About Ken Tumin

Ken Tumin founded the Bank Deals Blog in 2005 and has been passionately covering the best deposit deals ever since. He is frequently referenced by The New York Times, The Wall Street Journal, and other publications as a top expert, but he is first and foremost a fellow deal seeker and member of the wonderful community of savers that frequents DepositAccounts.

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Best Bank Account Interest Rates - Summary for January 22, 2011


Best Bank Account Interest Rates - Summary for January 22, 2011

Is stagflation in our future? Stagflation is when there's both high unemployment and high inflation. Many readers probably remember the stagflation that existed in the 1970's. In today's economy, unemployment is definitely high, but inflation, at least as measured by the government, remains low. However, there are signs that higher commodity prices will start to have more effects on the economy, and that along with the Fed's monetary policies will drive inflation rates higher.

Another sign of future inflation was described in this WSJ article. The Treasury yield curve has become steeper with a wider spread between 2-year Treasury notes and 30-year Treasury bonds. This spread should be reducing as the economic recovery takes hold. According to the WSJ article this indicates that investors "don't expect the Fed to be as aggressive as in the past in raising rates - even as they see inflation on the rise."

The first scheduled Fed meeting of 2011 takes place next Tuesday and Wednesday. Everyone expects the zero interest rate policy to continue, but there may be some slight statement changes in the bond-buying program known as QE2. The most interesting thing from the meeting will be how the new regional Fed presidents vote. Four new regional Fed presidents are being rotated into voting positions at the FOMC for 2011. Three of them are inflation hawks who have been critical of QE2. They don't have enough votes to change the policy, but if all three dissent it may help influence policy changes later in the year.

The chance that we'll see a Fed rate hike by December has gone up a little according to the Fed funds future. The futures are showing the implied probability of a higher Fed funds rate by next December at 51.5% which is up from last Saturday when it was 48.4%.

Savings Account Rates

Just two banks on my short list cut their savings account rates this week. One was Hudson City Savings Bank which essentially just offered a teaser rate for the last three months. The other rate cut was at DollarSavingsDirect from Emigrant Bank. When Emigrant Bank first offered its internet account in 2005, it looked promising. EmigrantDirect and later DollarSavingsDirect kept rates competitive for a few years. This slowly started to change. Last year at this time DollarSavingsDirect was in the middle of the pact. With a yield of only 1.00%, it's now on the bottom of my list. This looks like yet another internet savings account dud.

Which internet savings account has the best chance of avoiding the dud status? Looking back at this time last year, some of the banks that were near the top of my list with non-promo rates were Incredible Bank, SmartyPig, AmericaNet/Evantage Bank, SFGI Direct and Capital One. These banks are still near the top of my list. As we have seen with DollarSavingsDirect, banks can take a long time to fall. But that's better than the banks that make large rate cuts.

Rate Hikes:

  1. None

Rate Cuts:

  1. Hudson City Internet MMA - 1.10% (was 1.25%)
  2. DollarSavingsDirect Savings - 1.00% (was 1.10%)

Certificate of Deposit Rates

The 1-year CD rates continue to fall. Bank of Internet USA cut its 1-year CD yield from 1.41% to 1.36%. This is still the highest 12-month nationally available CD rate from a bank. Connexus Credit Union continues to offer the best 12-month CD yield with a 1.75% APY. However, this does require that you maintain an active checking account at Connexus. If you don't want to worry about that, RTN Federal Credit Union continues to offer 1.55% APY for a minimum deposit of $50K. There are associations that can be joined to make anyone eligible for this credit union, but as I described in my last review, it's not easy. If you want an easy CD opening process, internet banks like Bank of Internet USA and Colorado Federal Savings Bank have advantages.

With 1-year CD rates so low, is it worth opening a 1-year CD? Savings account rates could continue to fall. Let's say one person opens a savings account with a 1.30% APY and another person opens a 1-year CD with a 1.30% APY. If that savings account falls evenly during the year to half of its initial yield at maturity, the total interest earned on $10K would be about $97.5. The total interest earned on the CD would be around $130. Is the extra $32.5 worth locking your $10K for one year?

Two advantages of long-term CDs are higher yields and more protection against a long low-rate environment. The main risk is being stuck in a low yield CD as rates shoot up. Banks and credit unions that offer CDs with small early withdrawal penalties can reduce this risk. As was discussed in this November post, the risk may not be completely eliminated. Nevertheless, when you compare risks and benefits, long-term CDs with small early withdrawal penalties look better to me than today's short-term CDs. I did a new comparison of some of these long-term CDs on Friday.

Reward Checking Accounts

One of the banks offering the best nationwide reward checking accounts made an important announcement this week. Danversbank announced that it's being bought by People's United Bank. Although this has no short-term effects on the reward checking, its long-term effects are worrisome.

