every month.
  • (I no longer recommend this credit union myself, but the rate is still good.) Lafayette Federal Credit Union is offering 2.02% APY on balances up to $25,000 with a $500 minimum monthly direct deposit to their checking account. No debit transaction requirement. They are also offering new members a $100 bonus with certain requirements. Anyone can join this credit union via partner organization ($10 one-time fee).
  • Find a locally-restricted rewards checking account at DepositAccounts.

Certificates of deposit (greater than 1 year)
CDs offer higher rates, but come with an early withdrawal penalty. By finding a bank CD with a reasonable early withdrawal penalty, you can enjoy higher rates but maintain access in a true emergency. Alternatively, consider building a CD ladder of different maturity lengths (ex. 1/2/3/4/5-years) such that you have access to part of the ladder each year, but your blended interest rate is higher than a savings account. When one CD matures, use that money to buy another 5-year CD to keep the ladder going. Some CDs also offer “add-ons” where you can deposit more funds if rates drop.

  • Connexus Credit Union has a 5-year certificate at 3.21% APY ($5,000 min), 4-year at 3.11% APY, 3-year at 3.01% APY, and 2-year at 2.86% APY. Note that the early withdrawal penalty for the 5-year is 365 days of interest. Anyone can join this credit union via partner organization for a one-time $5 fee.
  • You can buy certificates of deposit via the bond desks of Vanguard and Fidelity. You may need an account to see the rates. These “brokered CDs” offer FDIC insurance and easy laddering, but they don’t come with predictable early withdrawal penalties. Right now, I see a 5-year CD at 3.30% APY. Be wary of higher rates from callable CDs listed by Fidelity.

Longer-term Instruments
I’d use these with caution due to increased interest rate risk, but I still track them to see the rest of the current yield curve.

  • Willing to lock up your money for 10 years? You can buy long-term certificates of deposit via the bond desks of Vanguard and Fidelity. These “brokered CDs” offer FDIC insurance, but they don’t come with predictable early withdrawal penalties. You might find something that pays more than your other brokerage cash and Treasury options. Right now, I see a 10-year CD at 3.85% APY vs. 3.04% for a 10-year Treasury. Watch out for higher rates from callable CDs from Fidelity.
  • How about two decades? Series EE Savings Bonds are not indexed to inflation, but they have a unique guarantee that the value will double in value in 20 years, which equals a guaranteed return of 3.5% a year. However, if you don’t hold for that long, you’ll be stuck with the normal rate which is quite low (currently 0.10%). I view this as a huge early withdrawal penalty. But if holding for 20 years isn’t an issue, it can also serve as a hedge against prolonged deflation during that time. Purchase limit is $10,000 each calendar year for each Social Security Number. As of 6/6/2022, the 20-year Treasury Bond rate was 3.41%.

All rates were checked as of 6/6/2022.

Filed Under: Banking, Deals & Offers, Investing //

Teachers Federal Credit Union New Member Promotion (DO NOT TRY)

Posted on May 30, 2022 // 30 Comments

Update 6/16/22: More than two weeks after joining and taking my deposit, they have finally refunded the deposit and officially declined my application due to vague reasons suggesting fraud. They have made no effort to contact me or to otherwise explain their actions. I’d never use this credit union, even if I lived in their region. 🙄

Update 6/13/22: Myself and many other readers report that this credit union has locked them out of online access and refunded the initial deposit, all without any further communication. All after approving the account, providing account numbers and routing numbers, and allowing us to set up direct deposits. Not a great look for them. I would not try for this bonus anymore if you have not already done so.

Original post as of 5/30/22:

Teachers Federal Credit Union has a new member offer worth up to $400 that consists of a $300 direct deposit bonus and $100 debit card spending bonus. The terms also state that you can stack this with the $50 refer-a-friend promotion. Teacher’s FCU has 32 physical branches in New York state, but membership is open to anyone applying online. Must enter promo code OFFER400 to participate in this offer. Hat tip to DepositAccounts. Offer ends 7/31/22.

$300 Direct Deposit bonus details.

  • Offer available to new members only.
  • Must enroll in Online Banking and eStatements.
  • Open a new Teachers checking account.
  • Have qualifying direct deposits totaling at least $2,500.00 within the first three monthly statement cycles after account opening.
  • Qualifying direct deposits include payroll or government benefits. Transactions that will not count toward direct deposits include external transfers, point of sale credits and in-person check or cash deposits, wire transfers, ATM transfers, and Online and Mobile Banking transfers.
  • For accounts opened online, you must use offer code OFFER400 to be eligible.
  • May be combined with the Refer-a-Friend promotion.

$100 Debit Card Spend bonus details.

  • Offer available to new members only.
  • Must enroll in Online Banking and eStatements.
  • Open a new Teachers checking account with a debit card.
  • Make $500 in eligible purchases using the Teachers debit card linked to that account.
  • The $500 must be spent within the first three monthly statement cycles in order to qualify. Qualifying debit card purchases do not include: ATM transactions, cash-back, Peer-to-Peer (“P2P”) payments, loan payments, account funding and disputed or unauthorized transactions.
  • For accounts opened online, you must use offer code OFFER400 to be eligible.
  • May be combined with the Refer-a-Friend promotion.

$50 Refer-a-Friend bonus details.

  • Referred person must keep account open for 60 days in good standing with a balance greater than $0.
  • Referred person must perform 10 qualifying transactions in 60 days – transactions include debit card purchases, direct deposits, mobile deposits, Teachers bill pay, in-branch deposits and ATM deposits
  • If these requirements are satisfied, both the referrer and referred person will each get a $50 bonus deposited into their Regular Savings account.
  • Here is my $50 refer-a-friend link. Enter your e-mail address to use. Thanks if you use it!

Smart Checking 1.00% APY details. There is a barebones Share Draft Checking with no minimum balance and no monthly fee, but also no interest paid. Alternatively, the high yield Smart Checking account earns 1.00% APY on balances up to $15,000 (and 0.10% APY on balances greater than $15,000) when you meet one of these qualifications:

  • Average monthly balance of $5,000 in your Smart Checking account
  • $20,000 in combined end of month deposit balances
  • Establish direct deposit(s) of $500 or more AND complete 10 debit card purchases each month

(Note that there is a inactivity fee if the Share Savings account balance falls below $100 AND there has been no account activity during the previous two years.)

