The next Fed meeting is scheduled for next week (Sept 25-26), and a rate hike appears to be almost a sure thing. Economic data continues to support the Fed’s plan for gradual rate hikes. The monthly Consumer Price Index (CPI) report was released last week, and it showed that inflation was unexpectedly mild. According to this Bloomberg article:
A gauge of underlying U.S. inflation unexpectedly cooled in August as apparel prices fell by the most in about seven decades and medical-care costs declined, suggesting little urgency for the Federal Reserve to speed up the pace of interest-rate hikes.
Housing data that’s scheduled for release this week could show early signs of economic weakness that could influence the Fed next year. Economist Tim Duy had this to say in his recent Fed Watch blog post:
We will be watching for indications that housing activity could be a moderating factor on economic activity. Enough such factors and the Fed could see the data that support a sustained policy pause in the first half of next year. But as I have said before, that is still more hope than reality.
As seen in this excerpt, Tim Duy still considers it most likely that the economy will remain conducive to a continuation into next year of the Fed’s policy of gradual rate hikes. If that happens, four more Fed rate hikes over the next year seems reasonable.
If you look back at deposit rates in early June 2017 (before the most recent four Fed rate hikes), the top savings account rate was 1.30% APY and the top 1-year CD rate was 1.55% APY. Today’s top rates are around a full percentage point above these values. Thus, it seems reasonable that the top savings account rate may be around 3.25% and the top 1-year CD rate will be around 3.75% a year from now. Of course, other factors could come into play even if the economy remains healthy. An inversion of the yield curve could put a lid on long-term rates. That could mean we may not see many 4% 5-year CDs next year.
All Treasury yields were up from last week. The long-term Treasury securities had the largest gains. The 5-, 10- and 30-year yields all increased 7 bps from last week. Consequently, the yield curve as defined by the 10-2 spread (the difference between the yields of the 10-year and 2-year Treasury notes) widened a bit from last week, increasing from 22 bps to 24 bps.
The odds of a 25-bps Fed rate hike next week continues to be 100% based on the Fed funds futures. The odds that the Fed rate will be at least 50 bps higher in December (most likely a 25-bps rate hike in September and December) went up from last week, rising from 79.1% to 87.0%.
- 1-month: 2.05% up from 2.02% last week (0.96% a year ago)
- 6-month: 2.36% up from 2.31% last week (1.18% a year ago)
- 1-year: 2.58% up from 2.55% last week (1.30% a year ago)
- 2--year: 2.81% up from 2.76% last week (1.40% a year ago)
- 5--year: 2.94% up from 2.87% last week (1.83% a year ago)
- 10-year: 3.05% up from 2.98% last week (2.23% a year ago)
- 30-year: 3.20% up from 3.13% last week (2.80% a year ago)
Fed funds futures' probabilities of future rate hikes by:
- Sep 2018 - up by at least 25 bps: 100% same as last week
- Dec 2018 - up by at least 50 bps: 87.0% up from 79.1% last week
- Mar 2019 - up by at least 75 bps: 50.3% down from 50.5% last week
Savings and Money Market Account Rates
The above graph shows the rate trends of the average savings account rates. These average rates are based on all the rate data that we have collected over the years. This is an interactive graph. You can choose the look-back period (from 3 months to 5 years).
As you can see in the graph, the average savings account rate is well above the five-year high. The average is dominated by brick-and-mortar banks and credit unions. Thus, the average is still low compared to internet savings account rates.
Below are the noteworthy savings and money market account rate changes that have occurred in the last two weeks:
- MySavingsDirect Savings (+125 bps to 2.25% APY)
- BankPurely Money Market (+25 bps to 2.25% APY, $25k min)
- iGObanking Money Market (+25 bps to 2.25% APY, $25k min)
- CIBC USA Agility Savings (+20 bps to 2.10% APY)
- CIT Bank 11-mo No Penalty CD (+20 bps to 2.05% APY)
- MutualOne Bank Online Savings (+21 bps to 2.02% APY, $1m max)
- Incredible Bank Savings (+14 bps to 2.02% APY, $25k min)
- HSBC Direct Savings (+21 bps to 2.01% APY, $2m max)
- SFGI Direct Savings (+10 bps to 1.91% APY)
- Pacific National Bank Money Market (+45 bps to 1.90% APY, $5k-$240k)
- McGraw-Hill FCU S3 Prime Money Market (new, 1.85% APY, $1m max)
Several online savings and money market accounts reached 2% in the last two weeks. Most noteworthy is the savings account at MySavingsDirect. After holding at 1.00% APY for more than a year, the rate shot up to 2.25% APY in early September. This is now the highest rate on a no-minimum savings account that’s nationally available.
