Best Online Savings Account Rates - January 8, 2025

Citibank and Chase Going Ga-Ga with Airline Frequent Flier Miles to Extend Credit to Consumers

Author: Ari Socolow on August 15, 2011

Less than a year ago many US consumer finance pundits like Suzie Orman and Dave Ramsey were suggesting that your opportunity to get free airline miles for opening a credit card would be ending soon. These pundits believed that banks that were giving out 25,000 miles for opening a credit card were spending much more than they could afford for the pleasure of giving consumers unsecured credit. It seemed the perks were a last vestige of the credit bubble waiting to be eliminated or at least cut back dramatically. They were not.

While airlines regularly carry miles on the accounting books at 1.4 to 2 cents a miles, it is widely believed they sell miles to their credit card partners for no less than 0.8 cents a mile. In other words, the 25,000 miles - enough for an free domestic ticket on many airlines - which you were getting for opening a credit card was believed to cost the bank or credit issuer $200. In 2010, $200 seemed like a steep price for Citibank, Bank of America or Chase to pay to issue a credit card to someone who could very well be just seeking a free trip.

It seemed like the credit card rewards programs had to be cut, but they actually exploded into mid-2011. Banks are now offering more and more miles or other incentives to draw consumers in.

The extension into new still more rewarding airline programs started last year when Chase introduced a new British Airways card that offered 100,000 miles with a new account if you spent over $1,000 in three months. The offer has since been modified, is occasionally withdrawn, and, unlike most offers, requires that you pay the annual fee in the first year ($95).

Chase quickly followed the British Airways offer with a United Airlines card that provides you with 40,000 miles, and a Southwest card that offered 50,000 points.

Not to be outdone, Citibank is offering two American Airlines cards that give you 75,000 American Airlines points each as soon as you have spent $1500 on one and $4000 on the other. These programs are discussed here.

American Express has even mildly increased the points that it is giving for new card members to its wildly successful Starwood program (30,000) and its Delta program (40,000 as soon as you have charged $1000).

If airline and hotel miles with a specific airline or hotel are not entirely your thing, Citibank and Chase also have reward program (Citibank Thank You rewards and Chase Sapphire rewards) that give you flexibility to use miles across several airlines or even get cash. This article discussing the Chase Sapphire Preferred program outlines an option to redeem your Sapphire reward points for a $500 as soon as you charge $3,000 to the card!

The major airlines have made it more difficult to redeem miles for flights on domestic routes at the lowest reward levels (and made miles less valuable), yet nobody believes that they are selling these miles to credit card partners for less than they were only one year ago. Citibank and Chase are giving away hundreds of dollars in frequent flier miles for each new account; in fact, Chase will even just give you $500 instead of the miles for opening their account. It seems highly inconsistent with the world that we are living in and it is difficult to understand how the banks are making these programs possible. It also seems like something that consumers should be taking advantage of (as long as they remain cautious of the potential adverse impact on their credit scores).

Income Generating Investments - Comparison Chart

Author: Ari Socolow

The chart below provides a quick comparison of several different asset classes that produce income for investors. It includes assets deemed to be almost totally safe, such as FDIC-insured savings and CD accounts and U.S. Treasury Securities, to assets that introduce more risk, such as dividend stocks.

