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Best Bank Account Interest Rates - Summary for April 17, 2018

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On Monday President Trump announced his intention to nominate officials to fill two vacancies at the Fed. Richard Clarida will be nominated for the position of Vice Chairman of the Board of Governors, and Michelle Bowman will be nominated for the position of Member of the Board of Governors. Will they be hawks or doves? This Bloomberg article describes Clarida as a “Pragmatic Centrist.” This MarketWatch article describes both nominees as “mainstream central bankers.” According to the article:

Clarida and Bowman are both well respected Republicans, but neither is seen as someone who would push hard for higher interest rates at a time when inflation, even after a recent upward shift, remains unusually low by historical standards.

Don’t expect the Fed to change much. If the nominees are more hawks than doves, they could impact the Fed in December. If this year goes as planned, we should see Fed rate hikes in June and September. Assuming inflation continues as it has been, a more dovish Fed would likely choose to pass on another rate hike in December. If the new members are more hawkish, a December rate hike will become more likely.

The 6-month Treasury yield topped 2% today; its yield at the end of today was 2.02%. It was only in February when the 1-year Treasury yield reached this milestone. Today, the 1-year Treasury yield reached 2.16%.

The yield curve continues to compress. Yields for maturities under 5 years are rising faster than the longer maturities. The 10-year yield now exceeds the 2-year yield by only 41 bps, and it exceeds the 6-month yield by only 80 bps.

The odds of more rate hikes in 2018 went up from last week according to the Fed funds futures. They now show a 100% chance of a June Fed rate hike (up from 90.2% last week). The odds that we’ll have at least four rate hikes in 2018 (federal funds rate up by at least 75 bps in December) went up from last week, but they’re still under 50%, which shows that the market still thinks that the Fed’s forecast of three rate hikes in 2018 is still the most likely scenario.

The following numbers are based on Daily Treasury Yield Curve Rates and the CME Group FedWatch.

Treasury Yields:

  • 1-month: 1.68% up from 1.63% last week (0.76% a year ago)
  • 6-month: 2.02% up from 1.93% last week (0.94% a year ago)
  • 1-year: 2.16% up from 2.09% last week (1.04% a year ago)
  • 2--year: 2.41% up from 2.32% last week (1.21% a year ago)
  • 5--year: 2.68% up from 2.62% last week (1.79% a year ago)
  • 10-year: 2.82% up from 2.80% last week (2.26% a year ago)
  • 30-year: 3.00% down from 3.02% last week (2.92% a year ago)

Fed funds futures' probabilities of future rate hikes by:

  • Jun 2018 - up by at least 25 bps: 100% up from 90.2% last week
  • Sep 2018 - up by at least 50 bps: 74.4% up from 58.0% last week
  • Dec 2018 - up by at least 75 bps: 44.5% up from 28.9% 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, average savings account rates are rising slowly. They are still below the average from five years ago, but not by much.

Below are the noteworthy savings and money market account rate hikes that have occurred in the last two weeks:

  • PurePoint Financial (+15 bps to 1.75% APY)
  • Sallie Mae Bank (+10 bps to 1.65% APY)
  • SFGI Direct (+10 bps to 1.61% APY)
  • Marcus by Goldman Sachs (+10 bps to 1.60% APY)
  • American Express Bank (+10 bps to 1.55% APY)
  • Radius Bank (+20 bps to 1.50% APY)

It has been almost a month since the March Fed rate hike, and we are still waiting for several of the big internet banks to raise their savings account rates. Capital One, Discover and Ally Bank haven’t increased their savings or money market rates since February. Barclays’ last rate hike on its savings account was in January.

In general, we’ve seen more rate hikes on CDs since the Fed rate hike than on savings and money market accounts. Raising CD rates probably costs the banks less than raising savings account rates since higher savings account rates immediately impacts both new and existing customers. One way banks can reduce this cost is to offer a higher rate only on a new savings account. Unfortunately for savers, that is a strategy that we’re seeing more internet banks using. The two rate leaders, Popular Direct (2% APY) and Salem Five Direct (1.85% APY) both introduced new accounts with these rates. Existing customers didn’t automatically receive these top rates.

Reward Checking Accounts

There continues to be little change to my list of nationally available reward checking accounts. The only change this week was the addition of three new nationally-available reward checking accounts. All three are from credit unions that offer easy ways for people in any state to join.

La Capitol Federal Credit Union started offering Choice Checking which earns up to 4.25% APY. It has a very low balance cap of $3k. Only the first $3k can qualify for the 4.25% APY. The portion of the balance above $3k and below $10k earns 2% APY, and the portion above $10k earns only 0.10%. Another downside with the account is a monthly fee. It can be waived if a $1k balance is maintained.

The other two new reward checking accounts are Kasasa Cash accounts. All Kasasa Cash accounts are free with no monthly maintenance fees.

The first new Kasasa Cash account is from Hanscom Federal Credit Union. The account earns 2.50% APY on balances up to $15k.

The second is from Northwest Federal Credit Union. The account earns 2.00% APY on balances up to $15k.