MySavingsDirect is one of the three online divisions of Emigrant Bank. The other two are Emigrant Direct and DollarSavingsDirect. Emigrant Bank has a history of making one of its three online banks a rate leader for a period of time. When that period ends, the rate eventually becomes uncompetitive.
Last year, Emigrant Bank made DollarSavingsDirect its rate leader while MySavingsDirect savings account APY remained at 1%. DollarSavingsDirect first became competitive in April 2017 when its APY shot up from 0.55% to 1.25%. The APY kept rising until February 2018 when it peaked at 1.80%. In February, the 1.80% APY was a rate leader. That has changed, and now it’s on the low side for online banks. Based on history, the 1.80% APY will probably hold steady. Its competitiveness will continue to decline as the Fed continues to raise interest rates.
Now, MySavingsDirect is the rate leader, and based on history, Emigrant Bank will likely keep it a rate leader for at least six to 12 months. At some point, MySavingsDirect savings rate will peak, and then we may see EmigrantDirect be the next leader. EmigrantDirect was Emigrant Bank’s first online bank. When it launched around the start of 2005, its savings account APY was 3.00%. The rate continued to rise throughout 2005. Perhaps EmigrantDirect will be back with a 3% APY in the next year.
Even though we shouldn’t expect MySavingsDirect to be a rate leader for the long run, it can be useful as a savings account while it’s a rate leader. MySavingsDirect and its two sister online banks haven’t changed much in their online banking features. As I described in my MySavingsDirect review, its ACH transfer service has several limitations. However, its bank-to-bank transfers are fast and the maximum amount that can be transferred is large ($500k). So it can be a useful savings account to attach to an online bank like Ally or Capital One.
Another blast from the past is HSBC Direct Savings Account. Back in 2005, the online savings accounts at EmigrantDirect and HSBC Direct were both in contention as the nation’s rate leader. As I described in this July post, HSBC has brought back HSBC Direct with a competitive online savings account. Its latest rate hike (2.01% APY) is still not close to MySavingsDirect, but if history repeats, we should expect more rate hikes and more competition between these two banks.
Competition from Money Market Funds
Another option for your cash instead of savings accounts and money market accounts are money market funds from brokerages. These don’t have FDIC coverage, but they can be reasonable alternatives to deposit accounts. Back when the Fed was holding rates near zero, money market funds had yields of around 0.01%. Keeping your cash at internet banks made a lot more sense back then. Now, it’s not so clear. Money market fund yields have been steadily rising as the Fed has been hiking rates.
Vanguard Prime Money Market Fund SEC yield continues to be over 2%. It had a slight increase in the last two weeks, rising from 2.08% to 2.10%. Fidelity Money Market Fund’s 7-day yield held steady at 1.83%.
Allan Roth has a review at AARP of using money market funds to replace savings accounts. He suggests using funds such as Vanguard Federal Money Market and Vanguard Treasury Money Market yield instead of the Vanguard Prime Money Market Fund. The yields are slightly lower, but they are a little safer due to recent regulation changes. Treasury money market funds have an additional advantage of being exempt from state income taxes.
Municipal money market funds have the advantage of being exempt from federal income tax, but their yields continue to be quite a bit lower than the other money market funds. Vanguard Municipal Money Market Fund now has an SEC yield of 1.41%.
Reward Checking Accounts
Two weeks ago we finally had a few changes to my list of nationally available reward checking accounts, but this week, we’re back to no change. We’re not seeing widespread rate increases like we are seeing with online savings accounts.
One popular credit union recently announced upcoming changes to its Rewards Checking Account. I had mentioned this two weeks ago. Since it hasn’t taken effect yet, I’ll mention it again. Consumers Credit Union notified customers of changes that will take effect on October 1st. One positive change will be rate hikes. The top rate for Tier A will be 5.09% APY, up from the current 4.59% APY. The big negative change is a reduction of the maximum balance that qualify for the top rates. For Tier A, the balance cap will be shrinking from $20k to $10k.
