The savings accounts are provided by Netspend prepaid debit cards. They have been around for a long time and each card comes with a savings account that pays 5% or 6% on limited balances (excess only earns 0.5%). The savings account is FDIC insured like any bank. Think of a Netspend account as two parts:
Some important notes:
There are several types of Netspend card, but they all have the same underlying platform with Netspend and each one works roughly the same. These are the ones I am familiar with:
Each person is allowed to open only one of each card, and also limited to 5 accounts in the 5% category. There may be other Netspend cards but some have fees or do not support a savings account or have limited availability, so avoid those ones. For example, the Netspend All-Access Bank Account offers 6% APY on $2000, but has a $5 monthly fee which reduces the APY below 3%.
Also, after it happened to me, a Netspend customer support agent informed me that they will lock your online logins if you attempt to log in to more than 4, maybe 5, accounts in the same day from the same computer as a fraud prevention mechanism. Unfortunately, this makes it annoying if you want to manage your legitimate accounts on the same day, especially if you have cards for multiple people. It seems like they use cookies in your browser to track this, so split your card logins across multiple browsers or multiple account containers (if your browser supports this) so each one tracks cookies for 4 or less cards. Firefox multi-account containers: https://support.mozilla.org/en-US/kb/containers. Chrome multiple user profiles: https://www.pcworld.com/article/2089364/how-to-create-and-manage-multiple-user-profiles-in-chrome.html. I’m not sure about other browsers.
There are just a few, fairly straight-forward steps needed to set up and manage these accounts.
Below are the detailed directions for each step. It is not complicated but will take some time to wait for the cards to arrive in the mail. Follow the steps in order and you should have no issues.
You need an online checking or savings account that lets you transfer money to the Netspend accounts (ex. Ally Bank). Some banks, such as Capital One 360, limit you to linking 3 external bank accounts. You need to link external bank accounts for each card you open. Also, make sure your bank has free ACH transfers in and out. If you use a savings account, you are limited to 6 transfers per statement period by federal law. You will need to stagger the transfers over different months so that you don’t hit the limit and so that you leave some room for yourself to make other normal transfers. The easier way is to use a checking account with unlimited transfers.
NOTE: Ally sends money to external accounts under the name of the Ally online login profile. The Netspend cards will reject the transfer if the names do not match. If you use a joint account with Ally, make sure you create separate Ally login profiles for each of the account owners. Link each external Netspend account to the corresponding Ally login profile matching the Netspend account owner name.
Here are links to the 5% card signup pages, as well as referral codes you can use to get a $20 referral bonus once you deposit $40 or more. Full disclosure - I get a referrer bonus too. More on bonuses later.
Here are links to the 6% card signup pages.
You may only get a bonus for the first card you open, but you might as well use the codes above to open each one just in case. Make sure that the code is in the Referral Code section of the sign-up form.
Go ahead and create your online login at the same time if prompted to do so. Otherwise, you can wait until your card arrives.
A packet will arrive in the mail with the card and a bunch of paperwork, including your routing number and account number just like with a regular checking account with a debit card.
Follow the directions to activate your card and create an online login if you have not already. You should default into the “pay-as-you-go” plan. Stay on this plan since it has no monthly fees. Once you activate the card, put it and the packet somewhere safe and ignore it forever.
Go to your online bank account and setup an external account link. For account type, choose Checking. Then enter the routing number/account number for your Netspend account (from the packet or online portal). Once linked, your bank may send some test deposits for you to confirm and verify the linkage before you can transfer.
Transfer money from your bank account onto your card. Do not try this until you have received and activated the card! Remember to transfer enough so that you get the referral bonus and can activate the savings account. *Note: When you transfer money to your card, they might send you an additional Netspend “Premier” Card in the mail. Do not activate it. Just put it with the other one and ignore it.
In your Netspend account, find the option to Enroll in Savings. It may be buried in the Account settings. Follow the prompts to activate the savings account.
Transfer the money from the prepaid debit card into the savings account. From the account Home page, click on the Savings Account, then click Savings Transfers, and then transfer all of the money from your prepaid debit card into your savings account.
Netspend charges an inactivity fee if there is no activity in your card for 90 days. Set up an automatic transfer of $1 onto the card to avoid that fee. To be on the safe side, set up the transfer every 2 months and you never have to worry about any inactivity fee because there will be a $1 deposit onto the card every 60 days or so.
Repeat for each card you want to open and for each person in your household. Unfortunately, each person may only get a referral bonus on the first account referred by someone across the cards and may only get the referrer bonus for the first card referred by them to someone. Use my codes to keep it simple, or use a clever combination of codes for the card(s) to hopefully get more bonuses. For example:
Person 1 opens the Ace Elite Visa Prepaid Debit Card using my referral code and we both get a bonus. At the same time, Person 2 opens the Western Union Netspend Prepaid Mastercard using my referral code and we both get a bonus.
Later, Person 2 opens the Ace card using Person 1’s referral code and hopefully they both get another bonus. At the same time, Person 1 opens the WU card using Person 2’s referral code and hopefully they both get another bonus.
Each quarter, collect the interest and dollar deposits from each account. Invest it elsewhere for better than the 0.5% you would get from Netspend or spend it on something fun.
You must first transfer the money from the savings account back to the card using the card’s online Netspend portal. Any money in your savings account must flow through the debit card first. Your bank cannot pull money directly out of the savings account. If you attempt to pull money without sufficient balance on the debit card, you will probably get hit with a fee for insufficient funds.
Then, from your bank account, submit transfers to pull the excess from each card. Initiate the withdrawals from your normal online bank account, not from the Netspend account. Any money being pulled out of the account should always be pulled by an external bank account. The only action that should happen in Netspend is transferring money between your prepaid card and savings account buckets.
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