My Personal Finance Journey

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VirtualBank Fought Back, Yielding 3.05% Now

Contributed by mm | April 8, 2005 1:29 PM PST

The news: in response to ING Direct's offensive move, VirtualBank raised APY of its eMoney Market account to 3.05%, an inch higher than ING Direct's 3.00% APY. To be exact, the 3.05% APY is awarded to accounts with a balance less than $10,000 balance. Anything above, the slightly lower 3.00% APY applies. Gee ... it is a good incentive to deposit less money there.

I admit it becomes pretty boring to following the price war of money market/saving accounts now. Like comparison shopping for the cheapest gas nearby, it does not take long to figure out where you can consistently get competitive price/rates. In this game, you might want to stick to one of the big names like ING Direct (3.00% APY), VirtualBank, or Emigrant Direct.

Between VirtualBank and ING Direct, it probably does not make much sense to chase the highest yield possible, with the understanding that they will always stay competitive compared to each other. For example, if you follow ING Direct's Tuesday's hike to move your VirtualBank balance to ING Direct, you might feel sorry today now that VirtualBank matches and beats the yield. After all, you will lose 5-7 days of interest each time you change horse, and these 5-7 days cost you about $5 for every $10,000 in lost interest.

Similarly, it does not make much sense to move from ING Direct to VirtualBank even with today's news. If the current yield gap of 0.05% stays, it will take 300 days for you to make up the loss of 5 days interest at 3.00% APY during the transfer. You can probably expect at least 10 individual rate changes during these 300 days.

This Post Has Received 7 Comments. Share Your Opinions Too.


Nathan Commented on April 14, 2005

I would argue it makes more sense to swith from VirtualBack to ING or Emigrant now rather than waiting. If you wait until the $10000 cap i reached, you'll be losing 5 days of interest on $10000 rather than 5 days of interest on whatever you have now. Be weary of places that punish you with lower rates for letting them borrow more of your money.


Stacy Commented on April 17, 2005

Why not just forgoe them both and get a Capital One Money Market Account with an APY of 3.15%.


Matt Commented on May 21, 2005

Two things I'm curious about:

First, I was wondering how you figure (literally) the 5-7 days of lost interest? It takes that long to transfer from one account to the other and while in this limbo no interest from either bank? What if you could move directly from bank to bank (no checking acct stopover), then you would lose nothing? In other words interest accrues from the day it leaves one account and begins when it arrives in the other, right? So why 5-7 days? Genuinely curious.

Second, why no mention of GMAC bank? The have 3.10% (which not as good as Cap1's 3.15% or EDB's 3.25%) but their website is MUCH better (more flexible, faster, more reliable) and they consistently offer the best short-term CD terms I've seen from BankRate.com. For both these reasons I'm more inclined to park my savings with them over .05 or .15%. I think I come ahead with even the rate on 6-month CDs from GMAC.

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