To find the highest reward checking rates and balance caps in your state or nationwide, please refer to our reward checking rate table. If you're new to reward checking, please refer to my blog post, Overview of Reward Checking and Our Reward Checking Table.
Certificate of Deposit Rates
I’m now publishing my CD survey as a separate post. Please refer to my survey of the best CD rates. This recap will focus on banking news of the week and liquid accounts.
CD Deals: I just wanted to include this reminder of a few noteworthy CD deals that are available.
The latest new CD deal is the 16-month CD special at the easy-membership credit union AgFed. This special earns 3.16% APY, and the minimum deposit is $1,600.
AgFed’s CD special didn’t quite outdo the hot CD deal at NASA Federal Credit Union. That deal is still number one with a 3.25% APY and a 15-month term. Minimum deposit is $5,000.
If you want a shorter term than 15 or 16 months, you’ll have to settle for under 3%. However, you can get close to 3%. The best short-term CD deal continues to be the 9-month CD special at the easy-membership Andrews Federal Credit Union (2.75% APY). Minimum deposit is $1k, and the maximum is $250k.
The best nationally-available 12-month CD continue to be the special at USALLIANCE Financial Credit Union. The CD special earns 2.75% APY. The credit union also has a 36-month CD special that earns 3.25% APY. Minimum deposit for both is $500.Rates as of September 18, 2018
Checking/Savings/Money Market Accounts:
- Best Savings Account Rates (Nationwide and by State)
- Best Money Market Rates (Nationwide and by State)
- Best Checking Account Rates (Nationwide and by State)
- Noteworthy Accounts Available Nationwide:
|MySavingsDirect||2.25%||MySavings Account - Account review|
|Customers Bank||2.25% ($25k)||Ascent Money Market Savings (rate guarantee through 6/30/2019 - Account review|
|BankPurely||2.25% ($25k min)||PurelyMoneyMarket - Account review|
|iGObanking.com||2.25% ($25k min)||MMA, New accounts and new money only - Account review|
|Northfield Bank||2.25% ($100k max)||Online Platinum Savings - Account review|
|Vio Bank||2.11%||Online High Yield Savings|
|CIBC USA (formerly The Palladin PrivateBank)||2.10%||Agility Savings Account - Account review|
|CommunityWide Federal Credit Union||2.10% (penalty-free withdrawals first 5 days of each calendar quarter)||High Rate Quarterly Funds Account - Account review|
|United Bank (MA)||2.10% (6mo rate guarantee)||Advantage Money Market, not available in all states - Account review|
|Bank 7||2.05% ($100 min)||High Rate Online Savings Account|
|Bank5 Connect||2.05% ($100 min)||High Interest Savings - Account review|
|Salem Five Direct||2.05%||eOne Savings, for new customers only - Account review|
|CIT Bank||2.05% ($1k min)||11-month No-Penalty CD - Account review|
|Bank 7||2.05% ($5k min)||High Rate Online Money Market|
|MutualOne Bank||2.02% ($1m max)||Online Statement Savings - Account review|
|NASB||2.02% ($25k+), 1.77% (up to $25k), 0.10% ($1.5m+)||MMA Special Online Only - Account review|
|Incredible Bank||2.02% ($25k+), 1.21% ($2.5k),||IncredibleBank Savings - Account review|
|Virtual Bank||2.01% (1 year rate guarantee)||eMoney Market - Account review|
|HSBC Direct||2.01%||HSBC Direct Savings|
|Citizens Access||2.00% ($5k min)||Online Savings Account - Account review|
|Popular Direct||2.00% ($5k min) (60-day freeze on new accounts, see details)||Popular Direct Plus Savings - Account review|
