I was giddy with excitement when LaLa showed me the 5.25% APY (as of November 28th) on her GMAC DemandNote statement. Yes. This *is* my life now...when an APY over 4% truly excites me.
GMAC DemandNotes are available to GM employees and their families. LaLa's father worked for GMAC and in LaLa's family getting a DemandNote account was just What One Did. A right of passage...a foregone conclusion. It must be opened with $1000 and added to with a minimum of $50. The minimum withdrawal is $250 and withdrawals are done via check (though I do believe they support ACH transfers now that it's all the rage).
Her DemandNote has been quite useful in her life. In fact, it's where we stuffed our money while saving for our house because it was our only savings vehicle and the interest rate seemed appealing....but what did *I* know? I didn't know a thing about savings accounts or interest rates, let alone APYs.
Fast forward to my 5.25% APY sponsored giddyness and add a curiousity for how they calculate their rate (all I found was a vague reference to "more than" some average money market statistic) and you can see how finding the following gem let the air out of my sails a bit:
It's unsecured debt. As in "non-FDIC insured". And it's apparently unsubordinated too. But I don't really know what that means in this context. I know this isn't normally a big deal - money market funds aren't insured either, right? But it's GM. They're not exactly a poster child for financial reliability right now. And folks are definitely wondering what will become of the DemandNote if things go further south for GM.
Right now I'm building our emergency cushion at EmigrantDirect though I expect to move it all to HSBC...both FDIC insured and paying a 4.0% APY. But 5.25% APY is juicy. Tasty. And I want some. Dare I risk it? Is it low risk? I'm just "the person"...how can I find information to judge how much (or little) of a risk it is to keep my safe and liquid funds there?
Anyone care to weigh in?