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.

For terms close to one year, INOVA FCU continues to offer 2.30% APY on a 14-month certificate ($50k minimum). For a standard 12-month CD that can be opened online, My eBanc and Banco do Brasil Americas are on top with a 2.25% APY.

MidFirst Direct is offering a special 15-month CD that earns 2.35% APY. MidFirst Direct’s online application used to be limited to a group of 12 states. Now it’s available to the 48 continental U.S. states.

For 5-year CDs, more banks and credit unions are at or approaching 3%. As you can see in our 5-year CD rate table, we have two small banks offering nationally-available 5-year CDs with a 3% APY. Popular Direct came close this week when it raised its 5-year CD rate to 2.90% APY. Several easy-to-join credit unions continue to offer 3% APY on 5-year CDs. A few of these include Mountain America, Quorum and Utah First.

Rates as of April 17, 2018

Checking/Savings/Money Market Accounts:

  • Noteworthy Accounts Available Nationwide:
InstitutionRatesNotes
Popular Direct2.00% ($5k min)Popular Direct Exclusive Savings - Account review
Salem Five Direct1.85% eOne Savings, for new customers only Account review
DollarSavingsDirect1.80% (no min)Dollar Savings Account - Account review
Bank 71.80% ($5k min)High Rate Online Money Market
Bank 71.80% ($100 min)High Rate Online Savings Account
Incredible Bank1.76% ($25k+), 1.21% ($2.5k), IncredibleBank Savings - Account review
CIT Bank1.75%Money Market ($100 min) - Account review
PurePoint Financial1.75% ($10k min)Online Savings - Account review
All America Bank1.75% (up to $50k), 0.50% ($50k+)Mega Money Market Account - Account review
Redneck Bank1.75% (up to $50k), 0.50% ($50k+)Mega Money Market Account
MutualOne Bank1.71% ($250k max)Online Statement Savings - Account review
ableBanking1.70% ($250 min)Money Market Savings - Account review
Live Oak Bank1.70% ($5 million max) Savings Account - Account review
BankPurely1.70% ($25k min) PurelyMoneyMarket - Account review
iGObanking.com1.70% ($25k min) MMA, New accounts and new money only, Account review
Sallie Mae Bank1.65%MMA - Account review
United Bank (MA)1.65% ($500k max, guaranteed for 6mo) Advantage Money Market, Not available in all states, Account review
Colorado Federal Savings Bank1.65% ($50k+) Premier Savings (New customers) - Account review
SFGI Direct1.61%Savings account - Account review
Amalgamated Bank1.60%Online Savings - Account review
FNBO Direct1.60%Online Savings
Marcus by Goldman Sachs1.60%High-Yield Online Savings Account - Account review
UFB Direct1.60% ($5k min)High Yield Money Market - Account review
EBSB Direct1.57% ($10k+), 0.80% ($2m+), 0.50% ($10+)Direct Money Market Special - Account review
Synchrony Bank (formerly GE Capital Retail Bk) 1.55%High Yield Savings - Account review
CIT Bank1.55%Premier High Yield Savings - Account review
Sallie Mae Bank1.55%High Yield Savings - Account review
American Express Bank1.55%American Express Personal Savings - Account review
Nationwide Bank1.55% ($10k+), 1.15% APY (up to $10k)Money Market - Account review
Northern Bank Direct1.51% ($250k max) Money Market - Account review
First Internet Bank1.51% ($250k+) 1.26% (up to $250k)Money Market Savings
My eBanc1.50%Super Saver - Account review
Barclays1.50%Online Savings - Account review
Community Bank of Pleasant Hill1.50% Premier Money Management Account
Community Bank of Raymore1.50% Premier Money Management Account
Discover Bank1.50% (no min) Online Savings - Account review
EverBank1.50% (1yr intro rate) 1.35% ($100k+) ongoing rateYield Pledge Money Market - Account review
Alliant Credit Union1.50% ($100 min)High-Rate Savings - Account review
Bethpage Federal Credit Union1.50% ($500 min)Money Market
Radius Bank1.50% ($2.5k min)Radius High-Yield Savings - Account review
Capital One1.50% ($10k+), 0.85% (up to $10k)360 Money Market - Account review
MyBankingDirect1.50% ($25k+), 1.35% ($5k+), 0.25% (less than $5k) Money Market
Northpointe Bank1.50% ($25k-$1m, guaranteed for 1 year) Ultimate Money Market - Account review
INOVA Federal Credit Union1.50% ($100k min)Platinum Money Market Savings
Ally Bank1.45%Online Savings - Account review
Pacific National Bank1.45% Money Market Deposit Account - Account review
Self-Help Federal Credit Union1.42% ($500) Money Market - Account review
SmartyPig1.40% SmartyPig Savings - Account review
Discover Bank1.40% ($100k min), 1.35% ($2.5k) MMA - Account review
Franklin Synergy Bank1.38% ($500k+), 1.25% ($250k+) Synergy Money Market
Dime Savings Bank1.35% Dime Direct Money Market, new money - Account review
Signal Financial Credit Union1.35% ($25k+, enrollment in Premium Bundle) Premium Money Market - Account review
TIAA Direct1.35% ($100k), 1.25% ($50k) Money MarketInternet bank
Nationwide Bank1.30%Online Savings - Account review
Bank of Internet USA (BofI)1.30% Smart Savings
BankPurely1.30% ($1 min) SavingPurely - Account review
CIBC USA (formerly The Palladin PrivateBank)1.30% (6mo intro rate), 1.10% blended APY ($1k min)Savings Account - Account review
UFB Direct1.30% ($25k+), 0.20% ($100) Premium Savings - Account review
McGraw-Hill Federal Credit Union1.30% ($75k), 1.10% ($20k), 1.00% ($5k) (guaranteed through 12/31/18)Ascend Account - Account review
M.Y. Safra Bank1.26%Direct Online Money Market
Quorum Federal Credit Union1.25% HighQ Savings
Chevron Federal Credit Union1.25% ($2.5k+), 0.25% ($1+) MarketEdge Savings
BBVA Compass1.25% ($10k min)ClearChoice MMA Promo - Account review
Hanscom Federal Credit Union1.25% ($25k min)Higher Yield Savings
INOVA Federal Credit Union1.25% ($50k min)Gold Money Market Savings

