Mango Prepaid Card: 6% APY Savings Account A Hidden Gem

By Harry Sit

Hidden Gem

Today we are going to look at something off the beaten path in our pursuit to double the bond yield. If you follow my footpath, you will find a hidden gem.

I didn’t find it myself. I learned from Bogleheads investment forum participant boglestan.

Mango Prepaid Card is one of many prepaid cards marketed primarily to the unbanked and underbanked population. For more on prepaid cards, please read the previous post Who Use Prepaid Debit Cards. As a competitive edge, the Mango prepaid card offers a linked savings account that pays 6% APY.

Think of the savings account as a lake and the prepaid card as the path leading to it. The only way to get money into or out of the savings account would be through the prepaid card. The money on the card and the money in the savings account are separate, and they are both FDIC insured. So no worries there.

You first transfer money by ACH onto the card.  As soon as the money appears on the card, you transfer the money to the savings account. The money then stays in the savings account, pretty much walled off from the card. If there’s no money on the card, using the card to buy stuff will get a decline even though you have money in the savings account.

6% APY is applied to the first $5,000 in the savings account (0.1% for the portion above $5,000). You will need to transfer $50 by ACH onto the card every month in order to keep the 6% rate. No problem, just schedule a monthly recurring $50 ACH transfer from your bank account.

My $5,000 in the savings account earned $24.88 interest in October. The 6% rate is real.

After all said and done, taking into account the initial $5,000 plus the $50 per month deposit and a $5/month fee, you end up getting a 3.9% yield or $210/year with the Mango card compared to only $53/year if you leave your $5,000 and the $50/month in a regular “high yield” savings account that pays 1%. The difference is $157/year.

Promo Rate Ending Soon?

Is 6% APY a short-lived promo that will end soon? Of course every bank reserves the right to change the rate at any time. Even 1% “high yield” savings account isn’t guaranteed to be 1% next month. But I’m willing to bet Mango’s rate will stay high for a long time. When other banks lowered rates on their savings accounts, Mango actually raised it. It used to be 5.1%. Now it’s 6%.

The more people are skeptical about it, the more likely the 6% rate will stay. The fact that the typical unbanked and underbanked customers don’t have $5,000 in their savings accounts makes the total cost for the 6% APY savings account not that high.

Exit Strategy

What if the 6% does end? No big deal. You close the account. They will send you a check after a $10 fee. Your $5,000 will make more than that $10 fee in less than a month.

Action Steps

Follow these exact steps for the maximum benefit:

1. Open an account online. The very simple form takes only two minutes. There is no credit check.

2. Click on Direct Deposit when you are done opening the account. You will be given a bank routing number 114994196 and an account number. Your Mango account starts with a negative $5 balance for the first monthly fee.

3. Link the Mango account as an external bank account on your bank’s web site. You can only transfer money into the Mango account by ACH, not out of it.

Be careful with banks that confirm the link by random deposits but pull the random deposits back. Because Mango doesn’t allow pulling back when the account is negative, this may cause problems with confirming the link. It’s best to use a bank that doesn’t pull back the random deposits.

Some readers reported their banks don’t recognize the routing number 114994196 for Inter National Bank. It’s not clear why; that routing number is correct and valid. You just have to use a bank that recognizes it. These institutions are known to recognize it:

  • Alliant Credit Union
  • Chase (bring the balance to positive first)
  • CIT Bank
  • E*Trade
  • Fidelity
  • ING Person2Person
  • Navy Federal Credit Union
  • TIAA Direct
  • Vanguard

These banks have been reported as not recognizing the routing number:

  • Ally
  • Bank of America
  • Capital One
  • Citibank
  • Discover Bank
  • ING Direct (regular ACH)
  • Popmoney
  • Wells Fargo

Please report your successes or problems with linking  the routing number to your bank account so I can add them to the applicable list.

4. Transfer $5,005 from your bank to the Mango account. Also schedule a recurring monthly transfer of $50 starting 40 days from that day.

5. Open the saving account. When the $5,005 arrives, the Mango card account will have $5,000 after filling the negative $5 hole. Click on Mango Savings to open a savings account. Transfer $5,000 from the card to the savings account.

If you also get a one-time $30 bonus after a few months for the monthly transfers, all the better.

