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Review of Online Savings Account Rates in 2017


This was the year in which savers finally started to see widespread deposit rate increases. Average rates haven't increased much, but if you look at the rates from internet banks, it's clear that rates are going up.

First, let’s look at the average savings account rate for all banks and credit unions that DA tracks. The vast majority of these savings accounts are from brick-and-mortar banks and credit unions. As you might expect, these rates are much lower than the rates you can get at most any internet bank. The current savings account average is only 0.194% which is up from 0.179% from a year ago, an increase of 8%. The chart below shows how the average has changed in the last year.

I thought it would be more interesting to see how much online savings account rates have risen this year. In addition, I wanted to see how the online savings account rates moved in relationship to this year’s three Fed rate hikes that occurred on March 15, June 14 and December 13.

I chose to look at the average rate from the top 10 savings accounts from the big internet banks. I define "big internet banks" as banks with assets of at least $10 billion that operate online-only divisions. This excludes several of the rate leaders such as Incredible Bank, DollarSavingsDirect and Live Oak Bank. These are small banks with assets under $10 billion. It also excludes money market accounts including Capital One’s 360 Money Market. I thought by including only the big internet banks, it would provide an average that would be more representative of internet banks. I choose to exclude money market accounts for simplicity.

You can find the highest rates by using our savings account table and money market table. To review the highest rates in these tables, enter a large deposit amount at the top of the table to see higher rates that are available for larger minimum balances.

Below is a table showing the 10 top savings accounts from the big internet banks. I included the asset size next to the name. I also included the rates of the savings accounts at the end of January 2017 and at the end this month. As you can see, the average has increased by 33 bps in 2017.

Internet Bank Brand (Parent Bank - Assets)Jan APYDec APY
Marcus by Goldman Sachs (Goldman Sachs Bank USA - $158B) 1.05% 1.40%
FNBO Direct (First National Bank of Omaha - $19B) 0.95% 1.40%
PurePoint Financial (MUFG Union Bank, NA - $119B) 1.25% 1.40%
American Express Bank, FSB (American Express Bank, FSB - $52B) 0.90% 1.35%
CIT Bank (CIT Bank, NA - $40B) 1.05% 1.35%
Synchrony Bank (Synchrony Bank - $76B) 1.05% 1.30%
Discover Bank (Discover Bank - $96B) 0.95% 1.30%
Barclays (Barclays Bank Delaware - $33B) 1.00% 1.30%
Ally Bank (Ally Bank - $130B) 1.00% 1.25%
SmartyPig (Sallie Mae Bank - $21B) 1.05% 1.20%
Average APY1.00%1.33%

I also wanted to see how the rates changed in relationship to the Fed rate hikes. I did that by generating the chart below. Note, I chose to use the bottom range of the federal funds rates. Also note that the rates are shown to increase at the end of each month. I just took an average of the rates at the end of each month.

online savings account rates vs federal funds rate in 2017

As you can see in the chart, most of the savings account rate hikes occurred starting in June after the second Fed rate hike. We are seeing another rate bump-up for this month.

One thing you might be asking is why did savings account rates on average only rise by 33 bps when the federal funds rate increased by 75 bps. One thing to note is that savings account rates at most internet banks never did fall much below 1% during the years of the zero interest rate environment. For example, the lowest rate of Ally Bank’s savings account was 0.84%. On the other hand, money market fund yields were very close to zero during this time. For example, the Vanguard Prime Money Market Fund had a yield of only 0.01% for much of this time. The Vanguard Prime Money Market Fund now has a yield of 1.37%. My guess is that many of the internet banks were using their savings accounts as loss leaders to keep customers. Now that interest rates are rising, the internet banks are cutting back this practice.

When interest rates were high back in 2005 to 2007, internet bank savings account rates tended to be close to the federal funds rates. For example, when the federal funds rate first reached 5.25% in June 2006, we started to see a few internet banks reach 5% APY in July 2006. As the federal funds rate held at 5.25%, a few internet savings accounts had rates that exceeded this for a period of time such as E-LOAN with a 5.50% APY and FNBO Direct with a promotional 6.00% APY.

