Friday, March 05, 2010

Options for interest checking

Since my Fidelity brokerage account, which I have been using as my default "checking" account, is paying me only 0.01% interest, I have been looking around at what options are available for interest checking.

My default savings account is which pays 2.01% APY, but without checking. This is where I keep all cash that I will not need over the next month or so. Given the tentative nature of my income, I need to keep a fairly large pile of cash as liquid as possible since I never know whether I will be working in three or six months and then how long I might be without work, so even a six-month CD is out of reach for me at this time.

Here are the interest checking options I have identified:

  1. Normal bank checking accounts: typically either no interest or maybe 0.01%. Hah! Enough said.
  2. My TD Bank 50 Plus Checking account (if you are over 50 years old): 0.12% APY. As normal bank accounts (with local branches and ATM machines) go, this looks attractive (in a relative sense.)
  3. Schwab Bank: 0.60%. That's appealing, but limited branches. Does reimburse all ATM fees.
  4. EverBank: 0.61% and with a 3-month 2.25% bonus rate. Very limited branch deposits, but ATM reimbursement for minimum balance of $5,000. Rate is tiered and increases modestly above $10,000: 0.70% for $10K to $25K, 1.15% for $25K to $50K, 1.19% for $50K to $100K, 1.25% above $100K.
  5. Ally Bank (nee GMAC Bank): 1.15% for $15,000 balance, 0.50% for less. Reimburses all ATM fees, but no local branches for deposits.

There are other options that pay more than my TD Bank account, but I already have that account so that is why it is now my default option.

My typical usage is intended to be a place where I can deposit any incoming checks and keep the amount of cash I need every month to pay recurring expenses such as rent, credit cards, utilities, and modest ATM withdrawal. On a good month I could have more than $10K come in, but usually less and my monthly expenses are usually below $5,000, unless I have a major purchase, travel, estimated taxes, etc.

If I had $15K of monthly cash flow, Ally Bank would be more attractive, but if on an average month I would need to keep less than $5k in the checking account (transferring excess deposits to as soon as they cleared), Everbank looks more attractive.

But, since EverBank does not have branches for depositing checks, Schwab looks like it would come out ahead. But, it turns out that even with Schwab I would have to deposit checks in a Schwab brokerage account and then have to wait five days before I could transfer it to a linked Schwab Bank account.

So, maybe I will just deposit checks in my local TD Bank branch, wait five days and then ACH transfer to SmartyPig and EverBank (or Schwab), use the TD Bank ATMs, and write checks on EverBank/Schwab. I probably wouldn't bother writing checks on TD Bank, except when I needed to do so before the five days it would take to settle and transfer to the other bank.

I haven't made any final decisions yet, but this is where I am right now.

There might be options for limited check writing on online money market accounts that I need to look into.

-- Jack Krupansky


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