Looking for a high yield savings account? The combination WaMu free checking and high yield savings account undergoes a rate increase to 4.00% APY.
Important Update: Because of changes in WaMu’s recent situation (e.g. the buyout), I can no longer provide you with links to WaMu’s financial products. But feel free to review the other online bank accounts I list above as options for your savings. Also, please take note that the online banking landscape has changed significantly since we first published this post. Our discussion on high interest savings accounts may be more helpful to you.
It’s been pretty exciting (bordering on wild and not in a good way) tracking the markets and the banks these days. One of the latest updates I can provide you on the online banks we’ve been monitoring here is that Washington Mutual has now increased the interest rate of their WaMu free checking and savings account from 3.75% to 4.00%. In the span of a few months, the hike in APY has been from 3.30% to 4.00%, which is quite a noticeable jump.
I’ve been following the bank rates for a while, and all this time, WaMu has been leading the APY numbers with one of the highest interest rate offerings I’ve seen among online banks. Just to compare, here are some other online banks with their interest rates:
- The Ally Bank Online Savings Account offers 1.55% APY (Updated 11/06/09).
- The Dollar Savings Direct Account offers 1.60% APY.
- The E*Trade Bank Complete Savings Account
offers 0.50% APY.
- The WTDirect Savings Account will now give you a 1.51% APY for the first 60 days. After the first 60 days, you’ll need to retain a balance above $10,000 or your APY will be reduced to 0.50%.
- HSBC’s Online Savings Account
will earn you 1.35% APY.
- ING DIRECT’s Electric Orange Account
will earn you .25% to 1.55% variable APY.
- The Bank of Internet High Yield Savings Account offers 1.65% APY.
- The FNBO Direct Online Savings Account currently offers 1.50% APY.
As per Bankrate.com’s figures, WaMu’s rates are beating the average 6 month CD rate of 3.19% and average 1 year CD rate of 3.69%. And they now pretty much match the current average rate for a 5 year CD (4.16%)!
Please don’t take this as an endorsement of WaMu, but I’m here to report updates on financial products I’ve found of interest. This series of rate hikes tells me that WaMu wants to attract depositors to their fold by setting the bar and working to stay competitive in the marketplace. Keeping in mind that an account with any bank will be FDIC insured, I wonder whether it’s a good idea to pursue higher rates at banks that offer them, despite “exogenous factors”.
Free checking at 4.00% is an extremely attractive rate, but like with any other offer, it’s something to take into account as part of the bigger picture (which would include the account’s other features, the bank’s strength, and the state of the financial industry today). Of course, it goes without saying that we should always take note of the current financial climate as we make decisions about where to place our money.
What do you think? I’d be interested to know how high you’d want rates to go before you override inertia and think of switching or putting money into a particular bank regardless of current financial circumstances. How do you feel about these rate offerings in the midst of stock market instability and economic bailouts, and by financial institutions in the news?
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This is great news. I bank at WAMU and it was a big bummer to see the rates decline so quickly many months ago when all those rate cuts were hitting us. Now, with WAMU doing really badly in the market, they are raising rates to attract more money to keep their books in check. I certainly hope it works because I like have a high yield once again.
What’s nice about this is that your funds are purely liquid at the 4.00% rate. So surely, this gives you a lot of flexibility with your money even with the stuff going on in the financial industry. There’s a lot to be said about tying your money up in a CD at these rates when you can get it here with with easy access and redemption privileges — just as long as you keep within FDIC guidelines!
Which makes me ask the question — if these online banks offer such high yields, why even bother with the average short term CD? Goes to show we all need to shop around for the best returns.
The other side of the story of course, is the whole issue of WaMu’s health. They are offering the excellent rate for a good reason.
With the current financial climate I’m willing to be risky with stocks, but NOT with my checking and savings account.
I’ll wait a week or two and see if WaMu is “savable” – then I’ll consider switching. It feels like they’re piling it on so they have more liquid cash, so if they aren’t extended the credit they desire they can cover those overnight overages. Smart plan, but one I wouldn’t like to be part of.
With all things equal (aka not this week in the American economy) I have no problem spending twenty minutes to switch checking/savings accounts. Even if it was for an extra .5%
Very good points Jenny. It’s definitely prudent to see how the dust settles over the next few weeks. With the whole bailout plan unfolding from Pres. Bush’s lips today, I hope that the murkiness in our nation’s financial picture soon dissipates and we’ll move from “uncertain” to something more clearcut, whatever plans the “powers that be” decide to undertake.
There are other issues to consider here, of course, including what came out today: the downgrading of WaMu ratings.
Well, let’s see how this unfolds.
That’s a pretty good rate, but I’d be kind of hesitant to put my money with WaMu right now. It’s probably worth checking into local solutions as well. I found out yesterday that my credit union is currently offering 5.0% APY on checking account balances up to $50,000 if you meet certain (easy) requirements.
Cheers,
Ken
Wow, that’s a great rate Ken! If others can share their high rate sources, we would very much appreciate it!
Good post but that is definitely a tough question. Has anyone gone through the process of getting money out of a bank through the FDIC if the bank goes under? If that is an easy task, then I would have no problem about putting money there. I am with a risky bank now with Country Wide (Although hopefully their time has passed).
4.0% is a fantastic rate and better than the current 3% of my ING account. WAMU is covered by FDIC as well so the savings account should be secure. I don’t know if I would move both my savings and checking account over at this time, but it does look appealing. Thanks for the info.
The key is to keep it under FDIC limits. That way the only risk you’re opening yourself up to is if the bank fails you miss out on interest for a few days. As soon as I don’t have to worry about hard credit checks effecting my credit score I will be opening a WAMU checking and savings account, if it’s still standing.
Our dear WaMu,
why oh why did you do this to us? Okay some disappointment aside, I guess it’s best that you got bought out by your friend with the deeper pockets, J.P. Morgan.
At least your depositors will still have access to their funds in your care. In my mind we can probably consider your buyout as a “best case scenario” for a bank in your straits. So it’s a consolation that somebody was around to catch your fall. But still, I find it ironic how you’d advertise a rate increase on the week you decide to “fold” as an independent bank.
It may not matter as things will carry on as usual — except under a different name (that of the acquirer’s, J.P. Morgan) — although I expect that what customers and employees will experience from WaMu is the standard situation you’d see at an establishment that is undergoing transition and changes within its walls.
Until they get their act squared away, things can be “bureaucratically” slow. Or, we may be pleasantly surprised and things go smoothly…. we shall see.
But yeah, the good news is that depositors still get their money and are probably going to keep earning your stated rate. Correct me if I’m wrong…..anyone?
This is something we haven’t seen in a while, but I bet we will be seeing a lot more of in the near future. I’ve heard it called “death-spiral financing,” and its a process where a bank becomes so desperate for capital that it begins to offer higher and higher return rates that it ultimately can’t afford.
The more a bank needs the money – the more it costs.
The government can try to step in and make money cheaper, but this has the unintended consequences of driving up prices on food and energy and pushing more consumers to the brink of debt-default…
Of course, when the credit cards and mortgages default, the banks need more money.
Its a pretty vicious cycle with no clear end in sight. Even the big bailout could backfire in half a dozen ways.
It is funny how times change. I was looking on Google for the best savings accounts rates and I stumbled upon your article. I wish I could find rates like this again.