Forever War and 5% Interest Savings Accounts

The Taurans invaded and Earth was unprepared.  William Mandela is conscripted for an elite counterattacking force and that was the beginning of his forever war.  Due to relativistic affects of space travel, while time passed slowly for him, it rushed passed in bounds on Earth.  What at first starts as a few years, turns into decades and eventually he misses centuries while serving in an eternal war.  One of the strange quirks of this insane life is that his military pay, sitting in a bank account for years upon years, compounds to insane amounts.  He returns from one campaign a multi-millionaire despite earning a soldier’s pay…and it only cost him a century or two.  When the war eventually ends, due to the discovery of an insidious secret, money is no longer an issue.

You can earn your own compound interest, and to help you speed up the process so that you don’t have to wait 300 years to earn a little money, I want to introduce you to a concept.  It’s the concept of 5% interest rates in an FDIC insured savings account.  Not all that long ago, before the subprime mortgage crisis it wasn’t all that unusual to earn 5% or even more in interest in a money market account.  In fact, when I graduated college in 2011, I received a handy little “how to be an adult” booklet from my school that provided tips on everything from dry-cleaning and ironing, to how to dress appropriately at the work place, to how to save money.  One of the tips suggested opening up a money market account because I could earn 5-7% interest in a virtually risk free environment.  When I asked my mom where these magical accounts could be find, because a quick Google in 2011 didn’t turn up anything even approaching 1% interest, she set me straight.  They went the way of dodo, thanks to the imbecilic wolves of wall-street and the subprime mortgage crisis.

Which is why, when I stumbled upon a blog post by the Financial Panther, talking about how to earn 5% interest on an FDIC insured savings account with Netspend, I was hugely skeptical. But I tried it and I like it.

There are a couple reason why I like these Netspend accounts, but it mainly boils down to the fact that this is the most interest you can earn on your money while keeping it totally safe.  First, it’s way higher than general high-yield online savings accounts.  It’s higher than most bonds right now and most CDs.  It is also risk-free and not affected by the market so its far safer than real-estate or stocks, and it’s liquid, so you can access the money whenever you need it.  Perfect for an emergency fund.

That said, there are a few things to keep in mind when opening these Netspend accounts, which you will have to decide for yourself if they make it worth it.  Mostly because while these accounts are risk free, they take work to avoid fees.

This is basically how these savings accounts work.  You get access to a savings account if you sign up for a Netspend pre-paid debit card.  These debit cards are terrible to use as debit cards.  They charge you fees every time you load money, unless you do with with an online bank transfer, and every time you use a card.  But, once you have money on a debit card, you can enroll in a linked savings account.  You can load as much money as you want on the debit card, and then transfer it to the savings account. When you want to withdraw money from the savings account, you transfer it from the savings account back to the debit card, and then you transfer money from the debit card to whatever online bank account you have it linked to.  By doing this, you can avoid the fees, but still get access to these awesome FDIC savings accounts with 5% interest.

Obviously this is a little cumbersome. Adding to the difficulty is that there are limits.  You can open up to 5 Netspend cards, but each one will only earn you 5% interest on the first $1000 you have in the savings account.  Despite these drawbacks, if you use these accounts as an emergency fund, which you want to have anyway, the work is well worth it.  And by following certain steps, you can avoid fees entirely.

Financial Panther lays these steps out and in more detail than I ever could, so I will just quickly note them for you and refer you to his blog if you decide this is a path you want to take.

  1. Make sure you have an online bank account.  Whether this is a savings account or just an online portal with your checking account, it doesn’t matter, but you will need to be able to transfer money electronically between accounts.
  2. Sign up for the Netspend account.  As I said, there are five cards.  First, you need to sign up and they will send you a card.  While the card is in the mail you can log-on and create your online account with Netspend for each card.
    1. Netspend
    2. Ace Elite
    3. Western Union
    4. H-E-B
    5. Brinks
  3. Activate the card.  Do NOT try to load money on the account until the card is activated.  You can activate the card either by phone or online.  Just make sure you stay in the default pay-as-you-go account.
  4. Link your online bank to your Netspend account. Log into your online bank account (from step one) and link the new Netspend account with it.  I’ve done it successfully with both a Chase checking account and a Marcus Goldman Sachs online savings account.  This will take a couple of days and require you to verify the trial deposits your bank puts into the Netspend account.
  5. Transfer money onto your Netspend account.
  6. Enroll in Savings and then transfer money from your prepaid card into your Netspend savings account.
  7. Set up an automatic transfer from your online bank account to the Netspend account every month or two, for just $1.  This way, you will avoid fees from having an inactive account.  This step is the one reason why I prefer using an online checking account instead of an online savings account to link with the Netspend cards.  By the end of this, you will have five Netspend cards, which means, if your bank is like mine (Marcus Goldman Sachs) you have to choose monthly withdrawals, and with five cards, you will have five withdrawals right there.  If you are using a savings account, you are limited to 6 per month (by law), which means if you ever need to withdraw money from your online savings account for another reason, you’re limited to once per month.  Not the best.
  8. Repeat the steps above with each of the five Netspend cards.
  9. Transfer the interest you earn back into your online bank account so you can use it!  To do this, log on to the online bank account you have linked to each of your Netspend accounts and initiate a transfer, so that bank pulls the money from the Netspend card account.  As I mentioned, each card only earns 5% interest on up to $1000.  So what I prefer to do is put $1000 on each card to start, and then transfer the interest into my checking or savings account when the interest is paid so I can use it for other things.  Interest on these cards comes quarterly instead of monthly.  So you can do this once every three months.
  10. UPDATE: One last thing.  Once you have all five cards, I’d recommend not logging into all five accounts on the same day from the same device if you can avoid it.  I just had one account locked because I was checking on all my accounts together.  When I eventually got through to the Fraud Department, they told me they have an automated system and because all the accounts are with the same company, if you log into them with the same device it sends up a fraud flag.  No idea why.  The Fraud Department didn’t seem disturbed and just told me it an automated thing and recommended I either log in using different devices, or just space out my logins.

Here’s the link to steps 1-8 as laid out by the Financial Panther.  (I added the ninth because this step momentarily confused me when I tried it!)  Here’s another link to the Doctor of Credit, who lays out the most exhaustive list of high-interest banks accounts out there I’ve ever seen, in case this has sparked your interest.  Most of them require even more work than the Netspend cards and didn’t seem worth it.  But for me, $5,000 tucked away and earning 5% interest is an excellent financial base to start with as I begin my financial journey.

And if you’re interested, here’s my referral link!  Use this link and you can earn both of us $20 on your first Netspend card (although it only works for the first card).



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