What A Stock Trader's Accidental Discovery Can Do For Your Financial Health
Blaine Cooper is a retired banker who recently signed up for a trading account online as he now have more time in hand to play the stock market. Having heard from his golf buddy that online trading firms charge lower commissions, he decided to open an account and try their service. What he found out was more than just cheaper commissions.
After some research on big trading firms, Cooper finally picked E*Trade Financials for their affordable rates and good reputation. He figured that it will be wise to also have an online savings account to compartmentalise his funds when not used for trading, and so he get one to go with his trading account from the same firm. Then something struck him. "It was my wife who first point this out to me. I was never interested in savings accounts that pay peanuts but she insist that this account is different," says Cooper.
Cooper's wife, Rose Marie initially think that her husband's savings account was in fact an investment-linked account since its interest rates were much higher than the usual APR offered by banks. "My CD with a local bank does not even give me this kind of rate!" Rose Marie beamed. While Cooper's savings account with E*Trade yield a 3.3% APR, he can potentially get 4% for CD from the same source.
This is the reason why his wife is planning to switch over her CDs that's nearing maturity. "I am in fact putting a lot of money on the table since my current CD rate is near half of what I can get from E*Trade," she adds. Blaine Cooper, on the other hand, finds that his high yield savings account is giving him more returns even when he is not using the money to trade.
Just what makes an online banks such as E*Trade so generous with their returns? Online banks are non-existent a few years back and their new operation model has worked so well that more and more of them are coming up. An online bank have significantly lower runnings costs compared to that of a conventional bank. There is simply no need for rent, electricity, renovation cost and employee salaries since an online banks do not have any physical outlet offline. This savings enable them to compete with normal banks on an unfair advantage by 'bribing' consumer like the Coopers with higher interest rates.
According to E*Trade's website, their returns can be as high as 8 times the national savings return and a background check on its competitors proved that E*Trade is the current leader for its 3.3% APR. Rose Marie Cooper's only complaint is that she should have discovered this earlier. "I realize that E*Trade used to offer better rates when times are good," she comments.
The Coopers are an example of normal people who found extraordinary value in online banks. Anyone can in fact open an account with E*Trade without having to get involve in stock trading. It is about time banks go to war to secure our saving dollars, and online banks like E*Trade has just raised the bar in high yield bank accounts.
Originally posted 2008-11-13 19:16:03.
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