In Strange Move, Emigrant Bank Launches DollarSavingsDirect

Yep . . . and the 16-month CD offer also dropped from 3.50 to 3.25%--before I could open account, and then transfer to funds to lock in 3.50%. Still, 3.25% is close to about the best I've found for CD rates for that duration. (I don't want to go the GMAC route . . .)

Re New Yorker, your strategy of keeping small amount is a good one. I do dislike numerous interest statements w/ small amounts to report on the 1040, but the "bait-and-switch" tactics of the banks require such strategies.

I wish I had joined DSD since August. I knew about them from here but somehow hesitated to go from ING to them. Anyway, I did it few days ago, but I guess the 4% ballon is popped now :) I hope it stays here at 3.5%

A qualification to my earlier remark.

1) I think DSD and Emigrant Direct (ED) both require a 1,000 minimum balance in MMAs. If so, then New Yorker's suggestion to maintain a small balance to keep an account open requires at least 1,000.

2) Emigrant Direct (ED) currently offers 2.40% APY. Acc to www.bankrate.com, there are about 21 banks offering a higher APY for high yield MMAs. Therefore, I see no reason to think I will need to revisit my ED accounts I closed. If/when rates go up, they will rise roughly proportionately at all these banks, so it is unlikely ED rates will rise higher and once again become more competitive than these other institutions.

3) My point is simply that some bank MM rates are more competitive than others, and that some banks rates are persistent laggers and therefore I don't need to maintain a small balance in those banks because I will not be retracing my steps. (INGDirect is another one, from my past experience).

4) Therefore, my strategy for investing in DSD is to lock in a 16-month CD to guarantee a 3.25% rate for that duration.

Looking forward to learning from others about their strategy to preserve capital.

With both ED & DSD you can keep your account open with as little as 1 CENT in the account. Neither will charge any penalty/fee; though the DSD APY will only be 1% if the balance is below $1,000.

Thanks everyone for the helpful feedback. I too was a bit disappointed to see that the rate dropped from 4 to 3.5 but am very pleased to see that it's still VERY competitive after checking comparable online accts.

Got into DSD just before the rate recently fell.
But, in anticipation as a hedge, also opened the Clear Sky savings with Chesapeake (very high rating).
Even though the initial 3.69/3.75% APY was slightly less than DSD's 4% APY, it offered a lock in until 3/31 which DSD did not.
So, I moved my initial DSD deposit (less $1,000 to get remaining interest) over to Clear Sky where it continues to earn 3.69/3.75% APY from the lock in.
Aside from the the poor rating of DSD, they do not allow outside ACH withdrawals (not originating from their website).
Otherwise, both banks are pretty decent.. customer service wise .

The web interface is a bit sparce but the site actually gives lots of feedback.

likes:

online 1099 form (so you can do your taxes a bit faster), daily tracking of interest (nice to help get a newbie in the family excited about saving). Online beneficiary form (still need to talk with CSR to change title of account!). You can set your own security questions instead of the standard favorite pet/color/city stuff.

gripes:

they ask you a random security question along with your password (makes you think for a few seconds :-) ) and they perform a nighly site meaintenance (hits around 11pm PST) where you can't see your account details which makes late night banking a bit annoying. Transfers are held for 5 days (not a huge issue if you're just saving stuff) - other online banks typically hold it for 2-3 days with the same transfer amount. Also, scheduled transfers tend to disappear for me on the day of the transfer before showing up in the history; this frekead me out the first time.

hints:

you can get your routing and account number via the deposit slip link in your account details screen (it's hidden right under your account title in blue). Also, in your 'my profile' screen, at the bottom you can opt out having your data used for marketing.

rate fell to 3.2% :(
well, I hope it doesn't fall more :)
I don't feel like going to other ones which may offer up to 3.5%. It is too much hassle every time you move things around.

The rate is dropping too fast. Hope they do not play the game too much.

If the rate continues to fall, I will be looking to move all my money out. Once banks start to play the game and lower the rate frequently I start shopping around. ING Direct was good for years and I kept my money with them till they started frequent rate cuts and were no longer competitive. A rule I usually live by is once I leave a bank, I'm gone for good. Nothing short of a free car will get me back.