3 Clear Winners When Exploring High-Yield Savings Accounts

Summary:

24/7 Wall St. Analyst Lee Jackson recently named a trio of potential low-risk places to park cash in a volatile economic environment.

High yield savings accounts and money market funds are currently perceived as attractive alternatives to traditional CDs, which can carry early withdrawal penalties. Among the names Jackson mentioned are American Express and PNC, which he highlights for offering FDIC-insured accounts with competitive monthly yields and full liquidity.

“American Express has one that pays a 3.3% dividend monthly,” Jackson explains. “You can move money in and out at any time, and it’s insured up to $250,000 by the FDIC. So if for any reason Amex were to go out of business, which I find highly doubtful since it’s been one of Warren Buffett’s longest holdings, you would get your money back eventually.”

Jackson also mentions Quontic Bank, which offers a higher yield with a low minimum deposit. He cites the flexibility to move money freely without penalties as a key advantage.

While yields may decline if rates fall, these accounts still provide significantly better returns than standard checking or passbook savings accounts.

Transcript:

Doug: You know, right now I’m looking for as many riskless assets as I can find. What have you got?

Lee: Well, it’s funny. One of the nice things about when interest rates were higher is some quality money markets, and they’re called high yield money markets or high yield savings accounts. Sometimes you see HSA or HYSA. The great thing about these, and this is why we want our viewers to remember them, is that as opposed to a CD, which can be great, typically if you get a five-year CD yielding four or four and a quarter, you need to hold it. If you try to liquidate it early, you’ll probably pay a principal penalty if you don’t hold it to maturity.

Now there are high yield money markets that we really like. American Express (NYSE: AXP) | AXP Price Prediction has one that pays a 3.3% dividend monthly. You can move money in and out at any time, and it’s insured up to $250,000 by the FDIC. So if for any reason Amex were to go out of business, which I find highly doubtful since it’s been one of Warren Buffett’s longest holdings, you would get your money back eventually.

PNC Financial Services (NYSE: PNC), which is a big East Coast and Upper Midwest bank based in Pittsburgh, has one as well. You can get all of these online. The PNC account yields 3.30%, paid monthly, with the same $250,000 insurance. If you put in more than $250,000, the excess isn’t insured, but you could open accounts at different institutions and keep each insured up to that limit.

Another one that is good to consider is Quontic Bank, spelled Q-U-O-N-T-I-C. They have a 4% yielding high yield savings account with a minimum of just $100. Again, you’re getting 4% paid monthly. The yield can go up and down with the market. The American Express and PNC accounts used to yield four and a quarter when rates were higher.

One option you can buy like a regular mutual fund is run by BlackRock (NYSE: BLK). The symbol is BFCXX. It’s one of BlackRock’s large money market funds, with roughly $370 billion in assets. I personally use it in my account at JPMorgan Chase (NYSE: JPM). It pays around 3% and maintains a $1 net asset value, which is typical for money markets. It hasn’t broken the dollar, and if money markets ever break the dollar again, that would signal serious trouble.

These are the kinds of investments to consider if you’re worried and your passbook savings account is paying 0.07% or 0.10%. You can open these accounts online and transfer funds via ACH safely and easily. They’re essentially riskless. Could interest rates go lower? Sure, they probably will. But inflation is still running around 2.7% to 2.8%, and until that’s under control, rate cuts may be limited.

Doug: If you leave your money in a checking account, all you get is a free pen from the bank.

Lee: That’s right. They pay you nothing. It’s a crime. It’s unfortunate they don’t pay more on traditional savings, but there are ways around it. Just remember names like American Express and PNC, or simply search for high yield savings accounts and you’ll find options.