Thomas Eddy and other businessmen and economists of his time believed that they had a cure to the alarming poverty rate levels in post-War of 1812 New York City: create a savings bank where “small sums of money as may be saved from the earnings of Tradesmen, Mechanicks, Labourers, Minors, Servants, and others” would have the advantage of providing both security and interest. This “Bank for the Poor”—so called in a notice printed in the New York Post of November, 1816— would “…encourage and assist the laboring classes to make the most of their earnings…” Eddy was convinced that if “America’s sailors, laborers, and widows could only be taught to save their money (rather than wasting it on lottery tickets and rounds at the tavern), the poverty rate would quickly fall” (In Cheap We Trust, Lauren Weber, p. 47). Savings accounts were seen as both philanthropic (they were managed without salaries) as well as the solution to the growing welfare burden on the state.
His efforts through the Society for the Prevention of Pauperism resulted in the New York legislature granting a charter to the Bank for Savings in the City of New York with the first deposits occurring on July 3, 1819. The bank was able to lease an apartment in the Old Alms House free of charge for at least two years by helping with the building’s repairs. Depositors were given a book to enter the amount of the deposit or draft (this was the beginning of the passbook).
The charter set a fixed rate of 5% interest per annum on sums from $5-$50 and 6% on $50 and larger. While we will definitely not find a rate of that in these current economic times (though 5% used to be the rate on my ING DIRECT savings account when I first opened it in 2005—ah, the good ole’ days), I can still do better than the paltry 0.747% I am earning right now. Here are some alternatives I have found while shopping around, all of which are FDIC insured:
- Smarty Pig: This is an online piggy bank for people saving for specific financial goals with a 1.0% APY. Interest accrues daily, and is paid to the account quarterly. Once you’ve reached a savings goal using Smarty Pig, you can receive up to an 11% cash back savings by placing it on a Retailer Gift Card. Smarty Pig does not allow for partial withdrawals, so you will need to close your entire goal if you would like access your funds.
- American Express: American Express is offering a 0.90% APY high-yield savings account. A positive is that there is no minimum to open an account. Interest is compounded daily and credited to your account monthly.
- ING DIRECT: This is our current online savings account, which only has an APY of 0.747%. I have been a saver here since December 20, 2005, and have earned a total of $1,778.40 on my deposits. Capitol One just purchased this company last year, and changes are on the horizon.
- Ally Bank: Ally Bank is offering 0.95% APY with interest compounded daily. There are no minimum deposits.
- CIT Savings: This savings account offers 0.90% APY on balances from $100-$24,999 (you need a minimum of $100 to open an account). If you have a daily balance of $25,000 or more in savings, then you will receive the premium rate of 1.0% APY. Interest is compounded daily and posted to the account monthly.
- Sallie Mae High Yields Savings Account: Sallie Mae offers 0.90% APY with no minimum balance. Under certain circumstances you can get a 10% annual match from your UPromise account. Interest is compounded daily and paid monthly.
I am a “lower and middling sort” myself (aka “working class”), and after looking at the available savings account offers on the market, I think we will be switching from our current online bank account (ING DIRECT) to CIT Savings. SmartyPig is also on my radar, but perhaps as a non-permanent savings account for this year’s or next year’s home projects and travel.
If you know of a savings account offering a better deal than the ones above, please share with the rest of us!
In Cheap We Trust: The Story of a Misunderstood American Virtue, Lauren Weber, 2009