Posted by Chuck on June 2, 2016
Checking Accounts

Published on June 2nd, 2016 | by Chuck

52

High-Yield Savings Accounts: Profit per Account

Profit per Account

In the post, “Which High-Interest Savings Account Should I Get?” we listed the best options for ordinary savings accounts and also for mega high-yield options which come with strings attached. With the semi-demise of the Netspend cards, I thought it would be neat to take a look at how much each of these high-yield accounts nets annually in dollars rather than in percentages.

The idea here is that each added account is an additional headache to deal with. All of the accounts have requirements to get the bonus interest rate, such as making 10 or 12 debit card transactions, spending $500 or $1,000 on their card, logging in monthly, 90-day inactivity fees, among other things. And I find that each added account takes up virtual real-estate in my head.

Thus, when determining whether to add an account or not, the decision revolves partially around the net total I’ll get from the account, irrespective of the APY rate offered. Of course, the APY is important too, and so is the level of hassle inherent to the account. Hassle levels vary greatly from one account to the next as some accounts are easier to deal with than others.

In this post, we’ll look just at the dollar net, not at the APY rate or hassle involved. See the original post for more details on those aspects.

Opportunity Cost

To give a baseline for these calculations, we’ll assume that you have a 1% savings account, for example, an Ally Savings account. There are a bunch of other options slightly higher or lower than that, but we’ll use that as an easy vantage point. If you’d put $5,000 in a 1% Ally account, you’ll have $5,050 in the account after a year. We’ll call this Opportunity Cost.

Another Opportunity Cost that comes up occasionally is the need to put spend on the bank’s debit or credit card and forgo credit card rewards. We’ll factor that in as well.

Note that the exact calculations involving APY are difficult to compute since it depends on how often it gets compounded, whether you pull out the interest or reinvest it, among other factors. Hopefully, I got close.

Consumer’s Credit Union – 4.59% APY

Read our post on CCU here

  • Interest Rate: 4.5% on $20,000
  • Annual Cash Total: $900
  • Opportunity Cost: -$200

This account requires spending $1,000 on a CCU credit card. The card earns just 1% cash back so let’s deduct $120 from our Annual Cash Total. (You could do better if you spend at the grocery store and get 3% back, but let’s keep it simple.)

  • Opportunity Cost: -$120
  • Total Net: $580

For going through the trouble of adding the CCU account to my arsenal, I’ll net an extra $580 annually.

One good thing about CCU is that they recently underwent a devaluation so hopefully the current rates will stick for a while.

Northpointe – 5% APY

Read our post on Northpointe here

  • Interest Rate: 4.91% on $10,000
  • Annual Cash Total: $491
  • Opportunity Cost: -$100
  • Net: $391

For going through the trouble of adding Northpointe to my arsenal, I’ll net an extra $391 annually.

Main Street Bank – 2.25% APY

Read our post on Main Street here

  • Interest Rate: 2.225 on $25,000
  • Annual Cash Total: $556
  • Opportunity Cost of 1% Account: – $250
  • Final Net: $306

For going through the trouble of adding this Main Street account to my arsenal, I’ll net an extra $306 annually.

Caveat: This account is tougher than the rest since they require that your activity should appear as your main checking account.

Lake Michigan Credit Union – 3% APY

Read our post on LMCU here

  • Interest Rate: 2.96% on $15,000
  • Annual Cash Total: $444
  • Opportunity Cost of 1% Account: -$150
  • Final Net: $294

For going through the trouble of adding LMCU to my arsenal, I’ll net an extra $294 annually.

One American Bank – 3.5% APY

Read our post on One American here

  • Interest Rate: 3.44% on $10,000
  • Annual Cash Total: $344
  • Opportunity Cost of 1% Account: -$100
  • Final Net: $244

For going through the trouble of adding this One American account to my arsenal, I’ll net an extra $244 annually.

Also note that recently we got one tentative data point indicating opening this account is just a soft pull.

Mango Prepaid Card – 6% APY

Read our post on Mango here

  • Interest Rate: 5.85% on $5,000
  • Annual Cash Total: $292.50
  • Opportunity Cost of 1% Account: -$50
  • Monthly Fees: -$36
  • Final Net: $206.50

For going through the trouble of adding Mango to my arsenal, I’ll net an extra $206.50 annually.

The caveat here is that this account requires spending $800 per month on the Mango debit card. If you use a debit card instead of a 2% credit card, it will virtually wipe out any gains from this account.  However, if you use it for debit-only transactions which wouldn’t work with a credit card, the account can make sense to get.

Alden Credit Union – 5.125% APY

Read our post on Alden here

  • Interest Rate: 5% on $5,000
  • Annual Cash Total: $250
  • Opportunity Cost: -$50
  • Final Net: $200

For going through the trouble of adding this Alden account to my arsenal, I’ll net an extra $200 annually.

