A few days ago I wrote about a high yield savings account from American Express. See, last week actually opened one of these accounts and so far the account has worked exactly as I’d imagined. I put money into the account and it continues to sit while collecting interest. This is because American Express pays me interest for keeping my money with them. Now, don’t get me wrong, they only do this because they are able to turn around and lend some of that money out to others at a much higher rate, but I don’t really need to get into the deposit multiplier right now…
Anyway, in that post I highlighted that American Express was paying 1.50% APY on high yield savings account balances. That means, if I put $10,000 into an American Express high yield savings account, I’d expect to earn about $150 of interest in the first year. I might be slightly understating that figure due to compounding interest, etc., but you get the idea.
However, as I look back at that post I realize there is one important thing about the high yield savings account that I failed to mention. That is, American Express, and other institutions, reserve the right to adjust their high yield APY as they see fit. So, while I might have signed up for a 1.50% APY, the actual offered interest rate could be higher or lower based on current market conditions.
American Express Adjusts High Yield Interest Rates
After opening an American Express High Yield Savings account last week, my funds arrived in the account on Monday of this week. As I mentioned previously, signing up for the account was incredibly easy and the whole process took less than 5 minutes. Sure, I would prefer just one log-in with my credit card accounts, but I’m overall happy with my decision.
Literally 4 days after the deposit hit my account, I received an unfortunate email from American Express. The email let me know that the interest rate on my account changed, effective immediately.
As noted in the above email, the interest rate on my account changed from 1.50% APY to 1.30% APY. Although this is a fairly small change, it could have a dramatic impact on those with larger deposits. For example, on a $10,000 account, you’ll earn $20 less of interest annually. However, on a $100,000 account, the difference is $200 of interest annually.
Of course, immediately following the email from American Express I check their website to verify the change and found that the site had indeed been updated with the new rate.
Even so, I’m still earning much more interest annually than I was from my Bank of America savings account. Prior to switching I was only earning 0.02% of interest on a standard savings account.
Final Thoughts
Although I knew that interest rates were subject to change when I opened my account, I didn’t expect them to change so quickly. While I am of course a bit sad to see the rate drop, I am still happy with the decision to open an American Express high yield savings account.
One thing I think is worth pointing out is that these rates are changing all the time. On any given day or week, one institution might be offering a much better rate than others. For example, UFB Direct is currently offering 1.70% APY on their high yield savings accounts. Now, it might be tempting to pick an account based on the interest rate, but remember that those rates can change. So, while UFB is offering the best rate today, it might not be the best tomorrow.
Therefore, I wouldn’t recommend selecting a high yield savings account based on the rate alone. Instead, find an institution you like with a competitive account and sign up. The truth is, as long as you move your money out of a traditional savings account and into a high yield account, you’ll still be much better off.