|All America Bank||2.00% (up to $50k), 0.50% ($50k+)||Mega Money Market Account - Account review|
|Redneck Bank||2.00% (up to $50k), 0.50% ($50k+)||Mega Money Market Account|
|Chartway Federal Credit Union||2.00% ($500)||12-month No Penalty CD - Account review|
|Ally Bank||2.00% ($25k)||No-Penalty 11-month CD - Account review|
|Radius Bank||1.96% ($25k+), 1.50% ($2.5k+)||Radius High-Yield Savings - Account review|
|Northpointe Bank||1.95% ($25k), 1.12% (below $25k and $1m+)||Ultimate Savings - Account review|
|SFGI Direct||1.91%||SGFI Direct Savings Account - Account review|
|Marcus by Goldman Sachs||1.90%||High-Yield Online Savings Account - Account review|
|Sallie Mae Bank||1.90%||Money Market Account - Account review|
|iGObanking.com||1.90%||iGOsavings - Account review|
|BankPurely||1.90% ($1 min)||SavingPurely - Account review|
|Pacific National Bank||1.90%||Money Market Deposit Account - Account review|
|PurePoint Financial||1.90% ($10k min)||Online Savings - Account review|
|Synchrony Bank||1.85%||High Yield Savings - Account review|
|Ally Bank||1.85%||Online Savings - Account review|
|Barclays||1.85%||Online Savings - Account review|
|MemoryBank||1.85% ($1 million max)||Online Money Market - Account review|
|FNBO Direct||1.85%||Online Savings|
|CIT Bank||1.85% ($100 min)||Money Market - Account review|
|McGraw-Hill Federal Credit Union||1.85% ($100) (guaranteed through 3/31/19)||S3 Prime Money Market - Account review|
|ableBanking||1.85% ($250 min)||Money Market Savings - Account review|
|Capital One||1.85% ($10k+), 0.85% (up to $10k)||360 Money Market - Account review|
|First Internet Bank||1.81% ($250k+) 1.61% (up to $250k)||Money Market Savings|
|American Express Bank||1.80%||High Yield Savings - Account review|
|DollarSavingsDirect||1.80%||Dollar Savings Account - Account review|
|Live Oak Bank||1.80% ($5 million max)||Savings Account - Account review|
|Discover Bank||1.80%||Online Savings - Account review|
|TIAA Bank||1.80% (1yr intro rate) 1.70% ($100k+) ongoing rate||Yield Pledge Money Market - Account review|
|Alliant Credit Union||1.80% ($100 min)||High-Rate Savings - Account review|
|American Heritage Credit Union||1.80% ($10k min)||High Yield Savings (guaranteed through 12/31/2019)|
|EBSB Direct||1.80% ($10k+), 0.80% ($2m+), 0.50% ($10+)||Money Market Special 3 - Account review|
|West End Bank||1.75%||Online Savings|
|Salem Five||1.75% ($1m max)||Gold Star Money Market - Account review|
|Sallie Mae Bank||1.75%||High Yield Savings - Account review|
|Quorum Federal Credit Union||1.75%||HighQ Savings|
|Bethpage Federal Credit Union||1.75% ($500 min)||Money Market|
|MyBankingDirect||1.75% ($25k+), 1.50% ($5k+), 0.25% (less than $5k)||Money Market|
|BBVA Compass||1.70% ($10k min, 12mo rate guarantee)||ClearChoice MMA Promo - Account review|
|UmbrellaBank||1.70% ($25k min), 1.00% ($1k)||Money Market|
|Discover Bank||1.70% ($100k min), 1.65% ($2.5k)||MMA - Account review|
|PenFed Credit Union||1.65%||Premium Online Savings|
|Colorado Federal Savings Bank||1.65% ($50k+)||Premier Savings (New customers) - Account review|
|Franklin Synergy Bank||1.63% ($500k), 1.50% ($250k), 1.38% ($100k)||Synergy Money Market|
|Amalgamated Bank||1.60%||Online Savings - Account review|
|MemoryBank||1.60% (up to $250k)||EarnMore Interest Checking - Account review|
|Spectrum Credit Union||1.60% ($2.5k+), 0.45% ($1+)||MarketEdge Money Market|
|UFB Direct||1.60% ($5k min)||High Yield Money Market - Account review|