Application and bonus qualification details. Here are some tips based on my account opening experience.

  • First, start by clicking on a $50 refer-a-friend link from a member and enter your e-mail address. This qualifies you for the $50 Refer-a-friend offer and you will move on to the application process. You can pick either the Share Draft Checking or Smart Checking (both have no monthly fee).
  • You will enter your personal information including name, address, drivers license/ID, Social Security number, and so on. They will ask you some identity verification questions. You will not have to join any special organizations to gain credit union membership, not even a $5 nominal fee. In fact, they will deposit $1 for you into a savings account to get you started.
  • Be sure to enter the promo code OFFER400 when prompted towards the end of the application.
  • Your initial deposit can be charged on a credit card, up to $5,000. I recommend using a 2% cash back card or similar to earn some rewards. If everything goes smoothly, you should receive an e-mail with your member number shortly, which allows you to sign up for online access. Otherwise, they may ask for some additional documentation.
  • They seem to be pretty good about frequent email communication. Once you get the account number (routing number is 221475786), you can use that for establishing direct deposit within the required timeframe. (Note the offer page says 60 days in some places, but the fine print clarifies it is within three monthly statement cycles.) Don’t forget to sign up for eStatements and make those 10 transactions as well to get the $50 referral bonus.

Altogether, this is a very attraction promotion on a pretty decent no-fee checking account. Teachers FCU also has competitive CD rates at times. They currently offer a unique 24 month “Smart CD” that pays 2.00% APY in Year 1 and 2.50% APY in Year 2 (as of 5/30/22).

Filed Under: Banking, Deals & Offers //

Best Interest Rates on Cash – May 2022 Update

Posted on May 10, 2022 // 4 Comments

Here’s my monthly roundup of the best interest rates on cash as of May 2022, roughly sorted from shortest to longest maturities. We all need some safe assets for cash reserves or as a bond substitute, and there are often lesser-known opportunities available to individual investors. Check out my Ultimate Rate-Chaser Calculator to see how much extra interest you’d earn by moving money between accounts. Rates listed are available to everyone nationwide. Rates checked as of 5/10/2022.

Significant changes since last month: Rates are moving. Brokered CDs and US Treasury bonds close to 3% for 5 years. 1-year Treasury close to 2%. 9.62% Savings I Bonds still available if you haven’t done it yet. 4% APY on up to $6,000 for liquid savings at Current with no direct deposit requirement.

Fintech accounts
Available only to individual investors, fintech companies often pay higher-than-market rates in order to achieve fast short-term growth (often using venture capital). “Fintech” is usually a software layer on top of a partner bank’s FDIC insurance.

  • 4% APY on $6,000. Current offers 4% APY on up to $6,000 total ($2,000 each on three savings pods). No direct deposit required. $50 referral bonus for new members with $200+ direct deposit with promo code JENNIFEP185. Please see my Current app review for details.
  • 3% APY on up to $100,000, but requires direct deposit and credit card spend. HM Bradley pays up to 3% APY if you open both a checking and credit card with them, and maintain $1,500 in total direct deposit each month and make $100 in credit card purchases each month. Please see my updated HM Bradley review for details.
  • 3% APY on 10% of direct deposits + 1% APY on $25,000. One Finance lets you earn 3% APY on “auto-save” deposits (up to 10% of your direct deposit, up to $1,000 per month). Separately, they also pay 1% APY on up to another $25,000 with direct deposit. New customer $50 bonus via referral. See my One Finance review.
  • 3% APY on up to $15,000, requires direct deposit and credit card transactions. Porte requires a one-time direct deposit of $1,000+ to open a savings account. Porte then requires $3,000 in direct deposits and 15 debit card purchases per quarter (average $1,000 direct deposit and 5 debit purchases per month) to receive 3% APY on up to $15,000. New customer bonus via referral. See my Porte review.
  • 1.20% APY on up to $50,000. You must maintain a $250 direct deposit each month for this balance cap, otherwise you’ll still earn 1.20% on up to $5,000. They also pay 6% on USDC stablecoin, but I avoid this as it is not FDIC-insured (and you can get higher rates elsewhere if you did want to hold USDC.) New customer $100 bonus via referral. See my OnJuno review.
  • 1.25% APY (no balance cap). SoFi is now offering 1.25% APY with no balance cap. You must maintain a direct deposit each month of any amount. Convenient if you already have a relationship with them. See $25 + $300 SoFi Money new account and deposit bonus.

High-yield savings accounts
Since the huge megabanks pay essentially no interest, I think every should have a separate, no-fee online savings account to accompany your existing checking account. The interest rates on savings accounts can drop at any time, so I list the top rates as well as competitive rates from banks with a history of competitive rates. Some banks will bait you with a temporary top rate and then lower the rates in the hopes that you are too lazy to leave.

Short-term guaranteed rates (1 year and under)
A common question is what to do with a big pile of cash that you’re waiting to deploy shortly (plan to buy a house soon, just sold your house, just sold your business, legal settlement, inheritance). My usual advice is to keep things simple and take your time. If not a savings account, then put it in a flexible short-term CD under the FDIC limits until you have a plan.

  • No Penalty CDs offer a fixed interest rate that can never go down, but you can still take out your money (once) without any fees if you want to use it elsewhere. CFG Bank has a 13-month No Penalty CD at 1.07% APY with a $500 minimum deposit. Ally Bank has a 11-month No Penalty CD at 0.60% APY for all balance tiers. Marcus has a 13-month No Penalty CD at 0.75% APY with a $500 minimum deposit. You may wish to open multiple CDs in smaller increments for more flexibility.
  • Department Of Commerce Federal Credit Union has a 12-month certificate at 2.15% APY. $500 minimum. 180 day interest penalty on early withdrawals. Anyone can join this credit union through a $5 membership in the American Consumer Council (ACC). Enter ACC membership number on the online application.

Money market mutual funds + Ultra-short bond ETFs
Many brokerage firms that pay out very little interest on their default cash sweep funds (and keep the difference for themselves). Unfortunately, money market fund rates are very low across the board right now. Ultra-short bond funds are another possible alternative, but they are NOT FDIC-insured and may experience short-term losses at times. These numbers are just for reference, not a recommendation.

