Dropping Interest Rates on High-Yield Savings

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WhaleMan
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Dropping Interest Rates on High-Yield Savings

Post by WhaleMan » Sat Oct 05, 2019 6:51 am

Anyone else re-thinking were to park emergency funds with decreasing rates? My online high-yield savings has dropped from 2.3% to 1.9%.

Is this enough of a yield loss to switch into Vanguard money market with loss of FDIC insurance?

Or 12 month CD (or even no-penalty CD) with slight loss of liquidity?

I do not want to deal with reward checking and my emergency fund are large enough where I am not interested in teaser rates that are slightly higher for the first 15k of deposits or similar products.

Thanks for your thoughts.

Tdubs
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Re: Dropping Interest Rates on High-Yield Savings

Post by Tdubs » Sat Oct 05, 2019 6:57 am

Every account will drift lower, including Vanguard. I don't see the downside of moving to no-penalty CDs if liquidity is important to you. I parked as much as I could in no-penalty CDs while the rate was still 2.3% at Ally.

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RickBoglehead
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Re: Dropping Interest Rates on High-Yield Savings

Post by RickBoglehead » Sat Oct 05, 2019 7:05 am

Tdubs wrote:
Sat Oct 05, 2019 6:57 am
Every account will drift lower, including Vanguard. I don't see the downside of moving to no-penalty CDs if liquidity is important to you. I parked as much as I could in no-penalty CDs while the rate was still 2.3% at Ally.
Ditto. I broke mine into 7 CDs for liquidity.
Avid user of forums on variety of interests-financial, home brewing, F-150, PHEV, home repair, etc. Enjoy learning & passing on knowledge. It's PRINCIPAL, not PRINCIPLE. I ADVISE you to seek ADVICE.

Tdubs
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Re: Dropping Interest Rates on High-Yield Savings

Post by Tdubs » Sat Oct 05, 2019 7:08 am

RickBoglehead wrote:
Sat Oct 05, 2019 7:05 am
Tdubs wrote:
Sat Oct 05, 2019 6:57 am
Every account will drift lower, including Vanguard. I don't see the downside of moving to no-penalty CDs if liquidity is important to you. I parked as much as I could in no-penalty CDs while the rate was still 2.3% at Ally.
Ditto. I broke mine into 7 CDs for liquidity.
Good point, my FIL used three.

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Harry Livermore
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Re: Dropping Interest Rates on High-Yield Savings

Post by Harry Livermore » Sat Oct 05, 2019 7:08 am

I got an email from Marcus late yesterday that they are dropping from 2% to 1.9%. Not a big enough deal for me to care.
I have always left money on the table, so to speak, in the case of my emergency fund. FDIC insured, at the same bank that we have checking accounts, ready to deploy in 2 minutes. I have always had "opportunity loss" with that pile of money. I have been (trying to) add cash to our overall portfolio, to deploy in a general market downturn, and to have more ready cash at our disposal as our middle child prepares for college (next year we will have 2 in at once, and she has not chosen a school yet so I'm unsure where we stand on preparedness for her tuition) So I recently moved $50K to Marcus to capture the 1% bonus reward, and to do a little better than our bank's 0.05% savings rate. :|
Going from 2% to 1.9% doesn't even register on my turbulence scale.
We have some money in VG Prime MM Fund, both in my small company pension, and in our taxable account. That's just ballast and cash waiting to deploy. The money at Marcus is not meant for that. I have never been a big fan of CDs, even though nowadays banks will let you out of them with very little penalty compared with the 1980s and 1990s. But as we edge closer to retirement, I really want to bulk up our taxable portfolio and particularly cash savings, so I plan to start building CD ladders in about 5 years (we are probably 10 years away from retirement) I want my taxable income to be as low as possible once we are retired, so I want to be able to simply draw on savings; along those lines, we have some ROTH conversions to accomplish in the next 10 years as well.
Anyway, I'm rambling, and that's all outside of the scope of this thread. My answer is: I am not fazed, nor am I changing anything.
Cheers

Tdubs
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Re: Dropping Interest Rates on High-Yield Savings

