Best Bank Account Interest Rates - Summary for Week Ending May 7, 2011

Comments (2)
May 7, 2011 - 6:13 PM by Ken Tumin

In the news this week there were two events that were good news especially for savers. First, oil and other commodity prices plunged this week. Analysts are now saying we should be seeing lower gas prices for the summer. The other good news was the government's job report for April. More jobs were added than had been expected.

Hopefully, falling commodity prices will continue. That should reduce inflation pressures. Even though this gives the Fed more time before they move to a tighter monetary policy, we don't want higher inflation to be what prompts the Fed to hike rates. Higher rates due to a growing economy with increased employment would be much better.

The other news this week wasn't as favorable for the economic recovery. There's more concern about Europe and a potential debt crisis in Greece. That and the commodity sell-off raised demand for Treasuries which resulted in another week of falling yields. In addition, the market's expectation for Fed funds rate hikes by early next year went down this week. Details can be seen in the following summary which is based on bond rate data and the CME Group FedWatch.

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

  • Dec 2011: 19.9% down from 23.4% last week
  • Jan 2012: 33.4% down from 40.7% last week
  • Mar 2012: 45.7% down from 53.9% last week
  • Apr 2012: 65.0% down from 73.3% last week

Treasury Yields:

  • 5--year: 1.86% down from 1.97% last week
  • 10-year: 3.15% down from 3.29% last week
  • 30-year: 4.28% down from 4.40% last week

There haven't been many things coming out of the government which have helped savers. When we were able to calculate the May I Bond inflation rate in April, I was happy to see that the I Bonds would give savers a little benefit. However, I was worried the Treasury might introduce changes to ruin this (like a larger penalty for early redemption). Fortunately, that didn't happen. On Monday the Treasury did announce the new very high I Bond inflation rate of 4.60% for May. As I described in my Monday post, this creates a good short-term deal that's better than any short-term CD rates. It's only a little benefit since I Bond annual purchases are limited to $10K per social security number.

Savings Account Rates

There was only one rate cut on my savings account list for the first week in May. EverBank reduced its 3-month intro rate from 1.51% to 1.26%. That new intro rate sure doesn't look appealing, and it doesn't come close to the savings account promotion offered by Salem Five Direct which guarantees 1.25% APY until April 1, 2012.

There were other rate cuts to accounts that are no longer on my list. Morrill and Janes Bank cut the rate of its Elite Checking account from 1.51% to 1.26%. I just removed this account from my list last week when the bank limited the availability of new accounts to only Missouri and Kansas residents.

Two other rate cuts were made to accounts that have long ago fallen off my list due to their low rates. HSBC Advance (formerly HSBC Direct) reduced its savings account yield from 0.90% to 0.80%. 1st Constitution Direct reduced the yield of its Super Savings Internet Special from 0.75% to 0.45% for balances of at least $10K. These accounts used to be competitive, but they're now on my list of savings account duds.

One bit of good news this week is the new money market account introduced by Incredible Bank. Its top yield is a little higher than the checking account, but there's not much difference (1.25% vs 1.21%). Since this top yield requires $100K, I don't think it will give Incredible Bank much more appeal. However, for those who already have the Incredible Bank checking and have a large balance, this money market account can give you a little extra yield.

Rate Hikes:

  1. None

Rate Cuts:

  1. EverBank 3-month promo - 1.26% (was 1.51%)
  2. Morrill & Janes Bank Elite Checking - 1.26% (was 1.51%)
  3. HSBC Advance Online Savings - 0.80% (was 0.90%)
  4. 1st Constitution Direct Savings - 0.45% $10K+ (was 0.75%)

Certificate of Deposit Rates

I was worried that we would see several CD rate cuts this week with the start of the new month. However, that didn't happen. Most credit unions on my lists kept their CD rates the same. There were a few banks that cut rates. One was Ally Bank. The most noteworthy cut was on its 11-month No-Penalty CD. The yield fell from 1.15% to 1.10%. That new yield isn't much higher than Ally Bank's savings account yield, but it is still higher than the yields of most short-term CDs. If you're looking for a CD with terms under one year, it's hard to beat the Salem Five Direct savings account promotion which guarantees a 1.25% APY until April 1, 2012.