  • The default sweep option is the Vanguard Federal Money Market Fund which has an SEC yield of 0.53%.
  • Vanguard Ultra-Short-Term Bond Fund currently pays 1.79% SEC yield ($3,000 min) and 1.89% SEC Yield ($50,000 min). The average duration is ~1 year, so your principal may vary a little bit.
  • The PIMCO Enhanced Short Maturity Active Bond ETF (MINT) has a 1.68% SEC yield and the iShares Short Maturity Bond ETF (NEAR) has a 1.38% SEC yield while holding a portfolio of investment-grade bonds with an average duration of ~6 months.

Treasury Bills and Ultra-short Treasury ETFs
Another option is to buy individual Treasury bills which come in a variety of maturities from 4-weeks to 52-weeks. You can also invest in ETFs that hold a rotating basket of short-term Treasury Bills for you, while charging a small management fee for doing so. T-bill interest is exempt from state and local income taxes. Right now, this section isn’t very interesting as T-Bills are yielding close to zero!

  • You can build your own T-Bill ladder at TreasuryDirect.gov or via a brokerage account with a bond desk like Vanguard and Fidelity. Here are the current Treasury Bill rates. As of 5/9/2022, a new 4-week T-Bill had the equivalent of 0.50% annualized interest and a 52-week T-Bill had the equivalent of 1.94% annualized interest.
  • The Goldman Sachs Access Treasury 0-1 Year ETF (GBIL) has a 0.38% SEC yield and the SPDR Bloomberg Barclays 1-3 Month T-Bill ETF (BIL) has a 0.23% (!) SEC yield. GBIL appears to have a slightly longer average maturity than BIL.

US Savings Bonds
Series I Savings Bonds offer rates that are linked to inflation and backed by the US government. You must hold them for at least a year. If you redeem them within 5 years there is a penalty of the last 3 months of interest. The annual purchase limit for electronic I bonds is $10,000 per Social Security Number, available online at TreasuryDirect.gov. You can also buy an additional $5,000 in paper I bonds using your tax refund with IRS Form 8888.

  • “I Bonds” bought between May 2022 and October 2022 will earn a 9.62% rate for the first six months. The rate of the subsequent 6-month period will be based on inflation again. More on Savings Bonds here.
  • In mid-October 2022, the CPI will be announced and you will have a short period where you will have a very close estimate of the rate for the next 12 months. I will have another post up at that time.
  • See below about EE Bonds as a potential long-term bond alternative.

Prepaid Cards with Attached Savings Accounts
A small subset of prepaid debit cards have an “attached” FDIC-insured savings account with exceptionally high interest rates. The negatives are that balances are severely capped, and there are many fees that you must be careful to avoid (lest they eat up your interest). There is a long list of previous offers that have already disappeared with little notice. I don’t personally recommend nor use any of these anymore, as I feel the work required and the fees charged if you mess up exceeds any small potential benefit.

  • Mango Money pays 6% APY on up to $2,500, if you manage to jump through several hoops. Requirements include $1,500+ in “signature” purchases and a minimum balance of $25.00 at the end of the month.
  • NetSpend Prepaid pays 5% APY on up to $1,000 but be warned that there is also a $5.95 monthly maintenance fee if you don’t maintain regular monthly activity.

Rewards checking accounts
These unique checking accounts pay above-average interest rates, but with unique risks. You have to jump through certain hoops which usually involve 10+ debit card purchases each cycle, a certain number of ACH/direct deposits, and/or a certain number of logins per month. If you make a mistake (or they judge that you did) you risk earning zero interest for that month. Some folks don’t mind the extra work and attention required, while others would rather not bother. Rates can also drop suddenly, leaving a “bait-and-switch” feeling.

  • Quontic Bank is offering 1.01% APY on balances up to $150,000. May be useful for those with high balances. You need to make 10 debit card point of sale transactions of $10 or more per statement cycle required to earn this rate.
  • The Bank of Denver pays 2.00% APY on up to $10,000 if you make 12 debit card purchases of $5+ each, receive only online statements, and make at least 1 ACH credit or debit transaction per statement cycle. If you meet those qualifications, you can also link a Kasasa savings account that pays 1.00% APY on up to $25k. Thanks to reader Bill for the updated info.
  • Presidential Bank pays 2.25% APY on balances between $500 and up to $25,000, if you maintain a $500+ direct deposit and at least 7 electronic withdrawals per month (ATM, POS, ACH and Billpay counts).
  • Evansville Teachers Federal Credit Union pays 3.30% APY on up to $20,000. You’ll need at least 15 debit transactions and other requirements every month.
  • Lake Michigan Credit Union pays 3.00% APY on up to $15,000. You’ll need at least 10 debit transactions and other requirements every month.
  • (I no longer recommend this credit union myself, but the rate is still good.) Lafayette Federal Credit Union is offering 2.02% APY on balances up to $25,000 with a $500 minimum monthly direct deposit to their checking account. No debit transaction requirement. They are also offering new members a $100 bonus with certain requirements. Anyone can join this credit union via partner organization ($10 one-time fee).
  • Find a locally-restricted rewards checking account at DepositAccounts.

Certificates of deposit (greater than 1 year)
CDs offer higher rates, but come with an early withdrawal penalty. By finding a bank CD with a reasonable early withdrawal penalty, you can enjoy higher rates but maintain access in a true emergency. Alternatively, consider building a CD ladder of different maturity lengths (ex. 1/2/3/4/5-years) such that you have access to part of the ladder each year, but your blended interest rate is higher than a savings account. When one CD matures, use that money to buy another 5-year CD to keep the ladder going. Some CDs also offer “add-ons” where you can deposit more funds if rates drop.

  • Department Of Commerce Federal Credit Union has a 5-year certificate at 3.05% APY. $500 minimum. 180 day interest penalty on early withdrawals. Anyone can join this credit union through a $5 membership in the American Consumer Council (ACC). Enter ACC membership number on the online application.
  • Live Oak Bank has a 5-year CD at 2.75% APY ($2,500 minimum) with an early withdrawal penalty of 180 days of interest.
  • KS StateBank has a 5-year CD at 2.70% APY ($500 min). Early withdrawal penalty is 18 months of interest.
  • You can buy certificates of deposit via the bond desks of Vanguard and Fidelity. You may need an account to see the rates. These “brokered CDs” offer FDIC insurance and easy laddering, but they don’t come with predictable early withdrawal penalties. Right now, I see a 5-year CD at 3.20% APY. Be wary of higher rates from callable CDs listed by Fidelity.

