Why It’s Getting Tougher to Sue Your Bank
Fifth Bank Failure of the Year - Allied Bank in Arkansas
Fed Holds Steady with Future Rate Hikes Anticipated To Be More Gradual
Best Bank Account Interest Rates - Summary for September 20, 2016Usefulness of Rate Chasing in the Last 3 Years
Looking back at internet savings accounts over the years, no banks or credit unions have been able to remain a rate leader for the long run. Some have been able to be a rate leader for several months, but their rates will eventually fall. If you're lucky, the rates will remain above "middle of the pack". There have been a few cases in which they became savings account duds. I reviewed some of these last year. One example of a dud is HSBC Online Savings Account. This account had a 6% APY promo back in 2007. Today the rate is only 0.40%.
Since there are no long-term rate leaders, if you want the best rates on an internet savings account, you need to plan to keep opening new accounts. I thought it would be interesting to look back at the rate history that we have collected over the last 3 years to see what would have been the best strategy. Instead of assuming someone would have switched to every new rate leader, I only assumed a switch no more than twice a year. I only switched when the new rate was significantly better. It turned out I did not have to switch that often. Below are my "ideal" picks that would have maximized rates over the last 3 years:
- Sep 2009: Alliant Credit Union Savings Account, 2.00% APY
- Nov 2010: Morrill and Janes Bank Elite Checking, 1.51% APY (Alliant was 1.35%)
- Aug 2011: UFB Direct Savings Account, 1.30% APY (MJ was 1.06%)
- Mar 2012: TIAA Direct Savings Account, 1.25% APY (UFB was 0.80%)
Average over 3 years: 1.48% APY
What if you had decided to just stick with Alliant Credit Union? Its savings account rate actually held up well until this year when its yield has fallen from 1.00% to 0.80%. So over the last 3 years, the average Alliant savings account yield was 1.33%.
I also looked at the average rates for two popular internet banks:
Ally Bank money market account 3-year average: 1.13% APY
ING DIRECT savings account 3-year average: 1.03% APY
Note, in my calculations I did not take into consideration the time it takes to transfer the money when no interest is earned. However, this time is rarely more than 2 days which is very small for a 3-year average.
Instead of keeping your money in a savings account, another option would have been opening a 3-year or 5-year CD in 2009. In September 2009, Melrose Credit Union had a 3.03% APY 3-year CD and a 3.91% APY 5-year CD. Ally Bank had a 2.70% APY 3-year CD and a 3.30% APY 5-year CD.
As you can see above, savings account rate chasing didn't help a lot over the last 3 years. It just added 15 basis points to the 3-year average. That's compared to if you had stuck with Alliant Credit Union. It helped a little more compared to if you had stuck with one of the popular internet banks.
For the most interest, CDs came out way ahead. Of course, that should be expected in a falling interest rate environment. Today's CD rates aren't much higher than savings account rates. The main benefit today with a CD is that you don't have to worry about falling rates until the CD matures.
It takes a certain amount of time to research, read disclosures, opt-out of marketing, loss of interest (as you covered in your article), potential for foulups, finding the idosyncracies of the new account e.g., 5-day hold on funds transferred by ACH
Pete
This is more about the Fed and less about the Executive Office.
What I do see is a small group of savers complaining endlessly about low rates...............but I'd hardly characterize it as "financial chaos". And no, please don't bring up the deficit & all that other crap because the man on the street, in truth, cares zero about that, nor does he actually understand it.
No, I'm not voting for Obama, but like I've said before I'm in California, so it hardly matters who I vote for.
My posts may seem to be mainly about zero interest rates but when I constantly write to my senators and reps in Washington, I assure you it is about more than this! The politicians in Washington are allowing our government to spin out of control and no one seems to be able to take charge. How you define "chaos" and how I define it may be different but when it comes to what "isn"t" being done in Washington, I see my country in "chaos" as per Websters. BTW, the banks hoarding money and not giving out much needed loans is NOT what I consider a "healthy" bank. You think it's great people can buy homes with cheaper rates on the backs of seniors who can't get 2% for a CD? And this is a good working economy? You and I are on two different planets when it comes to what is going on in the US today. Shorebreak has a great article he shared about how certain people think "Bernanke is Nuts" etc. You can read it on the Forum and realize I am not the only one who thinks things are very wrong with how our country is being run. Maybe you prefer terms like others use such as "we're in the crapper" but I am a lady and prefer to avoid such terms.
There is NO "financial chaos" in the USA today. BUT there is a "financial chaos" for us that have saved our entire lives to have a secure retirement by investing in CDs. Bernanke had ruined that. Regardless of who is elected president the rates will not make a comeback. Most of the people on main street WANT low interest rates because they DON'T save a dime. They just want handouts. Low rates give main street and business cheap money at very little cost. Whether you vote DEM or REP doesn't matter. Everyone wants low interest rates except for the savers. Sorry to say that........
By the way, I live 40 miles from one of the many troubled California cities. Most of the people there work, there is food in the stores & the economy still functions seamlessly, believe it or not. There is police & fire protection. There are no massive demonstrations or hordes of the disenchanted & & starving rioting in the streets the last time I checked. Perhaps you'd like to enlighten me as to where exactly this is happenning in the US right now.
