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Fed Cuts Rates by 75 Basis Points - Best Savings Strategies in this Environment?


The Fed cut the funds rate by 75 basis points to 2.25%. The futures market had priced in a 100% chance of a full percentage point cut, so it could have been worse for savers. Two of the Committee members voted against the cut. Inflation worries are slowly being appreciated by the Fed. From the Fed's statement:
Inflation has been elevated, and some indicators of inflation expectations have risen. The Committee expects inflation to moderate in coming quarters, reflecting a projected leveling-out of energy and other commodity prices and an easing of pressures on resource utilization. Still, uncertainty about the inflation outlook has increased. It will be necessary to continue to monitor inflation developments carefully.

The next Fed meeting will be on April 29th, and the futures market is already predicting another half-point cut.

We'll see how fast the banks will respond to this rate cut. I'm afraid most savings account rates will be below 3% in the next month or two. The last time the funds rate was 2.25% was in late 2004 and early 2005. That was the time when EmigrantDirect was launched with its 3% savings account. At that time ING Direct was only offering 2.35% APY so this 3% caused some excitement.

If you want to earn more than 3% without risk over the next year, your best bet would be CDs. Alliant Credit Union still has the best 12-month CD deal with a yield of 4.90% APY for a $25K minimum deposit. For banks, Indymac has the best deal with a yield of 4.05% APY. I doubt these will last much longer, so be sure to act quickly. For more CD rates and links to my reviews, please refer to my last weekly recap of CD rates.

Another possible way to earn over 3% without risk in the next year may be in high yield reward checking accounts. Rates have been going down on these also, but not as fast as savings account rates. There are still many reward checking accounts with rates of around 6%, and many of these have maintained this 6% for over 8 months. I'm sure we'll see more cuts in the next few months, but I still think there's a chance that many will be able to keep their rates one or two percent above the average online savings account rate.

By the end of this year we should know if these reward checking accounts can really compete over the long term with the online savings accounts. The two main issues with reward checking are the balance caps and the debit card usage. These may be deal killers for some, but they are also the factors that help the banks keep the rates high. For the latest reward checking accounts, please refer to my last weekly recap of the reward checking accounts available nationwide.

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Anonymous   |     |   Comment #1
i said a few months ago money market rates are going to 1%. here we go. i'm buying defensive stocks that will pay high dividends like "mo" now since the fed obviously is going to kill rates for savers and do everything possible to prop the stock market up. mo at least pays 4%. there are some good oil and gas trusts that pay high single or double digit dividends like hte, bte, sjt but theres some risk there....
Anonymous   |     |   Comment #2
nice analysis; i've held off doing the reward checking because the extra 1% at the one local CU by me (5% provident) i'd get over a 4% countrywide savings isn't worth the hassle, but if the spread increases because the savings rates go down, but the reward checking rate don't, then it become more appealing. I'd probably require an extra 2% for the trouble.
Anonymous   |     |   Comment #3
There is still some good-- 6 month and 12 month rates available (4.68%and 4.73% on 100K or more) in CA/AZ through United Methodist FCU:


Great lower deposit rates as well. Won't last too long though; CSR advices the "board" meets on the 22nd of each month to modify rates as necessary.

Has anyone thought of other ways to prosper (AOR, BOR, etc.)?
Bozo   |     |   Comment #4
To: All and Banking Guy
Re: Strategeries (to quote Bush)

It is apparent (if not painfully so) that you can't make jack squat in CDs in this rate environment. All those "super-duper" checking plus rates come with so many kickers it makes your head swim.

As I noted in a post to another article herein (wherein I was thoroughly bashed, I might add), the best thing to do with any spare cash right now (or at least as of yesterday) is buy financial ETFs (take your pick).

Tooting my own horn, those that bought any financial ETF (Vanguard, Fidelity, pick 'em) at the close yesterday made 7.25% in one day.

There are times we load up on CDs (and I did) and there are times we funnel spare cash to the market.

Don't get so wedded to any investment philosophy you lose out on opportunities.