Longer-term Instruments
I’d use these with caution due to increased interest rate risk, but I still track them to see the rest of the current yield curve.

  • Willing to lock up your money for 10 years? You can buy long-term certificates of deposit via the bond desks of Vanguard and Fidelity. These “brokered CDs” offer FDIC insurance, but they don’t come with predictable early withdrawal penalties. You might find something that pays more than your other brokerage cash and Treasury options. Right now, I see a 10-year CD at 3.00% APY vs. 2.98% for a 10-year Treasury. Watch out for higher rates from callable CDs from Fidelity.
  • How about two decades? Series EE Savings Bonds are not indexed to inflation, but they have a unique guarantee that the value will double in value in 20 years, which equals a guaranteed return of 3.5% a year. However, if you don’t hold for that long, you’ll be stuck with the normal rate which is quite low (currently 0.10%). I view this as a huge early withdrawal penalty. But if holding for 20 years isn’t an issue, it can also serve as a hedge against prolonged deflation during that time. Purchase limit is $10,000 each calendar year for each Social Security Number. As of 5/9/2022, the 20-year Treasury Bond rate was 3.38%.

All rates were checked as of 5/10/2022.

Filed Under: Banking, Deals & Offers, Investing //

Savings I Bonds May 2022 Inflation Update: 9.62% Interest Rate!

Posted on May 3, 2022 // 45 Comments

May 2022 rate confirmed at 9.62%. Official press release. The variable inflation-indexed rate for I bonds bought from May 1, 2022 through October 31, 2022 will indeed be 9.62% as predicted. Every single I bond will earn this rate eventually for 6 months, depending on the initial purchase month. The fixed rate (real yield) is also 0% as predicted. Still a good deal.

See you again in mid-October for the next early prediction for November 2022.

Original post 4/12/22:

Inflation (and thus I Bonds) 🚀🚀🚀! Savings I Bonds are a unique, low-risk investment backed by the US Treasury that pay out a variable interest rate linked to inflation. With a holding period from 12 months to 30 years, you could own them as an alternative to bank certificates of deposit (they are liquid after 12 months) or bonds in your portfolio.

New inflation numbers were just announced at BLS.gov, which allows us to make an early prediction of the May 2022 savings bond rates a couple of weeks before the official announcement on the 1st. This also allows the opportunity to know exactly what a April 2022 savings bond purchase will yield over the next 12 months, instead of just 6 months. You can then compare this against a May 2022 purchase.

New inflation rate prediction. September 2021 CPI-U was 274.310. March 2022 CPI-U was 287.504, for a semi-annual increase of 4.81%. Using the official formula, the variable component of interest rate for the next 6 month cycle will be 9.62%. You add the fixed and variable rates to get the total interest rate. The fixed rate hasn’t been above 0.50% in over a decade, but if you have an older savings bond, your fixed rate may be up to 3.60%.

Tips on purchase and redemption. You can’t redeem until after 12 months of ownership, and any redemptions within 5 years incur an interest penalty of the last 3 months of interest. A simple “trick” with I-Bonds is that if you buy at the end of the month, you’ll still get all the interest for the entire month – same as if you bought it in the beginning of the month. It’s best to give yourself a few business days of buffer time. If you miss the cutoff, your effective purchase date will be bumped into the next month.

Buying in April 2022. If you buy before the end of April, the fixed rate portion of I-Bonds will be 0%. You will be guaranteed a total interest rate of 0.00 + 7.12 = 7.12% for the next 6 months. For the 6 months after that, the total rate will be 0.00 + 9.62 = 9.62%.

Let’s look at a worst-case scenario, where you hold for the minimum of one year and pay the 3-month interest penalty. If you theoretically buy on April 30th, 2022 and sell on April 1st, 2023, you’ll earn a ~6.51% annualized return for an 11-month holding period, for which the interest is also exempt from state income taxes. If you theoretically buy on April 30th, 2022 and sell on July 1, 2023, you’ll earn a ~7.17% annualized return for an 14-month holding period. Comparing with the best interest rates as of April 2022, you can see that this is much higher than a current top savings account rate or 12-month CD.

Buying in May 2022. If you buy in May 2022, you will get 9.62% plus a newly-set fixed rate for the first 6 months. The new fixed rate is officially unknown, but is loosely linked to the real yield of short-term TIPS, and is thus very, very, VERY likely to be 0%. Every six months after your purchase, your rate will adjust to your fixed rate (set at purchase) plus a variable rate based on inflation.

If you have an existing I-Bond, the rates reset every 6 months depending on your purchase month. Your bond rate = your specific fixed rate (based on purchase month, look it up here) + variable rate (total bond rate has a minimum floor of 0%). So if your fixed rate was 1%, you’ll be earning a 1.00 + 9.62 = 10.62% rate for six months.

Buy now or wait? Given that the current I bond rate is already much higher than the equivalent alternatives, I would personally buy in April to lock in the high rate for the longest possible time. Who knows what will happen on the next reset? I already purchased up to the limits first thing in January 2022. You are also getting a much better “deal” than with TIPS, as the fixed rate is currently negative with short-term TIPS.

Unique features. I have a separate post on reasons to own Series I Savings Bonds, including inflation protection, tax deferral, exemption from state income taxes, and educational tax benefits.

Over the years, I have accumulated a nice pile of I-Bonds and consider it part of the inflation-linked bond allocation inside my long-term investment portfolio. Right now, the inflation protection “insurance” is paying off with high yields and no principal risk.

Annual purchase limits. The annual purchase limit is now $10,000 in online I-bonds per Social Security Number. For a couple, that’s $20,000 per year. You can only buy online at TreasuryDirect.gov, after making sure you’re okay with their security protocols and user-friendliness. You can also buy an additional $5,000 in paper I bonds using your tax refund with IRS Form 8888. If you have children, you may be able to buy additional savings bonds by using a minor’s Social Security Number. TreasuryDirect also allows trust accounts to purchase savings bonds.

Note: Opening a TreasuryDirect account can sometimes be a hassle as they may ask for a medallion signature guarantee which requires a visit to a physical bank or credit union and snail mail. Don’t expect to be able to open an account in 5 minutes on your phone.