The good news for savers is that we should continue to see savings account rate hikes in 2018 as the Fed hikes rates, and now that savings account rates are close to the federal funds rate, we may see savings account rate hikes that are more inline with the 25bps Fed rate hikes. In my opinion, there’s a good chance we’ll see 2%+ internet savings accounts in 2018.

Related Pages: banking tools and data
Previous Comments
  |     |   Comment #1
Much ado about nothing, frankly.

Rates still suck.
  |     |   Comment #2
Slowly but surely savers are being reconditioned to abandon traditional savings and head for the world of speculation and risk. Rates are what they are because the government can PRINT money at will. Savers' money is, in many ways, superfluous and, therefore, not that valuable.
  |     |   Comment #3
In light of which, what's there to be "Ecstatic" about?

BTW, that's very well put.
  |     |   Comment #4
Ecstatic (re comment # 2), it's all about supply and demand, as my local banker explained to me quite some time ago. We are "retail money" which, I was to learn, is a pejorative in the banking industry. Banks such as hers are awash in cash. As she explained, the profits come from "new money" and cross-marketing. Somebody with an existing account who just wants to add a few bucks, well, "have a nice day".
  |     |   Comment #5
Ken, we seem to have an ongoing issue with respect to the "yield" of VMMXX. Is it the SEC yield (1.37%) or the effective yield (the dividend)? As I noted over in the Forum, I'm almost tempted to buy 10,000 shares of VMMXX to settle the issue. I'll bet it throws off (dollars in the bank) roughly 1.15%.
  |     |   Comment #27
It's paying roughly 1% right now
  |     |   Comment #6
peanuts ,look at the stock mkt up 25 % and taxed at cap gain rates ,savors are nothing but food for the stock mkt
  |     |   Comment #7
I would call it fuel for the stock market. And that fuel is eventually is consumed.
  |     |   Comment #8
I prefer brick and mortars that also have good electronic banking ability for paying bills and moving funds between checking and savings at the particular brick and mortar. For a long time I was getting just as good liquid rates until recently when the internet banks have begun to exceed my local brick and mortars. Sooner or later though I will have to learn more about moving funds electronically in order to take advantage of some of the better liquid rates now available at Internet banks and credit unions.
  |     |   Comment #14
"For a long time I was getting just as good liquid rates until recently when the internet banks have begun to exceed my local brick and mortars."

Lucky you. Most people's local options are a tenth or less of the internet banks' rates.
  |     |   Comment #28
Bank branches have essentially been obsolete for more than a decade. It's much simpler, more convenient, and more profitable to stick with the web banks.
  |     |   Comment #9
Why I/we went to cash.
1. Sleep comes softly each night with nary a worry.
2. Going on 67 we'd like to keep what we have for the time given us.
3. Our cash earns 2.97% at the moment.
4. We save a large percentage of our after-tax retirement income.
5. We understand market risk and market losses. One year we saw $250K evaporate from our retirement savings...and it was tax-free money!
6. The next market crash is inevitable, it will be monumental and I'd rather not worry about such things at this point in life. Been there, done that. See #5.
7. See number 1.

Happy New Year to all.

We're ecstatic because the tax bill will allow us to KEEP $5000+ of our money for the next 3 years and then $6000+/yr for seven years after that. Someone actually told me that was a "selfish" position to take. Go figure.
  |     |   Comment #10
2.97% on what?
  |     |   Comment #11
@ #10, 2.97% on the cash as Ecstatic commented. Total amount of which is personal and wouldn't be wise to be posted here or on any website forum.
  |     |   Comment #13
#12, for many of us our cash earns 3% at PenFed (5 & 7 year CD's offered in 2013 and early 2014), Northwest FCU (3 year Cd's offered in 2015), and Andrews (7 year CD's offered at the end of last year and early this). Moreover some of us are still earning the 5% PenFed offered on 10 year CD's many years ago. Considering that, earning an aggregate 2.97% on deposit account funds isn't likely exceptional among us. I don't believe "Ecstatic" was suggesting he earns that rate on liquid funds.

