June 29, 2023 • By Andrew Shilling
Peter Salkins quoted in this MarketWatch article
There’s a catch, but it can be worth it for some. The lesson: No matter what savings account you get, read the fine print.
It’s among the highest available interest rates offered for a savings account today — but is the 5.75% annual percentage yield (APY) promised for the online savings account at Andrews Federal Credit Union worth making the move? Experts say the key to that is in the fine print, where a few key restrictions may turn off some potential savers — who may be better off with a different saving account (you can see some of the best savings account offers here).
The Andrews Federal Credit Union high-yield savings account comes with a common caveat often found in savings account marketing these days: the high APY advertised is only up to a certain amount of money. In this case, the touted 5.75% APY interest rate offering is only available for account balances from $0.01 to $1,000; average daily balances that exceed that threshold earn just 0.05% APY, according to Andrews FCU.
“The $1,000 balance threshold limits the real benefit of this offer which is the 5.75% APY. Not only that, but the 0.05% APY earned once you cross the said limit is very low compared to other offers out there,” says Jill Gonzalez, a senior analyst at WalletHub. (Want to explore other high-paying savings accounts ? You can view high-yield savings account offers here.)
When asked for additional information on the account and what type of customer this promotional offer is targeting, a spokesperson for Andrews FCU replied “this savings option is open to all our members,” and to “refer to our rates page” for further details.
It’s enticing, but only up to $1,000, pros say
Peter Salkins, a certified financial planner with Integrated Financial Partners, says the account is a perfect case in point for why everyone should be wary of “teaser rates” and “consider the total effective interest rate, not just the beginning rate of a tiered interest rate schedule.”
Salkins notes that the 5.75% APY “could be viewed as an attractive interest rate on a $1,000 deposit. However, he adds: “If the same person deposited $2,000 into that same account, the combined interest rate would be approximately 3.125%. If you deposited $100,000 in that same account your combined interest rate would be approximately 0.055%, clearly not as enticing.”
Even still, Gonzalez adds that if you have short-term financial goals or want to put some money aside, and you only have limited funds every month, this offer could still potentially work in your favor. “Even though the $1,000 balance threshold is quite low, you can still add some extra cash to your savings by taking advantage of the high APY,” she says.
