High Yield Online Savings Account

If you are looking for a high yield savings account, the best rates you will find are those of online savings accounts. The banks that offer such service and qualify for the "high yield online savings account" are Emigrant Direct and HSBC.

Until recently, there were about four banks in the high yield online savings account category, including Citi e-Savings, Emigrant Direct, ING Direct and HSBC. However, just a few days ago the Citi e-Savings dropped their yield down to 4.75% so they are no longer in line with the leaders. Unfortunately, ING Direct did the same, so Emigrant and HSBC are the current leaders in this pack.

Recently, HSBC announced that they’d offer a promotional interest rate of 6% for new funds until the end of April, giving you a little less than three months of interest earnings - not enough incentive for folks with existing accounts, because you lose yield if you move the funds around because of the lag. But it’s a good reason for people without accounts to open one and put their funds there. It is assumed that after the end of April, the yield will fall back to the 5.05% paid on their high yield online savings account.

The major players in the high yield savings are currently the following:

ING Direct and Virtual Bank offer sending you a new account referral and you can earn money for signing up. For ING, you’ll need to deposit $250 and you can get a quick $25, while the referrer gets $10. Virtual Bank, gives you $20 for signing up and another $20 for the referrer. Once you have an account, you can refer up to 25 people for ING and 50 for Virtual Bank. Moreove, after that you still have a high yield online savings account.

The high yield online savings account has some limitations, common to many savings accounts as, for example, a limit of six transfers to and from any one particular savings account. Also there is generally a nearly 5 days lag for moving funds. This lag is because the savings account generally doesn’t have an associated checking account, like you would normally, and so in order to access the funds you’d need to ACH it to another account  and the ACH process can take up to five business days. This doesn't apply Citi high yield online savings account because you can link it to a regular checking account and the transfer would be internal to Citi and immediate.

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