Post by Tdubs » Sat Oct 05, 2019 7:18 am

Harry Livermore wrote:
Sat Oct 05, 2019 7:08 am
I got an email from Marcus late yesterday that they are dropping from 2% to 1.9%. Not a big enough deal for me to care.
I have always left money on the table, so to speak, in the case of my emergency fund. FDIC insured, at the same bank that we have checking accounts, ready to deploy in 2 minutes. I have always had "opportunity loss" with that pile of money. I have been (trying to) add cash to our overall portfolio, to deploy in a general market downturn, and to have more ready cash at our disposal as our middle child prepares for college (next year we will have 2 in at once, and she has not chosen a school yet so I'm unsure where we stand on preparedness for her tuition) So I recently moved $50K to Marcus to capture the 1% bonus reward, and to do a little better than our bank's 0.05% savings rate. :|
Going from 2% to 1.9% doesn't even register on my turbulence scale.
We have some money in VG Prime MM Fund, both in my small company pension, and in our taxable account. That's just ballast and cash waiting to deploy. The money at Marcus is not meant for that. I have never been a big fan of CDs, even though nowadays banks will let you out of them with very little penalty compared with the 1980s and 1990s. But as we edge closer to retirement, I really want to bulk up our taxable portfolio and particularly cash savings, so I plan to start building CD ladders in about 5 years (we are probably 10 years away from retirement) I want my taxable income to be as low as possible once we are retired, so I want to be able to simply draw on savings; along those lines, we have some ROTH conversions to accomplish in the next 10 years as well.
Anyway, I'm rambling, and that's all outside of the scope of this thread. My answer is: I am not fazed, nor am I changing anything.
Cheers
When I started with Ally, the rate was 2.3 percent for their regular account. Now it is 1.9 and seems likely to go lower. You sound like the frog in a pot of water coming to a boil.

Marcus has a 7-month no-penalty CD at 2.1%. Other than time spent on a few computer clicks, why not?

Topic Author
WhaleMan
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Re: Dropping Interest Rates on High-Yield Savings

Post by WhaleMan » Sat Oct 05, 2019 7:21 am

Thanks for your thoughts.

No penalty CD's are probably my ticket.

Interesting...Marcus current rates:
7 Month No-Penalty CD 2.10%
11 Month No-Penalty CD 1.90%
13 Month No-Penalty CD 1.85%

Tdubs
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Re: Dropping Interest Rates on High-Yield Savings

Post by Tdubs » Sat Oct 05, 2019 7:24 am

WhaleMan wrote:
Sat Oct 05, 2019 7:21 am
Thanks for your thoughts.

No penalty CD's are probably my ticket.

Interesting...Marcus current rates:
7 Month No-Penalty CD 2.10%
11 Month No-Penalty CD 1.90%
13 Month No-Penalty CD 1.85%
And Ally's 11 month is 2.05%, but higher minimum of $25k.

HomeStretch
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Re: Dropping Interest Rates on High-Yield Savings

Post by HomeStretch » Sat Oct 05, 2019 7:24 am

Tdubs wrote:
Sat Oct 05, 2019 7:18 am
Marcus has a 7-month no-penalty CD at 2.1%. Other than time spent on a few computer clicks, why not?
Good point. Too bad the Marcus promo only applies to their (now 1.9%) savings account which locks me into the savings account for a few more weeks.

7eight9
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Re: Dropping Interest Rates on High-Yield Savings

Post by 7eight9 » Sat Oct 05, 2019 9:29 am

Redneck Bank is still offering 2.40% on their Mega Money Market Account on the first $50,000. The rate is scheduled to drop to 2.25% on October 22.

Link --- https://redneck.bank/accounts/mega-money-market
I guess it all could be much worse. | They could be warming up my hearse.

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Leif
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Re: Dropping Interest Rates on High-Yield Savings

Post by Leif » Sat Oct 05, 2019 11:06 am

Synchrony has a 2.0% high yield savings if you want FDIC. Vanguard Prime MM is 1.99%, no FDIC, last I looked.