6. Run it on autopilot after the initial setup. Every month $50 arrives on the card. It keeps your savings account at 6% and it pays the $5 monthly fee. After eight months to a year, if it bothers you that your few hundred dollars above $5,000 is earning practically nothing, you can withdraw the excess as cash on an ATM. Mango charges $2 for each ATM withdrawal (maximum $600 per withdrawal). ATM operator’s fee is extra. Because it’s only once a year, it’s not a big deal.

Click on the card image below to get your card.

I’m going to count this $157/year toward my “double the bond yield” goal. It fits all my rules. It’s an opportunity available only to individual savers. It’s safe (FDIC insured). After a one-time setup, you just sit back and collect the higher interest. The most you do manually would be logging into the account online just once a month.

Together with the previous steps taken to maximize our advantages as individual savers and investors, I’m 43% complete against the $3,400 goal. Almost half way!

[Photo credit: Flickr user Roger Lynn.]

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Posted on November 5, 2012 under Banking and Credit Cards. Keywords: , , .

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Comments

58 Comments on Mango Prepaid Card: 6% APY Savings Account A Hidden Gem

  1. slug | sunkcostsareirrelevant.com on November 5, 2012
     

    Nice find! I wish there was a way to make the transfers automatic/mindlesss.

  2. Jason on November 5, 2012
     

    Discover Bank claims that the routing number from Mango is invalid. That’s either suspicious or just plain annoying.

  3. Harry on November 5, 2012
     

    Transfer-in from your bank to the card is automatic. If you don’t even want to log in once a month to move the $50 from the card to the savings account, you can also spend it down. Schedule a fixed dollar payment with say your cell phone provider and have them charge the prepaid card $50 every month. You lose $0.50 – $1.00 from credit card rewards you would otherwise earn. Not a big deal if you want to make it fully automatic/mindless.

  4. Harry on November 5, 2012
     

    Jason – You will have to use a different bank then. It worked with my credit union.

  5. Steve on November 5, 2012
     

    Sorry, but I have to ask: Why do you have to transfer the $50 from the card to the savings account as soon as it hits?

  6. Grant on November 5, 2012
     

    link isnt working for me (on chrome)

  7. serbeer on November 5, 2012
     

    Same here:

    Not Found, Error 404
    The page you are looking for no longer exists.

    For people with, say, $50K in savings, great interest on $5K is something not to pass on. For those with more, I am not sure it is worth all the management hassles of handling additional account with unusual transfer conditions.

    Though it sure makes a great blog article so don’t blame you for going through with it.

  8. Harry on November 5, 2012
     

    Steve – Short answer is you will save money if you do so. You can also spend the $50 down as I mentioned in comment #3 but you lose a small amount from credit card rewards. If you do nothing, you will pay yet a little more.

    Grant – Thank you. I fixed the link.

    serbeer – I used to think that way too. I ignored many seemingly small edges, until I realized that in a low interest rate world, these small things add up quickly, to the point where it can double the bond yield even on a $1 million portfolio. That’s why I started the BY2 series. It took me maybe 15 minutes to set up, and then 1 minute per month to do the transfer. Overestimating the hassle is detrimental to one’s wealth.

  9. Steve on November 5, 2012
     

    FiveCentNickel explained it in his regurigation of this article: if you have a balance on the card on as of the 1st of the month, you’ll be hit with a $5 monthly fee for that month. Complicated indeed.

    It really, literally takes you only 1 minute to get a reminder, read it, log into a web site, and make a transfer? I’d put it at 5 minutes at a minimum – still not a lot, but 400% more than your estimate.

  10. Harry on November 5, 2012
     

    It’s not the 1st of the month. It’s the date you opened the account. If I must use a stopwatch I would say 1 minute is plenty. Reminder comes automatically. The subject says it all. I type a URL, log in, click on a few places, then it’s done. Seriously if you don’t want to do the transfer every month, just let someone automatically charge $50 to your card every month. Then you will spend zero minute.

  11. Gregg on November 5, 2012
     

    The website says that you need to sign up for direct deposit to get the 6% rate. Is that something new? Also, it doesn’t say that the $5/month fee is waived if your card doesn’t have a balance.

