High-interest savings accounts

[Eeezee]

A friend told me that there were risks associated with higher-interest savings accounts (4.5%-5%), but he didn't know what the risks were.

What are the risks if any?

 

[T9D]

I think you have to keep it in there a certain amount of time and not touch it? Not sure but I know some are like that.

 

[fbrdphreak]

TMK, an account like ING is fine. It just takes a few days to transfer to your regular bank account if you need it.

 

[overst33r]

IIRC, I think you cant touch the money for a certain time period...and if you decide you need the money then you dont get the interest...

 

[thomsbrain]

no risks beyond bank foreclosure, and they are FDIC insured. you can remove your money at any time, though it takes a couple days to do so. the rates are variable, but they have been on their way up, not down, and you can always remove your money if you don't like the rate. really, i don't know how you could get any safer, since it is pretty much impossible to lose money if you keep less than the FDIC maximum in there.

edit, oh yeah, you generally can't take your money out for the first 10 days, but that's all. and you can always withdraw your interest, there's no waiting period or anything like that.

they are taxable, though. keep that in mind.

 

[randomlinh]

umm... possibly you can't get to your money quickly because a lot of those high interest savings are online only ?

 

[MrChad]

The only "risk" I can think of is an added delay in transferring funds from the savings account to a more liquid (e.g. checking) account. FDIC protection is a must, but AFAIK the major online savings accounts (ING, HSBC, EmigrantDirect) are all FDIC insured.

 

[Maximus96]

its like 10 days for ING or something. i'm thinking of opening an account with emigrant. how do they compare to ING? I like ING because they're simple and easy to use but i hate the holding period and the 3 days it takes to transfer.

 

[iversonyin]

There is virtually no risk on keeping a high interest saving account. FDIC insured your money up to $100,000 in any bank.

The only risk I can think of its interest rate risk, which is associate with Certificate of Deposit. If you tie your money up to 1 year and interest rate goes up, you got suckered into buying that CD because you can get same interest rate without tieing your money up for a certain period of time. (that's if interest rate goes up after you bought the CD)

 

[Strk]

Some of them have a minimum requirement, which can include a penalty if you go below it. As for the inability to touch the money, you folks are thinking of CDs.

 

[Maximus96]

ING has no minimum

 

[thomsbrain]

Originally posted by: Strk
Some of them have a minimum requirement, which can include a penalty if you go below it. As for the inability to touch the money, you folks are thinking of CDs.

there's no minimum for most of the big names.

 

[JS80]

if your multibillion dollar bank goes bad on your deposit, you have more to worry about than the couple thousand you have in your savings.

 

[cubby1223]

Originally posted by: Eeezee
A friend told me that there were risks associated with higher-interest savings accounts (4.5%-5%), but he didn't know what the risks were.

What are the risks if any?

The only risk is having to figure out what to do with all the free money you're receiving each month!

 

[Legend]

Why not money market, balanced mutual funds, bonds? They outperform 5%.

 

[Eeezee]

Originally posted by: tk109
I think you have to keep it in there a certain amount of time and not touch it? Not sure but I know some are like that.

You're thinking of a CD (Certificate of Deposit), which is definitely not what I'm interested in. I have a CD right now, but that was when I had no idea that there were high-interest savings accounts online. I can't touch about $3000 until October 18th and it's only making 2.71% versus the 5%ish that I could make elsewhere.

Thanks for the responses everyone, ATOT's got my back

I'm going to close out the CD on the very day that it matures and then drop all of that money in a higher-interest saving account. I could be making twice the interest and have the power to use the money whenever I want. I'm glad my CD was only for 6 months.

 

[Eeezee]

Originally posted by: Legend
Why not money market, balanced mutual funds, bonds? They outperform 5%.

I considered that too, but the stock market has been all over the place. In the long term I'd make money (mutual funds always do in the long term). I want to make sure I can withdraw the money as necessary but have a secure interest rate with a guarantee that the principal will never be damaged.

When I start making making more money I'll consider taking the step to mutual funds, since I'll be interest in long-term savings at that point. Right now I need short-term, low-risk savings.