Posted by Chuck on June 2, 2016
Checking Accounts

Published on June 2nd, 2016 | by Chuck

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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.



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Phong

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

Fafa123
Fafa123

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.

Sa
Sa

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

AE
AE

Head on over – plug in your numbers (I would start at $10.000 to invest etc… but either way:

https://www.depositaccounts.com/checking/reward-checking-accounts.html

And then research full reviews of each account that you are interested in.

Carlos
Carlos

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.

Nit
Nit

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.

Catapult
Catapult

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

Steve
Steve

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
AE

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.

Fiby

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

billy d
billy d

also taxes.

Adam
Adam

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

Adam
Adam

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.

Dave_B
Dave_B

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

Fiby

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.

Den
Den

I was slow )

Den
Den

Tax for median income (after all credits) or for several different incomes (like 50, 75, 100, 150, 250 after all credits) could be done.

Den
Den

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.

Dan
Dan

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
anthonyjh2

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
Steve

> 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).

Victor
Victor

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.

Barry
Barry

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.

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