Getting More From My Emergency Fund With 3% and 5% Interest Savings Accounts

A strategy that I’ve used over the past five years or so is to take advantage of what you could call “mega high-yield savings accounts.” While your typical high-yield savings account pays 1% interest or less, mega high-yield savings accounts are savings accounts that pay much more – as much as 3-5% interest. This is money held in an FDIC insured savings account as well, which means there’s no risk in keeping your money in these accounts.

The downside of these 3-5% interest savings accounts is that there are often limitations or hoops you have to jump through in order to get these accounts fully set up. For example:

• All of these accounts limit how much you can earn at that mega high-yield interest rate. You’ll typically be able to earn 5% interest on up to $500 or $1,000 for each savings account. There are enough of these accounts that you can open up multiple accounts earning these rates, which allows you to earn mega high-yield rates on more significant sums.
• Some of these mega high-yield savings accounts require more set-up work compared to others. For instance, some of these accounts require more involved work in order to get them open. Others require you to automate certain transactions in order to keep the accounts fee-free. That said, it isn’t that much work, especially once you have everything set up and automated, but it is some work nonetheless. 

For me, taking advantage of these 3-5% interest savings accounts makes a lot of sense. I generally earmark these funds for my emergency fund or for more short-term goals where I can’t risk any loss (a house downpayment fund, for example). Here’s how my emergency fund is divided up, for instance: 

I currently have $33,500 that I earmark as an emergency fund. $13,500 of it earns 5% interest. $20,000 of it earns 3% interest. It’s a big emergency fund, but it’s also money that’s earning rates of return that beat inflation. When you think about it, these accounts basically allow me to get the best of all worlds – I get the safety of a savings account while also getting a high rate of return.

I have an admittedly more complicated money system compared to most people. It works for me because I find doing this stuff interesting, especially once I get everything automated. For some people, having this many different accounts might seem more complicated than it’s worth. I just think of these accounts as just one big pool of accounts. Most require a little bit of setup, but once they’re done, they all run themselves. 

I’ve continued to modify my 3-5% accounts as different accounts fade out or as I learn about new ones. In this post, I’ll be listing all of the 3-5% interest accounts I know about that don’t require a ton of work to maintain. That means this list only includes mega high-yield accounts that can be automated and don’t require you to do a lot of manual transactions each month.

List of 5% Interest Accounts

Here’s a list of all the 5% interest accounts I use, organized from the easiest, most straightforward to use, to the ones that require the most work to set up. 

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Digital Federal Credit Union (6.17% Interest On Your First $1,000). Digital Federal Credit Union (DCU) is probably the easiest mega high-yield bank account to set up. The savings account offers 6.17% interest on your first $1,000 (everything above $1,000 earns 0.25% interest). If you have two people in your household, you’ll be able to open up an account for both people, allowing you to put away $2,000 at 6.17% interest. 

The DCU savings account has no monthly fees, so this is an easy set it and forget it account. The minimum balance is $5, so you’ll notice that your “available balance” will always be minus $5, since you have to leave $5 in the account to keep it open.  

Interest is paid monthly, so at the beginning of each month, I log into my DCU account and pull the interest I earned back into my regular savings account. You don’t have to do this, but it’s just something I’ve gotten into the habit of doing each month. 

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Service Credit Union (5% Interest On Your First $500). Service Credit Union has a savings account that earns 5% interest on your first $500. The savings account has no fees, so this is an easy account you can open and use to park some of your emergency fund. Interest is paid monthly, so I pull the interest out at the beginning of each new month.

In addition, Service Credit Union is currently offering a $75 signup bonus if you sign up for the promotion via a referral link. To earn the bonus, you have to do the following: 

1. Register for the $75 referral promotion using a referral link (here’s my referral link).
2. Open a checking account with Service Credit Union (I recommend opening the Everyday Checking Account).
3. Have direct deposit of net pay of at least $500 per month into the new checking account.
4. Account must be open and in good standing for a minimum of 90 days.
5. Referee must enroll in e-communications.
6. The $75 bonus will be deposited to the checking account of both the referee and referrer 120 days after the referee’s account is opened as long as all criteria met.

Service Credit Union has some membership requirements in order to join, but they’re easily met. Follow the below steps to open your Service Credit Union Account.

1. First, you need to join the American Consumer Council (ACC). Go to the ACC membership website here to get your membership. Enter the code “consumer” in the membership code section for your free membership (if that doesn’t work, try entering the code “service”). You’ll then get an email with your membership certificate.
2. After getting your ACC membership, go to the Service Credit Union website here, click the “Open Now” box, and then click “New Member Account.” 
3. Under “Select Your Eligibility,” click the box that says you are a member of the American Consumer Council. Then enter your ACC membership number found on the membership certificate that was emailed to you. 
4. Under required products, choose Primary Savings.
5. On the final application page, you can upload documents before submitting your application. The documents you’ll want to upload are your ACC membership certificate, a picture of the front and back of your driver’s license, and something to verify your address, such as a utility bill or home insurance policy. You don’t have to do all of this at this point in the application, but if you don’t, you will receive an email from someone at Service Credit Union asking you to send them this information before your account can be approved. 
6. Even if you upload all of the required documents, you may get an email from the membership department asking you to send them these documents. Just keep an eye out for this email and send the documents again if you do receive this email.
7. Once approved, you’ll get a welcome email with your member number. To set up online access, go back to the main Service Credit Union website and sign up for online banking. To sign up, you’ll need your member number and your “Call 24” pin. Your pin number is the last four digits of your SSN. Once you enter this info, you’ll be able to set up your username and password to access online banking. 

