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Okay, Sallie Mae is advertising a savings account with 1.25% APY. That seems incredibly high for a savings account, especially right now. It seems like a too good to be true type thing. Is there a catch? What kind of account is this? (Is it a money market account?)

http://go.salliemae.com/bank

  • Get the terms and conditions to find out all the catches. It is an online account, so charges maybe invoked on branch visits and more. – DumbCoder Mar 1 '11 at 16:06
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    The funny thing is, a few years ago, these accounts used to be in 4-5% range. Now 1.25% seems too good to be true. – myron-semack Mar 3 '11 at 13:43
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Yup. It's totally legit and it is not a money market account. Though interest rates are so low across the board, this is about as high as savings accounts get and so it is called a "high-yield savings account". A number of banks offer these. There are different offerings nation-wide versus local/state. I would use this compare tool at DepositAccounts.com to find them and the blog is very good with updates and trends. Here are some well advertised accounts:

If you don't already have a rewards checking account, get one of those first. DepositAccounts.com will direct you to these as well. A reasonable interest rate on rewards checking is 2.5% and up. So much better. The only catches are reasonable - online statements, direct deposit or autopay, and use your debit card 10 or 12 times a month for any transaction amount (groceries, coffee, gas - easy).

The other major thing I would consider when opening any account is where you live and the current accounts you have. If you have an AMEX card already, just use their savings account. That way you have unified accounts, faster transfers, your personal information isn't spread thinly around all different banks, you have more leverage with the company as a "long-standing customer", etc. As far as using a bank in the state where you live, it simplifies taxes.

Two more things: I would always choose a credit union over a bank (and many have excellent rewards checking accounts). If you use Mint, Yodlee, or other financial software, make sure the potential new bank integrates with that service.

  • "A reasonable interest rate on rewards checking is 2.5% and up"... these are hard to find nowadays :( at least without a limit to how much money they give interest on. – Mehrdad Apr 21 '17 at 21:42
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It is FDIC insured, there is no catch .. a few banks offer above 1% APY. Alliant and Ally come to my mind.

Terms & Conditions

  • Awesome. I didn't know interest rates were that high. – Stainsor Mar 1 '11 at 19:23
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It's a regular savings account and I don't think there is a 'catch'. Just keep in mind that the transfer to and from the account can take a couple of days (yes, I've actually got one of their savings accounts).

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