Today’s interest rate cut means online savings accounts lovers will once again experience heartbreak as their high-interest accounts become even less so. There is still one company offering rates from the what now must be seen as halcyon days; E*TRADE’s online savings accounts give you 5.05%, though it’s not without caveats…

Firstly, as I just found out when I transferred all my long-term liquid savings there from HSBC Direct, E*TRADE will hold onto your money for about 15 days after your initial transfer into a newly opened account. Most places have it available in 3-4 days, I’m guessing that what they’re doing is attracting deposits with high rates and then holding onto it longer because they’re making money by using your cash to make guaranteed short term loans.

Secondly, people have been concerned about E*TRADE’s losses due in large part to their exposure to bad subprime mortgage investments. Should a bankruptcy that happen, as long as you have less than $100,000 in, your money is FDIC insured and you’ll get it back. What would happen in that case is that another bank would assume all of E*TRADE’s deposits and you would become a customer of that bank with an account set up for you and everything. In the case of Netbank, which folded and its customers were taken over by ING Direct, is that Netbank customers logging in to their Netbank account found a welcome screen telling them of the switch and then they used their Netbank usernames and passwords to log into their ING Direct accounts.

So all and all, I’m not overly concerned and that’s why I pushed my monies over there.

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