Best Bank Account Interest Rates - Summary for November 6, 2010

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Nov 6, 2010 - 7:28 PM by Ken Tumin

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As many economists had predicted, the Fed announced a new round of Quantitative Easing (QE2) at this week's FOMC meeting. In addition to the Fed's typical line of "exceptionally low levels for the federal funds rate for an extended period", the Fed described plans to purchase a further $600 billion of longer-term Treasury securities with the goal of driving down long-term interest rates. Thomas Hoenig continues to be the only one on the Fed to vote against this zero-rate monetary policy. In a past speech he labeled QE2 as a "a very dangerous gamble." Bernanke addressed concerns of critics in a Washington Post Op-Ed. Here's an excerpt in which Bernanke explains why he's not worried about inflation:

Our earlier use of this policy approach had little effect on the amount of currency in circulation or on other broad measures of the money supply, such as bank deposits. Nor did it result in higher inflation. We have made all necessary preparations, and we are confident that we have the tools to unwind these policies at the appropriate time. The Fed is committed to both parts of its dual mandate and will take all measures necessary to keep inflation low and stable.

One thing the Op-Ed lacked was any mention of this monetary policy's effect on savers and retirees. It's not only the issue of fairness, but it's also an economic issue. Bernanke maintains that the zero-rate environment will lead to higher stock prices which will boost consumer spending, and that will help business profits. However, after the last 10 years, we all know how quickly stock gains can evaporate. Also, higher stock prices won't help those who depend on interest income from their savings. As one reader noted in the forum, savers are a sizable segment of consumers, and they won't be increasing their spending.

There's a chance that QE2 will work, and that may have had an effect on the Fed funds futures. Expectations for rate hikes next year have actually gone up slightly from last Saturday. The implied probability of a higher Fed funds rate by next June went up from 3.6% to 6.7%. For next September, it went up from 14.8% to 16.2%. The upward change might also have been caused by some mildly good economic news. As I reported in the forum yesterday, Friday's job report was a step in the right direction and consumer borrowing went up in September.

The FDIC was back to its busy Fridays. Four small banks failed which brings the total bank failures for the year to 143. The number of banks that failed for all of 2009 was 140.

Savings Account Rates

It looks like QE2 gave banks an excuse to cut rates. EverBank, Sallie Mae Bank and Ally Bank cut rates on their savings and money market accounts. As an example of how rates have fallen, one year ago EverBank's ongoing money market account yield was 1.51%. It's now 1.11%. Ally Bank's savings and money market account yield was 1.55%. It's now 1.19%. I sure hope we won't see similar reductions over the next year, but I'm afraid it is a real possibility.

Rate Hikes:

  1. None

Rate Cuts:

  1. EverBank MMA/Chk 3-month intro - 2.01% (was 2.25%)
  2. Sallie Mae Bank Savings - 1.30% (was 1.40%)
  3. Colorado Federal Savings Bank - 1.20% (was 1.25%)
  4. Ally Bank MMA - 1.19% (was 1.24%)
  5. EverBank MMA ongoing - 1.11% (was 1.26%)

Certificate of Deposit Rates

With the start of November, I thought we would see several credit unions cut their CD rates. There were some that cut rates, but several of the rate leaders kept their rates steady. These included PenFed and Melrose Credit Union. PenFed continues to offer the best 7-year CD yield of 3.49% APY, and Melrose Credit Union continues to offer the best nationwide 5-year yield of 3.03% APY. iGObanking.com, the internet division of Flushing Bank in New York, continues to offer the best deal for mid-term CDs with a 2.25% APY for a 2-year and 3-year terms.

Many question the wisdom of locking into long-term CDs when rates are so low. What if rates shoot up in a couple of years from now? However, if a bank has a mild early withdrawal penalty, a long-term CD closed early can return more than a short-term CD for the same period. As I mentioned in this post, there are two risks of long-term CDs: 1) the bank may refuse an early withdrawal (some banks give themselves this right in the disclosures) and 2) the bank could increase the early withdrawal penalty before maturity.

In that post, I and several readers discussed the risks that the banks and credit unions could increase the early withdrawal penalties on existing CDs. I've been told by Ally's Public Relations Director that the penalty would not be increased on existing CDs (see post). However, this is not explicitly stated in Ally's disclosure. A reader received notice from the compliance office of Fort Knox FCU (which has a CD disclosure similar to the disclosures of Ally and other institutions) that they only have to give CD holders 30 days of notice before increasing early withdrawal penalties on existing CDs. Could other institutions make a similar claim at some point in the future? I plan to have another post on this issue next week.

Reward Checking Accounts

I reported on two new reward checking accounts this week. One that's available in parts of Nebraska has a 4.07% APY, and the other one is available for Iowa residents. It has an 3.51% APY. Both have $25K balance caps.

It wasn't a new reward checking account, but it was a rare example of a bank making an improvement to its reward checking account. Cambridge Savings Bank reduced the required debit card purchases and eliminated potential monthly fees on its 4% reward checking account. The account also provides worldwide ATM fee reimbursements regardless of meeting the monthly requirements. This account is available to all Massachusetts residents.

If you're not lucky enough to be near a bank offering these types of reward checking accounts, you'll have to look to banks offering reward checking nationally. I did another review of the best 5 reward checking accounts that are available nationwide this week. One of the banks, Beacon Federal, pays 4% APY, but it's only up to $20K [ Update 11/7/10: It looks like Beacon Federal has started to reduce availability. See post. ] The next best rate is 3.25% APY for up to $25K at Cattaraugus County Bank, but there have already been reports that the bank has begun to limit the availability. I'm trying to get more details from the bank. It may soon fall off the nationwide list. The next 3 of the best 5 all have rates around 3% for balances up to $25K.

To find reward checking accounts available nationwide or to find those that are only available in your state, 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 November 6, 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
In order of date posted. - Sort by votes
Anonymous

Anonymous - #1, Sunday, November 7, 2010 - 5:22 AM

Beacon Federal has not offered its Rewared Checking account nationwide since October 26, yet you still incorrectly report it as nationally available.


1
Anonymous

Anonymous - #2, Sunday, November 7, 2010 - 6:40 AM

Discover Bank also cut interest rate from 1.35% to 1.25% very recently.  Not sure if this was reported in previous summaries.


1
KenBDG

KenBDG - #3, Sunday, November 7, 2010 - 10:46 AM

@anonymous #1, Thanks for the info about Beacon Federal. I do see a change now in their online application. I just added that in the posts.

@anonymous #2, Discover Bank's online savings account rate cut was noted in the last weekly summary.


3
Anonymous

Anonymous - #4, Monday, November 8, 2010 - 12:00 PM

Instead of bellyaching about the rich and retired, why aren't we concerned about the poor and young?

People here spew so much venom at Ben Bernanke, and, yet, don't understand why the Fed must do what it is doing.  It's just so ignorant.


10
Anonymous

Anonymous - #5, Thursday, November 11, 2010 - 12:37 PM

re #4: Not everyone is living on credit. The only people who benefit from rock bottom rates are those up to their neck in variable rate debt. Maybe we should stop bailing out the borrowers.


1

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