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Netspend Accounts (5% Interest On Your First $1,000; Can Open Five Accounts Per Person). I’ve written extensively about Netspend in this post: Netspend Account: The Ultimate Guide to a 5% Interest Savings Account. You’ll want to read this post carefully if you’re interested in taking advantage of these accounts.

The short of it is that these are prepaid debit cards that offer an FDIC insured savings account that earns 5% interest on the first $1,000 in each account. You can have a total of 5 different Netspend accounts, so that means each individual can have up to $5,000 earning 5% interest. Interest is paid quarterly, so at the beginning of each quarter, I withdraw all of my earned interest back into my regular high-yield savings account.

The catch with these accounts is they require doing a little bit of research so that you understand how to use these accounts. The post I wrote is long – over 5,000 words. But if this is something you are at all interested in, you’ll want to read through all of it carefully. Netspend can have a lot of hidden fees, but these are all easily avoided with some simple automation. So long as you follow the steps outlined in that post, you’ll never pay any fees. I’ve had my Netspend accounts open for over 5 years now and have never had any issues. 

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Other 5% Interest Accounts. If you take advantage of the above savings accounts, you’ll have $6,500 set aside earning 5% or more interest. You’ll be in an even better situation with a two-person household – that’ll put you at $13,000 earning 5% or more interest. I think that’s a solid emergency fund for most people.

Depending on your situation, you may be able to take advantage of a few more 5% interest accounts. These accounts are still low maintenance accounts but have some limitations or requirements that make them unavailable to everyone.

Here are some additional 5% interest accounts you may be able to use:

St. Mary’s Bank (5% Interest On Your First $500). St. Mary’s Bank has a savings account called “Rainy Day Savings” which offers 5% interest on your first $500 and 3% interest on your next $500. In order to activate the 5% interest, you have to do a monthly deposit of $25 into the account. You’re also limited to one withdrawal per month. These are two pretty big limitations that may make this account more hassle than it’s worth for some people.

The other limitation is that St. Mary’s Bank may be geographically limited to people living in New Hampshire. I was able to open an account in October 2020 without having a New Hampshire address. However, my wife was rejected when she attempted to open an account, so it’s possible my application somehow slipped through the cracks.

In any event, I’m currently planning to use this account for an additional $500 of 5% interest space. My plan is to continue to do the $25 monthly deposit, then every 3 months or so, I’ll pull any extra funds out of the account. Since you’re limited to one withdrawal per month, you have to do a little bit of strategizing as to when you pull money out of this account. I figure that pulling out excess funds once per quarter should be sufficient, but still give me the flexibility if I need to pull money out in other months. 

Update: My St. Mary’s Bank account was closed a few weeks after I opened it with no warning. I only discovered this after I attempted to log into my account, where I then received a message that my account was locked. After calling in, I was told that my account was closed and that they would return my deposits. My advice is that you should not attempt to open this account unless you live in New Hampshire (and maybe only if you live near a branch). 

Additional Update (11/23/20): After my account was closed, I filed a complaint with my state Attorney General because St. Mary’s Bank still had the funds that I deposited into my savings account. My state Attorney General then sent a letter to St. Mary’s Bank to let them know of my complaint. St. Mary’s Bank then called me to let me know that my account was not closed, but rather had been placed on restricted status and was now being unrestricted. I’ll be keeping my account open for the 5% interest.

Blue Federal Credit Union (5% Interest On Your First $1,000). Blue Federal Credit Union has a savings account that offers 5% interest on up to $1,000. The downside is that you cannot have your balance go above $1,000 on this account, so it requires a bit more monitoring. In addition, Blue Federal Credit Union seems to be very sensitive when approving new accounts. If you’re interested in this account, I’d recommend opening it as one of your first accounts. It’s possible you still get denied, however.

T-Mobile Money (4% Interest On Your First $3,000; Must Be A T-Mobile Customer). This account offers 4% interest on up to $3,000. There are transaction requirements, however. And you have to be a T-Mobile customer to qualify for this account. Check the requirements to see if it makes sense for your situation. 

H-E-B Debit Account (6% Interest On The First $2,000). The H-E-B Debit Account is a separate product from the H-E-B Prepaid Netspend account. This means that, theoretically, it’s possible to have both the H-E-B Debit Account and the H-E-B Netspend account. 