Reward Checking Accounts:

  • Noteworthy Accounts Available Nationwide:
InstitutionRatesNotes
Consumers Credit Union4.59% (up to $20k) Rewards Checking - debit card and $1k credit card requirements
La Capitol Federal Credit Union4.25% (up to $3k), 2.00% ($3k-10k), 0.10% ($10k+)Choice Checking
Consumers Credit Union3.59% (up to $15k)Rewards Checking - debit card and credit card requirements
One American Bank3.50% (up to $10k), 0.25% ($10k+)Kasasa Cash - Account review
Consumers Credit Union3.09% (up to $10k)Rewards Checking - debit card with NO credit card requirements
Market USA Federal Credit Union3.01% (up to $15k), 0.05% ($15k+)VIP Checking Platinum Tier - Account review
Evansville Teachers Federal Credit Union3.00% (up to $20k), 0.00% ($20k+)Vertical Dividend Checking - Account review
MainStreet Bank3.00% (up to $15k), 0.25% ($15k+)Kasasa Cash - Account review
Lake Michigan Credit Union3.00% (up to $15k), 0.00% ($15k+)Max Checking
INOVA Federal Credit Union3.00% (up to $15k), 0.07% ($15k+)Shield Checking - Account review
Signature Federal Credit Union3.00% (up to $15k), 0.10% ($15k+)Choice Checking
USE Federal Credit Union3.00% (up to $10k), 0.25% ($10k+)Kasasa Cash
Great Lakes Credit Union3.00% (up to $10k), 0.10% ($10k+)Ultimate Checking
Partner Colorado Credit Union3.00% (up to $10k), 0.50% ($10k+)High Interest Checking
American Bank & Trust2.51% (up to $10k), 0.25% ($10k+)Kasasa Cash
Hanscom Federal Credit Union2.50% ($15k min), 0.30% ($15k+)Kasasa Cash Checking - Account review
Industrial Bank2.50% (up to $15k), 0.25% ($25k+)Kasasa Cash
Capital Educators Federal Credit Union2.50% (up to $10k), 0.20% ($10k+)High Yield Checking
New Buffalo Savings Bank2.27% (up to $15k), 0.2497% ($15k+)Kasasa Cash - Account review
Bellco Credit Union2.25% (up to $25k), 0.25% ($25k+)Boost Interest Checking - Account review
Main Street Bank2.25% (up to $25k), 0.25% ($25k+)Kasasa Cash - Account review
Altra Federal Credit Union2.25% (up to $15k), 0.50% ($15k+)A+ Checking
All America Bank2.25% (up to $10k), 0.50% ($10k+)Ultimate Rewards Checking
Redneck Bank2.25% (up to $10k), 0.50% ($10k+)Redneck Rewards Checking
Coastal Credit Union2.25% (up to $10k), 0.10% ($10k+) Go Green Checking - Account review that includes companion Go Green MMA
Georgia Bank Company2.15% (up to $25k), 0.40% ($25k+)Kasasa Cash - Account review
TruStone Financial Credit Union2.02% (up to $20k), 0.10% ($20k+)TruRate Checking - Account review
BankFirst2.02% (up to $10k), 0.15% ($10k+)Kasasa Cash
Finex2.018% (up to $25k), 0.20% ($25k+)Axcess Rewards Checking, Premier Account (formerly First New England Federal Credit Union)
XCEL Federal Credit Union2.01% (up to $25k), 0.03% ($25k+)Kasasa Cash Checking
Bay State Savings Bank2.01% (up to $20k), 0.25% ($20k+)Kasasa Cash - Account review
Legence Bank2.01% (up to $10k), 0.25% ($10k+)Kasasa Cash
Campus Federal2.01% (up to $10k), 0.05% ($10k+)Lagniappe Checking
Hawaii Pacific Federal Credit Union2.00% (up to $25k), 0.25% ($25k+)Kasasa Cash Checking
5Star Bank2.00% (up to $25k), 0.15% ($25k+)Kasasa Cash Checking Account review
Country Bank2.00% (up to $20k), 0.25% ($20k+)Kasasa Cash Checking Account review
Elements Financial2.00% (up to $20k), 0.10% ($20k+)High Interest Checking - Account review
Blue Federal Credit Union2.00% (up to $15k), 0.25% ($15k+)Extreme Checking (up to 4% w/account relationships) - Account review
Northwest Federal Credit Union2.00% ($15k min)Kasasa Cash - Account review
United Educators Credit Union2.00% (up to $10k), 0.25% ($10k+)Kasasa Cash
KS StateBank1.95% (up to $25k), 0.50% ($25k+)Check PLUS - Account review
Connexus Credit Union1.75% (up to $25k), 0.25% ($25k+)Xtraordinary Checking
MemoryBank1.60% (up to $250k) EarnMore Interest Checking - Account review
First Tech Federal Credit Union1.58% (up to $10k), 0.16% ($10k+)Dividend Rewards Checking
Superior Choice Credit Union1.50% (up to $30k)AMP Checking
Heritage Bank1.41% (up to $25k), 0.15% ($25k+)eCentive Account
Marine Federal Credit Union1.26% (up to $10k), 0.05% ($10k+)Kasasa Cash Checking
Bank of Internet USA1.25% (up to $150k), 0.00% ($150k+)Rewards Checking

