There are a lot of good reasons to hold cash. An emergency fund is a must. Then there’s saving for a home or vacation. Whatever the reason, the big question is where are the best short-term investments to park your money.
We’re in an historically low interest rate environment. In a Consumer Reports article from just two years ago, June 2019, it shows interest rates ranging from 2% at Sallie Mae to 2.75% at First Internet Bank.
Unfortunately, those days are behind us. They’re probably ahead of us too. I’m going to make a prediction that eventually we’ll get back to those rates. But right now, most big banks are paying about one basis point (0.01%).
You can do better. Here are 7 of the top short-term investments for your money.
Best Short-Term Investments for Saving Cash
Chime is what I would call a cash management app or a cash management account. It’s effectively a bank account, except that Chime is not a bank. There are a number of technology companies who have built incredibly easy to use mobile apps. They come with a debit card and they partner with an FDIC member bank. So Chime isn’t a bank, but it partners with an FDIC member bank so that your money is protected up to the FDIC insurance limits.
Chime has both a spend account and a savings account. It also comes with a debit card. This could be your everyday checking and savings account. It’s currently paying 0.50% APY on the savings account . Overall Chime has had very good reviews on both the iPhone and Android platforms.
And for those trying to build their credit, Chime also offers the highly rated Chime Secured Credit Card.
2. Axos Bank Savings Account
For those who want a straight up savings account, Axos Bank is the top choice. Founded in 2000 as Bank of Internet, they rebranded as Axos Bank, an FDIC-insured financial institution with over $14 billion in assets. As of today, they’re paying 0.61% APY on their savings account. Like most online banks, it charges little in the way of fees.
3. Axos Bank Rewards Checking Account
Axos Bank gets another mention in our list, this time its Rewards Checking Account. They have five different checking accounts, including accounts designed for teenagers and seniors, and even a cashback checking account. For parking cash, the rewards checking account is an excellent option.
You can earn up to 1.25% on this checking account. You do, however, have to jump through some hoops. The starting point is you have to have a direct deposit of at least $1,000 a month. That by itself gets you an APY of 0.41%. Then use the debit card at least 10 times in the month on transactions of at least and your interest rate jumps to 0.82%. Finally, use it another five times for a total of 15 or more transactions a month, and it all adds up to 1.25% APY.
OnJuno, like Chime, partners with an FDIC-insured bank for its customers. It offers an excellent app and currently allows you to earn 1.20% on deposits and 5% cashback with its premium metal card at select merchants.
Whenever you see something like that, you ought to know there’s going to be some qualifications because no one pays 2.15% on an unlimited amount of money. And nobody pays 5% cash back on all transactions. And that’s particularly true with debit cards. The first is the 2.15% is limited to either the first $5,000 saved, or if you go with their Plus account, it can go up to $30,000 saved. While the standard account has no monthly fee, the Plus account is free he first six months, then $9.99 per month.
I did the math, the Plus Account makes sense if you save the full $30,000 in the account. After the monthly fee, you’re still earning about 1.75%. The 5% cashback is limited to five retailers of your choosing within their list.
Varo is another cash management account, not a bank, but partners with the bank. And here you can earn up to 3%. To do that you’ve got to make five qualifying purchases each period with your debit card, and you have to have a direct deposit of $1,000 or more, and your balance can’t exceed $5000. So this is obviously limited. For some of you, if you’ve got more than that, you’re saving for a home, these sort of options may not be ideal, on the other hand, could be a good way to save your emergency fund.
It’s not a large balance that you can keep but the interest rate is so much more. I mean, if you compare this to say a traditional bank that’s paying just a couple of basis points, you’d have to put 100 grand in the bank a couple of basis points, maybe more, depending on the exact rate to earn the same rate you’d earn with just $5,000 in this account. So I think it’s worth considering and that’s why I included it in the list.
For small business owners and freelancers that have a business, Bluevine is an excellent choice. Bluevine is very similar in a way to Chime or OnJuno except it’s for small businesses. It pays 1% on balances up to $100,000. There is no interest earned on balances over 100,000.
Update: Bluevine has currently paused new applications for its business checking account. I’ll update this post when they reopen the application process.
7. Fitness Bank
The last one on our list is called Fitness Bank. They tie in the interest rate you can earn by how many steps you walk each day. They pay up to 0.65% APY. You have to average 12,500 steps a day to earn this rate. If you get at least 10,000, you get 0.55%. Even if you sit in a barcalounger all day you’ll earn 0.25% APR
If you’re a senior citizen at least 65 years of age they cut you a break. You get the 0.65% APY at 10,000 steps. You do have to download their app and wear an approved fitness tracker, which include Garmin, Fitbit, Google Fit and Apple Health.