Best Bank Account Interest Rates - Summary for Week Ending June 4, 2011

Comments (4)
Jun 4, 2011 - 9:33 AM by Ken Tumin

The economic news this week was disappointing especially the May employment numbers which fell far below expectations. This contributed to the decline of Treasury yields. The 10-year Treasury yield dropped below 3 percent for the first time in 6 months. There had been expectations that yields would increase due to the winding down of QE2 in June and the extended stalemate in Washington over increasing the nation's debt limit. But the weakness in the economy is trumping those issues.

Will we see QE3? This Reuters article via Moneycontrol makes the case that it's unlikely:

Most Fed watchers still see a third round of quantitative easing, or QE3, as a very remote possibility. The obstacles this time around are greater, since inflation has been creeping higher and the jobless rate, while still at an elevated 9%, has come down quite a bit in recent months.

However, that doesn't mean higher rates in the near future. The Fed will likely be in no hurry to exit its super easy monetary policy. Barrons shows how expectations on future rates have changed in the last few weeks:

Just three weeks ago, the fed-funds futures market predicted a hike to 0.5% by mid-2012. Now that has been pushed back to September or October of next year—quite an extended period, to use the Fed's parlance.

Looking at the latest Fed funds futures charts, expectations of future rate hikes didn't decline much from last week, but that comes after a big decline from the previous week. Consistent with the news reports, all of the Treasury yields were down from last 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: 13.6% up from 12.9% last week
  • Jan 2012: 20.8% down from 21.1% last week
  • Mar 2012: 28.0% down from 28.2% last week
  • Apr 2012: 39.4% down from 40.3% last week

Treasury Yields:

  • 5--year: 1.59% down from 1.72% last week
  • 10-year: 2.99% down from 3.07% last week
  • 30-year: 4.22% down from 4.24% last week

There was just one bank failure this Friday. A small South Carolina bank became the 45th bank failure of the year. The pace of failures is declining. For example, this time last year there had been 81 bank failures for the year. There was also one credit union failure which brings the total number of credit union liquidations for the year to 9.

We have updated our bank health ratings using the Q1 FDIC and NCUA data which had been released in late May. To learn more about our health ratings and our Texas Ratios, please refer to my bank health ratings update.

Savings Account Rates

The big savings account news this week came from SmartyPig which announced it will be decreasing the yield of its savings account from 1.35% to 1.10% effective June 15th. As I described in my post, it appears SmartyPig and its new bank partner, BBVA Compass, have no interest in being a rate leader.

SmartyPig had recently replaced Tennessee Commerce Bank (TCB) as the top savings account rate. TCB fell off the list when it stopped offering its savings account promotion. One interesting bit of news I just learned about TCB is its addition onto Calculated Risk's unofficial problem bank list. As I described in this forum thread, TCB has entered into a Consent Order with the FDIC. Since the savings account promo required a $250K balance to qualify for the top rate, some readers may be above $250K. As with any bank, it's always a good idea to ensure your balances are under the FDIC limits.

The new rate leader is the Costco version of Capital One's InterestPlus Savings Account. Its official yield is only 1.15% APY, but I added 0.12% to the yield to take into account the 10% quarterly bonus when one maintains a minimum $10K balance in the account.

The highest rate without any promo or bonus is Incredible Bank's new money market account which has a 1.25% APY on balances of at least $100K.

Rate Hikes:

  1. None

Rate Cuts:

  1. SmartyPig Savings - 1.10% effective 6/15 (currently 1.35%)

Certificate of Deposit Rates

I was happy to see that there wasn't a widespread decline in CD rates as a new month started. Most of the rate leaders on my lists kept CD rates the same. There were a few disappointments.

Navy Federal Credit Union reduced its 7-year and 5-year CD rates by 20 basis points. However, its 7-year CD yield (3.20% APY for $20K) continues to be the highest 7-year CD rate for nationally available CDs (although it does have restrictive membership).

Another disappointment was Nationwide Bank. It continues to slowly cut its CD rates. This week rates fell from 5 to 15 basis points on most of its CD terms.

There was also a little bit of good news.

Incredible Bank came out with some new internet CDs with competitive rates: 1.10% APY for 9 months, 1.30% APY for 13 months and 1.50% APY for 19 months.

