CD Deals Summary
Fed Holds Rates Steady But Signals One More Rate Hike - Strategies for Savers
Fed Meeting Preview and Deposit Rate Forecast - Sep 13, 2023
There Are 6,458 (or 7.9%) Fewer US Bank Branches Now Than in 2020 — Here Are the States, Metros That Lost the MostOnline Savings Account Rates Falling to All-Time Lows - Alternatives?
You may be disappointed by the recent rate cuts at Ally Bank and Discover Bank. Both lowered their online savings account rates to 0.80%. For Ally, the 0.80% APY is an all-time low. The previous all-time low was in 2013 when the savings account rate reached a bottom of 0.84%. For Discover, the new 0.80% rate ties the all-time low that occurred in 2012 and 2013.
| APY | MIN | MAX | INSTITUTION | PRODUCT | DETAILS |
|---|---|---|---|---|---|
| 4.30% | - | - | Discover | Online Savings Account | |
| 4.25% | - | - | Ally Bank | Savings Account |
A few of the new and smaller online banks have been cutting their rates much more aggressively. WebBank is the latest example. It just recently lowered its online savings account rate to 0.40% (half of what Ally now offers).
In late April, WebBank was offering 1.66% APY while Marcus was at 1.55% and Ally was at 1.50%. Last year, WebBank looked promising when their online savings account rate reached 2.50% in May 2019. Since May of 2020, their rates have been falling like a rock. This week’s cut lowered the online savings account rate from 0.75% to 0.40%.
How low will rates go?
I am worried that we will see more rate cuts to online savings accounts. During the last zero bound years from 2008 to 2015, most online savings account rates bottomed out in a range of 0.70% to 1.00%. It took three to five years after the Fed first lowered the federal funds target to its zero bound (0-0.25%) before these online savings accounts reached their bottoms in 2012 and 2013. We’re now seeing new bottoms after only four to five months of this new zero bound period. In the next year, I’m afraid many other online banks may join WebBank with an online savings account rate that’s under 0.50%.
One reason I think we should expect more rate cuts is how banks have been cutting their CD rates. Ally Bank’s 5-year CD rate was recently cut to 1.00%, and its 11-month No-Penalty CD rate was cut to 0.75%. Other online banks have cut their 5-year CD rates far under 1%. These include Barclays (0.65%), VioBank (0.60%) and PurePoint Financial (0.50%). WebBank’s 5-year CD rate is now only 0.25%.
Alternatives for savers
Savers who prefer keeping their money in deposit accounts don’t have a lot of options. There are still many high-yield reward checking accounts with yields over 2%, but these have requirements and limitations. Also, these aren’t immune to rate cuts and balance cap cuts (as seen at The Bank of Denver and at ECCU). Nevertheless, I think it’s likely that rates of many reward checking accounts will hold up better than online savings accounts. I reviewed a few in this post that have long histories of high rates.
Savers should be cautious about companies that advertise products with high yields. One example is the fintech Linus which claims that customers can earn up to 4.50%. According to Linus’s FAQs, deposits are not insured by the FDIC or SIPC. The FAQs also state that “your deposit is protected from default using borrower collateral.” I can’t say how safe it is. All I can say is that accounts at Linus and at similar fintechs have more risk than at FDIC-insured or NCUA-insured institutions. For more discussion on the importance of FDIC and NCUA deposit insurance, please see my article, Safety of Your Money - Importance of Deposit Insurance.
Marcus by Goldman Sachs is currently offering an 8-month no-penalty CD to AARP members. The yield is 1.10%.
https://www.marcus.com/us/en/savings/aarp-npcd?prd=os&chl=wb&schl=sco&cid=4099103
No-penalty CDs are not as liquid as checking or savings accounts; you have to wait seven days before withdrawing funds.
The only FDIC insured alternatives for liquid savings are the small capped high yield accounts offered at some FI's. Each account will be capped at $500-$2,500 for the higher yield though. Just type in smaller dollar amounts in the search for savings and money market accounts here on DA and you will see the higher yield options. I won't list them all by name as I don't want to kill the deals due to the DA effect.
Another alternative is the prepaid debit card attached savings accounts from NetSpend and Insight. The NetSpend card pays 5% on the first $1,000 and .5% above that(no cap). The Insight card used to pay 5% on $5,000 but now pays 1% on $5,000. It's capped at $5,000 but the interest above $5,000 continues to compound at the same 1%. I have 8 of these accounts which is plenty for a emergency fund of liquid cash if necessary.
For non FDIC alternatives there are the corporate debt accounts:
Mercedes-Benz first class demand notes...........2.25%(accredited investors only)
GM Right Notes..................................................2.00%
Ford Interest Advantage.....................................1.2% - 1.4%
Duke Energy Premier Notes...............................1.2% - 1.4%
Ally Demand Notes.............................................0.75% -1.11%
During down markets these hold up better than Savings/MMA's and money market funds.
Obviously all these rates can also change but all these type of accounts tend to keep their rates higher than most other options long term.
Ally derives nearly three-quarters of its revenues from the auto finance business. Ally had quarterly net loss of $319 million. Fitch gives Ally a BBB- rating which is the lowest investment grade rating. The rating is on negative watch.
I'm not implying they are going belly up but know what your getting into.
For those of us that locked in 3/5 year CD rates the last 12/24 months we have 3/4 years to ride this storm out until rates rise again.
Now I have just few grand left except what I have in safe an my monthly divies in a local savings that pretty much every single time I sign into it I see a new lower rate last time it was down to .95 I just use it to park that dividend $$$ an maturing CD's until I can roll it into something new but there hasn't an I can't see any except for some down n out looking to stave closing their doors.