Certificates of Deposit:

Bank Account Alternatives - NOT FDIC Insured

InstitutionRatesNotes
GM Financial Right Notes2.00% ($50k+), 1.85% ($15k+), 1.75% ($500+)
Vanguard Prime Money Market Fund1.77% 7-day yield
Ford Interest Advantage1.65% ($50k+), 1.60% ($15k+), $1.55 (less than $15k)Ford Interest Advantage review
Duke Energy PremierNotes1.65% ($50k+), 1.50% ($10k+), 1.45% (less than $10k)Duke Energy PremierNotes review
Fidelity Money Market Fund1.53% 7-day yield
Vanguard Municipal Money Market Fund1.48% 7-day yield
Ally Financial Demand Notes1.45% ($50k+), 1.30% ($15k+), 1.10% (less than $15k) (
Fidelity Municipal Money Market Fund1.05% 7-day yield

Post Publication Edits

4/18/2018: Amalgamated Bank new Online Savings account added.

Related Pages: savings accounts, money market accounts, reward checking accounts, nationwide deals, Internet banks
Comments
buckeye61
buckeye61   |     |   Comment #1
As Ken noted in his blog, the biggest online banks have been slow to adjust their savings rates since the FED's latest increase. I think banks like Ally are trying to direct customers into opening CD's by being more proactive on those rates.....especially shorter term(1-2 years)CD's. While the better CD rates are tempting, you have to be careful about committing funds in a rising rate economy.
kim
kim   |     |   Comment #2
When will we see 4% on a 5 year cd?
Robb
Robb   |     |   Comment #4
Last month we had one at Sharonview FCU but due to heavy demand it lasted all of 10 days. I wouldn't be surprised if we don't see another one until 2019 or 2020.
Nothing
Nothing   |     |   Comment #6
In my view, Sharonview is part of the overall problem, i.e. it does not know how much money it needs to loan out and, consequently, the amount of money it needs to receive. If it was marketed oriented it should have expected the over subscription and knew it from the get-go! And their Board should revisit its management!
anonymous
anonymous   |     |   Comment #9
Part of the problem may be that local CUs and banks are not always fully prepared for the national exposure they get if they offer good deals, thanks to websites like this one. A 4% CD may have been just the right rate that they would have needed to attract sufficient funds from a local customer base.
lou
lou   |     |   Comment #19
Yeah, let's attack a credit union that had the temerity to offer 4% CDs to its members. Are you insane?
anonymous
anonymous   |     |   Comment #5
Nobody really knows, but here is my best guess from the data I'm looking at. The fed's dot plot shows the current median projection for the Fed funds rate at 3.4% at the end of 2020. Since the yield curve is flattening, a reasonable assumption is that it would start to become relatively flat at that time, i.e. short and long Treasuries all yielding at about 3.4%. CDs should have some premium relative to 5-year Treasuries, so you might see 4% CDs in about the 2020 time frame, if it even goes that high in the current market cycle. (Of course, these rates don't move linearly over time and there are always CD specials, so there might be some isolated 4% CD opportunities.)
anonymous
anonymous   |     |   Comment #3
I've recently read about two reasons why banks are slow to increase their deposit rates in the current interest rate environment:

1. Banks use the usually upward-sloping yield curve to their advantage, accepting deposits at short-term rates and originating loans at long-term rates. A flat yield curve hurts bank's profit margins. But this does not fully explain why savings account rates were low, because they were high when the yield curve flattened last time, in 2006.

