Earning 5% Interest on Your Cash Savings

About a year ago I wrote about earning decent interest on my emergency fund savings. Over the past few months, I’ve transitioned away from the PayPal and Mango prepaid cards mentioned in that post, to new prepaid cards with no fees.

There is a little bit of hoop jumping to avoid inactivity fees, but I now have my money sitting in accounts that earn fee-free 5% APY. Each account allows up to $5,000 to earn 5% interest, so I plan to continue to open accounts if I compile more cash savings. Some might look at the details and decide this isn’t worth the hassle, but if you do the math, setting these accounts up pays *hudreds of dollars per hour* over years of earning interest!

These accounts are a great place to stash money that you are saving for a specific purpose, but aren’t ready to spend yet (house down payment, emergency fund, school tuition, etc.).

What You’ll Need

  • Extra cash sitting around begging for a job
  • A bit of patience
  • An account at a bank that allows you to push to and pull money from external accounts (I use PayPal and USAA successfully)

The Steps

  • Open a “prepaid debit card” account with attached savings option at one (or more) of 4 possible online institutions: NetSpend, Brinks Prepaid, Western Union Prepaid, or ACE Elite Prepaid
  • Wait to receive the physical debit card, and then activate it
  • Send extra cash from your external bank to your new prepaid account using provided routing/account numbers
  • “Open” the optional attached savings account through the web interface
  • Transfer up to $5,000 from your prepaid balance to the attached savings account and earn the full 5% interest

Because your selected external bank account allows you to push *and* pull money from other banks, when you’ve earned interest you can pull it out of the prepaid account. The interest payments only post quarterly, so 4 times per year you will be able to transfer money out of the “savings” over to the prepaid account, and pull your cash out via an external bank transfer.

Avoiding Fees

These accounts accrue no fees when they are not actually used as an everyday debit card. Pushing and pulling money from an external bank account costs nothing, and the savings account has no attached fees. The only fee you will worry about with these accounts is an inactivity fee. Avoiding this fee is as easy as scheduling a small transfer from your external bank every few months.


If you’re interested in an account, I’d appreciate if you sign up using my referral links. If you use my links below, we each receive $20 after you successfully fund the card with at least $40:

Brinks Prepaid

After you have an account, you can also refer people and earn $20 bonuses for each successfully funded new account.

For more information about these accounts, read the more in depth Doctor of Credit article on the subject.

UPDATE: the maximum balance for earning 5% in these savings accounts has been lowered to $1,000 each. It may still be worth setting up (especially if you can get a total of 6 cards between 2 people), but the return isn’t as good as it once was.

Posted in Musings