INVESTMENT	Advantages	Disadvantages	Best Current Interest Rate*	Risk to Principal	Tax Attributes
Savings or money market accounts	Many accounts require only $1; very liquid.	No guarantee of rate stability if short term rates decline.	Rates as high as 5.35% APY in nationally available online accounts. Savings and money market rates from banks where you live may also be competitive.	For FDIC insured banks, the standard deposit insurance amount is $250,000 per depositor, per insured bank, for each account ownership category.	Fully taxable in the year of accrual.
Certificates of Deposit	Provides a guarantee of income should short term rates fall. Rates for longer term CDs are higher than savings accounts.	Not liquid for term of CD (without significant penalty).	APY rates may be higher than online savings accounts for terms of 1-year and longer. Top-yielding online 1-year CDs pay around 5.50% APY. The best national raes on 18-month and 2-year CDs are lower now. Local rates at banks and credit unions near you may be more competitive than online rates.	For FDIC insured banks, the standard deposit insurance amount is $250,000 per depositor, per insured bank, for each account ownership category.	Fully taxable in year of accrual.
Credit Union Accounts	May be operated similar to online savings accounts or CDs	Can be difficult to find a FCU for which you qualify with the products you want.	Depends on particular credit unions, but credit union savings rates are ordinarily higher than big banks, but lower than online savings rates. Credit Union CD rates, also called "time deposit" rates, are comparable to rates at online banks and local banks.	For NCUA insured credit unions the standard deposit insurance amount is $250,000 per depositor, per insured bank, for each account ownership category.	Fully taxable in year of accrual.
Fully Taxable Money Market Funds	Usually very liquid.	Lacked any competitiveness from 2020 to 2022, but rates have recovered over the course of 2023. May rise faster than savings rates in rising rate environments and fall more quickly when short-term rates fall.	Retail funds are generally around 5.20% to 5.30%. Main value is to ultra high net worth individuals, corporations, and not-for-profits that have asset bases too large to disperse to savings and money market accounts. Most individuals and couples can obtain higher rates and benefit from insurance in FDIC-insured banks and NCUA-insured credit unions.	Not insured. Although rare, principal invested may fall below par ("break the buck").	Fully taxable in the year of accrual.
Tax-Free Municipal Money Market Funds	Usually fairly liquid; most beneficial to those in the highest federal and state tax brackets.	Even if tax advantages are fully utilized by high earning individuals, the effective return is often below US Treasuries and fully taxable alternatives. May also involve credit risk.	Approximately 2.60% yield for funds geared to a 10-year duration. For investors in the highest federal tax bracket (35%), these may produce better fully-taxable equivalent returns than US Treasuries, US Treasury funds or agency bonds of equal duration.	Although very rare, principal invested may fall below par ("break the buck"). The US Treasury has backstopped this through guarantees on occasion (most notably during the financial crisis when it guaranteed that the principal deposited in qualifying 2a-7 funds as of September 19, 2008 would be insured for one year).	Fully tax free provided that you are a resident of the appropriate state for the entire year.
US Treasury Securities	Very liquid	May decline in value if interest rates rise	Differs according to duration. Compare Treasury rates. Currently, 3-month Treasury notes are yielding approximately 5.30%, 6-months are at 5.20% and one-year Treasuries are around 4.70%. Durations longer than 1-year may be less favorable than CDs, even for those in high state and local tax brackets.	Backed by the US Full Faith and Credit. Generally accepted to be he highest credit quality bonds.	Federally taxible in year that interest payments are made, and gains (losses) are reported at sale or maturity Not subject to state and local taxes.
Series I Bonds	Relatively high yields; strong protection against inflation even where short term interest rates do not rise	Absolutely not liquid for 1 year; penalty of 3 month interest forfeiture if redeemed in fewer than five years. Maximum purchase is $10,000 per calendar year per individual in electronic format (may also purchase up to $5,000 per year using a Federal tax refund).	5.27% for new bonds through April 30, 2024, reset bi-annually based on CPI-U thereafter. Impractical beause most individuals may not purchase more than $10,000 per year. May be redeemed after 1-year with a 3-month penalty, and after 5 years with no penalty.	Backed by US Full Faith and Credit.	Not subject to state and local taxes. Since interest accrues and is not paid out, federal tax is deferred until redemption.
Treasury Inflation Protected Securities	Like all US Treasuries (except I Bonds), very liquid; strong protection against inflation due to principal and interest adjustments according to CPI-U.	May lose value if interest rates rise and inflation (as reflected in the CPI-U) does not rise as quickly. These bonds lost tremendous value in 2022.	Principal and yield component adjusts according to inflation. 10-year TIPs are currently priced to yield a "real" yield (inflation adjusted yield) of approximately 1.90%.	No risk to principal if held to maturity; backed by US Full Faith and Credit; may trade at values significantly below par before maturity	Not subject to state and local taxes. Interest is fully taxable in the year in which it is paid. Phantom interest is taxable in the year in which the bond's principal appreciates in accordance with changes in CPI-U.
Agency Bonds	Bonds issued by the Federal Farm Credit Bank (FFCB), Federal Hom Loan Bank (FHLB) and Tennessee Valley Authority (TVA) are usually fairly liquid and like Treasuries are exempt from state and local taxes (other agency bonds may not be). Benefits are greater for those holding state and local tax-exempt agency bonds in highest tax brackets of highest taxing states. Callable agencies may offer a substantial yield premium over other short term securities.	Longer term agency bonds may lose value very quickly if interest rates rise and bonds are not called. If rates fall, the call feature will cause them not to appreciate. While the US government is perceived to have a moral obligation to avoid an agency default, this obligation has not been tested and agency bonds may have more credit risk than Treasuries.	Long-term callable bonds issued by Federal agencies, such as Federal Farm Credit Bank (FFCB), Federal Home Loan Bank (FHLB) or Tennessee Valley Authority (TVA), may be state and local tax free, like US Treasuries. Due to the call feature and the perceived additional credit risk in the issuing agencies, these may offer higher yields than are available on US Treasuries of similar maturities.	Even those these are issued by federal agencies, risk to principal may exist; may trade at values significantly below par before maturity.	Certain agency bonds are not taxable at the state and local level; interest is federally taxable in the year that it is paid.
Municipal Bonds, including Pre-Refunded Municipal Bonds	Yields often exceed after tax yields for taxable bonds and cash equivalents for investors in highest feeral and state tax brackets.	Even the shortest term bonds may lose value if interest rates rise. Unless tax advantages are fully utilized by high earning investors, these bonds will underperform fully taxable savings accounts and CDs.	Current average 10-year yields on AAA-rated bonds are trading around 2.90%, which is can deliver an after-tax equivalent just under 4.00% for high net worth investors in the highest federal and state tax brackets.	Default risk (risk to principal) exists (mitigated for pre-refunded municipal bonds); may trade at values significantly below par before maturity.	Usually not federally taxable, and usually state tax free to residents of the issuing state.
Dividend Stocks	High quality Dow Jones dividend stocks, such as Intel or Pfizer offer 2-3% yield. More risky Dow Stocks, like Verizon and Walgreens can offer yields above 5%.	Stocks price can drop and investors can lose principal. Dividends can be cut.	1-5% yield.	Investor can lose all of their principal.	Tax rate on qualified dividends is 15%. To be a qualified dividend, investor must "must have held the stock for more than 60 days during the 121-day period that begins 60 days before the ex-dividend date."