2. Quantitative easing caused a large increase in excess reserves at banks. During QE, the Fed bought long-term Treasuries on the open market. The sellers of these Treasuries (pension funds, for example) would then typically redeposit the money they received in the banking system, thereby increasing bank deposits. Here is a graph of Excess Reserves:

https://fred.stlouisfed.org/series/EXCSRESNW

Excess reserves were very low before 2008 and they are now $2 trillion. So unfortunately, banks don't really have a current need for our deposit money. This might slowly change with the unwinding of QE. But I think it could be a factor in interest rates not keeping up, especially at large institutions that would be holding a lot of these reserves.
Bozo
Bozo   |     |   Comment #7
Anonymous (comment #3), back in 2006, credit unions were starved for money. Loan demand was off-the-charts. Remember when folks actually speculated on multiple properties with other peoples' money? That was before the crash. 2006 was a golden year for lenders. Credit unions (and many banks) offered 5.5 to 5.95% on 5-year CDs to fuel the mania. You have to have a sense of history to appreciate. I built my initial CD ladder in 2006, so I remember all those rates and terms.
Amos
Amos   |     |   Comment #8
Bozo - enjoyed the trip down memory lane, and I remember it well, but the question at hand is where we go from here? Your thoughts will be appreciated if you care to share.
Bozo
Bozo   |     |   Comment #15
Amos (re comment # 8), I've resigned myself to treading water in fixed-income. In this rising-rate environment, bond funds are problematic. The classic CD ladder (anchored by 5-yr CDs), likewise. Of late, I've explored short-term "specials" (such as INOVA's 14-month 2.3%) to march-in-place. The key these days is to be "nimble".
111
111   |     |   Comment #14
Bozo - there is an additional reason why some banks paid high interest back then. For banks with unexpected rises in "nonperforming loans" (remember subprime mortgages?), there were a limited number of ways to improve the ratios that the FDIC and the Fed kept tabs on. One was to somehow make the loans "performing" again, and as we know that didn't happen. Another was to dilute the impact of the nonperforming loans by loading up on new funds, often from new depositors. You could always tell the banks that were in trouble via subprime - they paid the highest rates.

In my area CountryWide (remember their heavily-tanned CEO, who assured us that "everything is just fine"?) did not do mortgages - we were not located in a sand state, just the boring Midwest. But they did have a national available bank, and I recall their savings account (or possibly their money market account) paying me well over 5% for spare cash, circa-2006 to 2007.

In my area we did have National City Bank, a regional which wanted desperately to play with the big boys. They got their subprime mojo late in the game, and largely in Florida. Instead of being taken over by the FDIC they were forced into a "shotgun wedding" (essentially a takeover) by PNC in 2008, greased with TARP funds. As I recall they were also paying well over 5% until then.

And yet, these troubled banks carried the same FDIC insurance at the same cost to the depositor (zero) as did the healthy ones. Moral hazard, anyone?
anonymous
anonymous   |     |   Comment #10
Another interesting piece in the 'excess reserve' puzzle is that Congress changed how interest is paid in reserves in 2008. Before 2008, the Fed paid banks interest on 'required reserves' only. So banks only kept minimal excess reserves deposited at the Fed.

Since 2008, the Fed also pays banks interest on excess reserves. It's part of the reason that excess reserves are now $2 trillion. (Required reserves are less than 200 billion.) How much interest does the Fed pay? Currently 1.75%. So all the banks that have our money on deposit for less than 1.75% could turn around and park it at the Fed for a risk-free profit.

The Fed now uses this rate (Interest On Excess Reserves or IOER) as the primary policy tool to enforce its Federal Funds rate target.

1.75% on $2 trillion is $35 billion. Who pays this expense? Technically the Fed, but actually the American Taxpayers. The Fed makes ~$100 billion in income per year from its portfolio of Treasuries, Mortgage-backed Assets, etc. and the Fed is required to remit its net income to the U.S. Treasury. The IOER is paid from the Fed's income, reducing the net income that it delivers to the government.
Nick
Nick   |     |   Comment #26
#10, The FED is scam, they create the money, they lend it out and then collect the interest for the Cabal. The American people are victims and not the beneficiary of the FED.
The Federal Reserve Banks pay interest (1.75%) on required reserve balances and on excess reserve balances. The Board of Governors has prescribed rules governing the payment of interest by Federal Reserve Banks in Regulation D (Reserve Requirements of Depository Institutions, 12 CFR Part 204).
The FED does not pay the treasury, it is an even exchange for treasury notes that the congress spends without any coverage (it is called deficit spending adjustment).
slovokia
slovokia   |     |   Comment #11
While banks have more than enough reserves to honor transactions between them, they still need to attract deposits to fill the liability side of their balance sheets. Their profits depend on the interest rate difference (margin) between loans and deposits - so they still need to attract and retain cheap deposits to make money. If they lose deposits they must shrink their balance sheet (i.e. sell assets / loans or stop making new loans) A smaller balance sheet produces a lower return on equity for the bank.
kim
kim   |     |   Comment #12
So, the fed funds rate is currently 1.75. And the rate that you can get on a five year cd is 3%. Is it safe to assume that if the fed raises the rate 3 more times this year to 2.5 by the end of the year, that we will be able to get 3.75 to 4% on a 5 yr cd? Or Higher?
Nothing
Nothing   |     |   Comment #13
KIm, look at the other side of the "bet," i.e. what is the financial institution saying to "you?" Especially if hi/lo EWP? If high rate and high EWP, aren't they betting that rates will be going up? Conversely, if mid rate and mid EWP, what are they saying then?
Bozo
Bozo   |     |   Comment #16
Kim (re comment # 120, the short answer is "no".
anonymous
anonymous   |     |   Comment #18
kim, to answer your question, it is probably best to look at a graph of how these rates develop over time:

