Finding a savings account with over 1 percent interest can be difficult today. The large banks are offering .01 to .06 percent, and getting the higher-end rates can require a large minimum balance. However, there are accounts out there that offer 5 percent interest with no minimum balance requirement.
Why consider using one of these accounts? Bankrate reports the average interest for a savings or money market account with a balance below $10,000 is .52 percent. Compare leaving a $5,000 in an account and you’ll earn an extra $224 for using the 5 percent savings account.
Brinks offers one such account. Yes, the company with armored vehicles that transfer money. The savings account is little different than one you’ll find at a traditional bank. You have open a Brinks prepaid card, be eligible for the savings account, and then fund the savings account by passing money through a checking account linked to the card.
The process is easier than that might make it sound, and the account is reputable. The money is held in an account backed by Bank of Internet Federal Bank, a member of the Federal Deposit Insurance Corporation (FDIC). FDIC-affiliated banks give account holders up to $250,000 in insurance from the Federal government in case the bank fails.
Creating and loading your account.
Although you can’t just walk into a branch, fill out some paperwork, and open an account, the process isn’t that hard.
- Optional, but recommended. Search online for a referral link from a current use – you can Google “Brinks savings account referral link” to find links from other bloggers or forums. You’ll get an extra $20 if you create the account with a referral link.
- Fill out the application form. Although it asks for a Social Security Number, there is no credit check. The application is for a prepaid debit card – not a credit card.
- Wait about a week for the card to arrive, and then activate it and create your online account.
- You need to have a direct deposit of $500 to the account within 35 days to get upgraded to the premier version, which lets you open the associated savings account. We spoke with a Brinks representative, and he said that an ACH transfer from another bank work. Some NetSpend accounts now require the initial $500 deposit to come from a payroll or government pay direct deposit.
- Once your account is upgraded, you don’t need to continue the direct deposits. You can add additional money to the account by electronic transfer or in-person reload (with a fee).
- Transfer the money to the 5 percent interest savings account.
There are other 5 percent accounts available via other prepaid card providers. Doctor of Credit lists some of them, including Western Union, Ace Elite, and Mango. NetSpend handles most of the cards associated with these accounts. Although this post focuses on how to open and use the Brinks account, the process, rules, and the fine print is often similar with other accounts.
The fine print (and how to get around it).
- Avoid monthly fees. The standard Brinks prepaid card comes with a $10 per month fee, the upgraded account has a $5 per month fee. To avoid this, switch your account to the pay-as-you-go option after it’s been upgraded and you’ve loaded your savings account. There is no monthly fee, but there is a $1 fee for credit transactions and $2 fee for debit transaction if you use the card.
- And inactivity fees. There is also an inactivity fee of $5.95 if there are no purchases, withdrawals, loads, or balance inquiry (fees) for 90 days. Avoid this by setting up an automatic transfer from another bank account to the Brinks account every 85 days.
- Withdrawing money can be difficult. This may be one of the largest drawbacks. You can’t electronically transfer money from the account, and the bill pay feature comes with fees. To withdraw money, you’ll need to transfer back to the prepaid/checking account and withdraw it by using an ATM (with a $2.50 fee), spend the money using the card (likely not a good option if you use pay-as-you-go), or getting cash back while shopping.
- The interest rate. The interest rate is technically 4.91 percent, giving account holders an annual percentage yield (APY) of 5 percent. This only applies to the first $5,000, after that the APY drops to .50 percent, still much higher than the offering at many large banks.
- Electronic communications. You need to continue receiving electronic statements and notices – rather than snail mail – to be eligible.
- Closure fee. If you decide to close your account, you can either withdraw all your money and or request a check. There is a $5.95 fee if you request a check, and it may take up to 20 business days for them to send it.
Is it worth it?
Creating and funding the Brinks savings account can be a bit of a hurdle. Is the time involved and potential fees worth it? The hassle may not be for those that intend to use the account as a standard savings account, but those that are looking for a secure investment it may be. Although the 5 percent only applies to $5,000, there’s no risk involved, and this could be a good place to park an emergency fund or money that you’re saving for a short-term goal.