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Goldman Sachs moves into online savings accounts

Investment maker acquires consumer banking operation from GE Capital

Goldman Sachs is a banking name closely associated with Wall Street, not Main Street. As an investment banker, its primary business has long been trades, investing, and facilitating deals.

But the venerable institution is suddenly moving in a new direction, offering a savings account that requires as little as $1 to open.

Actually, it isn't Golden Sachs, itself, that is going after consumer deposits. It's the online deposit platform of GE Capital Bank (GECB) that it has recently acquired. But the parent company makes clear that it is eager to get into consumer banking.

“We are committed to providing our new online deposit customers the high level of service they have come to expect,” said Esta Stecher, CEO of GS Bank.

$16 billion in deposits

Goldman Sachs closed on the acquisition, including taking over about $16 billion in customer deposits after clearing federal regulatory hurdles, as well as winning approval from the New York State Department of Financial Services and the Utah Department of Financial Institutions.

“This transaction increases the funding diversification and strengthens the liquidity profile of Goldman Sachs and GS Bank,” Robin Vince, Treasurer of The Goldman Sachs Group, Inc., said in a release. “We are pleased to add the capability for accepting online deposits, a strategic priority for the firm and for GS Bank.”

The online savings account currently pays 1.05% APY on deposits. While there is no minimum deposit to open the account, there are limits on how much customers may deposit.

Interest compounded daily

Interest on deposits is compounded daily and paid monthly. Depositors may access funds multiple ways but are limited to six withdrawals per statement cycle. Money can be accessed online, by phone or by wire.

Deposits can be made the same way or with the old school method of mailing a check.

GS Bank is chartered in New York and is a wholly-owned, direct subsidiary of The Goldman Sachs Group, Inc. Like a traditional bank, its deposits are FDIC insured up to $250,000.

Goldman Sachs is a banking name closely associated with Wall Street, not Main Street. As an investment banker, its primary business has long been trades, investing, and facilitating deals.

But the venerable institution is suddenly moving in a new direction, offering a savings account that requires as little as $1 to open.

Actually, it isn't Golden Sachs, itself, that is going after consumer deposits. It's the online deposit platform of GE Capital Bank (GECB) that it has r...

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    Where to safely stash cash and get some kind of return

    Some savings and money market accounts pay more interest than others

    The stock market's volatility in 2016 has some investors looking for places to park their money – anything from a nest egg or an emergency fund.

    While stocks have rallied over the last few weeks, they have mostly regained the value they had at the start of the year. Government bonds and certificates of deposit (CD), meanwhile, can tie up money for extended periods of time.

    But savings accounts, and their cousin – the money market account – may provide a safe and flexible place to temporarily park some cash, The FDIC insured up to $250,000. While most of these accounts pay a minuscule amount of interest, a few stand out by paying 1% or more.

    $25,000 or more

    If you have a significant amount of cash to deposit – $25,000 or more – it will be hard to beat the savings account at UFB Direct. It pays 1.2%, comparable to many banks' CD rates.

    You can open an account with as little as $1, but you won't get nearly as high a rate of interest on balances under $25,000 – around 0.20% APY.

    SFGI Direct doesn't pay quite as high of an interest rate on savings, but it's still a fairly impressive 1.06% APY. It doesn't require nearly as much money to earn that rate. It pays on balances of at least $1.

    Money market accounts sometimes pay a higher rate of interest, depending on the amount of money in the account. For example, the Patelco Credit Union currently pays 3% APY on balances between $1 and $2,000. The rate declines as the balance rises above $2,000.

    Advantages

    Checking into a money market account before automatically selecting a bank's savings account is usually a good idea. They sometimes offer advantages.

    "Santander's FDIC-insured money market savings account is a standout because our customers' balances grow faster than in traditional savings accounts while giving them that access through checks, online banking or mobile,” Michael Cleary, Santander's head of consumer and business banking, said in a release. “We design our products so they reflect how people like to bank.”

    One of the chief benefits of these money market accounts is they often have tiered interest rates, meaning they pay higher rates of interest if you deposit more money. At the same time, they usually have higher minimum balance requirements to open a new account, meaning you might have to start with a savings account and convert it to a money market once you hit the minimum threshold.

    Money market accounts may also make it easier to use the money, giving you limited check-writing privileges, something not usually found with savings accounts.

    On a historical basis, the return on keeping your cash in an FDIC-insured bank account is pretty paltry. However, the cash is safe and readily available. By shopping around, you should be able to find the best choice.

    The stock market's volatility in 2016 has some investors looking for places to park their money – anything from a nest egg or an emergency fund.While s...
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    Is having a savings account worthwhile?

    It is if it will help you accumulate savings. Just don't expect any interest.

    Years ago most consumers parked spare cash in a passbook savings account at their bank, a place where money could be separated from cash needed for day to day expenses and, where it could earn a little interest as well.

    But in an era of rock bottom interest rates and the addition of numerous bank fees, many have come to question whether it makes sense to have a savings account.

    It may, under the right circumstances. But it will definitely pay to shop around.

    Scaling back options

    Many banks – especially the larger national ones – have scaled back their savings account options and the rates they pay. Bank of America has what it calls its basic savings account, as well as a Rewards Money Market Savings account, with higher rates and added benefits. They are fairly typical of the industry standard these days.

    The basic account currently pays an interest rate of 0.01% APY. If that sounds very low, it is. If you had $1,000 in an account for one year, you'd earn almost nothing in interest.

    While that's definitely on the low end, at least it's something, and safer than sticking your cash in a mattress.

    Walling off money

    These days, few consumers put money in a savings account to earn interest. Rather, it's a way to wall off the money so it doesn't get spent on other things.

    With online banking, it is easy to transfer money from a checking account into savings without having to make a trip to the bank.

    Bank of America, along with many other banks, also offers a “Keep the Change” program. If you opt-in, the bank will round up every debit card purchase to the next dollar, transferring small amounts of change into your savings account. It's a fairly painless way to save.

    You can also use your savings account for overdraft protection. Should you overdraw your checking account, the bank can transfer money from savings to cover it.

    So there are some advantages to having a savings account, even though they don't earn any interest to speak of. And while online banks, like Ally, pay a higher rate on passbook savings, it's still a far cry from the rate paid a couple of decades ago.

    Requirements

    Of course, there are some requirements to maintain a savings account without incurring fees. For the Bank of America basic account, you must maintain a $300 minimum daily balance, or link to your Bank of America Interest Checking Account, or make combined monthly automatic transfers of $25 or more from your checking account during the preceding billing cycle.

    Failure to meet those requirements results in a $5 fee.

    Bank of America's Rewards Money Market Savings account pays a slightly higher interest rate – 0.03% to 0.06% – but has steeper requirements, like maintaining a $2,500 minimum daily balance. Failure to meet all the requirements results in a $12 monthly fee.

    While a savings account is not going to grow your money in any real sense, it might prevent you from spending it. It's a fact that some consumers need a separate account as a way to exercise financial discipline. And if you can meet all the requirements so that monthly fees are not eating into your savings, that's a perfectly legitimate reason.

    Other options

    For those who can carefully track their spending and exercise tight discipline, however, a rewards checking account might be a better solution. Some banks will pay a higher interest rate – in some cases over 2% APY – on balances up to $15,000 or so.

    By meeting all the requirements – usually a certain number of debit purchases each month and at least one direct deposit – consumers can avoid fees, earn interest, and sometimes receive other benefits, such as having all out of network ATM fees refunded.

    No matter what type of account you use, the important thing is to save.

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