  12. Harry on November 5, 2012
     

    The $50/month transfer from the bank account to the card is the direct deposit that qualifies the savings account for 6%. It doesn’t say they take only from what’s left on the card but that’s what’s happening in reality. Everything in the action steps is there for a reason. I waited until I tested everything out before I posted this article.

  13. Chad on November 6, 2012
     

    “Although I only opened one account, you are not limited to just one per person.”

    Does that mean I can open 4 accounts (maybe more) for $5k each for a total of $20k earning 6% ($1,200) per year? Or, do they limit the 6% rate to your first account?

    Thanks, keep up the good work.

  14. Harry on November 6, 2012
     

    Chad – I removed that sentence from the article. Because I promised to post from personal experience, I shouldn’t say anything I haven’t tried myself. If you are interested in having multiple accounts per person, please explore on your own but please keep the results to yourself. Some maximizers opening 10, 20, 50 accounts will eventually ruin it for everybody.

  15. Chad on November 6, 2012
     

    Feel free to remove my comment.

  16. Harry on November 6, 2012
     

    boglestan reported the $5/month fee is now charged regardless. Those who think logging in once a month to move the money is too much trouble should be happy now. No more email reminders. Zero minute per month spent on managing it. Just leave the monthly deposits on the card and withdraw them once a year. I updated the post.

  17. serbeer on November 7, 2012
     

    Yes, and he also reported that “it’s now effectively 4.8% interest, if you have a $5000 balance”
    Still not bad at all in today’s environment.

  18. Alex on November 9, 2012
     

    I’m surprised nobody has mentioned this, but I’m rather new to the world of personal finance so maybe I’m missing a glaring problem here:

    Wouldn’t this account be a fantastic place to store most (if not all) of your Emergency Fund?

  19. Harry on November 9, 2012
     

    Alex – Yes it would be. The only thing you may be missing is that most readers of this blog have more than $5,000 for their Emergency Fund. It makes sense to do the full $5,000.

  20. Andy on November 11, 2012
     

    I have done step 1, but stuck in step 2. It has a “direct deposit” form. On the form, it gives a R/T number of 1149-9419-6. Is that the routing number? I tried using that routing number to transfer money to the account, but my bank’s website says it’s not a valid routing number.

  21. Harry on November 11, 2012
     

    Yes that’s the correct routing number. Did you do it without the dashes?

  22. Andy on November 11, 2012
     

    Yes, I did it without the dashes (actually my bank’s form only allows 9 digits for the routing number anyways). It seems like Jason from comment #2 has the same problem with Discover Bank (I use Wells Fargo). Let me try to look into this a bit to see if I can find the reason.

  23. Harry on November 12, 2012
     

    Andy – You can see it’s a valid routing number here: http://www.fededirectory.frb.org/search_ACH.cfm

  24. Andy on November 13, 2012
     

    I checked with the Mango customer service. They explained that “Wells Fargo has decided not to work with our company due to their own security measures”.

  25. Jason on November 15, 2012
     

    The first time that I attempted to verify my Mango account as an external account at another bank, it failed and I believe it was because the bank was unable to withdraw the trial deposits because the initial account balance was negative. It might be advisable to first ensure there is a positive balance in the account using another deposit mechanism such as Paypal, which worked for me. After a second attempt I now have the account successfully linked.

  26. Chucks on November 25, 2012
     

    Looks like they’ve changed it to require $500 a month in direct deposit to waive the $5 fee. It’s nice but just too much of a hassle when you realize the effective interest rate is a good bit lower. So either I park $5000 in there and deal with the fees cutting the interest down to 4.8% and interest that really doesn’t compound. Or I put in $5000 or so, have $500 go in a month from direct deposit and then spend $500 a month using the card.. I can’t think of any recurring credit card charge I could establish for $500 exactly, so I’d have the burden of logging in to make sure my spending was in the ballpark. Even if I did, I’d be giving up the opportunity costs of a 2% rewards card. Plus you really can’t get at the money directly without another $10 fee. In the end, I’d be getting around $20 a month back more or less guaranteed, which is nothing to sneeze at, but just not worth it when compared to the opportunity costs of other investments. It’s certainly a better alternative to any other savings account for people with between $2000-4000 to save.