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Harry Livermore
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Re: Dropping Interest Rates on High-Yield Savings

Post by Harry Livermore » Sun Oct 06, 2019 12:23 pm

Tdubs wrote:
Sat Oct 05, 2019 7:18 am
Harry Livermore wrote:
Sat Oct 05, 2019 7:08 am
I got an email from Marcus late yesterday that they are dropping from 2% to 1.9%. Not a big enough deal for me to care.
I have always left money on the table, so to speak, in the case of my emergency fund. FDIC insured, at the same bank that we have checking accounts, ready to deploy in 2 minutes. I have always had "opportunity loss" with that pile of money. I have been (trying to) add cash to our overall portfolio, to deploy in a general market downturn, and to have more ready cash at our disposal as our middle child prepares for college (next year we will have 2 in at once, and she has not chosen a school yet so I'm unsure where we stand on preparedness for her tuition) So I recently moved $50K to Marcus to capture the 1% bonus reward, and to do a little better than our bank's 0.05% savings rate. :|
Going from 2% to 1.9% doesn't even register on my turbulence scale.
We have some money in VG Prime MM Fund, both in my small company pension, and in our taxable account. That's just ballast and cash waiting to deploy. The money at Marcus is not meant for that. I have never been a big fan of CDs, even though nowadays banks will let you out of them with very little penalty compared with the 1980s and 1990s. But as we edge closer to retirement, I really want to bulk up our taxable portfolio and particularly cash savings, so I plan to start building CD ladders in about 5 years (we are probably 10 years away from retirement) I want my taxable income to be as low as possible once we are retired, so I want to be able to simply draw on savings; along those lines, we have some ROTH conversions to accomplish in the next 10 years as well.
Anyway, I'm rambling, and that's all outside of the scope of this thread. My answer is: I am not fazed, nor am I changing anything.
Cheers
When I started with Ally, the rate was 2.3 percent for their regular account. Now it is 1.9 and seems likely to go lower. You sound like the frog in a pot of water coming to a boil.

Marcus has a 7-month no-penalty CD at 2.1%. Other than time spent on a few computer clicks, why not?
I might do that. I guess the point of all my rambling was that I have ALWAYS had "opportunity loss" with the money I keep in my EF. I have always been reluctant to put that cash into something that was not immediately available and FDIC insured. Sure, a "risk-free" CD for .2% more return sounds great. I'll look into it in the spirit of Bogle-headedness.
FWIW, using NerdWallet's interest rate calculator, I get the following results for 7 months at the 1.9% versus 2.1%:
1.9%= $50,556.81
2.1%= $50,615.73
Sure, I'd take an extra 60-ish dollars. Who wouldn't? Not even remotely life changing in any way though... but, as you point out, if it is just a mouse click away, seems like an easy $60 to nab. Thanks!
:sharebeer
Cheers
Last edited by Harry Livermore on Sun Oct 06, 2019 4:15 pm, edited 1 time in total.

anonsdca
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Re: Dropping Interest Rates on High-Yield Savings

Post by anonsdca » Sun Oct 06, 2019 12:34 pm

WhaleMan wrote:
Sat Oct 05, 2019 6:51 am
Anyone else re-thinking were to park emergency funds with decreasing rates? My online high-yield savings has dropped from 2.3% to 1.9%.

Is this enough of a yield loss to switch into Vanguard money market with loss of FDIC insurance?

Or 12 month CD (or even no-penalty CD) with slight loss of liquidity?

I do not want to deal with reward checking and my emergency fund are large enough where I am not interested in teaser rates that are slightly higher for the first 15k of deposits or similar products.

Thanks for your thoughts.
Comenity Bank is holding at 2.22% and FDIC. This is down from 2.49% tho.

yadbugee
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Re: Dropping Interest Rates on High-Yield Savings

Post by yadbugee » Sun Oct 06, 2019 10:47 pm

Look at discover bank CD...2.3% 1 year and more... I have been with them for last 2 years...no regrets

HEDGEFUNDIE
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Re: Dropping Interest Rates on High-Yield Savings

Post by HEDGEFUNDIE » Sun Oct 06, 2019 11:16 pm

4% at Orion FCU is keeping me from doing something rash like buying a ton of EE bonds.