|Self-Help Federal Credit Union||1.57% ($500)||Money Market - Account review|
|CIT Bank||1.55%||Premier High Yield Savings - Account review|
|SmartyPig||1.55%||SmartyPig Savings - Account review|
|Blue Federal Credit Union||1.55%||Sky High Savings - Account review|
|United Bank (CT)||1.55%||Prime Money Market Special (in-branch only), Not available in all states -Account review|
|Nationwide Bank||1.55% ($10k+), 1.15% APY (up to $10k)||Money Market - Account review|
|nbkc Bank||1.51% ($1m max)||Personal Money Market Savings|
|Northern Bank Direct||1.51% ($250k max)||Money Market - Account review|
|My eBanc||1.50%||Super Saver - Account review|
|Northpointe Bank||1.50% ($25k-$1m, guaranteed for 1 year)||Ultimate Money Market - Account review|
|INOVA Federal Credit Union||1.50% ($100k min)||Platinum Money Market Savings|
|McGraw-Hill Federal Credit Union||1.45% ($100 min)||S3 Prime Savings - Account review|
|Dime Savings Bank||1.35%||Dime Direct Money Market, new money - Account review|
|Signal Financial Credit Union||1.35% ($25k+, enrollment in Premium Bundle)||Premium Money Market - Account review|
|Nationwide Bank||1.30%||Online Savings - Account review|
|Bank of Internet USA (BofI)||1.30%||Smart Savings|
|UFB Direct||1.30% ($25k+), 0.20% ($100)||Premium Savings - Account review|
|McGraw-Hill Federal Credit Union||1.30% ($75k), 1.10% ($20k), 1.00% ($5k) (guaranteed through 12/31/18)||Ascend Account - Account review|
Reward Checking Accounts:
- Noteworthy Accounts Available Nationwide:
|Consumers Credit Union||4.59% (up to $20k)||Rewards Checking - debit card and $1k credit card requirements (Changes coming on 10/1/18)|
|La Capitol Federal Credit Union||4.25% (up to $3k), 2.00% ($3k-10k), 0.10% ($10k+)||Choice Checking|
|Consumers Credit Union||3.59% (up to $15k)||Rewards Checking - debit card and credit card requirements (Changes coming on 10/1/18)|
|One American Bank||3.50% (up to $10k), 0.25% ($10k+)||Kasasa Cash - Account review|
|Heritage Bank||3.33% (up to $25k), 0.15% ($25k+)||eCentive Account|
|Consumers Credit Union||3.09% (up to $10k)||Rewards Checking - debit card with NO credit card requirements (Changes coming on 10/1/18)|
|Market USA Federal Credit Union||3.01% (up to $15k), 0.05% ($15k+)||VIP Checking Platinum Tier - Account review|
|Evansville Teachers Federal Credit Union||3.00% (up to $20k), 0.00% ($20k+)||Vertical Dividend Checking - Account review|
|MainStreet Bank||3.00% (up to $15k), 0.25% ($15k+)||Kasasa Cash - Account review|
|Lake Michigan Credit Union||3.00% (up to $15k), 0.00% ($15k+)||Max Checking|
|INOVA Federal Credit Union||3.00% (up to $15k), 0.07% ($15k+)||Shield Checking - Account review|
|Signature Federal Credit Union||3.00% (up to $15k), 0.10% ($15k+)||Choice Checking|
|Great Lakes Credit Union||3.00% (up to $10k), 0.20% ($10k+)||Free Checking|
|Partner Colorado Credit Union||3.00% (up to $10k), 0.10% ($10k+)||High Interest Checking|
|Campus Federal||2.51% (up to $10k), 0.05% ($10k+)||Lagniappe Checking|
|Hanscom Federal Credit Union||2.50% ($15k min), 0.30% ($15k+)||Kasasa Cash Checking - Account review|
|Industrial Bank||2.50% (up to $15k), 0.25% ($25k+)||Kasasa Cash|
|Altra Federal Credit Union||2.50% (up to $15k), 0.40% ($15k+)||A+ Checking|
|All America Bank||2.50% (up to $10k), 0.50% ($10k+)||Ultimate Rewards Checking|
|Redneck Bank||2.50% (up to $10k), 0.50% ($10k+)||Redneck Rewards Checking|
|New Buffalo Savings Bank||2.27% (up to $15k), 0.2497% ($15k+)||Kasasa Cash - Account review|
