Liquid, FDIC insured, high interest accounts

PointsMahalo

Level 2 Member
#1
You guys may be familiar with the popular thread at Fatwallet about high interest, liquid accounts (http://www.fatwallet.com/forums/finance/783099/); but in my opinion that thread leaves out interesting savings accounts attached to prepaid products.

These types of accounts tend to have a low maximum balance (like $5,000 max per account) but have high interest rates (5%-6% APY) while being FDIC insured. Most of them do have a monthly fee for each account ($3-$5). Some products have convenient features like the ability to ACH pull and to connect/monitor with tools like https://mint.com.

Some specifics:
  • Paypal prepaid - https://www.paypal-prepaid.com/
  • Mango Money - https://www.mangomoney.com/
    • This month Mango announced that they'll be charging everyone a $3 monthly fee
    • I've been told that a combination of SSN/mailing address is allowed to have a maximum of 3 accounts (meaning in theory that one person could have 3 cards or three people at one address could each have a card or some combination as such)
  • Union Plus - https://www.myunionprepaid.com
    • Same company as Mango - I'm not sure if the account number restriction on Mango cards also applies to Union Plus cards
  • Momentum - http://momentumcard.com/
    • You do have to sign up in person
    • I've been told that one SSN is only allowed to have one account
    • If you choose the pay-as-you-go plan then there are no monthly fees
    • NOTE: You can only have the savings account if you get the old version of the momentum prepaid card (the black one, not the new blue one)
      • I have read that the black version of the card is still available in some places and I can confirm that the old version does still have the high interest savings account
      • Just to be clear and repeat - you cannot get a high interest savings account if you buy the new blue version of the momentum prepaid card
My personal feeling is that these kind of accounts would be a good place to store emergency fund cash. It seems to me like it is better than using any of the nationally available reward checking accounts I've seen. I realize that there are certainly better investment opportunities out there - but for a safe place to park a small amount of cash I don't know of a better option.

What do you guys think? Is the downside just having to deal with having your money spread out over little accounts here and there (and dealing with potentially unpleasant customer service if they forget to credit your interest/bonuses/etc)? Is there a better place to store your emergency fund money?

Appendix - "But what about miles?"
Here is a rough comparison between using these prepaid accounts and the scenario of putting $50,000 into the BankDirect AA Mileage checking account (http://www.bankdirect.com/programs/aadvantage.aspx):
  • 5% APY on $50k is $2,500 annually
  • Having $50k in these prepaid accounts probably means 10 accounts, so estimating $5 monthly fees per account is $600 in fees annually
  • The BankDirect account generates 100 AA miles monthly per $1,000 in the account up to the first $50k on deposit or 60,000 miles annually
  • The BankDirect account has a $12 monthly fee and would make 0.01% interest (compounded daily) on this account or a total cost of $139 annually
  • So based on these assumptions, the opportunity cost of the BankDirect account is ((2500-600+139)*100)/60,000 or around 3.4 cents per mile
  • However there is also a tax consideration - the AA miles are tax free and that may significantly change the equation for some people
 

raenye

Lever 2 Membel
#2
I have a Mango and Union+ accounts, and just opened a Paypal Prepaid one. Can load with GDMPs, that's some extra spend.
Mango and Union+ still haven't sent me debit cards (well over a month!) even after a phone call. But interest posts correctly.

P.S.
Some idea I had about Mango: in the same letter where they announced the $3 fee, they also said they're dropping the $10 fee for closing the account and getting a check. The maximum balance is $10K, so it's an opportunity to dump 20x $500 GDMPs and cash out. Not planning that though, I prefer the 6%.
 

Matt

Administrator
Staff member
#3
I think that this is a killer post thanks @PointsMahalo !

From a practicality perspective I think that it becomes onerous to have so many accounts for this purpose. And also, if they are EF stores then it can be tricky if there are any account rules. If you are in an emergency situation you need to be able to know what accounts you can clear down to zero without a penalty- I guess most, but some like the Paypal have monthly fees too, so there is a clean exit required. If that can be managed well then it could work.

Of course, worst case emergency is you die and and the fund is there to protect your family, and they have to figure this stuff out!

Personally, I like a lot of what you have outlined, and I like to write about such optimization too, but sometimes too optimized can make for too confusing to manage if things should go wrong.
 

Annie H.

