For those who remember the Great Recession and the government funded bailout of a number of U.S. banks to keep the country’s economy afloat, it might have not caught your eye but American Express was one of the recipients of that government money. But wasn’t American Express a credit card company, not a financial institution that would qualify it for getting a piece of the bailout pie? In 2007 it was not a financial institution but it did change its legal status so it could qualify for the money. With all the focus on the major banks, it basically escaped the notice of the general public, and in large part it was only the investors who were aware of what was going on. That laid a foundation from which the company can now offer personal savings accounts without running afoul of the law.
The next question to ask is why anyone should consider an American Express Savings Account. The biggest reason is its whopping 2.10% interest rate, a full 2 percent higher than the rate at most standard banks. Because it is now a financial institution, all deposits are fully insured by the FDIC – a key feature for investors large and small. But though the company does offer financial instruments, those instruments are very limited to savings accounts and certificates of deposit. Note that the FDIC insurance has the same maximum $250,000 of insurance per account – the same as other banks. But there are some subtle differences.
One is that you can open an account with $0. There is a technical rule that you need to have at least $1 to earn any interest, but you do not need to even have a minimum balance. For people who fear that their forgotten savings accounts with $50 will be eaten up by bank fees over time, opening up the American Express account is an important option. Speaking of fees, the savings account does not charge you any transaction fees. That means you get to keep all your money and make as many deposits and withdrawals as you wish, limited only by the requirements of Federal Banking laws. You have access to your account through mobile devices, your computer, standard telephone, and even electronic transfer. When you’re looking at making 2.10% while having convenient access to your money, it’s hard not to like this savings option.
To open an account you will have to have the bank routing number and your account number from where you are going to make your initial deposit. That is when you will discover how easy it is to link your new American Express High Yield Savings Account with any of your other bank accounts. You will probably want to feed it from your other checking or savings accounts to maximize the monthly interest you make.
While all this sounds great, the biggest problem is that it is a savings account that is actually more like a physical vault. You cannot use an ATM to get cash or conduct any transactions because there are no ATMs on the bank network. So every withdrawal you need to make will basically have a two step process connected to it. First, you move your money from the American express savings account to a checking or other account you have access to. Then you make your withdrawal from that second account.
However, this can be a huge advantage for people who tend to spend whatever money they can get at, at all the wrong times. Shopping sprees or casino visits can suck the life out of your checking account, so you can use this savings account to lock down your emergency money or any other cash you want to save for a rainy day.
Finally, because it is a savings account you are limited to six transactions per month. After that you will start being charged for any and all transactions on the account for a calendar month. This means that in case of emergency you need some fast cash, you can have quick access to it. But remember that deposits are also transactions, so use the 6 transaction limit wisely.
Some say the American Express High Yield Savings Account is very similar to the old days of banking, where fees were virtually non-existent and interest rates were decent. If this sounds like something you want, go online and see for yourself what American Express is offering to increase your income and decrease your expenses.