Diversify, diversify, diversify.


singlepap@gmail.com   |     |   Comment #5
If it's enough for you to place only 30k per each name, you can get 7% APY over next 9mo. at TDAmeritrade
Anonymous   |     |   Comment #6
You want to make more than 3% tax free, buy euros, yen and or swiss francs and keep them in a safe.
As long as Helicopter Ben will continue the systematic devaluation of the $ you will be guaranteed 3 to 10 % and it is tax free!!
Anonymous   |     |   Comment #7
You want to make more than 3% tax free, buy euros, yen and or swiss francs and keep them in a safe.
As long as Helicopter Ben will continue the systematic devaluation of the $ you will be guaranteed 3 to 10 % and it is tax free!!
singlepap@gmail.com   |     |   Comment #8
I'm serious: on 30k per each name, you can get 7% (!) APY for next 9mo. at TDAmeritrade insured deposit
Common Man
Common Man   |     |   Comment #9
What does that mean "30K For Each Name"? What "each name"? You can only use your real name and one social security number. I don't get it.
Anonymous   |     |   Comment #10

Yes, if you did what you said, you made out very good. But what about the next time and the next after that? It's like day trading, sooner or later a person gets burned really bad.

That's why most of us visit this site, Bank Deals-Best Rates and Deals, to be safe and sound (principle is insured}.

Granted, it doesn't look good for us that rely strictly on interest earned on savings and CDs. But we all have our own risk tolerance.
Anonymous   |     |   Comment #11
To Serious Guy,

If you want to help seriously give details. What you are telling helps nobody.

There is no bank or credit union with name like TDAmeritrade.
Anonymous   |     |   Comment #12

I think you & Wall Streeter are telling (or is it bragging?) about your gains today on the wrong forum.

What we'll tell you is "You made gains. Great. Good for you. But NO THANKS".

You need to take your message of "diversify" to people who want to hear it. What we want to hear on this forum is Bank Deals.

Hope you get the picture.

- Average Joe who is not interested in Wall Street.
Anonymous   |     |   Comment #13
You would have made 7% if you were in the market today but lost 30% if you were in the market a few weeks ago. I agree there is money to be made in the stock market if you are trading actively in this environment. Buying and holding finance stocks is toxic. They will selloff again just a question of when.
Anonymous   |     |   Comment #14
You want to make more than 3% tax free, buy euros, yen and or swiss francs and keep them in a safe.
As long as Helicopter Ben will continue the systematic devaluation of the $ you will be guaranteed 3 to 10 % and it is tax free!!

By Anonymous Anonymous, at 5:41 PM, March 18, 2008
Um, buy them with what pixie dust? Talk about late to the show. If you mean buy Euros and Francs with your dollars because you believe the slide in dollar leaves enough room to make any real money at this point in time then I have some scrap gold you might be interested in as well...
Anonymous   |     |   Comment #15

I'm sure those who bought Bear Stearns on March 13 for $60/share (previous year high $158/share) thought they were getting a pretty good deal. I'm not so sure they are so happy now.

I think people come here to seek the best risk-free, FDIC insured deposits that can't decline in (nominal) value and not investment options which will make them either rich or poor tomorrow.
Anonymous   |     |   Comment #16
Bozo, wall streeters and other enthusiasts with HERD mentality.

Wall street has brain washed you. I give you an example:

Morgan Stanley's quarterly profit falls 42% today, but Results top Wall Street forecasts; stock rises 6% in morning trade.

You see, the results beat consensus forecasts of wall street manipulators by 1%. How, they set a target way bellow the real numbers and when the results are in, they cheer themselves as victors, never mind the loss of 42%, they want you to invest in that stock, despite the huge losses and they are touting as a darling of a stock.

