Four weeks after the new Fed actions ING DIRECT may have finally responded. It has cut all of its deposit rates. Its Orange Savings account rate fell 5 basis points to 0.75%. The Electric Orange account rates also fell by 5 basis points. The rate for balances of $100K fell from 0.90% to 0.85%, and the rate for balances between $50K and $100K fell from 0.85% to 0.80%.
We haven't seen many rate cuts at ING DIRECT this year. The last time the savings and checking account rates were cut was in January. However, there was a surge of cuts late last year. This came after the Fed announced its mid-2013 low rate pledge in August. So I'm afraid there may be more cuts to come. Also, since ING DIRECT is the biggest internet bank, it may put downward pressure on all internet savings account rates. Here's how the Orange Savings account APY has fallen since February 2011:
- 0.75% 10/10/2012
- 0.80% 01/06/2012
- 0.85% 12/03/2011
- 0.90% 10/21/2011
- 1.00% 02/24/2011
In addition to the savings and checking account rates, ING DIRECT CD rates were also cut, and these cuts were larger. All rates fell by 10 basis points. ING DIRECT CD rates were already low before these cuts. Now they're just ridiculously low. For example, the 24-month CD rate is only 0.40%, and the 5-year CD rate is only 0.90%.
Coincidentally, it was almost one year ago when I asked how low can CD rates go. At that time, ING DIRECT's 2-year and 5-year CD yields were 0.60% and 1.10%. They still have the same language on their CD page in which they say "guarantee yourself a high yield" and "High Interest - Safe place to grow a nest egg". If you want to double your money with a 0.90% rate (the current 5-year CD rate), it will take 78 years.
It's possible that ING DIRECT's merger into Capital One may be having some influence on the rates. On November 1st, ING DIRECT and Capital One, N.A. will legally become one bank. Last month I described how this will affect FDIC coverage for customers who have accounts at both banks.
Rate Cuts at Other Banks
For some reason, we are seeing an uptick of rate cuts this week. The latest one is at UFB Direct. Its money market account APY fell from 1.10% to 1.05%. The 1.10% APY had been the highest rate for a non-promo account that's available to new customers. The 1.05% APY remains the highest rate, but it's shared with 5 other internet banks which also offer 1.05% APY on a savings or money market account.
There have also been CD rate cuts at other banks. CIT Bank reduced its 5-year CD rates by 5 basis points. Its Jumbo CD APY is now 1.85%, and its standard CD APY is 1.80%. The highest 5-year CD that's nationally available at a bank is now 1.86% APY at State Bank of India NY. I still think CIT Bank is a better deal since CDs can be opened online.