High Yield Savings Accounts

[DavidI]

I am researching High Yield Savings Accounts and would like input from those of you who have experience. I am leaning toward American Express. Please educate me, David

[Paul T]

I don’t have direct experience, but looks like they pay 4.25%? Why not just buy treasuries and ladder over different maturities depending on your liquidity needs?

[wdfifteen]

I used Marcus and American Express as the funding and payment source for Treasury Bills. Marcus had a problem of some sort, they kept reversing transfers to other banks, started refusing to release funds to Treasury for T-bill purchases, and stopped accepting payments from matured T-bills. Treasury froze my account with them.
That’s a long winded way of saying stay the hell away from Marcus.
I’ve had no problem with American Express. I keep money for most of my bill-paying needs at American Express and use that account for all my transactions with Treasury because my local bank pays .6% while Amex pays 4.25%.

[aschen]

I am not sophisticated enough to know the difference between high yield savings and money market funds, but I have been parking some money in the later for a bit.

Using fidelity SPRXX and a fe others its currently paying a bit over 5% and was near 6 not too long ago. Am I dumb for using this instead of a traditional savings?

[wdfifteen]

Originally Posted by aschen

Am I dumb for using this instead of a traditional savings?

No. Traditional Savings accounts aren’t great investments. They don’t pay a lot because the depositors can take the money out of their account at any time.
My bank pays .6% on its savings accounts.
High Yield savings are a different animal. I don’t know how they operate because they have even fewer restrictions on the number of transactions per month than traditional accounts.
If you expect to need the money in the foreseeable future a High Yield account is a good way to go.

[pwd72s]

Originally Posted by Paul T

I don’t have direct experience, but looks like they pay 4.25%? Why not just buy treasuries and ladder over different maturities depending on your liquidity needs?

Good suggestion. An added incentive for David is that interest earned on treasures is exempt from state income tax.

[rfuerst911sc]

I have a traditional savings account with UFB Direct that pays 5.25 % . Comes with an ATM card for easy withdrawals . It's FDIC insured and I have been using it for about 2 years now . My local bank only pays like .25 % so I use my local bank to do transfers to and from the online account . I have nothing negative to say about this online bank savings account .

[Chocaholic]

Been happy with Marcus. A few CD’s and high yield savings. I don’t do a lot of transactions though. The transfers I’ve done, in both directions, have been flawless. FDIC insured and the online subsidiary of Goldman Sachs. Had a UFB account for a while but had some frustrating transfer issues with them. On two occasions transfers simply didn’t happen...just a pop-up notice that “transfer failed”...and only when transferring out of UFB.

[A930Rocket]

Originally Posted by rfuerst911sc

I have a traditional savings account with UFB Direct that pays 5.25 % . Comes with an ATM card for easy withdrawals . It's FDIC insured and I have been using it for about 2 years now . My local bank only pays like .25 % so I use my local bank to do transfers to and from the online account . I have nothing negative to say about this online bank savings account .

I just opened up a savings account at UFB Direct paying the 5.25%. I just inherited some money from my parents and have it in my regular savings account at BOA, but will probably move it over to UFB until I decide what to do with it.

[wildthing]

I have Marcus and CapitalOne. There are other institutions that provide higher rates, but I went with the bigger ones that are less likely to collapse.

[Por_sha911]

Avoid AmEX!
I had CD's and a High Yield Savings with them. Unfortunately I didn't read the details and got screwed on fees and conditions. What they did is legal but they charged an huge early closure fee on my CDs (triple of what my bank or Discover charges). I also had to jump through hoops for them to let me close out my Savings. My fault for not doing a proper comparison.
I found Discover to have great rates and far easier to work with.

[G50]

CIT has a 5% savings account. No catches, withdraw at any time etc.

[vonsmog]

I am getting 5.24% from CFG bank online savings acct. and 5% from a local bank here in town. I asked about 5 banks here and had two say they would be willing to give 5%. But you had to ask for it, and be willing to put in a larger amount into the acct.

[fintstone]

I am getting 5.4% on 13-week Treasury Bills (which is about as safe as you can get). It is easy to do. It is all done online. They draw the money directly from my checking account and deposit the fund directly when they mature (unless I choose to reinvest). There are no fees. There are no state or local taxes on the return. They are very flexible as you can purchase the amount you want from $100 to $10M. Like others mentioned, I ladder them so that up to a quarter of my money is available every month.

[LWJ]

^^^Hey Fint!

Just dial up the US Treasury website? This makes perfect sense.

I have an account with a Uber large bank that is something North of 5%. But T bills are better. No tax!

[fintstone]

Yep..

https://www.treasurydirect.gov/

You can buy U.S. savings bonds there the same way.

Do a search OT, we have discussed these at length here a couple times recently. I really like this as I almost feel like a collector (As I grow my collection of T-bills).

I usually buy mine in $10K Bills for flexibility. For example, if you had $120K to invest...you could ladder 4 $10K 13-week bills in June, 4 in July, and 4 in August. Each actually costs around $9867.17 and matures at $10K. In September the first 4 mature. If you have decided to reinvest, then you can buy 4 more (or 3 or two)...each at the approx $9867.17 amount. Any that you do not reinvest put $10K into your checking account. If you reinvest all 4, just the interest goes into your account. About $135 each (about $540). The same the next month. As long as you keep reinvesting (and rates do not drop much), you get the approx. $540 each month. When I accumulate much money in my account, I just buy another. I treat it like a savings account (And don't keep much cash on hand). I used to keep a big emergency fund, but now I just keep most of my money in the T-Bill account (with the nice return) and figure my credit card will get me by for an emergency until the next month when I can choose to not to reinvest a bill or two.

[wdfifteen]

Originally Posted by wdfifteen

High Yield savings are a different animal. I don’t know how they operate because they have even fewer restrictions on the number of transactions per month than traditional accounts.

I got curious about this and did some research. Apparently NO bank has been required to limit withdrawals to 6 per month since April 2020. The rule (“regulation D”) is still in place but can be ignored at the bank’s discretion. Some banks, including my local bank, continue to enforce the rule.
Just something else to be aware of when choosing your bank.

[DavidI]

Thank you everyone! I like the idea of Treasury Bills and had not considered that before. Looks like I have some research ahead of me.

You guys are awesome!

[Cdnone1]

I have used Amex for a high yield saving account for years. I have never had a single problem and the transactions are fast and effortless

[wdfifteen]

These are the steps I've taken to start investing in T-bills.

1.Get a savings or checking account at a local bank. (you probably have one already)
2.Set up a high yield savings account at one of the big banks and link it to that account. (most HYS banks require you to fund the account by ACH or wire transfer from another institution - hence step one)
3.Use the HYS to fund T-bills.

The reasoning here is it can take several days from the time you order a T-bill to the time it is actually funded. I don't want my money sitting in a .6% savings while waiting for the Treasury to fund my T-bills when it could be earning 4.5%. Also, MY local bank limits the number of withdrawals per month to 6. You have to designate a place for the money to go when a T-bill matures, or when the interest is paid if you do a renewal. You don't want it going to a low yield savings account if there is any lag time between when the money is deposited it and when you use it for another purpose. You can, of course, have it sent to a checking account if you're going to spend the money right away.
Another tip is I don't have T-bill denominated in the same amounts. Say I have $29,000 to ladder. I buy one $9000 T-bill, one $10,000, and one $11,000. It's not necessary, but this way I can easily track the individual streams of money through renewals and redemptions.