I tried to open this account and was successful at first, but then discovered my account was closed the next day. Most likely, it was closed because I already have 5 Netspend accounts (Netspend limits customers to 5 total Netspend accounts). Another possibility is that my account was closed because I initiated a transfer into it before my debit card was activated. 

If you don’t have 5 Netspend accounts yet, it may make sense to go for this account first before the H-E-B Prepaid Netspend account. Even if you already have 5 Netspend accounts, it’s worth trying to see if you can open this account.

List of 3% Interest Accounts 

If you’ve maxed out your 5% accounts, you’ll need to move onto 3% interest savings accounts. Luckily, you have a lot of options here for 3% interest accounts that don’t require a lot of work to maintain.

Here’s a list of the 3% interest savings accounts I’ve used, starting with the easiest ones to set up. 

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Service Credit Union (3% Interest On Up to $3,000).  In addition to the 5% interest account mentioned previously, Service Credit Union also has a savings account called the Holiday Club Account. This account has no fees and offers 3% interest on your first $3,000. My recommendation is that when you open the 5% Rainy Day Savings account, you should also open the 3% Holiday Club Account as well. 

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HMBradley (3% Interest On Up To $100,000). HMBradley is a fintech bank that offers 3% interest on up to $100,000. To qualify for the 3% interest, you have to do the following: 

1. Have a real direct deposit of any amount go into the account each month; and
2. Save at least 20% of your deposits that go into your HMBradley account each quarter.

If you do both of those things, you’ll qualify for the 3% interest for the next quarter. Note that the interest is paid monthly, but the qualifications are determined on a quarterly basis. That means if you meet the requirements in Q1, you’ll earn the 3% interest rate on your funds in Q2, and so on. 

The thing that confuses most people about this account is the requirement to save 20% of your deposits. Basically, think of it this way. Add up everything that goes into your HMBradley account for the quarter. You can withdraw up to 80% of your deposits in that quarter and still qualify for the 3% interest rate for the next quarter. For example, if you deposited $10,000 in a quarter, you can withdraw $8,000 and you’ll still qualify for the 3% interest rate next quarter. Here’s an FAQ from HMBradley that explains in greater detail how to earn the 3% interest rate.

Right now, I use HMBradley for part of my emergency fund. I’m also using it as a place to hold my house downpayment fund. I think if you’re saving for something big like a house downpayment, HMBradley makes a lot of sense. You’ll earn a high interest rate on money that would otherwise be doing nothing. And when you’re ready, you can just pull all your money out. 

Unfortunately, HMBradley recently moved to an invite-only model. I’m out of referrals, so you’ll need to get a referral from someone who has referrals to give out. If you’d like to leave your referral in the comments, feel free to do so.

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Porte (3% Interest On Up to $15,000). Porte is another fintech bank that offers a 3% interest savings account on your first $15,000. To qualify for the 3% interest, you need to do a direct deposit of $1,000. The terms seem to suggest that you have to have a $1,000 monthly direct deposit to activate the savings account, but it actually looks like you only need to do a $1,000 direct deposit one time. 

Porte is built on the same bank as Netspend, so like with Netspend, interest is paid quarterly, rather than monthly. There are no fees, so this is an account you shouldn’t have to manage.

They also have a referral bonus where you can earn $50 if you open an account with a referral link, do a direct deposit of $500 or more, and activate the debit card. It looks like basically any transfer into the account qualifies as a direct deposit, so this should be an easy bonus to earn. You can open your Porte account with this link (you have to use your phone to open your account).

Note that I’m not quite as bullish on Porte as I am with the other banks. My main issue is that my referral bonus did eventually post, but it took a while and I’m still not sure whether the referral I got was for me signing up or because my wife signed up using my referral link. I also had an issue where my account kept getting locked when I would log in. This issue was addressed, but it was my first interaction with this fintech company, so just something to think about. 

Final Thoughts 

At the moment, I have $33,500 that is earmarked as my emergency fund. $13,500 is divided up between multiple 5% interest accounts. The remaining $20,000 is earning 3% with HMBradley. 

I also have a bunch of money in HMBradley that I’ve earmarked as a house downpayment fund. It’s unclear when we’ll be buying a new house, but we’re saving for one, so having it earn 3% interest is a plus. 

Taking advantage of these mega high-yield accounts isn’t for everyone. It admittedly adds a layer of complexity that might not make sense for you. But if you’re someone looking to get the best of all worlds when it comes to your emergency fund, these are the accounts you can use. Hope it helps. 

Additional Notes: I’ve had a lot of people ask about how safe your money is with HMBradley and these other fintech banks, especially given what recently happened with Beam. I personally feel comfortable with HMBradley for a variety of reasons, but of course, you’ll have to make your own decisions given your comfort level. Jonathan over at MyMoneyBlog wrote a good article with his thoughts about why he’s comfortable with HMBradley and why Beam was likely a unique situation. Worth a read if you’re looking for more info.