Bottom line. Savings I bonds are a unique, low-risk investment that are linked to inflation and only available to individual investors. Right now, they promise to pay out a higher fixed rate above inflation than TIPS. You can only purchase them online at TreasuryDirect.gov, with the exception of paper bonds via tax refund. For more background, see the rest of my posts on savings bonds.

[Image: 1950 Savings Bond poster from US Treasury – source]

Filed Under: Banking, Investing, Retirement, Savings Bonds //

Cash Rates Early Update: 5-Year CDs at 3% APY, 5-Year MYGA Rates at 3.65%

Posted on May 1, 2022 // 4 Comments

I’m going to wait a bit on my full May interest rate update, as I expect more rate changes early this week. Even the rates quoted below may become outdated quickly, but I wanted to point out certain rates at multi-year highs and also near the psychological 3% level. Here are a few examples as of 5/1/22:

  • Brokered CD rates: 3.05% APY for 5-year CDat Vanguard and Fidelity fixed income desks (non-callable, Capital One and Goldman).
  • Credit union CD rate: 3.03% APY for 5-year certificate at Department Of Commerce Federal Credit Union.
  • US Treasury Bonds: 2.97% yield to maturity at 5 years length, secondary market.
  • Fixed Annuity: 3.65% rate on 5-year MYGA from The Standard (A Rating) on 5/2/22 via Blueprint Income. Possibly as high as 3.85% with $100,000 at Stan the Annuity Man (varies by state). Learn more about MYGAs here and here.

I have no idea where rates will go from here. They may go much higher. 🤷 I haven’t decided when to lock in something, but I’m definitely paying attention.

Filed Under: Banking, Investing //

I Savings Bonds: Nearly 10% Yield + 10X More Popular!

Posted on April 24, 2022 // 16 Comments

Nothing like a 10% yield with no principal risk to attract more attention to a quiet little investment option. The WSJ has a new article What Are I Bonds? Everything You Need to Know to Earn Nearly 10% Interest as a follow-up to The Safe Investment That Will Soon Yield Almost 10% (paywall?). No groundbreaking discoveries, but you might find something useful as they are admittedly more complicated than a traditional bank savings account. Here’s an interesting stat of how TreasuryDirect is selling several billions of dollars more than in previous years:

Americans snatched up nearly $11 billion in I Bonds, which are inflation-adjusted U.S. savings bonds, over the past six months, compared with around $1.2 billion during the same period in 2020 and 2021, according to Treasury Department records. That figure will likely rise even higher on an expected jump in rates next month.

Another common question is to buy this week in April or wait until May. Here is another perspective:

I Bonds will be subject to at least one rate change in a 12-month period. Elliot Pepper, a financial planner in Baltimore, doesn’t know what the next rate after 9.6% will be. So, he’ll try to mitigate the risk that it will be lower than 7.12% by taking half of his annual limit and “locking in” the combined 7.12% and 9.6% and then buying the remaining $5,000 in late October, when he has more visibility about the next rate.

If the rate then is lower than 7.12%, Mr. Pepper said he would have been better off investing his $10,000 maximum before May. If the rate is higher than 7.12%, he would have been better off buying the bonds after May, he said.

My view remains that historically, a 7.12% inflation rate is much higher than average. So if you take a step back, your options are:

7.12% for 6 months + 9.62% for 6 months + ??? for 6 months

Or:

9.62% for 6 months + ??? for 6 months + ???? for 6 months

I’d rather lock in the 7.12% over an unknown number. However, if the new rate in October does end up being even higher, I will still eventually get that future ??? rate as a long-term holder of I bonds (it’ll just be shifted six months later). Finally, you get to start earning the interest a month earlier if bought in April. As I had the cash available in other low-interest vehicles, I saw no reason to wait. I’ve already maxed out for 2022 and 2021 (and 2020 and 2019…)

Filed Under: Banking, Deals & Offers //

Till Financial Review: Kid Banking App That Teaches Compound Interest

Posted on April 21, 2022 // 17 Comments

There are many apps in the “reloadable debit card for kids” category, where parents can transfer money into their account and kids can spend it. However, I have been looking for a better app that can illustrate the power of compound interest and deferred gratification. Till Financial allows the parent to incentivize savings via both custom matching and interest amounts. The idea is to provide them a safe place to fail and learn, such that they don’t have to learn it later through missed opportunities and credit card debt. Here are some important highlights followed by details about my favorite features:

  • No monthly fees. No premium tier exists, so not even requests to “upgrade”.
  • Child can be of any age. Family owner must be 18+.
  • Free virtual and optional physical Visa debit card.
  • Now supports both iOS and Android app.
  • Banking services provided by Coastal Community Bank, Member FDIC.
  • No interest paid.

Match each savings contribution. Parents can encourage transfers to savings by matching each transfer by a custom percentage. For example, if they move $10 from their Spend bucket to the Savings bucket, you might match another $5 or $10. Any transfers both in and out of savings must be approved by a parent/admin account.

Pay monthly “interest” on savings balances. Parents can also encourage savings accumulation by paying a custom “interest” rate. For example, you might pay them 5% or 10% monthly for a while and see if they notice how fast it can compound if they don’t touch it. 5% growth every month compounded for a year is +80% growth, i.e. $100 would turn into $180. 10% growth every month compounded for a year is +213% growth, i.e. $100 would turn into $313!

Automatic weekly allowance or one-time transfers. You set the allowance to “auto-pilot” once a week, or just give manually.

Save for a specific goal. Your child can set a goal (ex. $100 for Airpods) and then redirect their allowance, other income, or requested gifts from friends and family into that goal.

Tasks. You can create a menu of specific tasks along with specific payouts (ex. $25 for mowing the lawn.) Tasks can be made available daily, weekly, or on a one-time basis.

If it’s free, how does Till plan on making money? This quote from TechCrunch sums it up well:

Besides making money on interchange fees, Till aims to earn revenue by partnering with merchants to offer rewards to users. It also plans to earn referral fees by referring the teens to other financial institutions when they get older and have different needs.

“It’s not our intention to be your son or daughter’s forever bank. It’s our intention to be their first bank,” Burton said. “So, when they hit the age of majority, we’re actually giving them a high-five off of our platform and introducing them to maybe their first college loan or their first credit card.”

Does Till offer a sign-up bonus for new customers? Yes, if you apply at this link and enter my referral code JP8548 during sign-up, you will get $25 (now only $10?) once you set up an account, create a family, fund, and make one debit card purchase transaction. My cash bonus arrived without problem.

