Savings account help

dynacraze · #1 08-20-2007, 03:00 PM

I want to put 5K into a savings account and not into a CD because i dont want money tied up in case of emergency. A lot of people said go with INGDirect or HSBC Direct online since each gives 4.5 and 5.05 percent respectively. My quesiton is I always do those calculations with the months and percent using those CD calculators. Say, deposit 5000 dollars into a CD for 1 year at 5 percent interest would get me 250 dollars per year.

My question is does that work the same way for a savings account? If i put 5000 into INGDirect and basically my money will be around 4000-5000 dollars a year in there and 4.5 percent APY, would i generate about 200 dollars or so? I am getting confused because why would a CD pay basically just A BIT more than a savings account over a year since it has the restriction of not taking any money out during the time period or you will be penalized.

Or is it that INGDirect offers up to 4.5 percent if you deposit something like 50K and offers like 2 percent if you put only 5K. The reason is that my current savings back gives me 0.025 percent interest which is why I am really confused now.

Thanks.

gull · #2 08-20-2007, 04:24 PM

One reason is that CDs allow you lock in a rate. A year from now, savings interest rates may drop to 3%. If they do, then a CD that you locked in at 5% the year before will look much better. Even so, CD rates are very unimpressive to me and I simply use a savings account. Some people ladder CDs to maintain some liquidity while getting a slightly higher interest rate.

INGDirect pays 4.5% even on tiny balances. If you want a referral to INGDirect ($25 for you, $10 for me), PM me. I use INGDirect because of its high checking interest rate. Even though its savings is only 4.5%, which is unimpressive compared to other banks, its 4% interest checking is a stand out feature.

dynacraze · #3 08-20-2007, 05:25 PM

hey gull. I want to put in 5K. Do you calculate the 4.5 percent the same way as you would in a Certificate of Deposit Calculator? Say if i put 5K into INGDirect, i would make roughly 19 dollars a month? Is that correct? How would this be compounded? Is it daily,monthly or yearly?

Also, a lot of ppl say online banking is not safe because of phishing scams or whatnot. should i even worry about that? I have a bank of america checking account and have online banking and it has worked wonderfully. I also have a savings account at a local bank that pays 0.025 percent so i want to get my money out of there.

Jimbo232 · #4 08-20-2007, 08:02 PM

dynacraze,

My online savings account is at EmigrantDirect. They compound my interest daily, but only credit it to my account monthly. If you were simply making a 1 time deposit of $5,000 you'd earn (APY/365)*$5,000 each day. The interest earned would be credited to your account at then end of the month and then you'd make (APY/365)*($5,000 + Interest from Month 1) throughout the second month...

I'd imagine HSBC and ING calculate the interest on their savings account the same way, but you'd probably want to check their FAQ's to make sure.

emon87 · #5 08-20-2007, 08:22 PM

[ QUOTE ]
dynacraze,

My online savings account is at EmigrantDirect. They compound my interest daily, but only credit it to my account monthly. If you were simply making a 1 time deposit of $5,000 you'd earn (APY/365)*$5,000 each day. The interest earned would be credited to your account at then end of the month and then you'd make (APY/365)*($5,000 + Interest from Month 1) throughout the second month...

I'd imagine HSBC and ING calculate the interest on their savings account the same way, but you'd probably want to check their FAQ's to make sure.

[/ QUOTE ]

actually it would be your rate, not your APY. The APY is what you end up with after a year due to the compounding.

dynacraze · #6 08-20-2007, 08:25 PM

well i will be using hsbcdirect over ingdirect because it has a higher percentage. Can i transfer the 5K from my bank of america checking acct into the hsbcdirect account to do this OR do i have to open a hsbcdirect checking acct as well?

Shoe · #7 08-20-2007, 09:03 PM

[ QUOTE ]
well i will be using hsbcdirect over ingdirect because it has a higher percentage. Can i transfer the 5K from my bank of america checking acct into the hsbcdirect account to do this OR do i have to open a hsbcdirect checking acct as well?

[/ QUOTE ]

You can transfer from your BoA checking account to Emigrant Direct. It will take a few days to verify your account and few days to do transfers between the two accounts.

There is no minimum balance and the interest rate is the same whether you have 2k or 50k in there. I think the current rate is 5.05% but will probably be going down soon due to the rate cut the fed just made.

dynacraze · #8 08-20-2007, 09:29 PM

Would you say there is a big difference between Emigrant Direct and HSBC direct?

Jimbo232 · #9 08-20-2007, 09:31 PM

[ QUOTE ]
[ QUOTE ]
dynacraze,

My online savings account is at EmigrantDirect. They compound my interest daily, but only credit it to my account monthly. If you were simply making a 1 time deposit of $5,000 you'd earn (APY/365)*$5,000 each day. The interest earned would be credited to your account at then end of the month and then you'd make (APY/365)*($5,000 + Interest from Month 1) throughout the second month...

I'd imagine HSBC and ING calculate the interest on their savings account the same way, but you'd probably want to check their FAQ's to make sure.

[/ QUOTE ]

actually it would be your rate, not your APY. The APY is what you end up with after a year due to the compounding.

[/ QUOTE ]

Thanks for the correction - I guess I had APR and APY mixed up...

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Shoe · #10 08-20-2007, 11:27 PM

[ QUOTE ]
Would you say there is a big difference between Emigrant Direct and HSBC direct?

[/ QUOTE ]

The only difference between any of these account is their interest rate they pay. I'm not sure what HSBC is paying but if they are paying more than 5.05% i woud go with them, otherwise I would go with Emigrant.

All the sites mentioned in this thread are FDIC insured. If you go somewhere else, just make sure it is FDIC insured (unlike paypal -- avoid them like the plague for multiple reasons).

Just to note, the only thing to watch out for sure with FDIC insured is that you are only insured up to $100,000 per financial institution.