Review Of Dollar Savings Direct High Yield Savings Account

Published 1/9/09 (Modified 3/22/11)
By MoneyBlueBook

If you've been in the market for a high interest savings bank and have been searching for the highest interest rate offers, you may have come across an unfamiliar online savings bank called Dollar Savings Direct. It's no wonder few people have heard about Dollar Savings Direct - for many months since its establishment, the online savings bank has been operating under the shadows of its more established and well known divisional cousins - Emigrant Direct and Emigrant Savings Bank.

Until about a year ago, Dollar Savings Direct used to be known as BancoFortuna - Emigrant Savings Bank's attempt at launching a Spanish language bank to deepen its foothold into the Hispanic and Latino online banking market. Promoting its BancoFortuna.com website and touting a very high annual percentage yield (APY) interest rate on new accounts, Banco Fortuna was intended to appeal to U.S. consumers in the Spanish speaking demographic. After many months, it was ultimately evident and clear that the online bank's venture into the U.S. Spanish speaking market wasn't as successful as the bank had planned or hoped. Ultimately, and months into the foray, Emigrant re-branded Banco Fortuna into a new but familiar English based service - establishing a new bank named Dollar Savings Direct. If you visit the old BancoFortuna.com website today, you are automatically redirected to Dollar Savings Direct, confirming the change in marketing approach. While still a relative upstart, Dollar Savings Direct has recently begun to garner some success and much attention with its attractive high interest rate promotions, rates frequently much higher than those offered by the industry's current top online banks.

Difference Between A Dollar Savings Direct Account Vs. An Emigrant Direct Savings Account

When I first learned the published news that Emigrant Bank was promoting a new high yield savings bank in Dollar Savings Direct, I initially surmised Emigrant was sneakily trying to recruit more savings account deposits and game the market by not having to pay the higher interest rate to their existing Emigrant Direct American Dream Savings Account customers. In the world of consumer marketing, companies and product manufacturers frequently promote identical products in different packaged and advertised forms to appeal to different demographic segments. However, that didn't appear to be the case with Dollar Savings Direct, as the new bank's establishment appeared to be due to its previously unproductive foray into the Spanish market rather than a veiled attempt to garner new deposits at a discount.

However, while perhaps it wasn't Emigrant Bank's original intent to promote Dollar Savings Direct and Emigrant Direct as mere clones of each other, the end result was that they are essentially that - mirror images of each other. The one thing that new Dollar Savings Direct website visitors and account customers will immediately notice is that in almost every material way, Dollar Savings Direct and Emigrant Direct Bank are nearly identical. Other than a few cosmetic and aesthetic differences between the two in terms of different logos and graphics (such as Dollar Savings Direct featuring Benjamin Franklin as their mascot and Emigrant Direct featuring a red white and blue patriotic top hat), the two banks share nearly identical layouts and color schemes. This obviously shouldn't come as a surprise to anyone since both Dollar Savings Direct and Emigrant Direct have always been owned and operated as banking divisions by parent company Emigrant Savings Bank, except now Dollar Savings Direct is being brought into the English language fold as well.

While Dollar Savings Direct appears to have all the primary features of Emigrant Direct, there are a few important and key differences with Dollar Savings Direct - namely a much higher APY interest rate for new account customers and a $1,000 minimum balance requirement for the highest APY offer. While there is a $1,000 initial balance requirement to open new accounts, there are no maintenance charges or monthly fees for failing to maintain a certain account balance. A $1,000 minimum balance is required to earn the highest interest rate, but even if your balance falls below $1,000, you still earn interest at 1% APY. While this is noticeably different from Emigrant Direct in that the Emigrant savings account doesn't require a minimum balance to maintain the highest rate, the Emigrant Direct account offers an interest rate yield that is significantly less than that offered by Dollar Savings Direct. Of course, the one important thing to keep in mind is that all savings account interest rates, whether offered by Dollar Savings Direct, Emigrant Direct, or any of the top online banks in the market, are all variable in nature and therefore subject to periodic increases and decreases as market forces and national interest rates dictate. If you are interested in avoiding the variable nature of bank rate fluctuations, you may want to consider locking yourself into a fixed high CD rate with a certificate of deposit instead.

Can Existing Emigrant Direct Customers Get The New Dollar Savings Direct Interest Rate?

Frankly, I'm a bit perplexed as to why Emigrant chose not to combine Dollar Savings Direct with Emigrant Direct and let all of its aggregate customers enjoy the higher Dollar Savings Direct interest rate without additional effort. But regardless of Emigrant's reasons for not joining the two nearly identical online banks, current Emigrant Direct savings account customers can certainly reap the interest rate yields of Emigrant's new Dollar Savings Account. However, while the two banks operate under the same FDIC insurance certificate, they are still considered two separate banks. Thus, as an existing Emigrant customer, you will still need to open a new Dollar Savings Direct account to get the higher interest rate that Dollar Savings Direct is currently offering. Furthermore, since the two banks are regarded as separate financial institutions, to transfer funds between the two high interest savings accounts, you'll still need to use the services of a third party intermediary checking account.