My kids are still on the younger side, so I have been using this mostly as a virtual piggy bank for my kids so far, as they can log into their account and see the (growing) balance. I expect to gradually allow them to handle money and take some responsibility for their spending and saving decisions.

Bottom line. If you are looking for an educational spending app for your kids, check out Till. This is not a “high interest” account, but more about showing them how compound interest and consistent savings adds up. Hopefully, they can use the app to learn deferred gratification in a real-world environment. There is currently a referral bonus for new customers.

Filed Under: Banking, Deals & Offers, Family //

Wells Fargo $1,500 New Business Checking Account Bonus (In-Branch Only)

Posted on April 11, 2022 //

(Update: Looks like Wells Fargo ended this promotion early. Hope those interested got the code while they could.)

wellsfargo_logoWells Fargo has a $1,500 bonus offer if you open a new business checking account in a physical branch with a special bonus code from this offer webpage. Thanks to reader Matt for the tip. Here are the bonus details:

  • Open a new, eligible business checking account at a Wells Fargo branch with a minimum opening deposit of $25 by 05/13/2022. You must provide the bonus offer code (generated via link above) to the banker at the time of account opening.
  • Have at least $5,000 ending daily balance in your new business checking account on the 30th calendar day and the 60th calendar day after account opening.
  • We will deposit the bonus into your new business checking account within 30 days after meeting all offer requirements.

Here is the full list of documents you will need to bring to the branch for each type of business (sole proprietorship, LLC, corporation, etc). If you are a sole proprietorship that does work using your legal first and last name and your SSS as Tax ID, there aren’t any additional documents beyond a driver’s license required.

More fine print:

You must open a new Initiate Business Checking®, Navigate Business Checking®, Optimize Business Checking® or Analyzed Business Checking account in order to be eligible for this bonus offer.

This offer is intended for new business checking customers only. You must use your bonus offer code at account opening when you apply for a new eligible Wells Fargo business checking account. For this offer, a new business checking customer is identified by the U.S. Taxpayer Identification Number for the business used to open the new business checking account.

You are not eligible for this offer if:
– You are a current owner of a Wells Fargo business checking account.
– You received a bonus for opening a Wells Fargo business checking account within the past 12 months.
– You are a Wells Fargo employee.

Bonus offer code can only be used once.

While this requires an physical branch visit, Wells Fargo does have nearly 5,000 branches nationwide (map locator) and this is a quite big bonus with relatively modest balance requirements.

Filed Under: Banking, Deals & Offers //

Best Interest Rates on Cash – April 2022 Update

Posted on April 6, 2022 // 6 Comments

Here’s my monthly roundup of the best interest rates on cash as of April 2022, roughly sorted from shortest to longest maturities (useful for both cash reserves and as possible bond substitutes). I look for lesser-known opportunities available to individuals while still maintaining FDIC insurance or equivalent. Check out my Ultimate Rate-Chaser Calculator to see how much extra interest you’d earn by moving money between accounts. Rates listed are available to everyone nationwide. Rates checked as of 4/6/2022.

Significant changes since last month: Short-term rates are moving up. Don’t overlook US Treasury bonds, as they are now relatively attractive in the 6-month to 5-year range, while CD rates are still lagging (but may catch up later). 7.12% Savings I Bonds still available if you haven’t done it yet. SoFi 1.25% APY and some short-term CD rate bumps from the banks. Deposit promos are another alternative.

Fintech accounts
Available only to individual investors, fintech companies often pay higher-than-market rates in order to achieve fast short-term growth (often using venture capital). “Fintech” is usually a software layer on top of a partner bank’s FDIC insurance.

  • 4% APY on $2,000/$6,000. Current offers 4% APY on up to $2,000 on each of their “savings pods”. Free users get 1 savings pod, while premium users get 3 savings pods. Potential promos include $50 bonus and “Premium free for life”. Please see my Current app review for details.
  • 3% APY on up to $100,000, but requires direct deposit and credit card spend. HM Bradley pays up to 3% APY if you open both a checking and credit card with them, and maintain $1,500 in total direct deposit each month and make $100 in credit card purchases each month. Please see my updated HM Bradley review for details.
  • 3% APY on 10% of direct deposits + 1% APY on $25,000. One Finance lets you earn 3% APY on “auto-save” deposits (up to 10% of your direct deposit, up to $1,000 per month). Separately, they also pay 1% APY on up to another $25,000 with direct deposit. New customer $50 bonus via referral. See my One Finance review.
  • 3% APY on up to $15,000, requires direct deposit and credit card transactions. Porte requires a one-time direct deposit of $1,000+ to open a savings account. Porte then requires $3,000 in direct deposits and 15 debit card purchases per quarter (average $1,000 direct deposit and 5 debit purchases per month) to receive 3% APY on up to $15,000. New customer bonus via referral. See my Porte review.
  • 1.20% APY on up to $50,000. You must maintain a $250 direct deposit each month for this balance cap, otherwise you’ll still earn 1.20% on up to $5,000. They also pay 6% on USDC stablecoin, but I avoid this as it is not FDIC-insured (and you can get higher rates elsewhere if you did want to hold USDC.) New customer $100 bonus via referral. See my OnJuno review.
  • 1.25% APY (no balance cap). SoFi is now offering 1.25% APY with no balance cap as of 4/5/22. You must maintain a direct deposit each month of any amount. Convenient if you already have a relationship with them. See $25 + $300 SoFi Money new account and deposit bonus.

High-yield savings accounts
Since the huge megabanks pay essentially no interest, I think every should have a separate, no-fee online savings account to accompany your existing checking account. The interest rates on savings accounts can drop at any time, so I list the top rates as well as competitive rates from banks with a history of competitive rates. Some banks will bait you with a temporary top rate and then lower the rates in the hopes that you are too lazy to leave.

  • T-Mobile Money is still at 1.00% APY with no minimum balance requirements. The main focus is on the 4% APY on your first $3,000 of balances as a qualifying T-mobile customer, but the lesser-known fact is that the 1% APY is available for everyone. Thanks to the readers who helped me understand this. Unfortunately, some readers have reported their applications being denied.
  • AdelFi (formerly ECCU) is offering new members 1.01% APY on up to $25,000 when you bundle a High-Yield Money Market Account & Basic Checking. (Existing members can get 0.75% APY.) To join this credit union, you must attest to their statement of faith.
  • There are several other established high-yield savings accounts at closer to 0.50% APY. Marcus by Goldman Sachs is on that list, and if you open a new account with a Marcus referral link (that’s mine), they will give you and the referrer a 1.00% APY for your first 3 months (a 0.50% boost). You can then extend this by referring others.

