Dedicated to Deposits: Deals, Data, and Discussion

Rate Cuts and Other Banking News

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It looks like 2009 will be a challenge for savers. Banks continue to cut rates. ING Direct's Orange Savings Account yield is now down to 2.50% APY (was 2.75%). It also cut rates on its Electric Orange checking account and CDs. Its top CD rate is now only 2.75% APY for terms of 12 to 60 months.

Other banks that have recently cut rates include Corus Bank (MMA now 3.55% APY, was 3.65%) and Provident Direct (savings account now 3.25% APY, was 3.75%). There are still are three banks offering 4% savings accounts (see my weekly rate summary).

Banks are also cutting reward checking rates. I'm in the process of updating rates for dozens of banks in my High Yield Checking website. Thanks to the readers who have been leaving comments on the rate changes.

As reported by Wall Street Journal, GMAC fell short of its goal to raise $30 billion by converting its issued debt into preferred stock holdings. On Monday, GMAC received commitments from the federal government for $6 billion in aid.

GMAC is the parent of GMAC Bank. We'll have to see how greater stability at GMAC will affect the bank and its rates in the future months. GMAC Bank continues to offer a competitive 4.00% APY 12-month CD (see post).

According to this HousingWire article Fannie Mae may be holding up the IndyMac sale. The article mentioned sources that claim Fannie Mae has demanded $1 billion from IndyMac due to misrepresentations of loans it had sold to Fannie Mae.

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Comments
14 comments.
Comment #1 by marc (anonymous) posted on
marc
I really think, in this environment, the rewards checking account hassles will be worth the trouble. The spread in rate you get is now very nice and I think many that haven't looked into these accounts should reevaluate them. I resisted for a while, but since I've had one starting in July, I've found it's not THAT much of a pain to make your 10 or 12 debits and set up and ACH (which counts as a direct deposit for my RC account; I use Countrywide to make the ACH). Of course, if you have large sums, it does become a pain to manage multiple RC accounts (due to the cap) so this probably only applies to either some of your savings or those that maybe only have around the cap to put in (not a shabby amount still vs. the general public). I have been happy that West Bank of Iowa has held strong at 5% with fairly high cap at 50k since April. Remember that these banks effectively pay less interest to those that miss the requirements some months. If you miss 2 months on a 5% account, their effective interest rate to you goes down to 4.1%. 4 months, and they are down to 3.3% and so forth. So it's conceivable these accounts will stay strong as long as enough careless people are opening them.

Other than that, maybe us savers should just join the crowd and start buying stuff. It's clearly what the feds want us to do and sadly, the dollar will be devalued eventually with all this paper floating around. Good luck in 2009 to us.

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Comment #2 by Mike in Md. (anonymous) posted on
Mike in Md.
Another one bites the dust, I'm sorry to say. Everbank's homepage still shows the 4% introductory rate, but when you click on the link the rate has been lowered to 3.76%.

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Comment #3 by Sofa King Frustrated (anonymous) posted on
Sofa King Frustrated
I remember when a lot of us were just hoping the savings/MMA rate never fell below 4%.

Now we are praying we can at least get 3%.

If this bloodbath continues there might not be any bank paying more than 3% for a savings or MMA.

Like Marc said above, the majority of Rewards accounts have a balance ceiling that is too low. And th Rewards rates are dropping at a lot of banks.

Happy New Year to all.

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Comment #4 by Anonymous posted on
Anonymous
People forget that the rate you get is always relative to real inflation.

The spread right now between actual inflation and the 3-4% you can get, is quite normal, might even be high.

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Comment #5 by Anonymous posted on
Anonymous
Yes, good point! A year ago when we were getting over 5%, inflation was supposedly over 3%... now it looks like we might even be in a deflationary environment (let's hope not though), so your real rate of return is still about the same.

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Comment #6 by Anonymous posted on
Anonymous
rewards checking accounts//

can we buy .25 c gum x 10 to count for 10 debit card purchases?

&

Countrywide/ING direct deposit $268then ACH Countrywide/ING pull it out?

if so, these rewards checking accounts @ 4% don't look so bad now. Most seem local only though.

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Comment #7 by Anonymous posted on
Anonymous
Quote: People forget that the rate you get is always relative to real inflation.
The spread right now between actual inflation and the 3-4% you can get, is quite normal, might even be high.:
By Anonymous, at 1:11 PM, December 31, 2008

Not by a long shot!

The Feds always low balled the real inflation rate with their creative calculations and fuzzy numbers.

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Comment #8 by Anonymous posted on
Anonymous
Quote: "The Feds always low balled the real inflation rate with their creative calculations and fuzzy numbers."

Okay, what is the real rate, and show us where you got your data and how you did your calculations. If you can't, then please stop with the paranoid, made-up assertions.

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Comment #9 by Anonymous posted on
Anonymous
If I may change the subject...

Wachovia has lowered the rates on its Crown ("premium") interest-bearing checking accounts to 0.05%

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Comment #10 by Anonymous posted on
Anonymous
No paranoia, just facts gathered from various news media and government sources on how the inflation rate is calculated and presented to the public.
Get your head out of the sand and do some investigating to learn the true facts.

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Comment #11 by Anonymous posted on
Anonymous
Quote: "No paranoia, just facts gathered from various news media and government sources on how the inflation rate is calculated and presented to the public.
Get your head out of the sand and do some investigating to learn the true facts."

AGAIN - State these sources and the facts. If you've truly done your research, you have all this data on hand.

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Comment #12 by Anonymous posted on
Anonymous
The rewards checking account offer is not worth the effort for me because I don't use the bill payment service that much and I don't use ATMs that much either. I also don't use POS debit card payments either. The bank must want you to do a regular pattern of activity to your account in order to pay you a premium rate. I am guessing that there is some kind of hidden money being made by the bank because of your multiple activities on your account. The balance on my checking accounts have never been that high, so I don't get much of the benefit of the higher rate anyway. Also, I get back rebates from using my credit card that comes out to hundreds of dollars a year, so that, in and of itself, usually is better for my pocketbook than a rewards checking account rate.

On Monday, I deposited $100K to my Provident Bank account from my money fund account and other lower rate bank accounts and of course, one day later, the rate gets reduced to 3.25%. I guess it was still a good move rather than leaving the money where it previously was in.

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Comment #13 by Sarah (anonymous) posted on
Sarah
GMAC dropped their 12-month CD to 3.75%. Still decent, just a sign of the times!

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Comment #14 by Anonymous posted on
Anonymous
The problem with defining what is the real inflation rate is that it varies from one consumer to the next. Every person purchases different categories of goods and services which vary in cost, The government or consumer federation may state that the inflation rate is 5% this year. Well, if my utility bill and fuel costs double, then how does that come out to 5%? I know that they attempt to take into account a wide and varied estimate of price changes for many different categories of goods and servies. As for myself, many times the increase in prices of food items and clothes don't affect me because I buy grocery items from lower cost Korean markets and I buy clothing only on sale or clearance. Utility and commuting costs tend to keep going upward so that would impact me more in the standard of living. For someone who uses solar power and electric cars, they would not be impacted as much as I would be. So the inflation rate for each person will vary.

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