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Fed Cuts Rate by 50 Basis Points - Prepare for Another Round of Savings Account and CD Rate Cuts


The Fed cut the federal funds rate by 50 basis points to 3%. According to the Fed's press release:
Financial markets remain under considerable stress, and credit has tightened further for some businesses and households. Moreover, recent information indicates a deepening of the housing contraction as well as some softening in labor markets.

The Committee expects inflation to moderate in coming quarters, but it will be necessary to continue to monitor inflation developments carefully.

As this CNN article mentions, there are hints that we'll see further cuts if there are more signs of economic weakness:
Today's policy action, combined with those taken earlier, should help to promote moderate growth over time and to mitigate the risks to economic activity. However, downside risks to growth remain.

The federal funds rate is now down by 2.25% from its high last year and is now the same as it was in June of 2005. During that time the top savings account rates were under 4%. The first savings account that broke 4% was EmigrantDirect when it raised its rate in September 2005 from 3.50% to 4.00% APY. So I'm afraid we'll soon be seeing savings account rates fall below 4%.

AmTrustDirect already started the cuts by ending its 5.11% APY 3-month e-Savings promotion. The e-Savings yield is now 4.60% APY and the e-Money Market yield has fallen from 4.60% to 4.50% APY.

EverBank still has its 5.01% APY 3-month promo for its money market and checking account. I wouldn't be surprised to see them lower this promo rate to 4.51% in the near future.

The list of non-promo 5-percent-plus savings accounts is now down to OneUnited (still at 5.30% APY), Countrywide (5% APY) and ShoreBank (5% APY). For more info on these, please see my weekly summary savings account list.

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SVG   |     |   Comment #1

Banking Guy,

With this (widely expected) move by the FEDs, its going to rather difficult to find good deals. Thanks for maintaining this blog, which will be even more useful in the coming difficult months/quarters ...

Do you know of any dollar denominated CDs in foreign currencies that a US Citizen can buy easily? For some of my assets I'm considering overseas investments if that can be done easily.


Bozo   |     |   Comment #2
I guess you have to see the bright side. Since we come up for re-financing in a year, I've been tracking our bank's rates for re-fi mortgages for some months. The rate is now down to 62 and 1/2 basis points above what we got in February of 2004. That's for a 5/1 ARM jumbo with no points and a 50% LTV. If today's cut brings the rate down correspondingly, we'll be almost back to 2004 levels. If the Senate agrees to the increased jumbo limits, rate competition might even increase, but I'm not holding my breath on that.


tba02   |     |   Comment #3
Bozo, agreed, but finding somebody willing to lend is a tad more difficult today than in 2004 (or sadly, so we can hope, maybe)
Anonymous   |     |   Comment #4
Let's hope inflation soon roars like a lion and the Fed has to raise rates faster than it has been lowering them! Then maby the U.S. dollar will be worth something once again. Also we would see the return of some decent CD rates.
Anonymous   |     |   Comment #5
I'm glad I locked in the AmTrust Direct last week...thank you Banking Guy!
Anonymous   |     |   Comment #6
I just filled out the online application to lock in the 5 mo rate at century bank direct(5.01%). I asked the csr about the deadline to send in the check. She said that as long as it's not a month or two, they will honor the rate. Thanks Banking guy.
Anonymous   |     |   Comment #7
I agree, after detailed reading today, that the Fed will indeed continue to lower the rate in 2008, and will go down to 2.5%. So, get mentally prepared everyone.
Anonymous   |     |   Comment #8
With OneUnited Bank now being way ahead of the pack when it comes to a high yield savings account, people have to be thinking about them more than ever. It would be nice if Bank Guy posted opinions about them.

Thoughts: Is the fact that OneUnited posts interest quarterly a deal breaker? Their rule is that if you close your account before the quarterly posting, you forfeit the interest earned within that quarter.

Yes, OneUnited will certainly lower their 5.30% rate, but you might think even after they lower it, the rate will still be higher than most other banks? So, does that make it worth transferring money now?

Again, since OneUnited is the one holdout with the highest rate, shouldn't we start a discussion to help the people who are trying to decide?

Thank you.
Anonymous   |     |   Comment #9
I beleive money is available as I received info from 2 banks this week wanting me to refinance. One was ING and I think the other was countrywide but not sure. If you are not one of the 120 guys that lives under the bridge that John Edwards drives by every day but when asked doesn't know where the bridge is you should be okay. To Anonymous who hopes inflation roars like a lion [in the famous words of someone] be careful what you wish for. If you lived thru the late 70's and early 80's when that Georgia peanut picker had us in double digit inflation and interest rates of 15% to 20% I don't know how you could wish for that. While high interest is great for me since I have money for CD'S and savings accounts I don't want to wish that kind of inflation on my kids and grandkids.
moonimus   |     |   Comment #10
I've used One United for about a month. As far as I can tell, they are on par with igobanking in terms of customer service and online interface. I'm wondering if One United is waiting until the first interest payment to lower the rate...
Anonymous   |     |   Comment #11
Thanks, Moonimus, for the OneUnited comment. I think it is safe to say that there is a 100% chance they will lower that 5.30% APY. They will not want to take the loss of paying that much interest. The question, as you know, is how much will they lower it? Hopefully, they will still be higher than everyone else after they lower their rate.