  27. Harry on November 25, 2012
     

    I moved your comments from another post to this one, where it belongs. Just pay the $5 fee. It’s not a big deal. I don’t know where the $2,000-4000 comes from. Where else can you get 4%+ guaranteed? If you are married, each can have $5,000 in separate accounts for a total of $10,000.

  28. Maxly on December 2, 2012
     

    I just opened my Mango account. I’m curious about #26′s comment as I haven’t used Mango yet and don’t quite ‘get’ a couple things.

    Harry, can you tell me.. if I keep $5,000 in the Mango savings account for the good interest rate. Can’t I simply transfer via ACH $500 every month and then transfer over $500 as ACH “direct deposit” to avoid the $5 fee and also keep the good interest?

    I’m confused how comment #26 makes it sound like it would be impossible to get money out of the account without paying a $10 fee. I mean, why would I need to put money on the card anyways. From what I understand, a $500+ “ACH” direct deposit into the savings account should avoid the $5 monthly fee.

    Thanks and hope to get your reply.

  29. Maxly on December 2, 2012
     

    *Can’t I simply transfer OUT via ACH $500 every month

  30. Harry on December 2, 2012
     

    You don’t have direct access to the savings account. Must go through the card. See diagram in the post. No ACH out from the card, only ACH in.

  31. Maxly on December 2, 2012
     

    Then how do you avoid it from going over the $5,000 limit if you can’t transfer out? I thought on the web site it says “six (or five?) withdraws out” allowed per month? What is that in reference to?

  32. Harry on December 2, 2012
     

    You don’t avoid it. I already addressed it in the article. 6 transfers refer to transfers out to the card.

  33. Maxly on December 2, 2012
     

    So if I have $5,000 in the savings account. After interest gets added to the account it’ll obviously go over the $5,000 limit. So then the only option I have is to transfer anything over $5,000 to the card to avoid the interest rate going from 6% to 2%?

  34. Harry on December 2, 2012
     

    No. The $50/month ACH deposit to the card gives you 6% on the $5,000. Balance over $5,000 earns 0.1% but your $5000 still earns 6%. Follow the steps in the article.

  35. Maxly on December 2, 2012
     

    Thanks for the reply. Forgot to mention.. love the site.

    Is it $500 or $50 ACH transfer (“direct deposit”) per month to get 6%?

  36. Harry on December 2, 2012
     

    $50.

  37. hsv_climber on December 3, 2012
     

    What about taxes vs fees?

    Yield on this account is definitely taxable, but can the card fees be deducted?

  38. Harry on December 3, 2012
     

    No but they are not going to make a big difference. If you gross up the $5 fee to $7.50, or even $10, it’s still a good yield.

  39. Tom on December 27, 2012
     

    Any idea why routing number is not recognized by my bank and how to use the PayPal option to load the card/ account. Thanks for detailed steps for the process but now stuck on routing number, my both banks do not recognize that R/T. Please help. Thank you,

  40. theo on December 27, 2012
     

    “We are unable to process your request at this time. Some of the identification information you provided could not be validated”… wtf?
    Finally called them and it went through with the same info… go figure :)

  41. Tom on December 28, 2012
     

    I have called both sides and no one could help. Bank says we cannot verify their RT and Mango says try other options.

  42. Harry on December 28, 2012
     

    Tom – No idea why some banks don’t like that routing number without dashes. Outdated database maybe? It’s valid. My credit union has no problem with it. Maybe we should start a list for which banks recognize it and which ones don’t.

    Recognize: Alliant Credit Union, Chase (must bring balance to positive first), ING Person2Person

    Don’t recognize: Wells Fargo, Discover Bank, Ally, Bank of America, Popmoney, ING DIRECT (ACH)

  43. Tom on December 28, 2012
     

    Also it doesn’t like CapitalOne

  44. Tom on December 28, 2012
     

    So Harry could you suggest me some other better option to load cash to my prepaid card. Thank you.

  45. theo on December 28, 2012
     

    Yeah that could be a problem.. You need to find a financial institution that you use that can link to the Mango account. BTW the Mango routing number links to INTER NATIONAL BANK.

