PointsMahalo
Level 2 Member
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:
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):
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
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