Great Lakes Credit Union – 3% APY

Read our post on GLCU here

  • Interest Rate: 2.96% on $10,000
  • Annual Cash Total: $296
  • Opportunity Cost of 1% Account: -$100
  • Final Net: $196

For going through the trouble of adding GLCU to my arsenal, I’ll net an extra $196 annually.

Insight Prepaid Card – 5% APY

Read our post on Insight here 

  • Interest Rate: 4.91% on $5,000
  • Annual Cash Total: $245.50
  • Opportunity Cost: -$50
  • Final Net: $195.50

For going through the trouble of adding Insight to my arsenal, I’ll net an extra $194.50 annually.

Netspend Prepaid Cards – 5% APY 

Read our post on the Netspend cards here

  • Interest Rate: 4.91% on $1,000
  • Annual Cash Total: $49.10
  • Opportunity Cost: -$10
  • Final Net: $39.10

For going through the trouble of adding Netspend to my arsenal, I’ll net an extra $39.10 annually.

Two notes:

  • There are actually numerous Netspend cards, and you can net $39.10 from each one.
  • Many of us already have some Netspend cards set up and that might sway us to keep the cards for the extra $39.10 profit. Personally, I think I’ll close out all my Netspend accounts so as to simplify my life.

Totals

For easy comparison, here are the profit totals after factoring in opportunity cost (not the actual amount of money you’ll get, but what you’ll get more than using a 1% account):

  • CCU: $580
  • Northpointe: $441
  • Mainstreet: $306
  • LMCU: $294
  • One American: $244
  • Mango: $206.50
  • Alden: $200
  • GLCU: $196
  • Insight: $195.50
  • Netspend: $39.10 per card

$5,000 Baseline

Suppose you only have $5,000 to put in a savings account. Here’s the profit you’ll get by using these accounts after deducting the opportunity cost (again, this is not the amount of money you’ll actually get):

  1. Mango: $206.50
  2. Alden $200
  3. Insight: $195.50 (same for Northpointe and for 5 x Netspend)
  4. One American: $122
  5. LMCU: $98
  6. GLCU: $98
  7. Mainstreet: $61.25
  8. CCU: $55 ($225, minus $120 for the credit card use, minus $50)

Final Thoughts

I actually had a better time putting together this post than anticipated, and I found it interesting seeing how the numbers played out.

We based our Opportunity Cost numbers on a 1% APY account such as Ally. If you have an account that earns more (we’ve seen recently some 1.2% or 1.1% options), the profit numbers calculated above go down slightly.

Also keep in mind that we only went through the nationally available accounts, but be sure to check out the locally available options too to see if you can get something better. There are also a whole bunch more local options that offer 3% APY which we haven’t yet posted about.



52 Responses to High-Yield Savings Accounts: Profit per Account

  1. Phong says:

    Very interesting post! It’s super helpful in so many ways!

  2. Fafa123 says:

    Great post! Would be even better if you linked to previous posts on these accounts so the reader could determine what are the requirements (number of debit spends, etc) to get the full APY.

  3. Sa says:

    Thanks a lot DoC. Cant wait for the post about locally available 3% accounts.

  4. Carlos says:

    Discover Savings, 1% interest rate no cap or limits.
    100% free with no requirements.
    They even offer a bonus sometimes as you guys are aware.
    I have parked all my money over there only because of the no limit and im closing on my home soon and needed it in one account for 60 days.

  5. Nit says:

    Great Analysis. The only accounts worth opening are: insight / mango / CCU. Netspend not worth the effort but if it is already opened and automated, probably better to keep it that way. I see a big rush towards insight / mango / CCU in next few months and they are going to do the same what netspend did.

  6. Catapult says:

    For going through the trouble of reading this post, I’ll net a significant amount of money.
    Thank you! 🙂

  7. Steve says:

    Looks like you used the APR for your calculations, which assumes pulling out all the interest each month (since APY assumes you leave it in so it can compound). Might want to note that.

    Also, you assume you’ve maxed out each account. Might want to note that as well.

    Finals, ReCalculated for APY:

    CCU : $598
    LMCU: $300
    OAB: $250
    Mango: $214
    GLCU: $200
    Insight: $200
    NorthPointe: $200 / $80
    Netspend: $40

    • AE says:

      Steve – you have dollar limits on what they pay interest on – there is no compounding interest in effect here – presuming that one is maxing out the amount that the bank/credit union will pay the max interest on.

    • Chuck says:

      Steve, my calculations are based on actual interest rate, not APY, since you don’t earn the bonus rate above the limits. So if you put $20k into CCU, you’ll end up (I think) with $900, not $918, since the interest part doesn’t get the 4.59% rate. There might be a lower interest rate of, say, .1% that you get but I didn’t add that in.

