American Express Bank increased its savings account rate yesterday from 0.85% to 0.90%. The last rate increase was in late May when the rate went up from 0.75% to 0.85%. Just like before, this rate increase isn't anything to get excited about, but it's nice to see a rate increase in today's environment. Thanks to the DA reader who mentioned this news in the forum.
AmEx isn't alone in hiking rates. We have seen several internet banks increase their savings and money market rates over the last few months. In the last two months we have seen rate increases at Ally Bank, Sallie Mae Bank, UFB Direct, Incredible Bank and Union Federal Savings Bank. Competition must be the primary reason we're seeing these rate hikes. Hopefully, this will continue to put pressure on the internet banks to keep their rates up. They are certainly not getting any pressure from the interest rate environment which has yet to show any signs of a turnaround.
One interesting thing to note with this new 0.90% saving account yield is that it has the same yield as the AmEx 3-year CD. So you have to wonder how long this savings account rate will last. AmEx isn't alone with these low CD rates. ING DIRECT also has very low CD rates with both the 3-year and 4-year CD rate matching its savings account rate of 0.80%.
This AmEx rate increase may not be large enough for AmEx to win back a lot of deposits, but it may prevent some customers from moving their money to another internet bank. Banks hope their online banking features can keep customers even with less competitive rates. This may help some, and it may have helped AmEx which does have some nice online banking features such as a fast ACH bank-to-bank transfer service.
For more information about the savings account, please refer to my American Express Bank's Internet Savings Account review.