Best Bank Account Interest Rates - Summary for July 17, 2010

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Jul 17, 2010 - 7:03 PM by Ken Tumin

Best Bank Account Interest Rates - Summary for July 17, 2010

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The major financial reform bill passed the Senate this week and the President is expected to sign it into law next week. The one provision of this bill that many savers will appreciate is the permanent increase of the $250K deposit insurance limit. Without this change, the $250K limit would expire on December 31, 2013. With the $250K limit becoming permanent, savers will no longer have to worry about new 5-year or 4-year CDs that may become partly uninsured in 2014.

Other parts of the bill will likely be bad for many savers with reward checking accounts and cash-back credit cards. The issue of regulation causing banks to reduce deposit rates may already be occurring. New overdraft regulation that makes it easier for people to avoid overdraft fees started to take effect on July 1st. According to this Bankrate.com article

A recent analysis from Market Rates Insight reported that in the first week after Regulation E took effect on July 1, the national average rate for deposits dropped 0.06 percent.

This year has been a perfect storm for savers with many factors coming together to suppress deposit rates. We will probably have to wait for 2011 before there's a decent chance of rate hikes. The Fed funds futures are now showing the implied probability of a higher Fed funds target rate by December at 7.8% which is down from last Saturday when it was 8.1%. At least the decline wasn't as much as previous weeks.

The FDIC had a busy Friday this week with six bank closures which brings this year's bank failure total to 96. All of the banks were relatively small, and the FDIC was able to find buyers for all of them. The buyers agreed to assume all deposits (except some brokered deposits) including deposits above the FDIC limit. The main concern for depositors is the loss of their CD interest rates. The acquiring banks are allowed to reduce rates on existing CDs. One of the acquiring banks stated in their Q&A that "rates on certain CD accounts and IRA accounts will be adjusted to current market rates." That could be big rate reduction for those who had long-term CDs that were opened a few years ago. The depositors will be allowed to make a penalty free early withdrawal, but that won't help much in today's interest rate environment.

Discussion Forum and the Sweepstakes

The sweepstakes has ended, and we have three winners! I've updated the sweepstakes post with the forum members who won. Congratulations to the winners, and thanks to all who participated. We hope you will continue to participate in the forum. Don't forget that an easy way to view the forum is by using the Latest Thread link which shows the latest threads in a fashion that's similar to a blog.

Savings Account Rates

This was another quiet week for savings accounts. There were no rate changes for any of the top savings accounts.

With most 3-month CD rates being under 1.00%, EverBank's 3-month money market promo looks appealing. It has a 3-month rate of 2.25% APY for up to $50K. The checking account promo also has a 2.25% APY 3-month intro rate, but the maximum balance is up to $100K. Both can be done at the same time for a total of $150K. For more details about these promos and these accounts, please refer to my EverBank review.

Rate Hikes:

  1. None

Rate Cuts:

    None

Certificate of Deposit Rates

I can't say this was a quiet week for CD rates. Several banks and credit unions cut their CD rates including Bank of Internet USA, CNB Bank Direct and Wings Financial Credit Union.

There was one bright spot. Fort Knox FCU did a slight rate increase on its two CD specials. The rates are now 1.75% APY for a 14-month term and 2.30% APY for a 23-month term. Another bright spot is that Alliant Credit Union continues to offer top CD rates including a 2.00% APY 18-month CD and a 3.00% APY 48-month CD. If you prefer an internet bank rather than a credit union, Sallie Mae Bank is a good choice with competitive CDs including a 1.55% APY 1-year CD.

Are CDs Worthwhile in Today's Rate Environment?

With CD rates so low, is it worthwhile to open a CD? Using a high-yield savings account at institutions like Alliant Credit Union or Sallie Mae Bank is an alternative. Rates will eventually rise, and you'll get higher savings account rates rather than being locked into a low-rate CD.

The problem is that no one knows when rates will rise. Early this year, many had thought we would see rate hikes in the second half of 2010. Now it looks like it won't be until 2011 at the earliest. If rates do stay low or continue to fall, you can earn more with CDs. For example, one year ago Discover Bank was offering a 2.10% 1-year CD and a 2.00% savings account. Today, the savings account rate is 1.35%. As you can see, a saver would have earned more with the 1-year CD.

