Best Bank Account Interest Rates - Summary for October 9, 2010

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Oct 9, 2010 - 5:28 PM by Ken Tumin

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Yesterday's report on September unemployment was a disappointment, and this raises the chance that the Fed will soon implement a new round of Quantitative Easing (QE2). This will likely entail the purchasing of long-term Treasury securities with the intent of driving down long-term interest rates. Will lower interest rates help the economy even after we have had record low rates over the last two years? I don't think the Fed should overlook the possibility that it could do more harm than good. That's what Thomas Hoenig has been saying all year. He has been the lone dissenter this year at the FOMC. Bloomberg reported on a speech Hoenig gave this week in which he provided the following warning:

The central bank should heed the long-term risks from its low-interest rate policy, including the threat of accelerating inflation

With QE2 appearing to be more likely, the Fed funds futures continue to show smaller implied probability of a higher Fed funds rate by next June. It's now 5.8% which is way down from last Saturday when it was 16.8%. The futures are showing the chance of a rate hike by next September at 17.3%. It's starting to look like we may have to wait to 2012 before we see rate hikes.

Savings Account Rates

The banks offering the only non-promo nationwide 2.00% savings account announced this week a rate cut. The three internet banks owned by the Huckabay family (Evantage, AmericaNet and Redneck Bank) stated on their websites that their top Mega Money Market yield will fall from 2.00% to 1.75% effective November 18th. As one reader noted in the comments, there are two positive aspects of this. First, the banks were nice to give the public more than a month of warning. Also, the drop was only 25 basis points, and it keeps these Mega Money Market accounts as rate leaders. It's important to note that this top yield is limited to balances of up to $35K. For the portion of the balance over $35K, the yield falls to 1.00% APY.

When you open a savings account that's offering a very competitive rate, it's very frustrating when the bank slashes the rate to such an extent that the account is no longer competitive. That happened this week at NewDominion Bank which slashed its savings account yield from 1.40% to 0.90% APY. Fort Knox FCU came close in that respect also when it slashed the top yield of its money market account from 1.50% to 1.20% APY.

There was some good news. Even though there were no rate hikes, I added two very competitive liquid accounts to my list. The first one added was the checking account being offered by Morrill & Janes Bank which has a 1.51% APY on balances of at least $1,500. It's available nationwide, and the bank appears intent to keep this yield. On its front page it advertises that it has been paying 1.51% APY since April 2009. The other addition to the list is probably less likely to last. H&R Block Bank is offering a money market account with a 1.50% APY on balances of at least $50K. The reason why I'm skeptical this will last is due to what happened last year when the yield was slashed from 3.25% to 1.75%. They tend to keep the rate the same for a while, but when the rate falls, it goes way down.

Another bit of good news didn't involve rate hikes, but it did involve reduced balance requirements. A reader noticed this week that Capital One Direct Banking reduced the balance required to earn the top rate on its InterestPlus Online Savings Account, and it also reduced the balance required to qualify for the quarterly bonus.

Rate Hikes:

  1. None

New Additions to the List

  1. The Morrill and James Bank Checking - 1.51%
  2. H&R Block Bank MMA - 1.50% $50K+

Rate Cuts:

  1. Evantage & AmericaNet Bank MMA - 1.75% eff Nov 18 (currently 2.00%)
  2. Fort Knox FCU MMA - 1.20% $50K+ (was 1.50%)
  3. NewDominion Bank Savings - 0.90% (was 1.40%)

Certificate of Deposit Rates

When I checked Ally Bank's CD rates early Friday, I noticed a few rate cuts, but at least the 5-year CD yield was still at 2.64% APY. I'm afraid that didn't last. Some time between Friday morning and today, Ally Bank cut the 5-year rate from 2.64% to 2.55% APY. As I mentioned last week, these rate cuts are eroding the hot deal of Ally Bank's mild 60-day early withdrawal penalty.

USAA Bank and EverBank also did another round of CD rate cuts this week. USAA Bank's 7-year CD yield has fallen considerably. Just a month ago, the 7-year Super Jumbo yield was close to 4.00%. It's now only 3.00% APY.

The best long-term nationwide CD deal is currently PenFed's 3.49% APY 7-year CD. Last month I compared this CD with Ally Bank's 5-year CD when redeemed early after taking into account the early withdrawal penalty. Even with PenFed's penalty of 1 year of interest, PenFed's 7-year CD started to become a better deal than Ally's 5-year CD just after year 4. That was when Ally's 5-year CD yield was 2.74%. With the yield now at 2.55% APY, PenFed's 7-year CD starts to become a better deal soon after year 3.

Reward Checking Accounts

We lost our last 4.00% nationwide reward checking account (4% for balances up to $25K) on Thursday with the rate cut at South Division Credit Union. The yield was slashed from 4% to 2%. The top nationwide reward checking account is now at Westfield Bank which has top yield of 3.50% APY for balances up to $25K. There are now 10 banks and credit unions on our reward checking account table that are paying 3% to 3.50% APY on balances of at least $25K. However, one of these ten institutions, Consumers Credit Union, has informed its members that its balance cap will be falling from $25K to $10K effective November 1st.

