Savings Accounts with Consistently Top Rates

With the debt ceiling crisis over for now, we are back to the same environment with a weak economy and no signs of higher deposit rates. This doesn't bode well for savings accounts and other liquid accounts. We may continue to see more rate cuts. The latest cut was at Discover Bank which reduced its savings account APY from 1.15% to 1.10%. The concern for anyone opening a new savings account is if the rates will stay competitive.

We have seen several savings accounts that have taken big falls. The latest is WTDirect. Its internet savings account rates had remained competitive since it was launched. When news came out that its parent, Wilmington Trust FSB, was being acquired by M&T Bank, there were worries about the WTDirect's future due to what M&T Bank has done to other internet savings accounts. Those worries proved to be valid. WTDirect slashed its savings account rate from 0.76% to 0.25%. This 0.25% matches the rate at OnBank and other M&T Bank internet savings accounts.

So one cause of a bank losing its competitive rates is an acquisition by another bank. We also have seen this when Chase acquired WaMu and Bank of America acquired Countrywide. Bank acquisitions have rarely been good news for depositors. That's one concern with Capital One's acquisition of ING Direct. I'm a little more hopeful with the Capital One acquisition since Capital One already has a history of competitive savings account rates at its Direct Banking division.

Bank acquisitions aren't the only reason for the loss of competitive rates. Sometimes the conditions at banks change and they no longer need deposits. If deposits have grown more than their loan growth, the banks are unable to use the deposits. They have to invest the deposits, and in this environment with 6-month Treasury yields under 0.10%, those deposits are not going to be making them much money.

Small banks are the most susceptible to this problem, and that may explain why we have seen several small banks slash rates. The latest is The Morrill and Janes Bank which just reduced the APY of its Elite Checking from 1.26% to 1.06%. This checking account yield had remained very competitive at 1.51% for several months.

I thought it would be interesting to review the top 10 liquid bank accounts from my last year's weekly summary. Below is the list of that old top 10 with the old rates from last year along with the current rates as of 8/3/2011. New-account promotions were excluded.

• SmartyPig - old: 2.15% up to $50K, new: 1.10% up to $50K
• AmericaNet/Evantage MMA - old: 2.00% up to $35K, new: 1.25% up to $35K (closed to new customers)
• Fort Knox FCU MMA - old: 1.60% $50K min, new: 1.00% $50K min
• Incredible Bank Checking - old: 1.53%, new: 1.21%
• Ready Saver - old: 1.50%, new: 0.90%
• Alliant Credit Union Savings - old: 1.50%, new: 1.15%
• Acacia Federal Savings Account - old: 1.50%, new 0.60%
• Palladian PrivateBank Savings Account - old: 1.50%, new: 0.45% $50K min (closed to new customers)
• Sallie Mae Bank - old: 1.40%, new: 1.10%
• Capital One/Costco InterestPlus Savings - old: 1.40%, new: 1.15% (before quarterly bonus)

Which ones are still competitive? Banks like to say they're competitive if their rates are above the national average. Of course that national average includes all brick-and-mortar accounts, and most all of those aren't competitive when compared to internet savings accounts. So my basic measure is ING Direct's Orange savings account. This has long served as the baseline rate for internet savings accounts.

So based on my ING Direct comparison, the savings accounts from above that have remained competitive include:

• SmartyPig
• AmericaNet/Evantage Bank MMA
• Incredible Bank Checking
• Alliant Credit Union Savings Account
• Sallie Mae Bank
• Capital One/Costco InterestPlus Savings Account

The two best in my opinion are Incredible Bank and Alliant Credit Union. Both SmartyPig and AmericaNet/Evantage Bank have been disappointments. Even though they still have "competitive rates", they both have small balance caps.

I'm pleasantly surprised by Incredible Bank. Its internet checking account now has a history of over 20 months with competitive rates. The bank has also come out with competitive CDs and a money market account. Its parent, River Valley Bank, is a small bank with less than $1 billion in assets. Some how it has been able to keep the accounts available nationwide while keeping the rates very competitive.

Alliant Credit Union is less of a surprise. They have kept their savings account rates competitive for the last several years. They are also a large credit union with over $7 billion in assets. If you're trying to decide between Incredible Bank and Alliant Credit Union, I would give the edge to Alliant due to its longer history as a rate leader. I have more details in my last Alliant Credit Union savings and checking account review.

Searching for the Best Savings Accounts

To find the best savings accounts rates that are nationally available or in your state, please refer to our savings account rates table. Savings accounts are not the only liquid bank account with high interest rates. Sometimes, checking accounts and money market accounts can have higher rates. Even higher rates are available in reward checking accounts, but these have usage requirements and balance caps.