Despite the hassle of having to open a new account to get the higher rate for what's apparently a bank clone of what you already have, if you are a current Emigrant Direct customer, you should still do what any smart and savvy bank interest rate chaser would do - open a new Dollar Savings account immediately to snag the interest income benefits of a higher rate. The process of opening a new Dollar Savings Direct online account is actually pretty quick and hassle free. Not only that, since Dollar Savings Direct only performs a soft credit check during the new account opening process, there is also no need to worry about any possible damage to one's FICO credit score.

Opening A New Dollar Savings Direct Account - No Hidden Fees

The process of opening a new savings account with DollarSavingsDirect is very straightforward and efficiently quick. Simply visit the Dollar Savings Direct application page and follow the directions by filling in the requested information. While the bank account has no minimum balance requirement to earn interest income on deposits, it does require a minimum initial deposit of $1,000 to open a new savings account. So long as you maintain a minimum balance of $1,000, you'll earn interest income at the highest APY rate offered. If the balance dips below $1,000, you'll still earn interest, except it'll be at a lower rate - just 1.00% APY. Otherwise, there are no hidden costs, no fees, no penalties, and no service charges for inactivity. As you are filling out the online application, you will be required to provide the following personal and identifying information:

• Your name, address, birth date, and contact telephone number
• Your Social Security Number (SSN)
• Your driver's license number
• Electronic funding information (bank's routing and account numbers)

To finalize the application process once you've provided the necessary account information, you'll need to fund it. Funding your new Dollar Savings Direct account can be made online via an ACH electronic bank transfer from a linked checking or savings account. Before your linked external bank can be used for funding purposes, you'll need to verify ownership of the account through a series of test trial deposits. Dollar Savings Direct will automatically make two small trial deposits into your funding account, a process which usually takes a few days. Once you've received the two test deposits, simply return to your Dollar Savings Account and submit the dollar amounts to complete the initial bank fund transfer and begin banking online. For electronic deposits, Dollar Savings Direct mandates a 5 business day holding period before funds can be withdrawn. Once your Dollar Savings Direct account has been set up with initial funds transferred in, you are free to start banking online via the 24/7 access website. Feel free to transfer funds in and out of your linked up bank account as needed.

Bank Safety, Stability, and FDIC Insurance Coverage Of $250,000

One of the biggest and most serious concerns that many bank consumers have these days when choosing a bank is the ability of the company to stay in business. In this current poor economic climate amidst the shadow of multiple fallen banks, many of us are understandably concerned about the safety and security of our bank accounts in the event of an unpredictable financial catastrophe or bank failure. The high interest rate appeal of high yield savings accounts are alluring, but just how stable and safe are financial institutions like Dollar Savings Direct Bank?

For starters, Dollar Savings Direct is merely an online division of its much larger parent company Emigrant Savings Bank. While for promotional purposes, Dollar Savings Direct and Emigrant Direct seemingly operate independently, they both operate under the same FDIC insurance certificate (FDIC Certificate: 12054). Established during the mid 1800's, Emigrant Bank is the oldest savings bank in New York City and by some accounts, the largest privately owned bank in the United States. With assets in excess of $14 billion, its primary bank branches thrive in the heavily competitive New York metro area - all traits indicative of an aged and established banking institution.

While certain financial pundits place great weight on a particular banking institution's ability to garner high ranks on Bankrate.com's Safe & Sound Ratings or Bauer Financial's star based rankings, I prefer to recommend a greater attention to FDIC insurance limits instead. Emigrant is a FDIC insured bank and thus its checking, savings, and CD deposit accounts are fully backed by the full faith and credit of the United States government up to the current full FDIC coverage limit of $250,000 for each customer. Both shared Emigrant divisions of DollarSavingsDirect and EmigrantDirect have been fully FDIC insured since the 1930's. Unless the U.S. government somehow gets annihilated off the face of the planet or winds up in such complete financial disarray that it can no longer sustain its obligations (not very likely), your Dollar Savings Direct funds are safely protected and guaranteed from loss. As a Dollar Savings Direct customer myself with a modest amount sitting in a high yield savings account accruing interest income, I rest easy at night, as I know my deposits are fully secure. However, do keep in mind that because Emigrant Direct and Dollar Savings Direct are online banking divisions of Emigrant Bank that share the same FDIC certificate, any deposits you have at Emigrant Bank, Emigrant Direct, or Dollar Savings Direct are aggregated and FDIC insured up to a single combined limit of $250,000 per depositor.

Extra Information and Resource:

• Dollar Savings Direct ABA/Routing Number for direct deposits and ACH transfers: 226070403