|Bellco Credit Union||2.25% (up to $25k), 0.25% ($25k+)||Boost Interest Checking - Account review|
|Main Street Bank||2.25% (up to $25k), 0.25% ($25k+)||Kasasa Cash - Account review|
|Coastal Credit Union||2.25% (up to $10k), 0.10% ($10k+)||Go Green Checking - Account review that includes companion Go Green MMA|
|Georgia Bank Company||2.15% (up to $25k), 0.40% ($25k+)||Kasasa Cash - Account review|
|TruStone Financial Credit Union||2.02% (up to $20k), 0.10% ($20k+)||TruRate Checking - Account review|
|BankFirst||2.02% (up to $10k), 0.15% ($10k+)||Kasasa Cash|
|Finex||2.018% (up to $25k), 0.20% ($25k+)||Axcess Rewards Checking, Premier Account (formerly First New England Federal Credit Union)|
|XCEL Federal Credit Union||2.01% (up to $25k), 0.03% ($25k+)||Kasasa Cash Checking|
|Bay State Savings Bank||2.01% (up to $20k), 0.25% ($20k+)||Kasasa Cash - Account review|
|Legence Bank||2.01% (up to $10k), 0.25% ($10k+)||Kasasa Cash|
|Hawaii Pacific Federal Credit Union||2.00% (up to $25k), 0.25% ($25k+)||Kasasa Cash Checking|
|5Star Bank||2.00% (up to $25k), 0.15% ($25k+)||Kasasa Cash Checking Account review|
|Country Bank||2.00% (up to $20k), 0.25% ($20k+)||Kasasa Cash Checking Account review|
|Elements Financial||2.00% (up to $20k), 0.10% ($20k+)||High Interest Checking - Account review|
|Blue Federal Credit Union||2.00% (up to $15k), 0.25% ($15k+)||Extreme Checking (up to 4% w/account relationships) - Account review|
|Northwest Federal Credit Union||2.00% ($15k min)||Kasasa Cash - Account review|
|United Educators Credit Union||2.00% (up to $10k), 0.25% ($10k+)||Kasasa Cash|
|KS StateBank||1.95% (up to $25k), 0.50% ($25k+)||Check PLUS - Account review|
|Connexus Credit Union||1.75% (up to $25k), 0.25% ($25k+)||Xtraordinary Checking|
|First Tech Federal Credit Union||1.58% (up to $10k), 0.16% ($10k+)||Dividend Rewards Checking|
|Superior Choice Credit Union||1.50% (up to $30k)||AMP Checking|
|Marine Federal Credit Union||1.26% (up to $10k), 0.05% ($10k+)||Kasasa Cash Checking|
|Bank of Internet USA||1.25% (up to $150k), 0.00% ($150k+)||Rewards Checking|
Certificates of Deposit:
- Best CD Rates (Nationwide and by State)
- Best IRA CD Rates (Nationwide and by State)
- Survey of the Best CD Rates (Nationwide and Local)
Bank Account Alternatives - NOT FDIC Insured
|GM Financial Right Notes||2.25% ($50k+), 2.10% ($15k+), 2.00% ($500+)|
|Duke Energy PremierNotes||2.15% ($50k+), 2.00% ($10k+), 1.95% (less than $10k)||Duke Energy PremierNotes review|
|Ford Interest Advantage||2.15% ($50k+), 2.00% ($15k+), $1.95 (less than $15k)||Ford Interest Advantage review|
|Vanguard Prime Money Market Fund||2.10% 7-day yield|
|Ally Financial Demand Notes||1.85% ($50k+), 1.70% ($15k+), 1.50% (less than $15k) (|
|Fidelity Money Market Fund||1.83% 7-day yield|
|Vanguard Municipal Money Market Fund||1.41% 7-day yield|
|Fidelity Municipal Money Market Fund||1.23% 7-day yield|
Post Publication Edits
9/19/2018: Goldman Sachs High-Yield Online Savings rate raised.
9/19/2018: Vio Bank High-Yield Online Savings rate raised.
9/19/2018: Community Bank of Pleasant Hill Premier Money Management Account rate raised.
9/19/2018: Community Bank of Raymore Premier Money Management Account rate raised.
9/20/2018: Community Bank of Raymore Premier Money Management Account removed, not nationally available.
9/20/2018: Community Bank of Pleasant Hill Premier Money Management Account removed, not nationally available.