Wednesday, March 10, 2010

Trying for 3.51% APY high-interest checking

I posted on Monday about for finding community banks offering FDIC-insured high-interest checking (2-4%) and just this morning I took the plunge and opened a new bank checking account through their web site for a community bank in Texas. I still need in get the bank's welcome kit in the mail and send back the signature card and other documents, but within a few weeks I should be on my way to earning 3.51% APY on a bank checking account. What could be more exciting (in banking)?

I did see a bank offering 4.09% on Monday, but they were no longer listed this morning. 3.51% APY was the highest listed rate for my zip code this morning. Still, this is a fantastic rate compared to just about anything else available.

First I had to call the customer service number to clarify exactly what qualified as an "automatic payment". I make several payments each month by ACH debit from the web sites of my electric company, telephone/Internet provider, and credit card, but they are all "manual", so I wasn't sure if they qualified. Customer service picked up quite promptly and indicated that each bank had its own quirky rules, so it would be best to speak directly to the individual bank. I had already selected my preferred bank from their list and customer service gave me that bank's direct number. The bank picked up promptly, redirected my call and quickly answered my question, stating clearly that to get the special rate I needed "one ACH debit or credit" each month. Many consumers see ACH debits as part of "automatic bill payment" and only overly-cautious people such as me want to manually check my bill before it gets paid.

That so-called "automatic payment" was the worrisome "qualification" for me, but now I know that it is a no-brainer. There were three other specific qualifications for this particular bank (which many of the listed banks also had) in order to get the juicy 3.51% APY rate:

  • Minimum of 12 debit-card purchases each month (does not include ATM withdrawals). No minimum, so breakfast, lunch, snacks, fast food, etc. easily satisfy this requirement without impinging on my desire to use my 2% cashback credit card for larger purchases.
  • Must agree to receive e-statements rather than paper statements. No problem.
  • Must sign on to the online banking web site at least once a month. No problem since I believe in checking my credit card and other financial accounts at least one if not twice a week.
  • And that requirement for at least one ACH debit or credit each month.

Note: Some of the banks also have a bill-pay requirement, but this bank did not.

The sign-up process requested my current bank checking routing and account number so that the initial funding can be done via an ACH debit. This funding will not actually occur until after the bank receives the signed signature card and other sign-up documents needed to satisfy government regulations. My chosen bank bad a $100 minimum initial deposit. I chose $250 for the sign-up deposit. I intend to put a moderate pile of cash in the account to earn that 3.51% APY ASAP, but I want to see that the account gets all set up and working as advertised before committing more cash.

The sign-up process also asks a serious questions about your financial history similar to those you see when requesting your credit history to verify your identity. Usually not a problem, but having a copy of your credit history handy couldn't hurt. Some people claim to have had difficulty signing up due to questions about things they had forgotten or gotten confused about.

The bank is HCSB in Plainview, Texas. They have been around since 1934, formerly operating as "Hill Country State Bank."

Some other info on the account:

  • 3.51% APY applies to the first $25,000.
  • Rate is 1.51% APY on balance above $25,000. Still quite decent compared to... most other banks.
  • Rate is 0.05% APY if qualifications are not met in a given month. Still better than Fidelity. Some listed banks have base rates of 0.1% or even 0.2%, but I have no intentions of ever being in a position to get that rate.
  • No minumum balance.
  • No monthly fees.
  • Unlimited checks. [Note: I forgot to ask whether the check order is free or not.]
  • Refund of ATM feeds up to $20 per month.

So, now, I am just impatiently waiting for the paperwork to arrive via pony express.

In practice, the way I will use this account is in tandem with my local TD Bank account. I will deposit checks in TD Bank and then ACH transfer the bulk of the cash to HCSB. I'll write checks against HCSB. I'll keep a modest balance in TD Bank for "just in case" contingencies. I think I'll use HCSB for ATM withdrawals, but I could use TD as well.

-- Jack Krupansky


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