Online Bank Paying 5.84% APR?

I listen to Dave Ramsey’s radio show as a podcast while I’m driving, and I recently heard a caller ask where to put her emergency fund. Dave said that there wasn’t much to be had in terms of interest and suggested a site where you might receive 2% interest, or somewhere around that mark.

I duly researched PerkStreet and it seems they offer 0.15% APR. Which sucks. So that got me to researching and I found one bank with a 2% APR which seemed significantly better. Just for the record, I have my rainy day fund held at HSBC, a bank I truly loathe. And I’m looking to move my money somewhere with an interest rate higher than the rate of inflation. Not a long term investment – just a liquid account for emergencies. Of course, if you’d have said “liquid account for emergencies” to me 10 years ago, I’d have said a Smirnoff gift card, but things change.

Then I looked at my pre-paid credit card account. I use it as a nifty budgeting tool as I’m self-employed and I only want to move discretionary income there for petrol and crisps and such. I was fiddling around with it as the iPhone app just updated, and I was having difficulty remembering the username and password as they were no longer automagically populated.

Then I noticed it. The interest rate on the savings account is 6.0%APY if you have a direct deposit like I do. Holy crabapples. I’m not sure why I hadn’t noticed this before, but I clicked the two buttons required to transfer some of my credit into the savings account forthwith. There’s a minimum balance of $1.

If you’re wondering what 6.0% APY is, it’s approximately 5.8% APR – you can check out the interest conversion here.

So what’s the  catch? Well, the twice monthly direct debit into my pre-paid account is not interest bearing. Which is exactly the same as if I took the money in cash and stuffed in envelopes – the classic Dave Ramsey system for budgeting, which may have worked for Grandma, but doesn’t suit my general disgust with paper and coins carried around. And the super interest rate only works for the first $5,000, but hey, that’s better than a kick in the groin.

My plan is to move $4500 into the savings account so that it can accrue and compound at the higher rate APR than it currently is languishing at. Once it gets to $5000, I’ll move the excess out.

So yes, if you’re looking for a high yield interest bearing online account  for 1-$5000, I reckon Mango Money is the way forward.