So, Moonimus, does it not bother you that they credit interest quarterly instead of monthly like everyone else does? And, was it a difficult and/or lengthy process to sign up for your account?

I have a nice amount of money at ING and WaMu Online, and they lowered me to 4.25% APY (and I am not happy AND they will lower the rate even more in answer to the cuts of today).

Thank you!
Anonymous   |     |   Comment #12
After I posted the above saying I thought money was available I checked my e-mail and had e-mails from E-LOAN and EVERBANK saying mortgage money was ready and waiting for me. EVERBANK quoted a rate of 5.353 apr for a 15 year fixed and that was as of 1/25/08 which was before the last rate cut. For those looking for mortgage money I beleive they will be singing happy days are here again soon.
virgquest   |     |   Comment #13
Moonimus - is "on par with igobanking" a good thing or bad thing? I don't have an account with them, so I was unable to make a comparison.
Anonymous   |     |   Comment #14
IGoBanking Savings Account is currently 4.20% APY. OneUnited is currently 5.30% APY. Huge difference, of course. And of course, OneUnited won't stay at 5.30%. I would ask the same questions as Anonymous above: Is OneUnited's quarterly interest payments something to avoid? At 5.30%, this quarterly thing is worth tolerating. But how much will OneUnited lower their rate? If they lower their rate to match the other banks that pay interest quarterly, then one should avoid transferring their money to OneUnited. (Opinions welcome.)
Anonymous   |     |   Comment #15
Correction. I meant to type: "If OneUnited lowers their rate to match the other banks which pay interest monthly, then one should avoid transferring their money to OneUnited." Sorry.
moonimus   |     |   Comment #16
It doesn't really bother me that they pay the interest quarterly. It'd be nice if they could put up a stat as to how much interest you've accrued sort of like ING.

I don't believe it was a lengthy process to open the account. I did have to call customer service once and they were responsive. And I did have to fax my wife's and my drivers licences but other than that not painful and not lengthy but then I'm a patient person.

On par with igobanking is a good thing. The experiences were very similar.

And I would agree with the last comment in regards to if One United matches rates with other banks. I'd sit tight or move my money to a bank that pays interest monthly. But when I was doing research at the time, One United was still ahead of most of the online savings accounts.

Good luck finding those high rates! These cuts really hurt the savers unfortunately.
freeto   |     |   Comment #17
SVG Why don't you buy Iraqi Dinar. You could brag to your friends about being a millionaire for the low cost of $925.00. Lets see how long this post stays on............
Anonymous   |     |   Comment #18
Thank you, Moonimus. Helpful. You are right. If OneUnited drops their rate from 5.30% APY to close to what the others who credit interest monthly are paying, I will be sorry I switched from ING Electric Orange and WaMu Online Savings to them. Yes, one can always take their money out of OneUnited should OneUnited lower their rate a huge amount, but then that quarterly posting kicks in.

Moonimus, one more question (last one). Does OneUnited allow easy unlimited dollar amount ACH transfers to a linked checking account at another bank? Thank you again!
Banking Guy
Banking Guy   |     |   Comment #19
I have info on OneUnited's ACH dollar amount limts at my last OneUnited review. These limits could be an issue for those with large balances.
Anonymous   |     |   Comment #20
Thank you very much, Banking Guy. Great help. Wow! They only allow $40K maximum ACH withdrawl per month. You are right. This would be unacceptable to people who give this bank a high $100K balance.

Your site is invaluable. Thank you!
Anonymous   |     |   Comment #21
I decided to transfer some money into Countrywide at 4.75% APY instead of OneUnited's 5.30% APY. I just can't stomach OneUnited's quarterly postings rule and the fact that they cap ACH transfers so much. Yes, I know. Countrywide's rates will fall, as well. Especially once the B of A takeover goes through.
Anonymous   |     |   Comment #22
for the record, i just went thru the frustrating experience of trying to open 3 accounts with one united and would strongly advise staying away from this bank. they are a total mess, i still have one account with 100k in it at this point but i will be dropping it once my quarterly interest is paid on march 31st. its taken me 3 conversations just to get a straight answer on which account they 100k went to after it was drawn from my funding account. i also keep receiving emails telling me my other 2 accounts aren't active yet after i already verified trial deposits and have had 2 prior conversations with their account reps and was told the accounts were officially set up. it takes a 30 minute hold over the phone to even get connected to a real human being and they never responded to emails i sent them. seriously, stay away.