Fortunately, Ally Bank's 5-year CD yield remains at 2.40% APY. As I mentioned last week, I added Ally Bank's 5-year CD to the shorter-term CD lists. I calculated the effective yields based on an early withdrawal with the 60-day interest penalty. As we saw with Fort Knox FCU (see post), there is some risk that institutions will increase the penalty on existing CDs. Even though I've received assurances from an Ally Bank official that changes wouldn't impact existing CDs, I can't say it's without risk. On a positive note, many institutions that have increased their CD early withdrawal penalties did not apply changes to existing CDs. These include OneWest Bank, PenFed and Bank of America.

Best Local CD Rates

If you're lucky, you may be able to find local CD rates higher than the rates below which are nationally available. I did a new survey of the best local CD rates yesterday. I added Bay Ridge Federal Credit Union to the list which if offering the highest 5-year CD rate in the nation. It's in New York City, but unfortunately, its field of membership doesn't make it easy to join.

Another noteworthy addition was a new 4-year CD special at University of Iowa Community Credit Union with a yield of up to 3.30% APY.

It's not a CD special, but like the Salem Five Direct promo, it's just as good. Capital One is offering a new checking account promotion for the Austin metro area which guarantees a 1.50% APY for up to $100K for one year. If you're in Austin, you might have noticed the Cap One ads with Jerry Stiller. Those radio and TV ads don't mention the rate so that doesn't bode well for them keeping the 1.50% APY for too long.

Reward Checking Accounts

I reported on a new nationwide reward checking account this week with a 4.05% APY for balances up to $25K. I was worried that the deal wouldn't last more than a week since it was a small bank. It turns out the deal didn't last a day. The bank quickly became overwhelmed with the new account requests and stopped accepting new applications from outside the state.

So we're back to the best nationwide deal of 3.01% APY for up to $25K which is offered by both Danversbank and First National Bank. If you're deciding which of these two banks to choose, I think First National would be a better choice since Danversbank is being acquired by People's United (see thread).

If you're new to reward checking, my recent post, 10 Common Traits of High-Yield Reward Checking, should come in handy.

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

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 May 7, 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)


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Anonymous

Anonymous - #1, Saturday, May 7, 2011 - 7:45 PM

These are the Banks that are taking peoples houses while hospitalized, loosing jobs, tricked into bad loans, off fighting our wars, new widows, the disabled, and you get the picture. The Bank's said, "Now how can we create a monster like we handed out credit cards like candy? We can hound out home loans like candy too, but the benefit for us Bankers, is that the Government will have to bail us out and then when they do, we can illegally auction off Americans homes and pocket the cash we get from those homes that the government bailed us out of anyway. It's ok! because were the BIG GIANT BANKERS of america.


1
lou

lou - #2, Sunday, May 8, 2011 - 10:39 AM

As much as I dislike the mega banks and their monopolistic practices, particularly their lousy customer service and very low deposit rates, unlike the previous poster, I don't blame them for having to foreclose on homes where the homeowner is not current with the mortgage. If the govt prevents these banks from foreclosing on non-paying mortgages or they are restricted from issuing credit cards and pricing the risk appropriately, they will continue to penalize savers with lower deposit rates, fewer cash-back credit card deals and no-fee checking accounts because they will be forced to look at other ways to make-up the loss of income. Many of the govt regulations in this area have been counterproductive and have had unintended consequences. Most importantly, the govt should never have allowed these mega banks to acquire and merge with their competitors, creating these unwieldy behemoths who don't need to compete for depositors.

Although no one is a greater critic of these banks than me, it does no good to villainize them and needlessly punish them so they have to penalize savers to compensate themselves for the loss of income. Instead, we need a new Chairman of the Federal Reserve who doesn't compulsively print new money and keep interest rates at zero in response to all our problems, and we also need more responsible politicians who will stop spending money we don't have. Let's focus on the real problems.


7

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