After more than a year of a 1.00% APY, Barclays cut its online savings account yield to 0.90% APY on Thursday. As I described last month, Barclays started offering its online savings account and online CDs in March 2012. The savings account yield held for more than a year, but like many other internet banks in this low interest rate environment, Barclays wasn’t able to maintain this rate.
In addition to the Fed policies, deposit growth and competition are likely factors that affected Barclays’ decision. Last November, Barclays reported that it had exceeded its deposit goals with a billion dollars in deposits. Although I wasn’t able to get more details on Barclays’ deposit growth last month, it appears deposit growth was still exceeding expectations. That’s rarely good news for depositors. Also, with few internet banks offering 1.00% savings account rates, there’s no big need for Barclays to keep the 1.00% APY. In fact, the new 0.90% APY is still competitive. It’s higher than the savings account rates from all of the big internet banks such as Ally Bank, Capital One 360 and Discover Bank.
There are now only four banks offering non-promo rates higher than 0.90%. These accounts are available nationwide, and there are no checking requirements. I excluded banks with small balance caps on their savings or money market accounts (like SmartyPig and Evantage Bank).
Rates as of 5/17/2013
- MyBankingDirect MMA - 1.05% APY ($5K)
- CIT Bank Savings Account - 1.00% APY ($25K) 0.90% ($100)
- SFGI Direct Savings Account - 0.94% APY ($500)
- Incredible Bank MMA - 0.91% APY ($2.5K to $250K)
- Barclays Savings Account - 0.90% APY
One question you may be asking is how long will 0.90% hold up? Will rate cuts continue to be rare at Barclays? If that’s the case, the 0.90% should hold for the rest of the year. That’s probably the best case that we can hope for.
If there are more rate cuts to come in the near future, it may mirror what we have seen at TIAA Direct. TIAA Direct’s 1.25% APY held from its launch through 2012. Then the rate started to fall in January with additional cuts in March and April. The rate is now down to 0.76%.
The worst case scenario for rate cuts is what we’ve seen at UFB Direct and CNB Direct. High rates held steady for quite a while before we saw a quick fall. Then all of a sudden, the rates plummeted to levels that are very low for internet banks.
In my opinion, Barclays will probably follow the first scenario in which rate cuts will be rare. However, if we see more cuts in the next few months, we’ll know they probably don’t have intentions to remain rate leaders. As we have learned over these years, you can’t be attached to any one bank or credit union. Rate leaders rarely last for more than a year. If you want the best savings or money market rates, you should plan to be moving your money at least once a year.
Edit: Removed Citizens State Bank MMA