DollarSavingsDirect's savings rate finally succumbed to gravity as the bank cut its rate from 4% APY to 3.5% APY. That rate is still significantly above the BestCashCow savings rate average of 2.99% APY.
As the graph below shows, DollarSavingsDirect bucked the decrease in overall rates since mid-October. Even though it has dropped its rate by half a percentage points, it's still well above the average of the top bank savings rates in the US and is now third on the BestCashCow rate tables.
Will it stay at the top of the rate tables? History suggests it might not. DollarSavingsDirect was started by Emigrant Bank, the parent of another online bank EmigrantDirect.com. As we discussed in an earlier article on the launch of DollarSavings, it was odd that the company started another online brand. The motive seemed to be a desire to not have to reprice the rates of all of the deposit money sitting in EmigrantDirect. The biggest difference between the two online divisions other than rate is the $1,000 minimum balance requirement for DollarSavingsDirect. Emigrant Direct as a $1 minimum balance.
Whether DollarSavingsDirect cuts its rate further depends on its need for deposits and the competitive environment. Several other banks that offer savings rates include Clear Sky Accounts at 3.75% APY, Bank of Internet at 3.51% APY, and CNB Bank Direct at 3.5% APY.
Time will tell if DollarSavings remains competitive but as we've seen in the past, when one bank decides to cut rates, other banks are ready to move up to the top.
Etrade is offering $25 to open a new online savings account and fund it with $1. The $1 minimum deposit required to receive the $25 is as low as they get.
Etrade is offering $25 to open a new online savings account and fund it with $1. The $1 minimum deposit required to receive the $25 is as low as they get. Etrade's savings account pays out a decent rate compared to the best savings rates on the BestCashCow rate table. The bank has also received high marks for the ease of its account opening process and its money movement tools. I have an Etrade account and have never had a problem.
As a company, Etrade is hurting. It has received 0 out of 5 starts for safety and soundness according to Bauer Financial as of their Dec 09 bank reviews. It's stock is trading at $1.20, down from nearly $25 two years ago. If you decide to deposit money in Etrade, be sure to stay below FDIC insurance limits.
Today, Citi announced it had sold its Smith Barney brokerage division to Morgan Stanley, beginning the break-up of what was once the largest financial services firm in the world. But this is just the beginning. Citi grew with leverage and never fully melded its disparate operations, meaning the company is not only exposed to toxic assets to a high degree but was never a functional company to begin with. Leverage and good times can mask many problems.
Last November, Citi received $20 billion in capital from the TARP along with hundreds of billions in loan guarantees. Most observers did not believe this would be enough. According to Marketwatch, the financial company plans to shrink its size by 1/3 by selling off other divisions. But that brings up an interesting conundrum for its management. Right now, Citi is kept alive only through the generosity of the government. The govenment keeps Citi alive because it is supposedely "too big to fail." But at what point in Citi's incredible shrinking act does it stop being "too big to fail?" At what point does the Treasury and the Fed throw in the towel?
Citi's stock is down below $5 today, and many are buzzing about the future of the once mighty financial titan. For those who thought the financial crisis is over, this is a reminder that as long as the general economy is weakening, and real estate continues to decline, we're going to have more pressure and failures in the banking and financial sector.
