UFB Direct, an online bank known for competitive interest rates, is unleashing its new money market account to keep Americans saving. Launched on Friday, UFB Direct’s money-market account — available online nationwide — touts an attractive 1.15% APY, which is a tad below TIAA Direct’s money market rate of 1.25% APY.
In addition to a $5,000 minimum opening deposit, the account requires a $5,000 average daily balance to earn interest — anything less would result in a $10 monthly fee and no interest earned. Balances greater than $250,000 will earn 0.25% APY.
Requiring customers to maintain a specific account balance is not unusual. Money-market accounts at many brick-and-mortar banks have similar terms to warrant the higher interest rates (compared to savings accounts). But, it may not be the norm for online banks. TIAA Direct, Sallie Mae Bank, EverBank and Ally Bank are examples of online banks that offer money-market rates regardless of the account balance.
UFB Direct also offers a savings account with a 0.80% APY, that’s 0.35% APY less than the money-market account. Last year, the savings account carried a leading rate of 1.30% APY that topped most online banking competitors.
Perks of having a money-market account, as opposed to a savings account, include online bill pay, check-writing capability and a debit card for purchases and ATM withdrawals. It offers more convenience for savers who may need to conduct a transaction in an emergency. (The Federal Reserve allows a maximum of six outbound transfers and debit transactions per month on savings and money-market accounts.) UFB Direct imposes an excess transaction or withdrawal fee of $10.
Additionally, UFB Direct offers remote check deposits — a popular feature among bank customers — through a smartphone application or a scanner.
Despite historically low rates on savings accounts, money-market accounts and certificates of deposit (CDs), Americans haven’t stopped saving. In the first quarter of 2012, more than $166 billion have been deposited into these accounts, according to the FDIC.