WaMu Drops Interest Rate, Alternatives Abound
Tip It!A reader named William wrote in recently to point out that, as expected, Washington Mutual (WaMu) has cut the interest rate on their online savings account to 3.00% APY, dropping them from being a rate leader to being middle of the pack. Apparently they no longer need to pay a premium to attract (or retain) deposits now that they’ve been taken over by Chase.
As for us, we’re sitting tight with Everbank, which pays a high interest rate, and is rated as one of the safest online banks. In all likelihood, I’ll close our WaMu account. We opened it shortly before the collapse, and never got around to transferring any money over there, so what’s the point?
I’m also considering opening an E*Trade account, as they offer a competitive interest rate along with a linked brokerage account with relatively low commissions ($9.95/trade). Yes, you can do better with outfits like TradeKing ($4.95/trade) and Zecco (free trades), but it’s hard to beat the convenience of a linked savings account at the same institution.
Published on October 8th, 2008 - 11 Comments
Filed under: Banking
About the author: Nickel is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!
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11 Responses to “WaMu Drops Interest Rate, Alternatives Abound”
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October 8th, 2008 at 12:17 pm
They also dropped their 5% 12-mo CD to 3%.
I will also be closing my account. Chase is a cheap bank, and have never paid top interest rates.
October 8th, 2008 at 1:31 pm
Another reason to NOT chase rates.
There is NO free lunch people.
October 8th, 2008 at 2:41 pm
The Fed drop rates .5 point. You may want to lock in CD’s before banks follow suit on their CD’s and savings.
October 8th, 2008 at 5:12 pm
Does this mean those who had a 5% 12-mo CD that hasn’t matured yet will get their rate dropped to 3% on their existing CD as well, or is this only for new CD starting today?
October 8th, 2008 at 5:18 pm
I haven’t heard anything about rate cuts for existing CDs, though this is (I think) possible given the takeover. As far as I know, they’ve only reduced rates for their online savings accounts and for new CDs.
October 9th, 2008 at 1:45 am
“At our discretion, we may change the interest rate on your account at any time.” This quote was taken from the disclosures re online savings on FNBO Direct’s website. In addition, interest is credited on a monthly basis.
Don’t forget to check credit unions for their CD rates.
October 9th, 2008 at 7:31 am
Marian: Yes, that’s true of any savings account. For CDs, rates are guaranteed. For savings accounts, they’re not. However, FNBO Direct has consistently been at the top of the heap. Honestly, I expect all banks to cut rates shortly, as the Fed dropped rates 0.5% yesterday, but I fully expect FNBO to stay at (or very near) the top.
Keep in mind that WaMu’s rate drop happened before the Fed made their move, so they’ll likely decrease even further in the coming days.
October 9th, 2008 at 9:58 am
Ugh. While 3% isn’t horrible, it’s still a big drop (though expected). Since our main checking account is with WaMu anyway, it’s easier for us to keep the online savings there. We don’t have enough for 1% to really make a difference at this point, but if our savings were significant we’d likely look elsewhere.
October 9th, 2008 at 11:21 am
It looks like ING just dropped to 2.75%
October 9th, 2008 at 12:14 pm
I agree with Alex. Chasing rates can be a waste of time. Most of our customers enjoy the convenience of online banking with the security of bricks & mortar locations. No, 2.75% APY isn’t the best rate, but we are also rated as “Sound” (Four Stars) by BankRate.com.
October 14th, 2008 at 10:40 am
I’ll be moving a large portion to the Capital One Costco account. I liked having savings easily moved to my WAMU checking, but I also have a Chase credit card. I don’t want to give them the opportunity to offset if they screw up. I’ll keep some in there, but the bulk gets moved now. I also have a CD that will get moved as soon as it matures.
I also notice they gave NO NOTICE of the rate decrease.
I’ve had WAMU checking a long time and like them, but I expect worse service in the near future thanks to Chase.