Northern Flicker
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Re: Dropping Interest Rates on High-Yield Savings

Post by Northern Flicker » Mon Oct 07, 2019 12:57 am

The Orion 4% deal is attractive except for one thing. One of the requirements:
Perform at least 8 signature-based card transactions It's easy! When using your card, choose the credit option and bypass using your PIN.
So you need a debit card attached to your account and they let anyone in possession of the card drain money from your account without a pin. Seriously?
Index fund investor since 1987.

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wintermute
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Re: Dropping Interest Rates on High-Yield Savings

Post by wintermute » Mon Oct 07, 2019 1:35 am

Ibonds are paying .50% real. Max them for funds that can wait a year. Don't forget you can get them from your tax refund also.

HEDGEFUNDIE
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Re: Dropping Interest Rates on High-Yield Savings

Post by HEDGEFUNDIE » Mon Oct 07, 2019 1:55 am

Northern Flicker wrote:
Mon Oct 07, 2019 12:57 am
The Orion 4% deal is attractive except for one thing. One of the requirements:
Perform at least 8 signature-based card transactions It's easy! When using your card, choose the credit option and bypass using your PIN.
So you need a debit card attached to your account and they let anyone in possession of the card drain money from your account without a pin. Seriously?
Online transactions count as signature transactions.

I charge all of my recurring monthly bills on there; the card stays in my drawer.

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Tyler Aspect
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Re: Dropping Interest Rates on High-Yield Savings

Post by Tyler Aspect » Mon Oct 07, 2019 2:00 am

These high yield offers could be temporary. Or the credit union could be desperate for cash. Or these credit unions just want to give you free cash. Which one is more likely?
Past result does not predict future performance. Mentioned investments may lose money. Contents are presented "AS IS" and any implied suitability for a particular purpose are disclaimed.

HEDGEFUNDIE
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Re: Dropping Interest Rates on High-Yield Savings

Post by HEDGEFUNDIE » Mon Oct 07, 2019 2:11 am

Tyler Aspect wrote:
Mon Oct 07, 2019 2:00 am
These high yield offers could be temporary. Or the credit union could be desperate for cash. Or these credit unions just want to give you free cash. Which one is more likely?
The Orion offer has been available since the beginning of the year. 4% on 30k is $300 in extra interest so far just lying on the street. Don’t mind me if I choose to pick it up.

Hey, maybe I can use it to pay off my mortgage. Not! :twisted:

MikeG62
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Re: Dropping Interest Rates on High-Yield Savings

Post by MikeG62 » Mon Oct 07, 2019 7:01 am

RickBoglehead wrote:
Sat Oct 05, 2019 7:05 am
Tdubs wrote:
Sat Oct 05, 2019 6:57 am
Every account will drift lower, including Vanguard. I don't see the downside of moving to no-penalty CDs if liquidity is important to you. I parked as much as I could in no-penalty CDs while the rate was still 2.3% at Ally.
Ditto. I broke mine into 7 CDs for liquidity.
+1, (except I opened eight of them back in July/August). I've since broken two and moved the funds elsewhere. I've used NP CD's for a several years now and much more often than not I end up breaking them early for better investment opportunities.
Real Knowledge Comes Only From Experience

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RickBoglehead
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Re: Dropping Interest Rates on High-Yield Savings

Post by RickBoglehead » Mon Oct 07, 2019 7:20 am

MikeG62 wrote:
Mon Oct 07, 2019 7:01 am
RickBoglehead wrote:
Sat Oct 05, 2019 7:05 am
Tdubs wrote:
Sat Oct 05, 2019 6:57 am
Every account will drift lower, including Vanguard. I don't see the downside of moving to no-penalty CDs if liquidity is important to you. I parked as much as I could in no-penalty CDs while the rate was still 2.3% at Ally.
Ditto. I broke mine into 7 CDs for liquidity.
+1, (except I opened eight of them back in July/August). I've since broken two and moved the funds elsewhere. I've used NP CD's for a several years now and much more often than not I end up breaking them early for better investment opportunities.
I will be breaking at least 1 before year end to fund my solo 401K and IRAs for the year.
Avid user of forums on variety of interests-financial, home brewing, F-150, PHEV, home repair, etc. Enjoy learning & passing on knowledge. It's PRINCIPAL, not PRINCIPLE. I ADVISE you to seek ADVICE.

jharkin
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Re: Dropping Interest Rates on High-Yield Savings

Post by jharkin » Mon Oct 07, 2019 9:53 am

A couple years ago these accounts where all earning 0.5% at best... and had been for years. 10+ years ago they where generating 3-4%.

