Guaranteed Rate Offers from Online Banks

We receive a fair share of comments at The Savings Investor regarding the promotional-rate money market accounts which many banks are offering. These type of accounts, which are typically only available to new banking customers, will guarantee a rate for a pre-set number of days. Everbank and AmTrust Direct are offering these promotional-rate money markets with a 90-day rate guarantee. In the case of the EverBank money market account, the yield drops to 4.51% from 5.51% after 90 days. Instead of complaining bitterly about the banks and their ability to drop the rate, perhaps we should consider this type of an account like a 90-day CD which needs to be reinvested at maturity. Investors have seen falling deposit rates since last summer, so the bank's guarantee in fact has saved investors from a reduction in rate which a typical money market account could have effected by the bank on any given day. Couple that with the fact these rates are well-above the national rate average then these deals should not be considered another cautionary tale of the banks ripping off their customers, but should be considered a great deal for the online bank investor.

Umbrella Bank has an introductory offer on their Savings account which guarantees the savings rate of 5.35% for the first 90 days the account is opened. The rate that is applied after 90 days is currently either 4.56% ($1-$24,999), 4.75% ($25,000-$74,999), or 4.93% ($75,000+). Again these tiered rates are excellent in comparision to rates across the country on bank deposits as well as other short-term investments in general. So while the bank's motivation is to keep their new customers in-house with good service and good deposit rates, the investor will always have the ability to switch to the next rate deal if they are not happy with the current bank. Perhaps suprising to many though, many consumers are finding their online bank more than satisfactory.

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