Wait till tax man comes a callin this year surrounded by moe n curly I'm anticipating their gonna throw everything at us including the kitchen sink Federal State an County
So basically, open the account, transfer in $15,000, wait 90 days for the $200 bonus, transfer out $14,900 after the 90 days, wait until the 6 months are up, and then close the account and get the final $300 back. The regular interest rate for the savings account is 0.01%.
I've done this before and just did it again. There is a 2 year waiting period before you can participate in this offer again.
https://accounts.chase.com/consumer/banking/online/savings?jp_aid_a=T_63093&jp_aid_p=cxo_account_dashboard%2FBanner
2020 Bunus Earninings
Completed: BB&T CK $600, Fifth Third CK $250, SlickDeals HBC SV $125, CIT SV $300
In Process: CiTi $400, SoFi Cash $125, Wintrust CK $300, Wells Fargo CK $400, Suntrust CK $400, Suntrust SV $300
I also just reviewed my credit cards and retired two of them that are were outdated on the benefits they offered. I had them replaced with a different card from the same issuers with much better benefits and cash back offers, and I scored an additional $200 credit card statement credit on one and $150 on the other while at it. I carry no balance so the rate they charge is of no concern to me. My only requirements are no annual fees, and cash back or statement credits.
I also opened one of these low balance high interest rate accounts that deplorable speaks about. The one I selected makes $5.00 every month in interest. That's $60 dollars a year for doing nothing.
My short term plan is to cash in my maturing CDs and park the money in a liquid account to access whenever another good deal like Chase has comes along. No need to tie up my money at these pathetic rates.
That SoFi bonus $125 x 2 hit my account in 2 days fastest bonus I ever got a new record. I think I will do the direct deposit $75 x 2 now. Doc says the bonus posts as soon as the direct deposit is received.
One more thing, to get the $350, my coupon says the additional deposit required is $15000 but I agree it is a good deal. I did a similar bonus last year. Good luck.
Be careful with this.
There is a difference between an ACH transfer you make to transfer your money from one FI to another and an "ACH Direct Deposit." The latter is a transfer from a business or the government to your account. Both are ACH transfers, but the one you do from your FI is not an ACH Direct Deposit. So according to the language I see here, it doesn't appear to me that it would qualify. I would at least get a verbal clarification first before taking the deal to try to ensure it does.
Whenever a "Direct Deposit" is required, this is always the most pertinent question because the number of ACH Direct Deposits most people is limited to between zero and maybe one or two. So they may not be able to do the deal if inter-FI transfers from their own accounts don't qualify.
So the question is always: Is an ACH transfer the depositor makes from their account at another FI a qualified Direct Deposit for purposes of the deal.
@FresnoMan, I hope you will take advantage of the coupon, especially since you can apply by phone. It was an easy bonus for me last year.
The Doctor of Credit poster that you mentioned reminds me of the same thing occurring when I performed the same action opening up an account at Huntington Bank. I have to say it's a small task to take the chance so I should take your advice. I did check the offer again and it clearly states the additional bonus kicks in for $10,000. So now I feel special.
Thanks again for your input and for taking the time in doing so.
Never mind I just saw the rules under the comment but I had already hit enter. I really wish we were allowed to delete posts on our own.
My biggest concern now is that the policies that created the economic growth environment that led to those higher rates will be undone after November and cause this temporary situation to turn into a catastrophically long depressed rate environment. The pandemic created an opportunity to blame the economic stress on the policies rather than on the pandemic itself, and I fear that it may cause people to throw the baby out with the bathwater. Reversing some of these policies now, after the economic blow of the pandemic, could well create a long and catastrophic depression.
On the other hand, once the pandemic passes, if the current policies remain in place, and hopefully strengthened even more, the economy could snap back to pre-pandemic levels like a rocket and bank rates could suddenly start climbing.
I think it all depends on November's results. I've never seen such a stark contrast.
Yes, a change would be better...but will there ever be a favorable one?
I was getting my BEST CD deals from late 2017 to late 2019, the sweet spot.
Ooo la, la ..if only again ...but as most do here, I fear those days may never return. :(
1. Ally Demand Notes (Information extracted from Ally's website):
"Demand Notes are unsecured debt obligations of Ally Financial offered in the U.S. by prospectus only."
"(Ally) Demand Notes:
-Are not FDIC insured
-Are not bank guaranteed
-Are not deposits
-May lose value"
2. GM Right Notes (Extracts from the prospectus issued by General Motors Financial Company, Inc. for GM Demand Notes - Marketed and sold as the GM "Right Notes"):
"The interest rate paid on the Notes may not bear any relation to the investment risk."
"The Notes are not a money market fund or other type of diversified investment."
"The Notes are not equivalent to a deposit or other bank account, and investments in the Notes are not insured by the Federal Deposit Insurance Corporation or any other source. The Notes are not a brokerage account."
"GM Financial is the sole obligor on the Notes."
"The Notes are not transferable."
In my opinion the risk premium on these is way too low today to make them a sensible option.
The safe rate today for a liquid account is 0.8-1.0%. Makes little sense to take that much risk for a hundred extra beeps, especially since the spread is likely to narrow in the near term.
The latter is the worst case.
Midland National , A+ rated by AM Best , is offering 3.25 on a 7 year annuity ( taxed at the end and you want to do this in a retirement account if you'll be under 59.5 at the end of the annuity)
Security Benefit (A- with Best) is offering 3.0 on $100k and 3.1 over 125k on a 4 year annuity.
Each allows at least interest to be withdrawn during the term.
There's also Upstream Life paying 5.50 on yr 1 and 4.65 on years 2-15. It's rated B++ by Best.
I won't placemoney with them because they are losing huge sums paying these rates while maintaining a AAA portfolio of bonds. I'm not clear what they are doing, but after speaking with them I want no part of it even if there's the Texas Guaranty Fund