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High Interest Savings Accounts
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freudling
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Aug 31, 2007, 08:41 PM
 
Not sure what it is like in the US, but right now, all the banks in Canada are at war. Even just a few years ago, you could not find high interest savings accounts that were practical: they all carried exhorbitant transaction fees. Now, every bank has come out with these high interest savings accounts, and some are no fee (no monthly fee, no minimum balance, free transfers from bank-bank, etc.). Some even have just a 2 day delay when moving money around.

My question, I got one of these high interest accounts, and there truly are no fees. Right now it is paying 3.5% annually, calculated daily and paid monthly. Because I have a constant stream of money coming in to my business, I would like to earn interest on the float. Am I best to stick with the high interest account I have (moving money to it from the business account), or are there other options out there?

Thanks.
     
macfantn
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Aug 31, 2007, 08:43 PM
 
you could wire the money to my paypal account, that is my best interest. Thanks.
"I'm sick of following my dreams. I'm just going to ask them where they're goin', and hook up with them later"
     
turtle777
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Aug 31, 2007, 08:55 PM
 
I have never heard or seen savings accounts that charge fees. At least not in the US or Germany. Really weird, must be a Canadian thing.

-t
     
Sealobo
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Sep 1, 2007, 03:38 PM
 
If your business is doing well and it has made you a HNWI, you might consider using a private bank. Retail banks give you sh!tty interest rate for your time deposit.
     
torsoboy
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Sep 1, 2007, 03:53 PM
 
Originally Posted by freudling View Post
My question, I got one of these high interest accounts, and there truly are no fees. Right now it is paying 3.5% annually, calculated daily and paid monthly. Because I have a constant stream of money coming in to my business, I would like to earn interest on the float. Am I best to stick with the high interest account I have (moving money to it from the business account), or are there other options out there?
You are tready in some muddy waters if you are mixing your business money with your personal savings account. You should never mix the two accounts.

Now to answer your question... in the US there are things called "sweep" accounts that act as high interest investment accounts for businesses. The federal governments do not allow banks to have high interest checking accounts (seriously) so the banks have come up with a way around the rules; instead of paying you interest on your checking account they pull all of the money from your business checking account every night and put it into the investment/sweep account (your checking account balance then goes to $0 every night). When bills come in that need to be paid the bank first hits up your checking account (in case you have had any deposits that day that haven't been swept into the other account yet), and then it moves on to the sweep account if there is not enough funds in the checking account. Everything happens automatically, the transactions between the two accounts happen instantly, and there is no extra work on your end to keep things working like this.

The interest rate on our business sweep account is at 4.8% right now (calculated daily, paid monthly). It is a very nice system. The only thing that isn't so nice is that because it is an investment account there is no FDIC insurance on it.
     
Cold Warrior
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Sep 1, 2007, 03:57 PM
 
Originally Posted by torsoboy View Post
The only thing that isn't so nice is that because it is an investment account there is no FDIC insurance on it.
The only thing?? That sounds like the major thing. You're basically risking your entire business' liquidity and operating funds, unless you have cash reserves elsewhere.
     
torsoboy
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Sep 1, 2007, 04:03 PM
 
Originally Posted by Cold Warrior View Post
The only thing?? That sounds like the major thing. You're basically risking your entire business' liquidity and operating funds, unless you have cash reserves elsewhere.
Some people think of it as a major thing, but I don't. FDIC only insures a small percentage of the money anyway, and if the whole banking system failed I would fully expect the government to fail as well in their promise to help out.
     
Cold Warrior
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Sep 1, 2007, 04:11 PM
 
Up to $100,000 is insured -- which is quite a lot for most small and medium businesses.
     
torsoboy
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Sep 1, 2007, 04:18 PM
 
Originally Posted by Cold Warrior View Post
Up to $100,000 is insured -- which is quite a lot for most small and medium businesses.
Most businesses also have business insurance that covers things like this. I don't forsee the banking system failing, and if it did I think $100k would be the least of everyone's worries (if the federal government did in fact pay it). BUT, some people are more conservative with their money and have more faith in the government than I do. For my business it is a great fit, but others might not feel that it is a good fit for them.

Also, pretty much everything in a business is a gamble. One day you could be living high on the hog, and the next you could be down in the mud. You get to choose where you take your risks... I think not having FDIC insurance is a very small risk.
     
Angus_D
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Sep 2, 2007, 08:04 AM
 
Woah, 3.5%? My savings pay >6%.

