Wednesday, April 23, 2008

Cash Money, Yo

When I think of my financial situation, I have a weird picture in my head: that of a six-year-old boy, cheerfully tugging a wagon behind him. More and more stuff gets piled on that wagon the further I go. I tend not to think about it much, but every once in a while I switch to another wagon that looks like it will do a better job at hauling my stuff around.

This past month, I switched to yet another wagon. I am now in the process of taking things off of Grand Yield Direct and loading them onto Capital One Online Savings. Why the switch? As with Grand Yield Direct, it came down to interest rate. Especially with rates so low rate now (thanks a lot, Federal Reserve! Grr...), even one point can mean a big difference in the interest earned.

I tend to hit up every few months to check out their comparison of savings account rates. If my current account is just a bit below the maximum, I'll keep put - these things tend to fluctuate a fair amount anyways, plus I don't want to miss out on getting interest in the days when my money is flowing from one account to another. In this case, though, I could go from 3.0 to 3.75%, which seemed big enough to be meaningful.

How did I select Capital One? There are a few standard things I look at:
  • Fees. Or more precisely, the lack thereof. I will never sign up for any account that charges fees.
  • Minimum balances. See above. It's okay if they have a minimum balance to open, but the whole point of a savings account is to have money available, and so I avoid minimum balances like the plague.
  • FDIC insurance. This is pretty standard with online accounts, but I still check to make sure they have it.
  • Reputation. Bankrate helpfully rates banks on a scale from zero to five stars. I'm generally looking for four stars. As long as it's FDIC insured, this is not critical, but still, I'm looking to avoid a hassle and keep my funds available. Because of this, I did NOT sign up with Countrywide, even though they have the highest rate.
With those standards in mind, Capital One looked like my best choice. It was about the highest out of all of them. There were a few other things that were interesting about it:
  • It has a tiered interest rate structure. To get the top rate I'll need to keep a lot of money in there, and the rate goes down if I withdraw too much. But even the lower rate matches what I currently earn in Grand Yield Direct.
  • I have a credit card from Capital One, so I'm already familiar with the institution.
  • It's technically a money market and not a savings account. I prefer savings accounts, but the terms of their MMA are pretty good, and again, as long as it's FDIC insured, I don't much care.
After finishing due diligence, I signed up for the account. This is where things started going wrong. I eventually got it all straightened out, but out of all the banks I've dealt with in the past, they have had the worst setup experience.
  • When I tried to sign up online, I got most of the way through the process before hitting an error screen. No changes I made could make it work.
  • So I had to call them to finish setting up the account, which defeats a lot of the purpose of online banking. The woman I spoke with was very pleasant and efficient, which is nice. Once again, the financial sector has the best customer service out of anyone.
  • Because their servers were having problems, my setup got messed up, so I had to manually copy down and re-enter various numbers to get things working.
  • Weirdly, you can't finish signing up for the account online. Unlike ING and Grand Yield Direct, you do 90% of it online, but then they mail you a physical letter which you need to sign and send back to them. This just seems odd, a very 20th-century way of doing business.
  • Worst of all, when they sent an email describing how to link to an external account, the instructions were just WRONG. It referred to screens and links that just don't exist. I had to contact their customer service, who, to their credit, did give the right instructions. Still, it seems bizarre that a major national bank like this would get something so wrong, especially since it keeps people from making deposits.
On the whole, I have been disappointed with them so far. That said, none of my experiences have been so bad for me to cancel my account and move somewhere else... for that good of a rate, I can forgive their warts. Still, it seems odd that even tiny one-city banks have better online systems than a company that does massive national ad campaigns.

Speaking of which, my other hesitation is that this may turn out to be a prolonged teaser rate. Generally speaking, smaller banks offer better rates than larger ones since they don't have the same overhead costs. Because of this, I'll probably be checking rates every month instead of every three months, just to be sure that it still makes sense to keep my money there.

The whole thing is kind of surreal. Browsing the web, clicking on buttons, and somehow trusting that large sums of money are being transferred from one bank to another and that I'll be able to get at it when I need it. It's been working so far; let's hope the trend continues!

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