A great thing about online savings accounts with no minimum balances is that theoretically you can just move all your money to the one currently paying the highest interest! (If it’s worth it.) But, from e-mails I have gotten and other reports on the web, you might want to leave some more spare change in those accounts. Specifically, Capital One 360 and Emigrant Direct have closed people’s accounts without warning for having balances of less than $1. On top of that, Emigrant doesn’t pay interest if your account is closed before the end of the month!

But they have no minimum balance you say. Yes, but in their fine prints they can also close your accounts at any time, for any reason. So I’d advise keeping $5+ in your accounts to avoid account closure and lost interest. This way, if the rate leaders change, your options stay open.

Perhaps inspired by Greenspan’s parting rate hike, the rate on the Presidential Internet Checking Plus (review) account has been raised to 4.25% APY and their Presidential Premier Savings (review) account is now at 4.37% APY. I consider my Prez account as my main checking due to their good rate (for a checking account) and flexibility, but their savings account has a $5,000 minimum. I was hoping they’d raise rates higher, especially on the savings end, but this is about what I expected.

HSBC Direct is now paying 4.80% APY on their OnlineSavings accounts. It’s not updated on their front page, but it is shown on their Rates page. For those with accounts, check out my Rate Chaser Calculator if you are at a lower rate right now and are thinking of transferring money. Use the HSBC transfer schedule for reference. For those without, don’t miss the $25 HSBC Direct bonus.

Update: It’s only until 4/30.

The rate wars continue! EmigrantDirect announced today that they raised their interest rates to 4.25% APY, matching HSBC Direct. For those with accounts, check out my Rate Chaser Calculator if you are at a lower rate right now and are thinking of transferring money. For those without, check out my $10-$20 EmigrantDirect Signup Bonus.

With the proliferation of new high-yield savings accounts and them leapfrogging each other’s rates, we come to the all-important question – Should I move my money to the higher rate? Well, with the data from my transfer-time experiment, I can better gauge the answer.

First, let’s find the formula for figuring out how long you must keep the money at the new higher rate account to counteract any interest lost during the transfer. I’m not the inventor of this simple formula, I just derived it right now with good ole’ pencil and paper.
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Here are the results of my bank transfer timing experiment to help estimate the lost interest when transfering money from one online bank to another. I scheduled transfers very late on Monday (~9pm Pacific) to and from various online banks and recorded when the money was taken out of the originating bank, and when the money was noted as deposited in the destination bank.

I would have posted the data earlier, but I’ve been trying to pore through all the fine print to figure out exactly when the banks stop and start paying interest during withdrawals and deposits. I’m still fuzzy on several things, but I just made some assumptions and ran with them for now. Here are the (I think reasonable) assumptions I made:
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Every time there is an issue with a bank, I have to go digging to find their fine print again. No more! I have tracked down the direct links to the Terms & Disclosures for each of the banks on my high-yield savings account comparison page – Capital One 360, Emigrant, HSBC, and VirtualBank. I’ve also highlighted some of the useful information from each. Hopefully it will serve as a good reference.

Capital One 360 – Terms & Disclosures
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So apparently from the comments on my last post, I am wrong about all banks taking 2 business days to do a transfer. I thought taking the money out on a Monday and depositing it on Wednesday was about normal for online savings accounts? All this time I’ve never paid attention. So it’s time to set up more experiments. Hey, my classes haven’t started yet, so why not.

I’m going to set up the following transfers on 9-10am Pacific on Monday, and see how long they take. The bolded bank is the one initiating the ACH push or pull.

HSBC -> Presidential Checking
HSBC Emigrant Direct -> Presidential
Emigrant Direct Capital One 360 -> Presidential
Capital One 360 VirtualBank -> Presidential
VirtualBank E*Trade Bank -> Presidential
E*Trade Bank CashEdge as the backend to their funds transfer service. This way we can see if the hold times is solely an HSBC thing, or a CashEdge-wide occurrence.

I must admit, after opening up my HSBC Direct account I went ahead and linked all of my numerous other bank accounts (except ING). Other than racking up over $6 in trial deposits, I envisioned having HSBC be my hub for all my interbank transfers. But then I heard some rumblings about how HSBC Direct is really slow with their online bank-to-bank transfers. During the last week, I’ve been shooting various amounts of money around my different accounts, and they have all been following the schedule that HSBC openly discloses. I couldn’t get a link to it as it only works when I sign in, but here is a screenshot of it (click to enlarge):

It’s true, it can take a while if you miss their 8pm Eastern deadline. For example, if you did it on late Wednesday night, it would count as a Thursday submission, and the money would be taken out of the initial account on Friday and wouldn’t be put in the receiving account until Tuesday. That’s almost a week, sort of, and you’d lose 4 days of interest.

But overall, it takes 2-3 business days, which I thought was about industry standard. Sunday through Tuesday are the best days to initiate transfers in order to minimize transfer time and lost interest. Next week I’ll try the other online banks and see how they compare.

I have redone my old Online Bank Comparison to drop Presidential Premier Savings and add HSBC Direct instead. This way, all four accounts compared have no minimum balance requirements, no monthly fees, and no other strings attached. That way, one can always move money away without issues. There may be other banks with higher rates, but also higher balance requirements to get those rates. The best value for each feature is bolded:

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I’ve blogged about Pentagon Federal Money Market Cerificates (CDs) before, including how to join, previously. PenFed has just announced new rates, and several of them are very competitive –

3 Year CD – 5.5% APY
5 Year CD – 5.75% APY
7 Year CD – 6.0% APY
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Another good question spurned by fellow rate-chasers’ comments. We now have a lot of competition in the high yield savings account arena. So, a good question asked is “When it worth it to move your money”? This is because there may be a gap in between money transfers from Bank A to Bank B where your money will not be earning any interest, which could negate much of the benefits of moving. (Another good question is which bank or entity is earning money off the float.) Things to consider:

1) When does Bank A stop paying interest?
2) How long does it take to for the transfer?
3) When does Bank B start paying interest on your deposit?
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