Egalatarian
#5
One of my old favorites is SmartyPig. Just 1% but maximum per goal is $250K and one can have multiple goals. Of course pay attention to FDIC insurance rules. You can also cash out with gift cards, some with 11% cash boost. They are supposed to be introducing a cash rewards MC Debit card one of these months.

https://www.smartypig.com/
 

raenye

Lever 2 Membel
#6
A quick update on Mango and Union+ --- you need to have $20 in the *prepaid* account to get the debit card sent to you.
I always transferred the money immediately to savings after the load, so the system couldn't recognize it. So wait till the cards are "in fulfillment" before you move the last $20 to savings.
 

windycity

Level 2 Member
#7
I also have Paypal prepaid and put $5000.
But come to think of it... wouldn't it be better if I do MS using the same $5000 at supermarket or cvs using Amex Old Blue getting 5%?
It takes time but return would be much greater, no tax, and almost risk free.
 

Ttitle

Level 2 Member
#10
Does anyone know what is going on with Union Plus? I believe they said they would give new information about closing the account today.
 

RRD

Level 2 Member
#11
Yeah, something is up with Union Plus. Off late, I am unable to to transfer funds from Savings to Prepaid and they wouldn't reply via email. Need to call them.
 

Ttitle

Level 2 Member
#12
You have to call them. They can transfer the money to your prepaid, then you can MO the money out from there. Otherwise, you won't get your money for at least three weeks. Looks like they didn't find a replacement service.
 

RRD

Level 2 Member
#14
Does anyone know what is going on with Union Plus? I believe they said they would give new information about closing the account today.
Is Union+ closing down?
Is anyone have problems with their DD to U+? I had a DD/ACH setup via CapOne which was rejected this month. Anyone have any idea what is going on?
 

cdancer20

Level 2 Member
#15
Union is closing on the 31st. The last day to use the debit card I believe was a month ago. Today is the last day to use the Mango MasterCard I believe.
 

cdancer20

Level 2 Member
#16
Is Union+ closing down?
Is anyone have problems with their DD to U+? I had a DD/ACH setup via CapOne which was rejected this month. Anyone have any idea what is going on?
Union stopped allowing DD on August 15th I believe is the date. That really sucked too b/c I forgot to do it and got charged the $3 monthly fee. I called though and they reversed it.
 

cdancer20

Level 2 Member
#18
Thanks for the info - I had no clue until today.
Here's the official notice: (I had some dates wrong)


"Dear Valued Cardholder,

Our records indicate you have an open Union Plus Prepaid Visa® Card issued by First Bank & Trust, Brookings, South Dakota.

As such, this letter is to notify you that all Union Plus Prepaid Visa cards will be discontinued, including all services in connection with the Card, effective September 16, 2015. This means your account will be closed on September 16, 2015, or on your Card’s expiration date, whichever comes first. A new provider for this program will be contacting you directly between now and September 16, 2015 with details of the new program that will be available to you.

After September 15, 2015, your Card will no longer be available for use. Any remaining available balance will be refunded to you in accordance with the terms and conditions of your Cardholder Agreement.

THE FOLLOWING DATES APPLY LEADING UP TO THE CLOSING OF YOUR ACCOUNT:

1. August 15, 2015 - Last Day to Reload Your Card
Card loads including recurring deposits will not be available after August 15, 2015. If you receive recurring deposits (such as direct deposits) please make arrangements – as soon as possible - with your bank, payment provider or payroll department to stop those deposits from posting to the Card. Any recurring deposit initiated on or after August 15th , 2015 will be rejected and returned to the originating source.

2. September 15, 2015 - Last Day to Use Card at A Merchant or ATM
Use any remaining balance before September 16, 2015, or your Card’s expiration date, whichever comes first. Remember, your Card may be used everywhere Visa debit cards are accepted. If recurring debit charges are assessed to your account, you should contact the merchant immediately to make other arrangements for payment.

3. By September 30, 2015 - Check Issued for Remaining Funds
The check will be sent to the name and address we currently have on file no later than 30 days of account closure.

Remember, the new provider for this program will be contacting you directly and before September 16, 2015 regarding details of the prepaid card they will make available to you.

Thank you very much for your business. We regret any inconvenience this change may cause.

If you have questions regarding this notice, or any other matter related to your account, please call the number printed on the back of your card.

Union Plus Customer Service "
 

Ttitle

Level 2 Member
#19
Anyone familar with StreetShares, offer 5% savings account (fee for withdrawals during first year only). Doesn't look like it is insured though.
Code:
https://streetshares.com/landing/veteran-business-bonds
 
#20
Anyone familar with StreetShares, offer 5% savings account (fee for withdrawals during first year only). Doesn't look like it is insured though.
Code:
https://streetshares.com/landing/veteran-business-bonds
That site appears to me to just be offering unsecured notes in the same way Prosper and Lending Club do, in a slightly slicker format and with much lower rates. I'd stay away.
 
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