Best Bank Account Interest Rates - Summary for April 9, 2011

Comments (1)
Apr 9, 2011 - 6:42 PM by Ken Tumin

When will increasing inflation and the improving economy move the Fed to reverse its accommodative monetary policy? According to the Fed minutes that were released this week, there was some debate at the last FOMC meeting. The inflation hawks at the Fed have been expressing concern about the growing inflation pressures. However, the majority on the Fed see the latest growth in inflation to be primarily limited to commodities and not a long-term concern.

Next Friday the government will be releasing March CPI data. The higher gas prices will likely have an effect on the March CPI. However, it's the core CPI which excludes energy and food that the Fed focuses on. There's probably not going to be much change at the Fed until there's a substantial increase in the core CPI.

One thing to note about next Friday's CPI release is that we'll have all the necessary data to accurately predict the next I Bond inflation component. This component is based on the Consumer Price Index for All Urban Consumers (CPI-U) which is impacted by energy prices (remember 2008). According to the Savings Bond Advisor, "If inflation for all six months of this period matches the rate during the first five months, the next I bond inflation component would be 3.15%." That could make I Bonds a better deal than short-term CDs even if the Treasury keeps the I Bond fixed rate at 0%. I Bonds will never be a hot deal since they're limited to $10K per calendar year per SSN ($5K for electronic and $5K for paper).

Below is a quick summary of Fed fund futures and Treasury yield changes since last week based on bond rate data and the CME Group FedWatch. According to the Fed funds futures market, the chance of a rate hike in December 2011 went down this week, but the chance for a rate hike went up a little for next March. However, the yields for the 5-, 10- and 30-year Treasuries all when up this week.

Fed funds futures' implied probability for a higher rate by:

  • Dec 2011: 41.5% down from 45.7% last week
  • Jan 2012: 65.7% down from 66.8% last week
  • Mar 2012: 80.8% up from 79.6% last week

Treasury Yields:

  • 5--year: 2.31% up from 2.24% last week
  • 10-year: 3.58% up from 3.44% last week
  • 30-year: 4.64% up from 4.48% last week

Savings Account Rates

This was a quiet week for savings account rates with only one bank on my list that made a rate change.

It has now been six months since I first reported on Morrill & Janes Bank's checking account and its 1.51% APY for all balances of $1,500 and above. Unlike a reward checking account, this doesn't have monthly usage requirements to qualify for the rate.

A few readers have expressed concern about Morrill & Janes Bank's disclosure which has been alleged to be weak in terms of the bank assuming liability if there's fraud. I have not analyzed the disclosure and compared it with other banks. I have found a couple of government resources on customers' liabilities when there is bank fraud. One consumer resource I found at the FDIC is titled A Crook Has Drained Your Account. Who Pays?. It should be noted that this article is over 10 years old. At the OCC website, helpwithmybank.gov, there's a FAQ on Forgery and Fraud with some useful information. It should be noted that Morrill & Janes Bank is not a national bank, and its primary regulator is the FDIC and not the OCC.

Rate Hikes:

  1. None

Rate Cuts:

  1. Zions Bank Internet Savings - 1.01% (was 1.06%)

Certificate of Deposit Rates

CD rates were pretty steady this week. There weren't any major disappointments at least as related to rates. There was a disappointment in terms of early withdrawal penalties. I confirmed that Pentagon Federal Credit Union increased its maximum early withdrawal penalty on 5-year CDs from 180 days to 365 days of dividends. However, this change only applies to new CDs. It does not apply to existing CDs that have not matured. PenFed has often had great deals on its 5-year CDs. Currently, its CD rates are a little low. If its 5-year CD becomes a rate leader again, this new penalty will be an important factor to consider.

A large early withdrawal penalty on a long-term CD can be costly if interest rates shoot up. The cost can be planned if the penalty is fixed until maturity. However, if the bank or credit union can increase the penalty on existing CDs, the depositor is at a big disadvantage. That's the concern over what happened at Fort Knox Federal Credit Union. A reader has been in contact with the NCUA about this, and I can confirm they are investigating this specific case. For the general case, the NCUA has stated the following:

A federal credit union may change the early withdrawal penalties on a new term share account or an existing term share account at maturity when rolling the funds over. However, the credit union should not be able to change the penalty on an existing term share account in accordance with Truth in Savings.

I'll be sure to post more on this as the NCUA completes its investigation.

Short-term CD rates continue to be very low. If you want to avoid being locked into a long-term CD, don't forget Ally Bank's 11-month No-Penalty CD. Its yield is higher than almost all other CDs with maturities of 3, 6 and 9 months. The No-Penalty feature allows you to make this CD a 3-month CD, a 6-month CD or virtually any maturity of up to 11 months.

Reward Checking Accounts

I didn't find any new reward checking accounts this week, but I did review some old ones and highlighted those that have held up well. In my Monday review I noted five reward checking accounts that are still paying at least 4.00% APY on balances of at least $25K. Unfortunately, none of these are available nationwide, but some of these are available in major metro areas of the country.

It used to be easy to find reward checking accounts with top rates for balances up to $50K, but that has become rare these days. Most of them have reduced their balance caps to $25K or lower. I took a look at one credit union in Washington State that has kept its $50K balance cap since 2007. However, its top rate has fallen quite a bit, and it's now only 2.75% APY. For a reward checking that may seem low, but it's over twice the rate of SmartyPig's savings account.

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

Posts from Previous Weeks

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.

Rates as of April 9, 2011

Checking/Savings/Money Market Accounts:

  • Noteworthy Accounts Available Nationwide:

3-Month Certificates of Deposit:

  • Noteworthy Accounts Available Nationwide:

6-Month Certificates of Deposit:

  • Noteworthy Accounts Available Nationwide:

9-Month Certificates of Deposit:

12-Month Certificates of Deposit:

  • Noteworthy Accounts Available Nationwide:

18-Month Certificates of Deposit:

  • Noteworthy Accounts Available Nationwide:

24-Month Certificates of Deposit:

  • Noteworthy Accounts Available Nationwide:

36-Month Certificate of Deposit:

  • Noteworthy Accounts Available Nationwide:

48-Month Certificate of Deposit:

  • Noteworthy Accounts Available Nationwide:

60-Month Certificate of Deposit:

  • Noteworthy Accounts Available Nationwide:

84-Month Certificate of Deposit:

Various Deposit Account Deals

Bank Account Alternatives

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

Edit 4/10/11: Added Affinity CU's IRA CD specials


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SaveYurMoney

SaveYurMoney - #1, Monday, April 11, 2011 - 10:13 AM

It seems odd that the next I-Bond rate could have a variable rate of over 3% and yet a fixed rate portion of zero, or close to zero.  I guess this shows the divergence between artificially low interest rates and inflation.


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