I didn't include Evantage, AmericaNet and Redneck Bank on this list of 4% accounts since their reward checking accounts have a $10K balance cap. The smaller balance cap makes it easier for the banks to pay the high rates (Refer to this post for the reason). But even the $10K cap wasn't enough for these banks to keep the 4%. Along with the Mega Money Market rate cut, they also announced a rate cut on their reward checking accounts. The yield is scheduled to fall from 4.00% to 3.75% APY effective November 18th. As one reader mentioned, it's not as bad as other rate cuts. For example, Danversbank's yield fell from 4.01% to 3.01% APY. So the smaller balance cap probably did help some.

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

Savings/Checking Accounts - Nationwide

CD Deals - National

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.

Rates as of October 9, 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)


Post a CommentComments
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starlight

starlight - #1, Saturday, October 9, 2010 - 8:16 PM

Regarding FALLING RATES - a quote from Dallas Fed president Richard Fisher yesterday speaking at the Minneapolis Economics Club:

In performing a cost/benefit analysis of a possible QE2, we will need to bear in mind that one cost that has already been incurred in the process of running an easy money policy has been to drive down the returns earned by savers, especially those who do not have the means or sophistication or the demographic profile to place their money at risk further out in the yield curve or who are wary of the inherent risk of stocks. A great many baby boomers or older cohorts who played by the rules, saved their money and have migrated over time, as prudent investment counselors advise, to short- to intermediate-dated, fixed-income instruments, are earning extremely low nominal and real returns on their savings. Further reductions in rates earned on savings will hardly endear the Fed to this portion of the population. Moreover, driving down bond yields might force increased pension contributions from corporations and state and local governments, decreasing the deployment of monies toward job maintenance in the public sector.

 


13
Anonymous

Anonymous - #2, Saturday, October 9, 2010 - 9:36 PM

Pen Fed's 5% 10 year insured CD is looking better everyday!


3
Anonymous

Anonymous - #3, Sunday, October 10, 2010 - 6:36 AM

It's about time that a Fed official has stood up for the savers of this country. It shows that he is in touch with the real world. Bernanke continues to believe that anther round of QE to force rates lower will give the econmy a boost. If there is little demand for loans or anything, no matter how low the price, in this case, interest rates, it does not boost demand.

 


8
Jo

Jo (anonymous) - #4, Sunday, October 10, 2010 - 9:49 AM

Well, we all know what the definition of insanity is. Obviously, Bernanke doesn't. I gave up rate chasing a while back and will be sticking with the accounts I currently have. I hope that when the Fed rates start to go back up in favor of the consumer, so will the bank and credit union where I have accounts.

As for as a Fed official speaking up for us, the guy from Kansas City long ago was talking about this very thing. No one listened; maybe they all need to simultaneously voice their angst about this insanity?

Just some thoughts.....


6
Anonymous

Anonymous - #5, Sunday, October 10, 2010 - 12:25 PM

What did people complain about in the early 80s, when interest rates went through the roof?


17
me1004

me1004 - #6, Sunday, October 10, 2010 - 3:28 PM

I recall comments in the last recession in 2001 when Greenspan had pushed rates down to -- well, I don't recall just how low but not anywhere near as low as they are now -- and the experts were saying that no stimulous would be provided by pushing rates any lower because if people and businesses were not already borrowing at the very low rates that already were in effect, making rates even lower would not attract them. And that thinking apparently was one of the significant reasons Greenspan did not push rates lower than he did. That is, at some point in lowering rates, if it is not working, then even lower rates will not induce people to borrow, other issues are their concern. So, our policymakers should already have stopped lowering rates, as that is not going to induce more borrowing but it is going to leave we savers with lots less to spend, the exact opposite of what the Fed wants!


9
51hh

51hh - #7, Sunday, October 10, 2010 - 3:50 PM

it is nice that some people at the FED realize teh truth and speak out.  But let us not count on them.  After all, we wiould all be beggars by now if we had counted on the Government or the stock market to do something for us several years ago.

If we had a smart Government, we would not be in the current economic situation.  Let us not make the mistake twice; i.e., to count on the Government.

For each of us, we should carefully examine our financial situation and the realistic environment we are in, make the most prudent strategic steps we possibly can. 

For example, I am 10% in equity (90% in fixed income) for my 401K.  All my cash is currently in Reward Checking Accounts.  Needless to say, rate-hopping is an integral part of my overall strategy.  A pain in the neck (for rate hopping), but hey, for a few thousand dollars, it is worth the labor. 

When all the reward checking accounts go down to "normality" (average rate of 1- 2%), I will worry about that when it comes.  Maybe I have spent all my money by then and will have nothing to worry about:D  For now, I can care less about the stupid Government and what is going on with the Fed and stuff.


4
Jesse

Jesse (anonymous) - #8, Tuesday, October 12, 2010 - 12:34 PM

Where does the Evantage wite state the rate drop? I see nothing on the site.. it still shows 2.0%..


1

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