https://fred.stlouisfed.org/graph/?g=jveD

There's not a good graph of the highest 5 year CD rates over time (Ken?) so let's use the 5-year Treasury bond as a substitute. The graph linked above shows a 30-year time frame with the three most recent economic cycles where the Fed increased interest rates. Notice that the 5-year rate generally does not move up (or down) as much as the Fed funds rate. The 10-year rate is what you might consider the "long-term rate" over which the Fed does not have much control, so it moves very little and sometimes out of step with the Fed funds rate. The 5 year rate is somewhere in-between.

As you can also see in the graph, the 5 year rate does not move up nice and linearly. It sometimes moves up, moves sideways, drops a little bit, takes a breather and then increases more. So nobody can really predict with any kind of accuracy how much 5 year rates will go up towards the end of this year.

One way to make this kind of prediction is to calculate the "5 year forward rate" from something like the current 5-year and 10-year spot rates, but it would be just what the bond market currently "thinks" the rate will be in the future.
DCGuy
DCGuy   |     |   Comment #17
Wow. United Bank (MA) reduced the MM interest rate. They must have too much money coming to those accounts.
NYCDoug
NYCDoug   |     |   Comment #20
On their website, United Bank (MA)'s Advantage Money Market rate is still listed as 1.65% APY (just checked) . . . which it has been at for the past few months.

See last item here [under "Deposit Accounts"]: https://www.bankatunited.com/Resources/Rates/Deposit-Rates

Do you know any different, DCGuy?
NYCDoug
NYCDoug   |     |   Comment #21
Apologies!

I see there was a slight flare up to 1.7% for new account holders earlier this year (unobtainable by existing account holders).
DCGuy
DCGuy   |     |   Comment #31
Yes, I saw that their rate was listed at 1.7% recently.
Reader
Reader   |     |   Comment #22
Capital One just increased their 360 Money Market rate from 1.50% to 1.60%.
kcfield
kcfield   |     |   Comment #23
Deposit Accounts has the most thorough and up to date list of highest savings and CD rates. One thing that would make this excellent website even better is to post the customer rating (e.g 3 star, 4 star, 5 star) next to each bank listing, as do some other sites. The reason is that many of the banks and credit unions offering the best rates also have very low customer ratings. While one can, on this site, click on the particular institution to see the customer rating, it is much better to have the rating on the main page. That way, let's say for example, I am considering five banks that are offering 3.00% five year CD rates, I might be able to quickly narrow my choices to one or two by noting that the rest have star ratings of less than 4 of 5.
XXX
XXX   |     |   Comment #25
One can, on this site, click on the particular institution to see the customer rating.
DA is not some other site, which is confirmation of your first sentence.
kcfield
kcfield   |     |   Comment #27
Hi XXX: I noted,as you did, that one can click on the particular site, which is helpful; but more helpful to have it on the main page in my view; it makes it easier when one is trying to screen a large number of institutions by customer rating not to have to click on each individual one to do so. If Ken doesn't feel my suggestion is of value to to the blog, hopefully he will disregard my counsel.
anonymous
anonymous   |     |   Comment #34
kcfield, have you found customer ratings to be reliable? I think bank ratings are sometimes skewed because people tend to complain when something goes wrong but it's more rare to see people praise banks when things run smoothly. I tend to look more at objective ratings such as bank health, total deposits, etc.
anon
anon   |     |   Comment #24
I'd like to know anyones thoughts on Tax Free MMF, such as the ones at Vanguard? Isnt it better to go with something tax free if you are parking funds for a year?
Nick
Nick   |     |   Comment #28
#24, Nothing is tax free, the tax is either included in the product or you pay at the end. Tax free MMF has lower rate of return than regular investments in similar products and when you include the expenses, you will be better of with regular investments. Do not forget, tax free MMF is still required to pay alternative minimum tax, if you are in higher tax bracket.
anon
anon   |     |   Comment #29
Thanks Nick for your input. Well, Vanguard California Tax Free MMF yield is 1.43% right now -- no tax for CA or FED. With GS Bank, Ally, AMEX online account with yields of around 1.50% -- wouldn't it be smart to go with Vanguard? I'm just wondering if I am missing something here. Thanks all!
Bozo
Bozo   |     |   Comment #30
Nick (re comment #28), taxable equivalent yield varies by state, and by taxpayer. I've addressed this in other threads. Herewith a synopsis:

Some bonds are state-tax-free. Some bond funds are state-tax-free. When comparing bonds and bond funds, it is always important to consider the tax consequences.
DCGuy
DCGuy   |     |   Comment #32
Some tax free MMFs try to avoid AMT municipals in their investment objectives. But technically, any tax free MMF can invest in tax free or even taxable investments as stated on their prospectus. Usually, the rates on taxable funds have exceeded tax free funds, but in 2009 tax free yields actually was above taxable yields, but it only lasted several months.