This chart may be shared and forwarded to others. It can be posted on other sites as long as the following link is included in the article or post as attribution: Comparison of Savings Accounts CDs, Treasuries, Munis, and Other Safe Investments – BestCashCow.

BankSimple Lands $10 Million in Additional Capital and Announces Several Key Partnerships

Author: Sol Nasisi on August 11, 2011

BankSimple, a stealth banking company that plans to launch by the end of the year, just announced $10 million in new funding from several prominent investors as well as some key partnerships. The company aims to simplify the banking experience via technology.

Not all is doom and gloom in the banking world. Even as the world's stock markets melt down and U.S. debt is downgraded by the S&P, companies are still innovating and laying the ground work for the next economic boom.

BankSimple, a stealth banking company that plans to launch by the end of the year, just announced $10 million in new funding from several prominent investors according to Techcrunch. This second funding round was led by IA Ventures and existing investors Shasta Ventures. That brings total funding to $13.1 million before the service has launched.

On its website BankSimple says it wants to reinvent personal banking by making it simple and providing a way to save and track money. It is not a bank but rather partners with charter banks and then provides the interfaces and customer experience to help consumers access their funds in these banks. Based on their website, they look like a combination of SmartyPig, Mint, and Perkstreet and I'm curious to see how they differentiate themsevles. Clearly, they aim to innovate around mobile and technology but some of the big banks are pretty good at that also - see Chase QuickDeposit. But still, any company that can raise the bar on the banking experience is a welcome addition.

In addition to their funding, they also announced partnerships with CBW Bank, the The Bancorp Bank, Visa, and Allpoint. I knew the Bancorp Bank sounded familiar because it's the same bank PerkStreet uses to hold customer funds. The Bancorp Bank's financials look pretty strong and its deposits and assets are growing quickly. I'm not sure what they'll be using CBW Bank for because it's tiny with only $7 million in assets but at least their financials also look okay.

It's nice to see that even as the traditional banks are facing stiff heawinds (mostly of their own making) innovation is still happening in the banking and financial space.

Best Online Savings & Money Market Account Rates 2025

Best Online Savings & Money Market Account Rates

Recent Articles

Citibank and Chase Going Ga-Ga with Airline Frequent Flier Miles to Extend Credit to Consumers

Income Generating Investments - Comparison Chart

BankSimple Lands $10 Million in Additional Capital and Announces Several Key Partnerships