If what we're going through right now is "financial chaos", then please can I have some more of this next year, because I'm doing great.
Doesn't it bother you that our rating was lowered not too long ago and now they are talking about lowering it even more. How devalued must our currancy get before you can't afford to even eat at McDonalds much less your nice expensive restaurants? When I refer to the word "chaos", I should make it clear that is the term other writers are using for our country because "they" can see all the signs of what is coming. We, imo, are on the verge of chaos and if we don't wake up soon, it will be here. And that is as cheerful as I can be for you today. Continue to play "Let's Pretend" just don't include me in your games.
BTW #17: Maybe you are doing great right now but I can assure you that you are one of the lucky ones. Don't you keep up with the number of Americans on Welfare and Food Stamps now! Just because "you" are doing great, does that mean you could care less about the thousands of unemployed people who can't find jobs? What about the thousands of college graduates who have all those student loans but can't find a job in their chosen field. But they are over-qualified for Burger King! Your country is in trouble but that doesn't matter. YOU are doing ok! Have a nice day!
Do I really care about the unemployed or ones on welfare? No, because the truth is that in most places in the world those people would be in far worse shape than here. Do I care about the long term unemployed? Sorry but the truth is that you don't want to be employed or you think certain jobs are beneath you. Well, tough.............if you really want a job then swallow your pride & take what is available. Or start your own business like I did 15 years ago when I got tired of the corporate bs. And yes, I did that with my own money.
No one owes anyone anything. There are people who apparently can only survive when government policy favors them. And then there's others who will thrive regardless of government policy. As much or as little effort as I have cared to put, I have always............ & intend to always be part of the latter category. Others should do the same & quit blaming everyone else for their shortcomings &/or bad planning.
Why am I here? I've explained this on anpther thread already. In a nutshell, it's "community service". It's like when you're an athlete busted for drugs, who then has to go to high schools telling everyone how bad drugs are. Years ago I worked as a broker & sold some products for big commissions. But alas these products failed to keep up with inflation, so the courts ordered me here to counsel everyone to only invest in things that give you a positive return. In other words.............not CDs. :)
As for wealthy people from China etc. wanting to come here. It is very obvious why. They want to be where "their" money is. I don't think China ever expected us to allow our economy to deteriorate to such an extend but now that they have a fortune invested in our debt, they either stick it out hoping we do better or they take us over. I think they should start teaching the Chinese language in all schools asap! How many times do they have to lower our ratings before you and others take seriously what is happening to our once great country? You may think you are rich today but if our currancy keeps deteriorating, your millions won't be millions for very long. Have a good night!
I think Anonymous #17 hit the nail on the head with the statement:
"If what we're going through right now is "financial chaos", then please can I have some more of this next year, because I'm doing great". This person is self-centered.
Most of the people have jobs or have CDs which are paying high rates since they were take out before the financial meltdown and have yet to mature. But their day of "withdrawing from their principle" will come sooner than later.
Some people have annuities which are paying good returns, but I read yesterday that some insurance companies are starting to invoke the "fine print" to reduce payments.
Many pension plans are underfunded. The affected companies are looking at creative ways to reduce their liabilities. Another future impact on future and current retirees. Pensions are not 100% guaranteed.
I could go on with many other examples of what is in the early stages caused by bernanke's policies, but I think I get my point across.
Most people don't care if it doesn't affect them directly at the current time as #17 pointed out.
Many of your points are well taken, but even the President (dem or rep) can't change everything.
If you people had any idea how many well off & super well off people from China, Taiwan, Malaysia, Indonesia etc etc. have already made plans for themselves & their money to come here at the first sign of trouble, you would feel better about future prospects. Not for you necessarily, but for this country
Wow, I thought I was argumentative. If you want to pick a fight with Paoli, go for it. But I I choose my own fights & I have no argument with Paoli. You're sadly mistaken if you think that I can be goaded into one.
Now back to the reason I first posted. #39: You haven't seen the "Wizard of Oz"!? It is so famous here in the States that after all these years they still show it on tv for our kids who weren't born back then. It's a Judy Garland move. But then again, you may not know who she is either. No wonder I haven't amassed your fortune. "I" was wasting my time at the movies and you were out there building up your fortune! Good for you, bad for me. It really is a child's fantasy movie musical so you may not want to Netflix it. I wasn't trying to insult you as #40 is trying to insinuate. Just trying to figure out the WD40 post myself. Now I will "chill out" (whatever that means) and read the financial reports so I can really be in a good mood!
What is your real problem with this particular poster? I find him to be very polite, intelligent and evidentally a hard working person to have achieved what he has. It doesn't matter if he is 20 or 90 years old. He seems to have already achieved the goals many of us are still trying to achieve and he should be welcomed on this Blog, not nitpicked and attacked with remarks you won't even explain to him. It's obvious I am not the joy of this Blog but I am still around because I need the help Ken's Blog and Forum provides. I appreciate it when the successful folks, men or women post to help us learn even more. I would hope you would have the same feelings for them.