For example, VMSXX is now 1.5% while the Fidelity brokerage sweep MMF account is at 1.3%. So tax free is the better deal (ignoring other taxable MMF yields).
Nick
Nick   |     |   Comment #33
#29,30,32, Be your own judge, do some math and see how you feel. I, for starters, would never consider Tax free investment, not because of the low return, but because living in CA is always a losing proposition.
Example: I invest a million dollars in CA in tax free MB and lets suppose I live in CA, the cost of living in CA is twice as much as the national average and the return on the purchasing power of interest received on the tax free money is already half of the money I receive in TN compared in purchasing power and the cost of living. It may sounds OK to do tax free in CA, but it will not help much, unless you double that income from better investments (even if taxed).
There is a point of no profitable return if you live in CA and most of you know that, however, if you want to shield the income from taxation, there are certain annuities where you can withdraw 10% penalty free money each year and the rest of the interest received accumulate tax deferred until your retirement and then you can chose to pay the tax over 10,20 or on life time table, which will amount to very little tax or you can exchange (do 1035) it for charitable entity annuity, where you will receive all of the accumulated income and principal staring from day one and then deduct all of the money you ever paid into the annuity. It is a win win proposition, talk to a tax advisor first.
Not Nick
Not Nick   |     |   Comment #35
Get your facts straight.

The California's state average cost of living isn't 100% above the national average. The statewide average is distorted because of high real estate prices in LA and SF.

It's hard to do a valid comparison because the largest metro area is Nashville at 1.5 million people. Heck your whole state is less than 6 million (LA & SF are bigger).

If you compare the Sacramento metro area at 2.6 million to Nashville's 1.5 million the cost of living there is only 8% higher.

Personally, I live in a nice little suburban city of around 100,000 people in south Orange County, CA.

Sure, the cost of living here is high. That's because people are willing to pay for schools, libraries, parks, senior and police services. The crime rate here is low.

The county has excellent regional beaches and parks that are just a few minutes away. Plus, a national forest that's practically in my back yard.

There's state and national parks within a two hour drive of where I live. Mountains and deserts that are beautiful places to explore.

Quite frankly, it's not a bad place to retire either. The state doesn't tax Social Security and Proposition 13 limits property tax increases to 2% per year.

Oh, and did I mention the weather? Yup, we pay extra for that too. And, being from Chicago originally, it's definitely worth the extra cost!
Nick
Nick   |     |   Comment #36
#35, I'm glad you enjoy your life in Orange county, however the topic was tax free vs cost of living in different states around the country. Are there exceptions, of course there are, but in general tax free investments are to low to be considered comfortable living in retirement. In orange county the real estate is high and therefore the property insurance and taxes add up to it and when you include transportation costs, registrations, traffic, pollution, food is about 30% higher than in other parts of the states and even in other parts of CA, it all adds up to unfordable tax free income retirement in CA.
If you like tax free, please buy them and do not get influenced by other commentators, you know best your financial condition. Watch out for Brown, he will tax anything to support his illegals.
Bozo
Bozo   |     |   Comment #37
"Quite frankly, it's not a bad place to retire either. The state doesn't tax Social Security and Proposition 13 limits property tax increases to 2% per year." This often goes un-noticed.
Nick
Nick   |     |   Comment #38
#37, California taxes everything, including the businesses and retirees. Examples:
California residents - Taxed on ALL income, including income from sources outside California,
barters and exchanges are taxable, car trade-ins are taxable, CA has sale and USE tax that may be applied at same time, the gain of real estate is taxable by California even if the real estate is sold when you are a nonresident, sale of stocks and bonds, all pension income is taxed at full rates, California's property tax rates are based on your home's full cash value at the time you buy the home (not the real value), California residents pay the second highest capital gains tax rate in the world – 33.3 percent,.......I have a list over 20 pages long, but you get the picture of the costs for living in CA.
Someone suggested retiring in CA, you must be out of your mind to make such decision.
lou
lou   |     |   Comment #39
Not going to argue about crazy Ca taxes, but I think you mean 13.3% (not 33.3%) for capital gains tax rate. This rate is for anyone with $1million ( married couples: $2 million) or more of income.