Not all news was bad this week. Thanks to a reader's email, I learned that Jeff Davis Bank is offering its reward checking account nationwide. This account currently pays 4.01% APY on balances up to $15K. There's also a companion savings account that pays 2.00% APY on balances up to $25K.

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.

Cash Back Credit Cards and PenFed

An alternative savings strategy to reward checking is to save with internet savings accounts and CDs while you earn cash back with credit card rewards. If you spend a lot and don't keep a lot of liquid cash, this can be a better strategy than saving with a reward checking account that requires debit card usage.

If you have been using this strategy with PenFed's Visa Platinum Rewards Credit Card, your cash back will be going down. PenFed informed credit card members that the cash back on supermarket purchases will be going down from 2% to 1% effective March 1st.

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

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, CDs by state.

Rates as of January 22, 2011

Checking/Savings/Money Market Accounts:

  • Noteworthy Accounts Available Nationwide:
  • Noteworthy Accounts - Local Only

3-Month Certificates of Deposit:

  • Noteworthy Accounts Available Nationwide:
  • Noteworthy Accounts - Local Only

6-Month Certificates of Deposit:

  • Noteworthy Accounts Available Nationwide:
  • Noteworthy Accounts - Local Only

9-Month Certificates of Deposit:

  • Noteworthy Accounts - Local Only

12-Month Certificates of Deposit:

  • Noteworthy Accounts Available Nationwide:
  • Noteworthy Accounts - Local Only

18-Month Certificates of Deposit:

  • Noteworthy Accounts Available Nationwide:
  • Noteworthy Accounts - Local Only

24-Month Certificates of Deposit:

  • Noteworthy Accounts Available Nationwide:
  • Noteworthy Accounts - Local Only

36-Month Certificate of Deposit:

  • Noteworthy Accounts Available Nationwide:
  • Noteworthy Accounts - Local Only

48-Month Certificate of Deposit:

  • Noteworthy Accounts Available Nationwide:
  • Noteworthy Accounts - Local Only

60-Month Certificate of Deposit:

  • Noteworthy Accounts Available Nationwide:
  • Noteworthy Accounts - Local Only

84-Month Certificate of Deposit:

  • Noteworthy Accounts - Local Only

Various Deposit Account Deals

Bank Account Alternatives

Historical Rates from the Federal Reserve (Federal funds, Treasury bills, CD's)

Anonymous   |     |   Comment #1
Yes, back to the 1970s, when we had high unemployment, high inflation, and long gas lines (remember the Arab Oil embargo of 1973 which essentially changed how we look at energy use and the environment since that time?).  All we need is another middle East crisis (which shouldn't be too hard to conjure up).
pearlbrown   |     |   Comment #2
I remember the Arab Oil embargo, being able to fill up only on your assigned day (odd/even depending on your license plate) and hoping the gas station didn't run out of gas before you got to the pump.  This was in the Northeast; perhaps it was different in other parts of the country. 

Anonymous   |     |   Comment #3
The banks are spoilt, they do not need customers, why, they have free money from Bernanke, as much as they want, almost free, so why bother with customers and their need for services.

Chase made billions in profits from TARP and other FEDs free money and tax breaks and special treatments and pampering, now they think the whole world rotates around them and that the country will collapse without them. QE2 is pumping new billions into Chase already and they expect QE3 next year also.
Anonymous   |     |   Comment #4
What kills me is walking by my local citibank and seeing all the customers lined up at the ATM of this bank - which took our TARP money and gives almost 0% interest on your accounts.

I just walk by and laugh at those suckers.  Keep my checking at East River and deposit a check in my HSBC ATM online savings account for cash when I need an ATM. 

Banks can charge these ridiculous rates because we continue to use their services and let them make money hands over fist with almost no regulation.  We all suffer - as PT Barnum said sucker born every minute. I feel better now - but only slightly.  Thank you Ken for raising the bar!
Steve   |     |   Comment #5
You might add Urban Partnership Bank (formerly ShoreBank) to your Checking/Savings/Money Market Accounts Noteworthy section.  Its rates are the same as you posted August 30, 2010:


1.20% APY for balances under $100K (was 1.03% APY)
1.25% APY for balances of $100K and above (was 1.19% APY)

They have pretty good ACH transfer, but only allow 3 accounts.
Anonymous   |     |   Comment #6
Fort Knox FCU is changing their withdrawal penalty from 3 months to 6 months starting 15 Feb 2011.  It is noted in their publication "The Cornerstone" for January 2011.  It applies to CD's greater than 24 months.  It is my understanding that it applies to CD's opened 15 Feb 2011 and later.  You can find the publication on the website under sitemap.  It is under the graph that shows the Treasury Yield Curve.
Anonymous   |     |   Comment #7
Banks are back. JPMorgan Chase recently announced that it earned $4.8 billion in the fourth quarter of 2010, nearly 50% over the previous year.