So, please go way and stay out of this forum. We are not suckers like you are.
singlepap@gmail.com   |     |   Comment #17
I'm monitoring 7% APY for 9mo. deal at TDAmeritrade insured deposit. So far the deal is active, although deadline may kick in tomorrow or?
Anonymous   |     |   Comment #18
Just to comment and agree on what someone above says about risk tolerance and our return on investment - yes, I put ALL of my money in insured bank accounts, and most opinions say that I am being short changed in the long run. I have to tell you something. For the last 6 years (at least), I have done better with insured investing than most of my peers who have put their money in other types of investments. Today I am still getting more than 5% and even as high as 6% on all of my money - even new money coming in - and this will continue for a while thanks to the deals I've found on this forum. I'd much rather tolerate the careful planning that goes into an insured investment strategy than to take my chances with other risky investments. That's just me, and I'm glad that others here share the sentiment.
Tom   |     |   Comment #19
Salem five has dropped its tiers to 3.10-3.6APY
Anonymous   |     |   Comment #20
For long term leaving, invest with the paper-printers; the US Govt I-Bond is paying 4.28% until end of April when it's semi-annual adjustment happens. Since inflation is raring it's ugly head the inflation premium is sure to push returns higher and higher. One caveat is the interest penalty if you cash out before 60 months. Buy at your local bank!
Anonymous   |     |   Comment #21
Even wall street started to see Ben Bernanke elementary mistakes.

Read This:
“I remain unimpressed,” said economist Ram Bhagavatula, who’s managing director at the hedge fund Combinatorics Capital. Bhagavatula, who has previously said he’s been dumbfounded by the Bernanke Fed since early last fall, adds, “Fundamentally, the Fed is confusing liquidity provision and monetary policy.| The two are not the same.”| As a result he expects weak growth and nasty core inflation in the coming year.

" Money manager Jim Awad, who’s been a mild critic of Bernanke along the way, says, “The jury is still out. He has been scrambling to catch up to the curve and is making silly moves. "

Ben is is Panic mode and his approval abroad is very low and is criticized as well.
“The Bernanke Fed has come into its own as this is a financial crisis that has no historical parallel,” the Bank of Tokyo-Mitusbishi’s Rupkey wrote in a note to clients this week . “The Fed has finally moved far beyond the legacy of former Fed Chairman Greenspan and the responsibilities is on him alone”

From now on, all of the blame is on Ben for every move he does.
Savers are angry, main street are disappointed, wall street is about to see the backlash of Ben's monetary policy and soon they will nullify his deeds and himself.
Anonymous   |     |   Comment #22
I agree with the above comment about Ben.
Wall street needs someone to manipulate and use. Ben is perfect candidate and wall street already took big advantage of him by crying for rate cuts and free money and bail outs and...you get the picture.

Next year wall street will blame him for following their wishes and the cycle will start all over again, this time in reverse of what he did by now.

That is what happens when our Feds don't care for the people as mandated by law.
Anonymous   |     |   Comment #23
I work for a Bank in the loan department. I can tell you just this:

We are not lending to anyone with bad credit or <730 points="" from="" the="" credit="" bureaus.="" second,="" the="" income="" to="" debt="" rations="" must="" be="" pretty="" high.="" third,="" you="" must="" have="" at="" least="" 20%="" equity,="" whether="" buying="" or="" re-financing.="" all="" info="" submitted="" must="" be="" verifiable="" and="">

In the last month we turned down over 80% of the applicants.

The Bank I work for has tremendous amounts of cash, just either sitting in the treasuries or some foreign derivative cash fund.
I'm not allowed to disclose any of this, but, I thought people ought to know what is going on behind the Bank's walls.
Anonymous   |     |   Comment #24
This is to singlepap, would you care to explain this 7% you are bragging about at TDAmeritrade. They are a discount broker where I have an account and I don't know anything about any 7%. Let us in on this great deal.
Anonymous   |     |   Comment #25
Regarding the 7% APY for 9 months.
"singlepap" is bragging about some corporate bond. There is no CD at TDAmeritrade that has this kind of yield.
Bozo   |     |   Comment #26
To: All the Bozo Bashers

Folks, I am so topped off in safe, FDIC/NCUA insured CDs I could puke. For the next ten years, my ladder will average over 5%, even if rates go to zilch. Beat that.