    • Fiby says:

      I concur with Chuck. It’s a non compounding interest rate because of the caps.

  8. billy d says:

    also taxes.

  9. Adam says:

    This analysis isn’t very helpful if you don’t control for how much money you put in…

    • Adam says:

      Which is to say, if I have $N to put into high-yield savings accounts, I really don’t see how I can look at this article and figure out where to put it (without redoing all the same calculations myself). You might say “I’ll pick the one with the highest overall dollar yield!”, but that number (obviously) just scales with the maximum amount you’re able to put into an account. They’re not comparing alike things.

      • Chuck says:

        Correct, the purpose of this post is for someone who has, say, $100k in an Ally Savings account, and is debating whether to open one of these accounts.

        For your purposes, you’ll do better checking out this post https://www.doctorofcredit.com/high-interest-savings-to-get/

        • Adam says:

          But even so, what would they learn from these numbers? If you’re thinking about where to put $100,000, then 20 Mango accounts ($4130) would net rather you more per year than 5 CCU accounts ($2900). But if I’m just looking at the overall numbers you’re quoting, I’d clearly wind up thinking CCU is better.

          And maybe it is; maybe the hassle of keeping open an extra 15 accounts isn’t worth the extra $1230. But the point is that these numbers aren’t very user-friendly, since they require you to take what you have and do a whole bunch of extra calculations. It would be much more helpful to post how much a certain amount (say, $1000) would net per year for each account. Otherwise you simply can’t compare.

          This isn’t about “my purposes,” btw, I just care about numbers being used in the right way 🙂

          • Dan says:

            Whoops I didn’t refresh before posting my comment! I basically said the same thing. Need to baseline the data, at say $5000, to make this really useful.

          • anthonyjh2 says:

            You definitely have a valid point here and I was going to mention the same thing.

            Also not mentioned was the opportunity cost of whatever you value a new credit card at. Conservatively I’d suggest $200 here.
            SO CCU is now $380 for the first year.

            I don’t have the time to figure out N for each, perhaps PPD (profit per dollar) in this case, but I think this post could definitely benefit from including this.

            Don’t get me wrong though, this is a great write up and i know it takes time and effort and I greatly appreciate it Chuck!

          • Chuck says:

            Yeah, all the accounts which have a hard pull (like CCU) have that initial hard pull hinderance.

          • Steve says:

            You can only have one of each of the above accounts, with the exception of Netspend, which allows 5.

            Thus, your algorithm is quite simple, assuming you don’t mind handling many accounts. Divide the “Final Net” by the percentage that is $1,000, and divide your money into $1,000 increments. Put each $1,000 in the bucket with the highest net until it’s maxed out, and move on the next.

            In this case, that would be:

            First $5,000 in Mango
            Second $5,000 in Insight
            Third $5,000 in NorthPointe
            Fourth $5,000 in 5x Netspend
            Next $20,000 in Consumers
            Next $10,000 in One American
            Etc.

            Skip any step if the requirements to get the APY seem too onerous.

          • Steve says:

            EDIT: My above calculations assumed increments on $5,000, not $1,000.

            For $1,000 increments:

            If your total is under $5,000:
            Insight card

            If your total is between 5-10:
            Mango + Insight

            If your total is between 10-15:
            Mango+ Insight + Netspend to cover the extra
            If your total is between 15-20
            Mango+ Insight + NorthPointe + Netspend to cover the extra

            Etc.

  10. Dave_B says:

    Thanks for this excellent article. Very good info you’ve derived here for us.

  11. Fiby says:

    You left out taxes for this analysis. Obviously everybody’s tax rate is different, but it should still be mentioned.

    It’s especially important if your opportunity cost is credit card spending, because the cash back for that is tax free, and you shouldn’t compare a tax free value to a taxable value (bank interest).

    The same thing happens with Mango Money – you’re taxed on the interest (not net of fees), and then you subtract fees to calculate net profit.

  12. Den says:

    Interest from bank is taxable and not just Final Net but whole Annual Cash Total. Of cause,the part of Opportunity Cost is also taxable (excluding credit card part).
    It could be a big impact on real net.

  13. Dan says:

    I think instead of (or in addition to) using the maximum account value, you should used a baseline like $5000, so you can see what the same amount of “investment” gets you from each account. Of course the APY technically does that, but doesn’t show all of the other “fees” you did account for.

    I’m also not sure about the 1% opportunity cost being included, or at least not shown with and without, as not everyone has a savings account close to that high right now. It’s easy enough to calculate on your own, but just for comparison’s sake. Make a big table would be useful as well.

    • anthonyjh2 says:

      I like the baseline being $5k for simplicity.

      I don’t agree with the 1% being removed. Anyone can open a 1% savings account in a matter of minutes. I think his listing opp costs was actually a great part if this post. If anything, there should be further costs included such as your value of a new credit card or a hard inquiry.

