Online money markets

[ChuckF]

Six months ago, I got a subsidized (interest free until 6 months after graduation) student loan that I didn't really need, so I stuck it in a six-month CD. I kept it there just in case I didn't get funding for next year, in which case I would need it. Now that I have funding, I no longer need it, so the money is mine to earn interest on for another 18 months or so. The rate I got on the CD was pretty abysmal (3.44%), and I went to the bank today to see about rolling it over. The new rate was not much better (3.68%), so I'm looking for something else to do with the money.

I also have a moderately sized chunk of change sitting in a money market account earning 4.5%. So I'm looking for to consolidate these two accounts into one investment. Since I will have to pay off this student loan, I'm not looking for anything remotely risky.

I considered a conservative, bond-heavy mutual fund with no sales charges and no fees, but the 10-year performance on that was only 4.94% less 1.24% operating expenses, so that's basically a CD with risk. That's out. I'm looking around for other options, and I found that HSBC has an online money market account (http://www.hsbcdirect.com/1/2/1/offer?code=PPGB040000) where new deposits earn 6% APY for a month (big deal) and then 5.05% APY. ING Direct (http://home.ingdirect.com/products/products.asp?s=OrangeCD) has a 12 month CD with 5.1% APY. WAMU (http://www.wamu.com/personal/accountchoices/savings/wamuonlinecd/default.asp) has a 12-month CD rocking 5.4% APY. I need to decide if I'd rather have the liquidity of a money market or the better rate of a CD. It isn't as if this is a huge amount of money, but I would like to maximize return.

So, does anyone know of any better deals out there (at reputable institutions - no Haitian penny stocks!)? More importantly, has anyone done the online-only accounts - checking, money market or otherwise - before? I manage all of my accounts online now, but I can always go into a branch when necessary or to make deposits etc. How easy is it for you to get at your money?

[ms_ann_thrope]

Don't know about any particularly great deals, but I have accounts with two online-only institutions, ING and USAA (in addition to accounts with a "regular" brick-&-mortar bank).

As far as I am concerned, the only PITA with online banks is with depositing checks --- because there's no place to go to deposit them! USAA just introduced a new thing, though, where you scan in your checks from home to deposit them, which will be great; otherwise, the way you have to make deposits is to mail in your checks to the online bank, or else deposit your checks into your brick-&-mortar bank and then EFT the money to the online bank. Direct deposit, of course, eliminates this hassle, but direct deposit isn't available for everything.

Getting money "out" is easy, either through EFT back to the brick-&-mortar bank (which I do for larger amounts) or by using the online bank's debit/ATM card.

I like online banking very much for the higher interest rates, so that is where I keep the bulk of the household's finances. Like I mentioned, though, I also maintain "offline" accounts for local convenience, but with much smaller balances.

I vote for putting 20% of your nut into a money market, balance into a CD. Best of both worlds!

[Godwhacker]

E*trade has some CDs and even savings accounts at around 5%.

My take is that right now its hard to find anything mid term investment wise better than around 5% unless you want to gamble with stocks. If were talking a few years time, might consider a solid utility stock or big company with a high dividend yield - usually around 4% for the dividend, plus the potential for growth...or decline! A little riskier, although most solid utility companies have slow, steady growth.

[ChuckF]

I checked out what the local banks were offering, and I found a 30 day CD paying 4.97% (5.1% APY) at Fifth Third Bank and decided to go with that. Not quite as good as some of the online offers, but pretty good nonetheless, and I since it's short term (but only a one day grace period!) it's fairly flexible. I'll leave it sitting there for a few months until something better comes along.

The customer service was so great that I'm considering closing my checking account with Chase and moving across the street. I don't have a really good reason except that it smells really funny in the branch I usually visit. But when I called to close out my CD* they bumped up the limit on my credit card, so I'll stick with them for checking and credit cards I guess.

*The very polite customer service agent sped through the disclaimer and offered a helpful gloss of the release relating to provisions of the USA PATRIOT Act. "It's to make sure you're not a terrorist," she said. I wanted to say "Oh, no, I'm a Republican!" But those calls are recorded and I didn't want to get reported to Homeland Security for snark.

[Dingfod]

If snark warrants FBI attention, I must have a file a foot thick.

[viscousmemories]

Wow, complicated stuff. Thanks for reminding me how lucky I am to be poor.