They will go up and they will go down. When one goes down they likely all will go down in time. Up to you if its worth moving money around every few months to chase a 10th...

rich126
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Re: Dropping Interest Rates on High-Yield Savings

Post by rich126 » Mon Oct 07, 2019 10:16 am

WhaleMan wrote:
Sat Oct 05, 2019 7:21 am
Thanks for your thoughts.

No penalty CD's are probably my ticket.

Interesting...Marcus current rates:
7 Month No-Penalty CD 2.10%
11 Month No-Penalty CD 1.90%
13 Month No-Penalty CD 1.85%
That is typical of most things right now. Longer term, except for extreme long term, you get less interest. Part of the whole inverted yield curve stuff going on. Some people are expecting rates to continue to fall.

Northern Flicker
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Re: Dropping Interest Rates on High-Yield Savings

Post by Northern Flicker » Mon Oct 07, 2019 12:47 pm

HEDGEFUNDIE wrote:
Mon Oct 07, 2019 1:55 am
Northern Flicker wrote:
Mon Oct 07, 2019 12:57 am
The Orion 4% deal is attractive except for one thing. One of the requirements:
Perform at least 8 signature-based card transactions It's easy! When using your card, choose the credit option and bypass using your PIN.
So you need a debit card attached to your account and they let anyone in possession of the card drain money from your account without a pin. Seriously?
Online transactions count as signature transactions.

I charge all of my recurring monthly bills on there; the card stays in my drawer.
I’m also not enamored with having a pinless debit card stored at vendor sites. Your liability is limited to $50/event by law but you will be out the funds while it gets sorted out if there is a breach.
Index fund investor since 1987.

anonsdca
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Re: Dropping Interest Rates on High-Yield Savings

Post by anonsdca » Sat Oct 12, 2019 11:20 am

anonsdca wrote:
Sun Oct 06, 2019 12:34 pm
WhaleMan wrote:
Sat Oct 05, 2019 6:51 am
Anyone else re-thinking were to park emergency funds with decreasing rates? My online high-yield savings has dropped from 2.3% to 1.9%.

Is this enough of a yield loss to switch into Vanguard money market with loss of FDIC insurance?

Or 12 month CD (or even no-penalty CD) with slight loss of liquidity?

I do not want to deal with reward checking and my emergency fund are large enough where I am not interested in teaser rates that are slightly higher for the first 15k of deposits or similar products.

Thanks for your thoughts.
Comenity Bank is holding at 2.22% and FDIC. This is down from 2.49% tho.
Just noticed Comenity Bank just lowered from 2.22 to 2.12% Darn, this is getting irritating.

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Munir
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Re: Dropping Interest Rates on High-Yield Savings

Post by Munir » Sat Oct 12, 2019 7:11 pm

Barclay's Online Savings it at 2%.

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CardinalRule
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Re: Dropping Interest Rates on High-Yield Savings

Post by CardinalRule » Sun Oct 13, 2019 1:16 am

Don't be surprised if the fixed rate on I-Bonds changes for the worse in November.
wintermute wrote:
Mon Oct 07, 2019 1:35 am
Ibonds are paying .50% real. Max them for funds that can wait a year. Don't forget you can get them from your tax refund also.

fujiters
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Re: Dropping Interest Rates on High-Yield Savings

Post by fujiters » Sun Oct 13, 2019 5:16 am

CardinalRule wrote:
Sun Oct 13, 2019 1:16 am
Don't be surprised if the fixed rate on I-Bonds changes for the worse in November.
wintermute wrote:
Mon Oct 07, 2019 1:35 am
Ibonds are paying .50% real. Max them for funds that can wait a year. Don't forget you can get them from your tax refund also.
Indeed. Expect it to change for the worse and plan to get your $10k/person/year in by the end of the month (if you're thinking of buying I bonds in 2019).
“The purpose of the margin of safety is to render the forecast unnecessary.” -Benjamin Graham