    I may be able to load cash through my fidelity cash management account as it does not have a trial deposit verification system. It will take 7-10 days to find out though :)
    Looking at the list above, my Chase trial deposit verification will probably fail… I am also trying Vanguard though they also use trial deposits…

    What about sending a check with the initial contribution or at least a small sum to move the balance into positive territory?

  46. Harry on December 28, 2012
     

    Tom – I put the banks that recognize the routing number and those that don’t into the article body. Hopefully other readers will help expand the lists. I would suggest trying a brokerage or mutual fund company such as Fidelity or Vanguard. Maybe they are less picky.

  47. Hans on December 29, 2012
     

    1) TIAA Direct works fine for ACH.

    2) A way to avoid the $5/ month fee is to direct deposit $500/month and then use Amazon payments (funded by the mango card) to pay this + monthly interest to your spouse/significant other. It can then be deposited to a bank account. I’ve done this previously to hit sign up spending targets on credit cards. Nice way to get the money back (with no fees) and not take away other usual credit card rewards. (Although technically, I guess you could be using a 2% rewards card w/ amazon payments every month)

  48. Juliana on January 6, 2013
     

    Why not just make $500 deposit per month to avoid the $5 fee.. and keep doing that until you reach the $5,000 limit.

    Possible?

    Also, having said that already.. I made my first $500 deposit to Mango Money in December but the $5 card service fee hasn’t been returned yet. What’s up with that? Does it take extra time for them to return the $5 service fee? I thought the service fee is waived with a $500 deposit.

    Harry? Any advice on this?

  49. Harry on January 6, 2013
     

    Juliana – Because with $5,000 in the savings account from the get-go, you get about $25 interest every month ($24.88 posted to my account at the end of December). That’s much more than the $5 fee. If you only have $500 in the first month, you get only $2.50 interest ($22.50 opportunity cost). Next month when you only have $1,000, you get $5 interest (another $20 opportunity cost). Next month, … you get the picture. Don’t get so hung up on the $5 fee. Pay it; it’s worth it. I didn’t get the $5 fee for the first month returned to me. I’m OK with it.

  50. Justin on January 15, 2013
     

    If my bank does not allow me to set direct deposit then I get 2% pay.
    Is there a way to get around this with PayPal and get 6% apy?

  51. Justin on January 15, 2013
     

    Also note that 6% apy applies only to direct deposit and not any other transfer(ACH) is what I understand, as stated on their website, so how come transferring from bank qualifies for 6%

  52. Harry on January 15, 2013
     

    Justin – I read on another forum PayPal didn’t work. The account added as a bank account to PayPal was removed because PayPal doesn’t allow it. Use a different bank, ideally one that’s already confirmed working, for example CIT Bank.

  53. Justin on January 15, 2013
     

    Harry, Thanks for your reply. I am thinking to open Chase account, do you know if that would affect my credit score?

  54. Harry on January 15, 2013
     

    Sorry, no idea. I opened several bank accounts in 2012, especially in Q4. My score didn’t appear to be affected much. I guess it depends on what score you have now.

  55. theo on January 16, 2013
     

    In my experience Paypal, Vanguard and Fidelity CAN be linked to Mango.
    OTOH Chase gave an error presumably due to negative balance and Cap1 doesn’t recognize the routing number, both already reported above.

  56. Harry on January 18, 2013
     

    Thank you theo. I added Fidelity and Vanguard to the “good” list.

  57. Charlie on January 24, 2013
     

    Navy Federal Credit Union accepts the routing number and can be linked to the Mango account. NFCU doesn’t use small deposits to verify the account, so there is no problem with the negative balance. It’s only possible to ACH $2,500 out of a NFCU checking account per day, so it takes a few days to fill up the Mango account. Also, unless you have access to a NFCU branch, you have to wait for a verification letter to come in the mail with a confirmation code to link the external account.

    Is there any reason you suggested to start the monthly transfer 40 days after opening the Mango account?

  58. Harry on January 24, 2013
     

    Charlie – Thank you for the info about Navy Fed. The 40 days is not that important. Because you need an ACH deposit every month to keep the 6% rate, the initial $5,000 load will satisfy that requirement for the first month. Then the monthly transfers starting in 40 days will satisfy it for the following months. If you start it sooner, you just have extra $50 on the card. No big deal.

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