The point is this. If you are diversified, you have a tad left over to invest or trade. You do, don't you? Well, given the public propensity to spend rather than save, maybe you don't.

Well, if you do, and you're not just here to claim you have money when you don't (and I think that's a lot of you), then read my posts.

The rest of you might learn to save a little bit of money (hint: spend less than you earn, assuming you have a job).

Yours cynically,

Bozo   |     |   Comment #27
PS: For example, my 5 year CD with USAA is yielding 5.91% APY, my KeyDirect 10 year CD is yielding 5.75%, I could go on. You get the drift.
Bozo   |     |   Comment #28
In addition:
State Farm Bank (5.75%), LaJolla Bank (5.6%), not to mention Alliant Credit Union (5.4%). Regrettably my 5.75% at Patelco matures in April (boo hoo).

Just for info to the bashers.

Yours with kindness (yah, right)

Bozo   |     |   Comment #29
PPS: When you have over $750,000 to move around in cash accounts, you tend to watch CD yields very, very carefully. And attempt to get the best you can over 5% (remember, anything over 5% is a gift).

Yours frugally,

Anonymous   |     |   Comment #30
Bozo? Isn't that a clown's name?
Never take financial advice from a "clown".
Anonymous   |     |   Comment #31
The guy who said BOZO is a clown's name is correct and the name fits you just fine. First off your statement that anything over 5% is a gift is a joke. Any serious investor looks at anything less than 8%[ over a several year timespan] as a poor return . You should have said anything less than 5% is a loss. Assuming 25% fed tax and 3% state tax you are only geting a net of 3.6% out of your 5%. If my high school math[ from a hillbilly school] is correct it takes between 19 and 20 years for money to double at a compound rate of 3.6%.That return wouldn't make me happy. I just looked up the inflation rate since 1988 and it is 82.4%. So if you divide 82.4 by 20 years you get annual inflation rate of 4.12% If you had something you were going to buy in 1988 for $1000 but decided instead to put it in a cd at 5% and buy it in 20 years it would now cost you $2242. That $1000 compounded at an after tax rate of 3.6% would be worth $2028. What is wrong with this picture. Why can't I see what a good deal a 5% cd is. A cd is not an investment it is a parking lot for money. It is a place for your liquid assets where you are safe and hopefully the interest rate will keep you from losing to much to inflation. If you do in fact have $750000 in cd's there are a couple of words that would describe you better than clown but being a high class hillbilly I won't say what they are. This site is for people who want only FDIC insured products. It is a place to find best current interest rates on those products. I use this site to find those rates for money I want to keep liquid and I never go out further than 24 months on cd's. I have stated on this site before that anyone who has much in the way of assets should own at least some stocks and the younger they are the bigger % of those assets should be in stocks. Everybody has different circumstances and different risk tolerances. Some people have 0 risk tolerance so they should own 0 stocks. It doesn't do any of us any good to tell us about your high paying cd's. Maybe you should get with singlepap and get some of that 7%. Banking Guy you do a great job here and provide a wonderful service. Hopefully people like Bozo and myself won't **** it up. I just couldn't read any more of Bozo's bragging with saying something.
Anonymous   |     |   Comment #32
Hillbilly -

While I agree that anything less than 8% is a poor return, that doesn't mean it's realistic to expect to be able to get a RISK FREE 8%. That is what a CD is, a risk free place to put money. You don't get 8% risk free. You may get 5% risk free, except then you are taking the risk, as you said, that inflation will overwhelm your interest earnings and you will lose out in real terms. However, if you invest in things that can earn you 8%+, sometimes they go up and sometimes they go down.

Fact of life. TANSTAAFL. If having $750k in CDs gets Bozo the income he needs and lets him sleep at night, good for him.
Anonymous   |     |   Comment #33
Comment posted: 1:11 PM, March 20, 2008

Good research and example.
Well said.