8 Best Places To Put Leftover Cash To Work

With the S&P 500 at all-time highs and the global economic outlook getting more uncertain by the day, investors looking for a low-risk place to park their extra cash have few good options. An explosion of online banks has created a new source of competition for deposits, however, and choosy investors can still get decent yields from a number of relatively low-risk sources.

Here’s a look at eight places to put your excess cash to work today.

Cash & Savings Accounts

• Robo-advisor Wealthfront is now offering a no-fee Wealthfront Cash Account with up to $1 million in FDIC insurance coverage that pays the highest rate on the market at 2.57%. The account minimum is just $1, and the only downside is that customers have no branch locations and no ATM card.
• Northpoint Bank is offering an extremely high 2.55% yield on its Northpointe Bank Ultimate Savings Account that is locked in for at least three months. However, the high rate is only for accounts with at least $25,000 cash, and there is a $15 fee for any outgoing transactions beyond the monthly limit of six.
• Vio is the online division of MidFirst Bank, and customers can access their highest-yield 2.52% Vio Bank High Yield Online Savings Account with a minimum deposit of just $100. There are no monthly fees, and interest is compounded daily for maximum returns.
• Salem Five Direct, the online division of Salem Five Cents Savings Bank, is offering a 2.51% high-yield Salem Five Direct eOne Savings Account with no monthly fees and no minimum balance requirements. In addition, all deposits are fully insured via a private insurance fund, even those that exceed FDIC coverage.

Other Low-Risk Options

• If you know you won’t need access to your excess cash for at least two years, you can get a locked-in 2.75% yield from a two-year CD at Sallie Mae. The minimum deposit for the CD is $2,500, and early withdrawals will come with a steep penalty, but Sallie Mae’s CDs are FDIC insured, limiting risk.
• For Americans looking for a nearly risk-free early retirement investment option, 30-year U.S. Treasury bonds are currently yielding 2.63% annually. U.S. Treasuries are backed by the full credit of the U.S. government, and a 2.63% annual yield will turn $100,000 into $217,886 over 30 years if interest is reinvested.
• Investment-grade corporate bonds are a slightly higher-risk option than the ones mentioned above because they are not protected by the U.S. government. Instead of betting on financial health of a single company, a fund like the iShares IBoxx $ Invest Grade Corp Bd Fd LQD provides diversified exposure to corporate bonds and an annual dividend yield of 3.4%.
• Finally, it’s never been easier for retail investors to invest extra cash in real estate without the hassle of actually buying and selling pieces of land. The VANGUARD IX FUN/RL EST IX FD ETF VNQ is a diversified play on about two-thirds of the entire U.S. real estate investment trust market and even pays a 4% annual yield.

Things To Remember

Regardless of where you choose to put your excess cash, there are certain simple precautions to take. The single most important thing to verify about any online bank is that its deposits are FDIC-insured. FDIC-insured deposits are essentially risk-free for Americans up to at least $250,000 per depositor, per bank. To confirm an online bank is in fact covered by the FDIC, use its search database here.

The second thing to remember when choosing a savings or cash account is fees. Any account fees eat into potential returns, essentially lowering the overall yield of the account. If possible fee-free accounts are always the best route.

Finally, online banks may not offer ATM cards or easy immediate access to funds. Before depositing all your cash into an online account, consider whether or not you may need to access those funds at a moment’s notice, as ACH transfers to other bank accounts often take two to three days to complete.

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