Even when rates rise, you may earn more with a 1-year CD than a savings account. In September 2005, an ING Direct 1-year CD yield was 4.20% and the savings account yield was 3.40%. This was the time that the Fed was actually raising rates (sure seems to be a long time ago). By September 2006, the ING Direct savings account yield had risen to 4.40%. This was a higher rate than the 1-year CD from the previous year. However, the average savings account yield for the year was about 3.90%. So even in this case, the saver would have earned more with the 1-year CD.

Rates will eventually rise, but no one knows how long these low rates will last. If you do open a CD, make sure you review the early withdrawal penalty. This is especially important for long-term CDs. The bank with the best early withdrawal penalty continues to be Ally Bank with only 60-days of interest for all terms including the 2.94% APY 5-year CD. For more details about Ally Bank and its CDs, please refer to my Ally Bank CD review post.

Reward Checking Accounts

I reported on two new reward checking accounts this week. Both offer attractive rates: 4.00% APY and 4.75% APY. Both apply to balances up to $25K. The 4.75% yield is being offered by the North Carolina bank, Randolph Bank and Trust Company, and the bank is currently allowing people from any state to apply. Before this, the best nationwide reward checking yield was only 4.00% APY. It's a small bank so this rate and/or this nationwide policy may not last for too long.

The financial reform bill that's likely to become law next week will be a test for reward checking. Debit card fees that banks get from retailers will likely go down. It may also become more difficult for reward checking customers since stores will be allowed to offer discounts for cash and can impose a minimum purchase requirement on credit card purchases.

To find both reward checking accounts local to you and those available nationwide, please refer to the reward checking section of DepositAccounts.com.

Recap for the Week - Links to This Week's Posts

Banking News/Resources

CD Deals - National

Savings/Checking Accounts - Nationwide

Checking/Savings Bonuses

Reward Checking Accounts

CD and Money Market Deals - Local

The rates listed below are based on Annual Percentage Yield (APY). No minimum balances are required unless noted. MMA next to the rates indicate a money market account. Most MMAs have check writing and ATM cards. Online savings accounts usually lack both of these. Previous weekly summaries are available at this page. Quick Links: Refer to the following links for the savings accounts and CDs that interest you: Liquid Account Rates: Savings Accounts, Reward Checking, Bank alternatives CD Rates: 3 Mo CDs, 6 Mo CDs, 9 Mo CDs, 12 Mo CDs, 18 Mo CDs, 24 Mo CDs, 36 Mo CDs, 48 Mo CDs, 60 Mo CDs, 84 Mo CDs, CDs by state Comments: read and discuss

As of July 17, 2010

Checking/Savings/Money Market Accounts:

  • Noteworthy Accounts Available Nationwide:
  • Noteworthy Accounts - Local Only

3-Month Certificates of Deposit:

  • Noteworthy Accounts Available Nationwide:
  • Noteworthy Accounts - Local Only

6-Month Certificates of Deposit:

  • Noteworthy Accounts Available Nationwide:
  • Noteworthy Accounts - Local Only

9-Month Certificates of Deposit:

  • Noteworthy Accounts - Local Only

12-Month Certificates of Deposit:

  • Noteworthy Accounts Available Nationwide:
  • Noteworthy Accounts - Local Only

18-Month Certificates of Deposit:

  • Noteworthy Accounts Available Nationwide:
  • Noteworthy Accounts - Local Only

24-Month Certificates of Deposit:

  • Noteworthy Accounts Available Nationwide:
  • Noteworthy Accounts - Local Only

36-Month Certificate of Deposit:

  • Noteworthy Accounts Available Nationwide:
  • Noteworthy Accounts - Local Only

48-Month Certificate of Deposit:

  • Noteworthy Accounts Available Nationwide:
  • Noteworthy Accounts - Local Only

60-Month Certificate of Deposit:

  • Noteworthy Accounts Available Nationwide:
  • Noteworthy Accounts - Local Only

84-Month Certificate of Deposit:

  • Noteworthy Accounts - Local Only

Various Deposit Account Deals

Bank Account Alternatives

Historical Rates from the Federal Reserve (Federal funds, Treasury bills, CD's)


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Anonymous

Anonymous - #1, Monday, July 19, 2010 - 6:35 AM

Other parts of the bill will likely be bad for many savers with reward checking accounts and cash-back credit cards.  What will happen with cash-back credit cards?


1
Anonymous

Anonymous - #2, Wednesday, July 21, 2010 - 2:20 PM

to 1 what ??????


1

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