For a few years my emergency fund was in a savings account that paid 0.01% interest rate.
After inflation our money was actually losing value over time.
Why did we keep it there? And why was it there in the first place?
Because it was the bank that my wife and I had a checking account with. Simple as that.
I finally got around to shifting our emergency fund to a high-yield savings account. I quickly realized this is something I should have done long ago, as we immediately saw a $500+ difference in how much we’d receive in interest each year.
I’m far from an outlier. The popular Wall Street Journal columnist Jason Zweig wrote about this recently as well. Many Americans have cash parked in accounts that are paying rock-bottom interest rates.
It doesn’t have to be this way. With technology available today, it’s easier than ever before to open a high-yield savings account.
And for that I recommend CIT Bank, for a very simple reason: interest rate.
Interest Rate is What Matters
It’s always been odd to me the profits banks and financial companies make. The products and services they offer are usually very interchangeable. They aren’t offering unique or ground-breaking products that can’t be found elsewhere.
But the reason they can make so much money is because of consumers doing what I just described: parking cash in super low interest savings accounts.
This is hardly the only reason banks make billions of dollars, but it’s something that consumers can change.
When I was looking for a high-yield savings account, I was focused primarily on interest rate. Every bank has customer service, an online dashboard, and the other things that come with a savings account. The way a bank can differentiate itself is on the yield it offers.
CIT Bank currently offers 0.55% APY. APY is the annual percentage yield. Said differently, this is the amount of interest you will be paid on your cash including interest on interest. For example if you receive a $1 in interest in January, you will then receive interest on that in February, March, and so on.
As I mentioned earlier I had our emergency fund parked in a 0.01% savings account. This was a big mistake. You can see the math behind it in this post, but we essentially were missing out on $500+ of interest a year.
When you run the numbers, you can see that it would take $20k+ to see that sort of interest. But just because you don’t have $20,000 parked in a savings account doesn’t mean you should accept an almost-zero percent yield on your savings. Even if you are just starting out building an emergency fund you should make it a priority to get the highest yield possible. If not for yourself, do it because the banks are making tons of money on people who settle for a savings account with a rock bottom interest rate.
CIT Bank Review – The Details
CIT Bank is an online bank, meaning they save money by not staffing hundreds or even thousands of branches like traditional banks. This is what allows them to offer such a high APY.
CIT Group, who owns CIT Bank, was founded in 1908. They are a Fortune 500 company and are traded on the New York Stock Exchange. Today, they hold nearly $50 billion in assets, according to their website.
Like any reputable bank, CIT Bank is FDIC insured, meaning that each depositor is insured up to $250,000 of contributions. And while no bank is completely safe from hackers, CIT Bank takes security seriously. They provide activity monitoring, layered security, and plenty of firewalls and antivirus software to keep your accounts safe.
During the economic hardships of 2009, CIT Group filed for Chapter 11 bankruptcy. Fortunately, they emerged from the bankruptcy process within a brief 40 days. CIT Bank was not a part of the bankruptcy, however the FDIC did block the bank from accepting new deposits between July 2009 and April 2011.
This is part of the bank’s past, but today it is prospering. It currently has a five-star rating from Bankrate’s Safe and Sound rating system, which is the highest rating a bank can receive.
A bank group declaring bankruptcy sounds like cause for concern, but fortunately, CIT Bank is FDIC-insured to protect your contributions. You never know what could happen, regardless of where you bank. The best thing you can do is to ensure that your bank is FDIC-insured.
Besides the high yield of their savings account, fees (or the lack of them) is what really sets CIT Bank apart. To summarize, their fees look like:
- No fees to open or maintain an account
- No online transfer fees
- No outgoing wire transfer fees (if your daily account balance is $25,000 or more)
- No incoming wire transfer fees
Considering how many banks charge you a monthly maintenance fee (which we are against – there are enough options out there that you can void this), CIT Bank is an affordable way to bank.
If you open a CIT Bank savings account, you aren’t penalized for withdrawing money from your account. It’s important to note, however, that you can only make up to six transactions per statement cycle. This is a rule imposed by the Federal government, not CIT Bank.
CIT Bank Savings Builder – Requirements
There are two ways to get the 0.55% APY on a CIT Bank Savings Builder account:
- $25k average balance – At the end of the month, your average daily balance needs to be $25,000. Don’t have that? No problem. The alternative is:
- $100 minimum single deposit per month – If you make a single $100 deposit into your CIT savings account each month you will receive the 0.55% APY, regardless of your balance. This is a great option if you have a goal of building an emergency fund. I talk more about this strategy in build an emergency fund $100 at a time
The minimum to open a Savings Builder account at CIT Bank is $100. So even if you are starting at just $100, you can get the high interest rate as long as you deposit $100 a month into the account.
If you are unable to deposit $100 in a given month and are below the $25k threshold, you simply won’t receive the high interest rate that month. If you deposit $100 the next month you will be back to receiving the 0.55% APY.
Because CIT Bank is an online bank I highly recommend people consider taking the approach I did. I have a checking account at a traditional bank with branches and ATMs. But I also have my high-yield savings account at CIT Bank. It’s relatively easy to transfer money between the two banks, and I get the best of both worlds: a brick-and-mortar bank for my checking, and a high yield on the cash I have parked in a savings account.
The $100 required monthly deposit for balances under $25k may deter you from choosing CIT Bank, but that could actually be beneficial. This creates an incentive to consistently deposit additional funds into your account, which helps build your savings. Ultimately the 0.55% interest rate is what puts CIT Bank above the other options.
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