I'd take issue with "Ecstatic" however in his asserting Trump's tax cuts imply no selfishness on the part of anyone who stands to gain because of them, - especially in light of his apparent scorn of Fed money printing prior. How does he think those tax cuts are being paid for except by heaping more debt on future generations? Enjoy things now and let others down the road suffer the consequences. Pretty selfish if you ask me.
  |     |   Comment #15
Trump is planning on a hollowing out of the federal bureaucracy to help pay for the tax cuts. MAGA !
Cheap Date
  |     |   Comment #18
Trump is President now. A year late to be planning, should be doing by now.
Cheap Date
  |     |   Comment #17
Tying money up for 10 years in exchange for 3% versus 3 years at 2.6% seems risky, to me. If the world finally concludes it expects more interest in exchange for US dollars, I would expect banks and credit unions to assert whatever right they can to disallow early withdrawals. Most language about early withdrawals include "may" or "agrees."
  |     |   Comment #20
The government has done its job well. You, and many others, believe the government deserves your money regardless of the manner in which they redistribute it. Government cares nothing about cost or efficiency. I do. I am a much better custodian of my earnings than the government. I have always supported the common good through taxation but not at any cost. Every year, for the past 45 years, I have paid more in taxes than the previous year. In retirement, our tax bill is equivalent to 45% of our annual living expenses. Yes, we save money in retirement, but that's not the point. The point is we can live a decent lifestyle on 2X times the amount of money we send the government. How much is enough? We were clearly on the road to a government controlled nanny state that is nothing short of a full-fledged plutocracy. I, for one, enjoy having more of my wealth (i.e. power) in my hands than in the hands of a nameless government functionary.
Blissful Ingorance
  |     |   Comment #21
The United States fails on many indicators of public welfare. Education, health care, violent crime. The only area where the US actually leads is the size of the military. The primary function of the federal and most local governments is to enrich politically connected crony capitalists. Such as Donald Trump.

America does not coddle our citizens. You don't understand how taxes are misspent and certainly are not doing your part to improve the situation.
  |     |   Comment #23
After nearly forty years of direct and indirect involvement with government entities, encompassing many tens of billions in expenditures, I can assure you I am neither ignorant or naive regarding appropriation of the common wealth. Have a great New Year.
Blissful Ignorance
  |     |   Comment #24
So were you responsible for the mismanagement, or profiting from it?
  |     |   Comment #25
Actually, just the opposite but facts rarely change opinion. Have a great New Year!
Just The Facts
  |     |   Comment #26
So, list some facts. List how Americans are coddled, compared to the rest of the world. There is plenty of evidence to the contrary. List the metrics which show Americans work less, receive more government aid, pay more taxes.

List some facts, friend.
  |     |   Comment #31
#24. Give us the facts and we’ll see if opinions change. Were you opposite as to what? What is your point and stick to facts!
deplorable 1
  |     |   Comment #30
Well said Ecstatic! I too feel that I can do better at managing my own money that a bloated government bureaucracy.
  |     |   Comment #32
We have to manage our own money more efficiently than our bloated government bureaucracy, deplorable 1. For many of us, especially retirees, there isn't any more to draw from verses our politicians who just raise our taxes when they waste the money that they have to work with and their pot runs low. Or just drive our nation deeper in debt.
deplorable 1
  |     |   Comment #29
@gregk: You do realize that that added 1.5 trillion is nothing more than mere speculation on the part of the CBO right? It wrongly assumes that no growth will be created as a result of the Trump tax cuts. I strongly disagree with that assertion and think the tax cuts will end up being neutral to positive with regards to the debt. Also you do realize that we are now paying interest on the extra 10 trillion that Obama added to the debt with $0 tax relief for the middle class right? 266 billion is the current interest x 10 years is 2.66 trillion divided by 2 is 1.33 trillion. So 1.33 trillion is the interest on the 10 trillion in debt that Obama added over a decade and that doesn't take into effect rising interest rates. So to put this in perspective that 1.5 trillion over a decade that the liberals are now complaining about is the same amount as just the interest on Obama's added debt he saddled us with.
  |     |   Comment #19
We have 3.4%, 3.3%, 3% and various high 2's. The average is 2.97%.
  |     |   Comment #22
Is that the average rate or weighted rate for all funds?
Cheap Date
  |     |   Comment #16
Citizens who save a few thousand dollars and conclude the $1.5 trillion tax cut is a good deal are a cheap date.
  |     |   Comment #33
Hi, where would I find longer term data on high yield savings rates?
  |     |   Comment #34
Hi anyone know where I can find long term data on high yield savings rates? Like for the last 10 years?

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