Oh and ICICI are offering 4.5% in Canada.
     
ballison
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Sep 2, 2007, 08:49 AM
 
Ive loved my ING direct savings account...4.5% interest no fees whatsoever and just signed up for their checking account which has about 3% on that. really a great company not sure if they cover canada though
     
torsoboy
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Sep 2, 2007, 11:05 PM
 
Originally Posted by ballison View Post
Ive loved my ING direct savings account...4.5% interest no fees whatsoever and just signed up for their checking account which has about 3% on that. really a great company not sure if they cover canada though
This is only for consumer savings accounts though I think, and not for business checking/savings accounts.
     
SpaceMonkey
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Sep 2, 2007, 11:48 PM
 
Originally Posted by Cold Warrior View Post
The only thing?? That sounds like the major thing. You're basically risking your entire business' liquidity and operating funds, unless you have cash reserves elsewhere.
Money Market Funds (which I think is what torsoboy is mostly referring to) are so highly regulated in terms of what kinds of notes they can invest in (ie only very short-term, less than 90 day average maturity, high grade corporate paper, government securities, and bankers notes) that if a well-regarded MMF were to "break the buck," as they say, the global economy would probably be in rough enough shape that the FDIC would be the least of your worries. In fact, the Vanguard Prime Money Market Fund, for example, has currently almost half of its holdings in bank CDs.

Are they higher risk than FDIC-insured accounts? Sure. But the difference is so slight that it is hardly worth worrying about.
( Last edited by SpaceMonkey; Sep 3, 2007 at 12:07 AM. )

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freudling  (op)
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Sep 3, 2007, 01:03 AM
 
Wow, great response.

Ok, in Canada, they allow high interest checking/savings accounts.

I looked into ICICI. They are a bit ratty. I went to a branch downtown... I don't trust them, and I think the money is not insured.

I am with HSBC. The Direct Savings acccount. Actually, 3.75% is the interest rate. There is no fees, no minimums, and you can do online transfers between an account at another bank and it.

I looked into ING. You Americans always get the better end of the stick. Their interest rate here is 3.5%. They do have a business account, but it is essentially worthless. You can't write any checks from it. ING is also not a large bank with the kind of service you would get from, say, HSBC. At least I know that I can visit a branch and get service with HSBC, all over the world. But I think in the US, ING is more attractive.

I shopped around a lot, and this is the best account to have. Everyone else has fees, holds on your money, and other stuff that HSBC does not (regarding high interest savings/checkings).

torsoboy:

That sweep account sounds amazing. I wish I could get one.

Angus_D:

What bank is the 6%+? Man, I wish.
     
EricTheRed
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Sep 3, 2007, 04:15 AM
 
Originally Posted by freudling View Post
Not sure what it is like in the US, but right now, all the banks in Canada are at war. Even just a few years ago, you could not find high interest savings accounts that were practical: they all carried exhorbitant transaction fees. Now, every bank has come out with these high interest savings accounts, and some are no fee (no monthly fee, no minimum balance, free transfers from bank-bank, etc.). Some even have just a 2 day delay when moving money around.

My question, I got one of these high interest accounts, and there truly are no fees. Right now it is paying 3.5% annually, calculated daily and paid monthly. Because I have a constant stream of money coming in to my business, I would like to earn interest on the float. Am I best to stick with the high interest account I have (moving money to it from the business account), or are there other options out there?

Thanks.
In August banks ran into a credit crunch. Meaning they weren't liquid. Meaning some banks were having a hard time finding money so they could pay off interest earned on various kinds of accounts as well as the cash they use to lend out. Among a whole bunch of other things, the lack of liquidity started a war on raising interest rates of savings accounts to retain people's cash. I hear that some banks are paying as much as 5.5%.
     
tie
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Sep 3, 2007, 08:45 AM
 
Originally Posted by torsoboy View Post
Most businesses also have business insurance that covers things like this. I don't forsee the banking system failing, and if it did I think $100k would be the least of everyone's worries (if the federal government did in fact pay it). BUT, some people are more conservative with their money and have more faith in the government than I do. For my business it is a great fit, but others might not feel that it is a good fit for them.
But banks do fail, every year. It has little to do with the banking system failing. Why wouldn't the government pay it?
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Angus_D
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Sep 3, 2007, 05:45 PM
 
Originally Posted by freudling View Post
Angus_D:

What bank is the 6%+? Man, I wish.
Interest rates are high here in the UK at the moment (as is inflation), it's probably not fair to comapre.
     
   
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