My Personal Finance Journey

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E*Trade's New $175 Promotion Is A Lousy Deal

Contributed by mm | February 24, 2005 4:56 PM PST

The easiest money I made last year is from the now-famous $175 E*Trade checking account promotion. By opening a new account with $100 or more, paying two bills online, and establishing a direct deposit of $1,000 or more a month for three months, E*Trade will credit $175 to your account. I took advantage of the offer twice (the second time using my wife's name) and happily saw my wallet $350 fatter.

Today, I received another invitation from E*Trade begging me to take another $175 by opening a E*TRADE Bank Money Market Plus account that offers "a premium yield up to 2.25% APY." (Offer link here.)

Another golden opportunity? Unfortunately, this time it's not.

Take a look at the fine prints:

"$175 bonus will be paid out in 2 intervals. $50 will be credited to your new E*TRADE Bank Money Market Plus account within 30 days of account being funded with a minimum balance of $100. The remainder of your bonus will be deposited into your account by October 5, 2005, as long as your account balance on October 1, 2005 is $15,000 or greater."

"Annual Percentage Yield (APY) of 2.25% as of 2/18/05 and applies to balances of $50,000 or more. Balances of $15,000 - $49,999 will earn 1.75% APY, balances of $1,000 - $14,999 will earn a 0.40% APY and balances of less than $1,000 will earn a 0.30% APY. A $100 minimum balance is required to open account and you must maintain a balance of $15,000 to avoid a $20 monthly fee on the E*TRADE Bank Money Market Plus account. Certain fees may reduce earnings on account. Yields subject to change daily."

If you don't have time to digest, here is the primer:

1. This account bears a tiered APY model, in which only balance exceeding $50,000 is entitled to the 2.25% APY. (0.30% APY for less than $1,000, 0.40% for $1,000 to $14,999, and 1.75% for $15,000 to $49,999.)

2. $15,000 minimal to avoid $20 monthly charge.

3. If you keep $15,000 to avoid the fee, in the tiered model, your effective APY is less than 0.40%.

4. You will only get the full bonus if you keep the account open until October 1, 2005 (which means 6-7 months if you open the account today.)

Now that you know you can get fee-free 3.00% APY from EmigrantDirect, if you choose to keep $15,000 at E*Trade bank for 6 months, you lose $15,000 * (3.00% - 0.40%) / 2 = $195 interest. So, instead of getting $175 fatter, you will actually be $20 worse off. What a lousy deal!

This Post Has Received 3 Comments. Share Your Opinions Too.


Scott Duffy Commented on February 24, 2005

The way I read the offer, if you keep $15,000 on deposit, you will get 1.75% interest on the full amount, not 0.40%. But of course, E-Trade has learned (from that actions of people like you) that they have to put heavy restrictions to keep the money on deposit for as long as possible.


Dan Lanseret Commented on March 29, 2005

I closed my etrade account today because I am fed up with all of their rising and multiplying fees. They total eat up and gains to your portfolio if you don't actively buy or sell every month. Even after I sold my stocks, they tried to pull another $40 quarterly fee out of the proceeds befor charging me $10 to send me my money. I will never use any online service to buy or sell anything again.


C. V. Hamner Commented on April 14, 2005

I closed my account on 3-29-2005 also. Today is April 14, 2005 and I am still awaiting my "overnight delivered check." These crooks hold your money as long as they possibly can--maybe forever. We are now waiting on the telephone to speak with a customer service rep again. I agree with Dan Lanseret above. I hope you've gotten your money by now.


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