I admit it. I’ve been procrastinating opening up a high yield savings account (HYSA). As the yields have been ticking up, so has the stock market. I’ve opted to invest most of our money into the market as of late. Still though, we had just under $10k in a Bank of America account that was earning us 0% in interest. What caught my attention was a flyer in the mail from Green State Credit Union offering a 5% interest rate on HYSA with $25k or more in them. It made me think if there was another HYSA out there offering a great interest rate like Green State, but with a lower balance threshold. So, I began a search for a 5% HYSA that didn’t require a $25k balance.
What I found
There are several online banks and credit unions offering high interest rates on some savings accounts with varying minimum requirements. Here’s a link to some of the higher interest bearing accounts out there. There was one bank that caught my eye: CIT Bank. I hadn’t heard of this bank before but they were offering a 5.05% savings account if you had a balance of $5k or better. Also, no fees or penalties for going under a given balance. I felt like this might be too good too be true. Was this a legit bank? Was there a catch? I decided to do some research.
Is CIT Bank Legitimate?
Yes, CIT Bank is a legitimate bank. Its not a scam. Here’s what I found out about it:
First, and most importantly, it IS FDIC insured. This is a very important designation and you should never bank at a bank or credit union that isn’t FDIC or NCUA insured. Banks are FDIC insured and credit unions are NCUA insured. When a bank or credit union has this insurance, it means that depositor accounts are protected up to $250k by the federal government.
Second, CIT Bank has been around since the early 1900s and is a subsidiary of First Citizens Banc Shares. In the banking world, its a small bank, but one that has been around for a long time and is owned by a large holding company.
Is there a catch?
CIT Bank doesn’t have any physical locations or ATM networks. This bank is going to be good for people who are comfortable having a 100% online savings account. One big drawback is that you can’t withdraw funds from the Platinum Savings Account that offers the 5% interest rate using an ATM. There is no debit card that comes with this account.
How do I get my money out?
It is possible to connect your CIT account to a checking or savings account you have at another bank. We’ve connected our CIT account to our Chase checking account so we can easily move money from one account to the other via ACH transfers and bypass the lack of ATMs at CIT. This is probably the best way to go about it. Also, with the account I opened up, there were no fees associated unless you did a wire transfer and had a balance of less than $25k. Then you get hit with a $10 fee for the wire.
Personally, I felt opening and funding our CIT account was pretty simple and quick. There is about a 5 day period where your money is inaccessible as it transfers over to your new CIT account. This wasn’t a big deal for us. I felt that connecting our checking account from a different bank was a little more difficult in that CIT would send over microdeposits after a couple of days of initiating the connection that I would have to verify. That felt kind of annoying given how used to I’ve become to instant results. However, this is pretty standard practice and I’ve done this before with Chase bank. Given a 5.05% carrot at the end of the stick, I mustered up some patience.
Which account gives the high interest rate?
At CIT the Platinum Savings Account is the one you’ll want to open. This account, after its funded with $5k, will start earning you 5.05% (as of this writing). This account offers daily compounding interest, no fees to open the account and no maintenance or monthly fees. There isn’t a time period you need to keep the account open and the minimum to open the account is $100. To earn the 5% interest rate you need to have a balance of $5k.
You can fund this account by writing a check and mailing it to them, via a wire transfer or ACH deposit. You can also deposit checks using the CIT mobile banking app.
I don’t get paid by CIT Bank for promoting this account.
What you’ll need to open the account
When you open this account you’ll need your SS# number handy as well as the routing number and bank account number you wish to move funds from. You’ll also be asked some personal questions like your date of birth, occupation, phone number and email and address. Make sure to put your cell number in as you will need to receive verification codes as texts (or as a phone call) when you open your account and when you log in after.
Why not a Certificate of Deposit (CD)?
Although some short term (less than 2 years) CD rates are yielding over 5%, I haven’t put our cash in there yet because the money I currently have available is our super liquid emergency fund money. When you purchase a CD, most of the time its difficult to cash out the certificate before the maturity date without incurring a penalty. There are some no-penalty CDs out there that will allow you to take money out of the CD before maturity. However, they offer lower interest rates.
For example, I could open a no-penalty 11 month CD at CIT, but the interest rate is 4.9%. Doesn’t make sense to open a CD up when the HYSA is offering a higher rate and allows me to be liquid. The benefit of opening the CD would be locking in that rate for the term of the CD. My HYSA rate is variable and can change.
What about I Bonds?
I Bonds are meant to keep cash savings from losing value to inflation; they won’t make you rich. We do have some I Bonds that I will probably be cashing out soon as I Bond interest rates go down. I will take the proceeds from our I Bonds and most likely invest some of that money into short term CDs that are yielding high interest rates. Stay tuned on the CD I pick up, or if I just stash it in an HYSA. I will most likely continue to keep some of our cash in I Bonds, for now.
Are there other options?
Yes. There’s a relatively new fintech company Raisin that you can open an account at. You’ll get above market interest rates. They operate kind of like a pass through. You’ll open an account at Raisin and then select a bank to open an account at. You won’t actually be that bank’s customer. You’ll be a consortium customer, if you will, with other users. Your money is pooled at Raisin and then deposited on your behalf. The highest interest rate HYSA I saw offered through Raisin was 5.30% as of this writing. However, I don’t quite understand Raisin and I probably didn’t explain it correctly. I have an investing rule that if I don’t understand how something works, I don’t put my money into it. Hence, why I haven’t opened a Raisin account, yet.
Jim Wang of Wallet Hacks wrote a good article explaining how Raisin works. Perhaps, after reading his article, you may want to try that service out. Let me know how it goes for you!
There are also other local banks and credit unions that are offering HYSAs, money market accounts and CDs at competitive rates. If anything I hope this article encourages you to investigate local banks and credit unions to help you get the most bang for your buck!