Short-term guaranteed rates (1 year and under)
A common question is what to do with a big pile of cash that you’re waiting to deploy shortly (plan to buy a house soon, just sold your house, just sold your business, legal settlement, inheritance). My usual advice is to keep things simple and take your time. If not a savings account, then put it in a flexible short-term CD under the FDIC limits until you have a plan.

  • No Penalty CDs offer a fixed interest rate that can never go down, but you can still take out your money (once) without any fees if you want to use it elsewhere. CFG Bank has a 13-month No Penalty CD at 0.85% APY with a $500 minimum deposit. Ally Bank has a 11-month No Penalty CD at 0.50% APY for all balance tiers. Marcus has a 13-month No Penalty CD at 0.65% APY with a $500 minimum deposit. You may wish to open multiple CDs in smaller increments for more flexibility.
  • Alternatively, Marcus has a 10-month CD at 1.10% APY and a 1-year Treasury Bond has a rate of about 1.76% (purchase at TreasuryDirect.gov or with brokerage account, details below).

Money market mutual funds + Ultra-short bond ETFs
Many brokerage firms that pay out very little interest on their default cash sweep funds (and keep the difference for themselves). Unfortunately, money market fund rates are very low across the board right now. Ultra-short bond funds are another possible alternative, but they are NOT FDIC-insured and may experience short-term losses at times. These numbers are just for reference, not a recommendation.

  • The default sweep option is the Vanguard Federal Money Market Fund which has an SEC yield of 0.19%.
  • Vanguard Ultra-Short-Term Bond Fund currently pays 1.45% SEC yield ($3,000 min) and 1.55% SEC Yield ($50,000 min). The average duration is ~1 year, so your principal may vary a little bit.
  • The PIMCO Enhanced Short Maturity Active Bond ETF (MINT) has a 1.36% SEC yield and the iShares Short Maturity Bond ETF (NEAR) has a 1.23% SEC yield while holding a portfolio of investment-grade bonds with an average duration of ~6 months.

Treasury Bills and Ultra-short Treasury ETFs
Another option is to buy individual Treasury bills which come in a variety of maturities from 4-weeks to 52-weeks. You can also invest in ETFs that hold a rotating basket of short-term Treasury Bills for you, while charging a small management fee for doing so. T-bill interest is exempt from state and local income taxes. Right now, this section isn’t very interesting as T-Bills are yielding close to zero!

  • You can build your own T-Bill ladder at TreasuryDirect.gov or via a brokerage account with a bond desk like Vanguard and Fidelity. Here are the current Treasury Bill rates. As of 4/6/2022, a new 4-week T-Bill had the equivalent of 0.19% annualized interest and a 52-week T-Bill had the equivalent of 1.76% annualized interest.
  • The Goldman Sachs Access Treasury 0-1 Year ETF (GBIL) has a 0.22% SEC yield and the SPDR Bloomberg Barclays 1-3 Month T-Bill ETF (BIL) has a 0.04% (!) SEC yield. GBIL appears to have a slightly longer average maturity than BIL.

US Savings Bonds
Series I Savings Bonds offer rates that are linked to inflation and backed by the US government. You must hold them for at least a year. If you redeem them within 5 years there is a penalty of the last 3 months of interest. The annual purchase limit for electronic I bonds is $10,000 per Social Security Number, available online at TreasuryDirect.gov. You can also buy an additional $5,000 in paper I bonds using your tax refund with IRS Form 8888.

  • “I Bonds” bought between November 2021 and April 2022 will earn a 7.12% rate for the first six months. The rate of the subsequent 6-month period will be based on inflation again. More on Savings Bonds here.
  • In mid-April 2022, the CPI will be announced and you will have a short period where you will have a very close estimate of the rate for the next 12 months. I will have another post up at that time.
  • See below about EE Bonds as a potential long-term bond alternative.

Prepaid Cards with Attached Savings Accounts
A small subset of prepaid debit cards have an “attached” FDIC-insured savings account with exceptionally high interest rates. The negatives are that balances are severely capped, and there are many fees that you must be careful to avoid (lest they eat up your interest). There is a long list of previous offers that have already disappeared with little notice. I don’t personally recommend nor use any of these anymore, as I feel the work required and risk of messing up exceeds any small potential benefit.

  • Mango Money pays 6% APY on up to $2,500, if you manage to jump through several hoops. Requirements include $1,500+ in “signature” purchases and a minimum balance of $25.00 at the end of the month.

Rewards checking accounts
These unique checking accounts pay above-average interest rates, but with unique risks. You have to jump through certain hoops which usually involve 10+ debit card purchases each cycle, a certain number of ACH/direct deposits, and/or a certain number of logins per month. If you make a mistake (or they judge that you did) you risk earning zero interest for that month. Some folks don’t mind the extra work and attention required, while others would rather not bother. Rates can also drop suddenly, leaving a “bait-and-switch” feeling.

  • Lafayette Federal Credit Union is offering 2.02% APY on balances up to $25,000 with a $500 minimum monthly direct deposit to their checking account. No debit transaction requirement. They are also offering new members a $100 bonus with certain requirements. Anyone can join this credit union via partner organization ($10 one-time fee).
  • Quontic Bank is offering 1.01% APY on balances up to $150,000. May be useful for those with high balances. You need to make 10 debit card point of sale transactions of $10 or more per statement cycle required to earn this rate.
  • The Bank of Denver pays 2.00% APY on up to $10,000 if you make 12 debit card purchases of $5+ each, receive only online statements, and make at least 1 ACH credit or debit transaction per statement cycle. If you meet those qualifications, you can also link a Kasasa savings account that pays 1.00% APY on up to $25k. Thanks to reader Bill for the updated info.
  • Presidential Bank pays 2.25% APY on balances between $500 and up to $25,000, if you maintain a $500+ direct deposit and at least 7 electronic withdrawals per month (ATM, POS, ACH and Billpay counts).
  • Evansville Teachers Federal Credit Union pays 3.30% APY on up to $20,000. You’ll need at least 15 debit transactions and other requirements every month.
  • Lake Michigan Credit Union pays 3.00% APY on up to $15,000. You’ll need at least 10 debit transactions and other requirements every month.
  • Find a locally-restricted rewards checking account at DepositAccounts.