E-LOAN surprised me with two competitive rates: 1.26% APY for 1 year and 1.05% APY for 9 months.

There was also a pleasant little surprise at Ally Bank which increased the yield of its 11-month No-Penalty CD from 1.10% to 1.14% APY. The no-penalty feature allows the depositor to make this CD have any maturity they want from one week to 11 months.

The one thing in common with the above rate increases is that they all applied to relatively short-term CDs. There's not a lot of change, but overall, we are now seeing more cuts in long-term CD rates. As seen with the recent economic news and the Treasury yields, there's a lot of uncertainty about the future economy. It's possible that this awful interest rate environment could last for years.

No one can say when we'll see higher interest rates. That's one benefit of CD ladders. It's designed so you don't have to try to guess. Also, choosing CDs with mild early withdrawal penalties can reduce your risk of being locked into a low-rate CD when rates shoot up.

One CD I reviewed this week at Consumers Credit Union with a special 59-month term has both a very competitive yield (2.75% APY for $100K) and a mild early withdrawal penalty (120 days of interest). Most 5-year CDs have a penalty of at least 6 months of interest. Of course, the one well-known exception is Ally Bank which has a penalty of only 60 days of interest (see my Ally Bank CD review).

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 was happy to see many of the May rate leaders kept rates the same into June. I was especially happy to see this with two CD promotions: Visions Federal Credit Union's hot CD specials in Rochester, New York and Sovereign Bank's competitive CD specials in the Dallas-Fort Worth metro area.

Reward Checking Accounts

After being on the nationwide list for years, Danversbank finally fell off this week. Danversbank stopped taking online applications this week. New accounts will now have to be opened at a branch in Massachusetts. This is the first change coming as the result of People's United acquisition, and it's unlikely to be the last change.

With Danversbank falling off the nationwide list, we no longer have a 3 percent reward checking account for balances up to $25K that's available natiownide. As I described in my reward checking review post, the best ones only have yields of 2.51%. You can do a little better at Consumers Credit Union with its reward checking account. Even though it has a balance cap of $10K, its top rate of 4.09% APY combined with its second-tier rate of 1.59% APY results in a blended APY of 2.59% APY for a $25K balance.

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. Be sure to use the "Filter Accounts" button above the table to compare accounts in your state.

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 June 4, 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)


Post a CommentComments
In order of date posted. - Sort by votes
Bozo

Bozo - #1, Saturday, June 4, 2011 - 8:07 PM

I'm back on my annual visit with my Mom (96 years old and still living on her own, believe it or not). To help pay for her in-home caregivers (nice arrangement, 1 hour in the AM and 1 in the PM), I convinced her last year to cash in all her putrid one-year CDs and even-more-putrid money-market accounts and consolidate her money (rxcept for emergency funds) in that 3.79% 7-year USAA CD. Since my Mom is still thinking that was a terrible thing to do (she's living back in the days of 6%, mind you), and assumes rates will pop back up to 6% in just a few months, I try to circle all those articles in the paper that say rates for her favorite "investment" (CDs of short duration) will plod along at 2% or less for the foreseeable future. I finally called her bluff by saying I would be happy to take her monthly interest payment, have it applied to my bank account, and give her the going rate for a one-year CD. Boy, did that shut her up.

She might be cranky, but she's not stupid.

Bozo


12
Ed G

Ed G (anonymous) - #2, Monday, June 6, 2011 - 6:20 AM

Bozo,

     I don't see the 3.79% rate you mentioned at USAA. Can you let us know how you got it?

Thanks,

Ed


1
KenBDG

KenBDG - #3, Monday, June 6, 2011 - 6:50 AM

Ed, I'm afraid that rate ended last year. Unfortunately, rates have continued to decline over the last year. If Bozo's mom had waited for higher rates, she would be earning less and less interest as short-term CD rates and savings account rates fell and her options for long-term CDs became worse as those rates have also fallen.


3
Anonymous

Anonymous - #5, Monday, June 6, 2011 - 6:09 PM

Going for  a 7 year CD may be a "risky" choice given her age.  At least for the shorter term CDs, she can take it "one year at a time".  If you really look at it, the spread between the shorter and longer term CDs rates, it is much smaller now than it was just 3 years ago.  This smaller spread is, in and of itself, provides a sort of risk by going long term.


1

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