JackoC
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Re: Dropping Interest Rates on High-Yield Savings

Post by JackoC » Sun Oct 13, 2019 12:32 pm

Leif wrote:
Sat Oct 05, 2019 11:06 am
Synchrony has a 2.0% high yield savings if you want FDIC. Vanguard Prime MM is 1.99%, no FDIC, last I looked.
For us a 2.0% savings account pays 1.25% after tax at the margin. VMFXX at 1.91% is 1.29% after tax (~80% direct US govt), VUSXX at 1.92% is 1.33% after tax (100% US govt), VMMXX pays generally less after tax for us than those two besides being a bit more risk (more than 1/2 the short term $ debt of non-US banks).

VMFXX is the 'settlement fund' so we keep some there though a strategic cash reserve in VUSXX. A bank rate now needs to be ~2.12% to match VUSXX, at our fed/state tax rates. Others mentioned examples of ones which are higher than that, depositaccounts.com has a bunch, but the banks which are consistently *pretty* near the top (like Ally etc) are now lower
https://www.depositaccounts.com/savings/

Shifting accounts around between banks which don't have a long term commitment to be top rate payers has a time and effort cost, plus some of those offers have restrictions. I played that game when the Vang money funds yielded nearly 0% but the best bank accounts gave 1%. Maybe at some point it will become worth it to me again.

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Leif
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Re: Dropping Interest Rates on High-Yield Savings

Post by Leif » Sun Oct 13, 2019 1:01 pm

JackoC wrote:
Sun Oct 13, 2019 12:32 pm
Leif wrote:
Sat Oct 05, 2019 11:06 am
Synchrony has a 2.0% high yield savings if you want FDIC. Vanguard Prime MM is 1.99%, no FDIC, last I looked.
For us a 2.0% savings account pays 1.25% after tax at the margin. VMFXX at 1.91% is 1.29% after tax (~80% direct US govt), VUSXX at 1.92% is 1.33% after tax (100% US govt), VMMXX pays generally less after tax for us than those two besides being a bit more risk (more than 1/2 the short term $ debt of non-US banks).

VMFXX is the 'settlement fund' so we keep some there though a strategic cash reserve in VUSXX. A bank rate now needs to be ~2.12% to match VUSXX, at our fed/state tax rates. Others mentioned examples of ones which are higher than that, depositaccounts.com has a bunch, but the banks which are consistently *pretty* near the top (like Ally etc) are now lower
https://www.depositaccounts.com/savings/

Shifting accounts around between banks which don't have a long term commitment to be top rate payers has a time and effort cost, plus some of those offers have restrictions. I played that game when the Vang money funds yielded nearly 0% but the best bank accounts gave 1%. Maybe at some point it will become worth it to me again.
I agree that highly taxed individuals should look at their after tax return. For those in high tax states a Muni MM might be the right choice after tax. I keep my money market fund in VUSXX (Vanguard Treasury MM).

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Re: Dropping Interest Rates on High-Yield Savings

Post by brokendirtdart » Sun Oct 13, 2019 1:57 pm

WhaleMan wrote:
Sat Oct 05, 2019 6:51 am
Anyone else re-thinking were to park emergency funds with decreasing rates? My online high-yield savings has dropped from 2.3% to 1.9%.
My emergency savings and I have been on a long and winding road trip. It sat for years in USAA's savings earning nothing(this was easy as they are my primary bank), I wised up and went with Barclays online savings, eventually I consolidated to Vanguard's Prime Money Market, and finally I decided that I had a whole lot of money just sitting in "cash" and I dumped it into Vanguard Wellesley(VWIAX).

While Wellesley is "expensive" at 0.16%, and "risky" with an average standard deviation since 2001 of 5.7%, currently being active duty military well over 20 years gave me a bit of flexibility and a safety blanket for most risk.

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