      I don’t however believe we should get into taxes here. Perhaps a disclaimer could be provided, but these posts have to walk that line of being comprehensive yet also digestible and easy to read for the masses.

    • Steve says:

      > as not everyone has a savings account close to that high right now.

      Anyone can open a Discover or Ally account.

      I agree that it should be recalculated as APR – Fees (assuming max).

    • Chuck says:

      The main purpose of this post was for someone with lots of money sitting in a 1% account, and deciding whether these accounts are worth their time.

      I suppose it would be useful to compare even-amounts of money. Hopefully, it’s easy enough to divide it up and figure it out.

  14. Victor says:

    I’ll just throw out there that’s there’s always the (implied) 3.5% APY guaranteed by US Series EE Savings Bonds, which you can buy through the TreasuryDirect website. The actual interest rate is currently negligible (0.10% through Oct 2016), but the bonds are guaranteed to double in value after 20 years, which implies an APY of 3.5%. Think of it as a 20-year CD with a very severe early withdrawal penalty. If you think interest rates will remain low, they are a decent risk-free option. Interest is also exempt from state and local tax, and you can defer paying taxes on the income until you redeem the bonds. Now that the 5% Netspend accounts have been “neutered”, this option may look decent to some (risk averse) people who are looking to put money away for a while.

    • Chuck says:

      Thanks Victor.

      20 years is a long time. What is the penalty for withdrawing early?

      • Victor says:

        There is no explicit penalty, but since the actual interest rate is so low, if you cash in the bonds before they double in 20 years, you will be left with just what paltry interest they’ve earned. For example, if you were to buy a $100 bond today (earning 0.10%) and cash it in after 19 years, you’d only get about $102, vs $200 if you wait another year. You can cash them in after 1 year. Interest gets paid every 6 months.

  15. Barry says:

    I don’t have 20 years to wait…Chuck left out the most important (I think) part of CCU. The US based customers service. I had this acct for over 2 years. I had to withdraw 18k in an emergency situation last year. I called them an spoke with an actual human who answered the phone. They are great and I didn’t want to close the acct. They told me they will keep accts open with absolutely no fees and they are true to their word. Their service is worth something and my time (holding on ) is valuable. So I will xfer 4 netspend accts. on 7/1. The only problem is the 12 debits. They only allow 4 charges per store per day. So I use the self checkout at Shoprite 4x/ then Dunkin Donuts for 3/4 separate charges and in 2 days done. The drawback is the 1k spend on CC, but at last you get 15 which covers the VGC fee.. I recommend this route.

  16. Barry says:

    I meant 1%, not 15 in above post

  17. John says:

    Chuck, would be good to also add the hard pull. I would value a hard pull at $500 (since you typically get 50,000 miles with a credit card) so it would reduce CCU to $80.

    • Chuck says:

      True, but other people might worry about how to rack up 10 debit purchases more than a hard pull. To each their own – that’s what the first post was for.

      This is to calculate the dollar value.

      • anthonyjh21 says:

        Yeah I’m not overly concerned with a hard pull as it’s temporary. Where I place value is on opening a new line of credit, including it’s impact to AAOA.

        Anyone considering CCU 4.59% specifically should pay close attention to this because it’s not of direct consequence and they may regret it later (hello 5/24).

  18. Jeff says:

    Small point, but Northpointe’s website lists their interest rate as 4.89% (5.00 APY), not 4.91. Not sure if this would make a difference in the calculations.

  19. sam says:

    Hello guys!
    Please make new UPDATED thread (article).
    1. With all still existing and new banks.
    2. Sorted from the best (where is no fee, direct deposits, and debit purchases etc.) and highest interest to the lowest and more hustle accounts.
    This is my Home Work: )
    – One American Bank – 3.5% APY Rewards Checking Account On Up To $10,000
    – Insight 5% APY Prepaid Card on up to $5,000
    – Mango 6% Rewards Checking $5,000 (Direct deposit required: Yes, minimum of $500 per month. ($3 fees per month SO $36 per a year) (also direct deposit required- such as paypal direct deposit)
    – Control Card 5% APY On Up To $5,000 (plus – Two or three different little fees! I didn’t calculate the fees)
    – Northpointe – 5% APY for $5,000 balance (Will get total only $68 (if count OPPORTUNITY COST and $6,000 expenses for debit card – for which I can get $120 back – 2 point (0.02 = 2% ))
    – Union Plus Prepaid Review (5.10% APY + $20 Bonus) up to $5,000 (direct deposit required- such as paypal direct deposit)

    Thanks.

  20. Cole Gleason says:

    Why is the opportunity cost on Northpointe not -$100 ($10k at 1% in Ally)?

    • Chuck says:

      Fixed now, thanks for pointing out. (The error was due to the Northpointe limit change from $5k to $10k. I didn’t update it all properly.)

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