Certificates of deposit (greater than 1 year)
CDs offer higher rates, but come with an early withdrawal penalty. By finding a bank CD with a reasonable early withdrawal penalty, you can enjoy higher rates but maintain access in a true emergency. Alternatively, consider building a CD ladder of different maturity lengths (ex. 1/2/3/4/5-years) such that you have access to part of the ladder each year, but your blended interest rate is higher than a savings account. When one CD matures, use that money to buy another 5-year CD to keep the ladder going. Some CDs also offer “add-ons” where you can deposit more funds if rates drop.

  • NASA Federal Credit Union has a special 49-month Share Certificate at 1.80% APY ($10,000 min of new funds). Early withdrawal penalty is 1 year of interest. They also have a 15-month special at 1.20% APY and 9-month at 0.90% APY.
    Anyone can join this credit union by joining the National Space Society (free). However, NASA FCU will perform a hard credit check as part of new member application.
  • KS StateBank has a 5-year CD at 2.05% APY ($500 min). Early withdrawal penalty is 18 months of interest.
  • You can buy certificates of deposit via the bond desks of Vanguard and Fidelity. You may need an account to see the rates. These “brokered CDs” offer FDIC insurance and easy laddering, but they don’t come with predictable early withdrawal penalties. Right now, I see a 5-year CD at 2.70% APY. Be wary of higher rates from callable CDs listed by Fidelity.

Longer-term Instruments
I’d use these with caution due to increased interest rate risk, but I still track them to see the rest of the current yield curve.

  • Willing to lock up your money for 10 years? You can buy long-term certificates of deposit via the bond desks of Vanguard and Fidelity. These “brokered CDs” offer FDIC insurance, but they don’t come with predictable early withdrawal penalties. You might find something that pays more than your other brokerage cash and Treasury options. Right now, I see a 10-year CD at 3.00% APY vs. 2.64% for a 10-year Treasury. Watch out for higher rates from callable CDs from Fidelity.
  • How about two decades? Series EE Savings Bonds are not indexed to inflation, but they have a unique guarantee that the value will double in value in 20 years, which equals a guaranteed return of 3.5% a year. However, if you don’t hold for that long, you’ll be stuck with the normal rate which is quite low (currently 0.10%). I view this as a huge early withdrawal penalty. But if holding for 20 years isn’t an issue, it can also serve as a hedge against prolonged deflation during that time. Purchase limit is $10,000 each calendar year for each Social Security Number. As of 4/6/2022, the 20-year Treasury Bond rate was 2.81%.

All rates were checked as of 4/6/2022.

Filed Under: Banking, Deals & Offers, Investing //

Marcus Bank CD Promo: 1.10% APY for 10-Month Term, Rising Rate Commentary

Posted on March 30, 2022 // 2 Comments

Rates are rising… slowly. Marcus Bank has a 10-month promo CD paying 1.10% APY ($500 min, early withdrawal penalty is 90 days of interest). Ally Bank has a 14-month promo CD paying 1.00% APY (No min, early withdrawal penalty is 60 days of interest). If you have a short-term window, these (sadly) are competitive rates. I figure I should mention them, although you can also get 1%+ APY from a liquid savings account if you know where to look.

Personally, I’m only keeping my cash in short-term lock-ups with high effective APYs like the deposit promos recently from CIT Bank (still live) and Live Oak Bank (probably too late if you haven’t started) and Marcus Bank (already expired).

Overall, I definitely don’t on locking in any 5-year CDs due to the mix of current low rates and impending possibility of higher rates soon. Inflation numbers are still elevated. However, I also don’t expect to see significantly higher rates on savings accounts right away. Banks tend to raise their rates on credit cards first and by a lot, and savings account last and by a little. Via Axios (notice the different scales!):

Filed Under: Banking, Deals & Offers //

Plaid Data Privacy $58M Class Action Settlement (Venmo, Robinhood, Chime, SoFi, Coinbase, Etc)

Posted on March 9, 2022 // 2 Comments

Many online banking, stock trading, crypto, and fintech apps use the Plaid service to provide easy funding via your existing bank accounts. The price of this convenience is that you are providing some very sensitive data to a small, private company. They have your bank login information and can see all your transaction data. (Visa was in an agreement to acquire Plaid for over $5 billion, but it was cancelled to due antitrust concerns.) A recent Plaid class action lawsuit alleges the following improper actions:

The allegations include that Plaid: (1) obtained more financial data than was needed by a user’s app, and (2) obtained log-in credentials (username and password) through its user interface, known as “Plaid Link,” which had the look and feel of the user’s own bank account login screen, when users were actually providing their login credentials directly to Plaid. Plaid denies these allegations and any wrongdoing and maintains that it adequately disclosed and maintained transparency about its practices to consumers.

(You may have gotten an e-mail about this as early as mid-January. Thanks to those who sent it in as well. I still managed to forget about it until writing a post about firewall bank accounts to avoid such data privacy concerns.)

If you connected your financial account(s) to a mobile or web-based app that has used Plaid between January 1, 2013 and November 19, 2021 in the United States, you may be eligible for a payment from this class action Settlement. This might include Venmo, Robinhood, Chime, SoFi, Coinbase, OnJuno, Lili, M1 Finance, or Blockfi just off the top of my head. I don’t have any special insights about the merits of this lawsuit, but the proposed settlement amount is for $58 million with the payout per claim being unknown. The settlement also requires Plaid to:

  • Delete certain data from Plaid systems;
  • Inform Class Members of their ability to use Plaid Portal to manage the connections made between their financial accounts and chosen applications using Plaid and delete data stored in Plaid’s systems;
  • Continue to include certain disclosures and features in Plaid’s standard Link flow;
  • Enhance disclosures about Plaid’s data collection practices, how Plaid uses data, and privacy controls Plaid has made available to uses in Plaid’s End User Privacy Policy;
  • Minimize the data that Plaid stores; and
  • Continue to host a dedicated webpage with detailed information about Plaid’s security practices.

The deadline to submit a claim is April 28, 2022.

Filed Under: Banking, Deals & Offers //
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