Not sure I understand the difference between the sale price of a home and the real value. I would say the real value of a home is whatever it would sell for in the marketplace. It is true that if you own the home for many years, the assessed value of the home would be far less than what the home would sell for in today's market, a considerable break for existing homeowners.
Nick
Nick   |     |   Comment #40
#39, The market value is the amount potential buyers are willing to pay for a property.
Appraised Value (real value) is the amount the banks are willing to finance the property.
A large gap between the appraised value and the asking price can be a problem for the buyer. If the lender thinks the appraised value of the property is not enough to cover the requested mortgage, the lender could require a larger down payment, which can be problematic for a buyer if there is mortgage involved.
The county will appraise the property at the sale price (mortgage + cash + down payment + closing costs), which means you pay property tax on your hard earned cash in perpetuity or until you live in it, even if the property is worth much less.
In other words, you could be living in a shack, in a bad neighborhood, but you payed millions for it and your property tax may be 10 times or more than the house next door of same size and looks.
On the capital gains, it is CA tax + Federal tax = 33.3% maximum (and that is second highest in the world).
lou
lou   |     |   Comment #41
You are referring to Prop 13 in Ca. This is about the only good thing taxpayers have ever done in this state. Before Prop 13, homeowners were paying huge property taxes because their assessed values were constantly going up as the market value of their homes appreciated. Now that can't happen anymore. Furthermore, if home prices should decline, a homeowner can petition the county and have their home's assessed value lowered, even though the county can't do the opposite. Thank god for Prop 13.
Nick
Nick   |     |   Comment #44
Lou #41, As long as the democrats are in power in CA, they will find way to nullify prop13. It has been a liberal dream for decades to undo parts or all of Proposition 13. Every year they try with sneaky amendments to separate business real estate from residential real estate and once they succeed to cut it in two, the prop 13 will be nullified.

A coalition of liberal groups is trying to qualify an initiative for the November ballot that would remove Prop. 13’s restrictions on reassessments and tax increases for corporate-owned property.
There is another way for the democrats to nullify prop 13, the governor can declares state of emergency or if the state defaults on the pensions, bonds and other public obligations. It is in the CA constitution, so do not rely 100% on prop 13 to stay around for life time.
#42 - This comment has been removed for violating our comment policy.
#43 - This comment has been removed for violating our comment policy.
Bozo
Bozo   |     |   Comment #50
Lou (re comment #39) unregistered poster Nick seems to have a bee in his bonnet. As a California retiree, I can assure you that the exemption of Social Security benefits from CA state income tax, when combined with Prop 13, creates a "stickiness" factor. The issue is total tax burden for retirees.
Nick
Nick   |     |   Comment #54
BOZO #50, this is a reply from the guy with bee in his bonnet. There is no reason to attack or defend the facts, therefore, I let the facts speak for themselves, please fine few minutes to read some facts:

https://www.forbes.com/sites/thomasdelbeccaro/2018/04/19/the-top-four-reasons-california-is-unsustainable/2/#7767798d55ce

http://uscommonsense.org/research/unsustainable-california-the-top-10-issues-facing-the-golden-state-wall-of-debt/

https://www.sfchronicle.com/politics/article/California-s-400-billion-debt-worries-analysts-6812264.php

http://www.latimes.com/politics/la-pol-ca-road-map-jerry-brown-budget-wall-of-debt-20170702-story.html

https://medium.com/@andrewengel2010/california-is-saddled-with-a-unsustainable-debt-and-without-federal-money-they-would-be-unable-to-f065fade4b2d

https://californiapolicycenter.org/californias-total-state-local-debt-totals-1-3-trillion/

https://www.newsmax.com/dwightlschwab/california-ronald-reagan-debt-sanctuary/2018/02/14/id/843420/

I think these facts should chase the bee from my bonnet.
Nick
Nick   |     |   Comment #55
Bozo #50, Please listen to Reagan of what it means to live in freedom, not under the Dems occupation:

https://www.youtube.com/watch?v=JDVT-8tUfiE

He knew in advance what the liberals will bring to this country a destruction from within.
anonymous
anonymous   |     |   Comment #52
anon (re comment #24), I'm very interested in something like VMSXX, also. 1.52% yield at, for example, a 22% marginal federal rate translates into a federal tax-equivalent yield of 1.95%, if I did the math correctly.
Bert
Bert   |     |   Comment #45
CalPERS calculation that it was 69 percent funded in 2016, which is slightly higher than the 66 percent level for state pension systems nationwide. That’s a $168 billion unfunded liability – again assuming that it will meet its earnings goals, which is dropping slowly to 7 percent.
Nick
Nick   |     |   Comment #46
That is misleading info, the CalPERS are in bigger trouble than the state of CA admits.
Please read some actual reality from reputable sources:
http://www.santacruzsentinel.com/article/NE/20180206/LOCAL1/180209803

https://www.city-journal.org/html/pension-fund-ate-california-13528.html

https://www.npr.org/templates/story/story.php?storyId=98392050

The corruption in CA is out of control, the taxpayers should brace for new bail out for CalPERS.
Bert
Bert   |     |   Comment #47
The stats I posted wss for 2016 and was from the following site calmatters.org/articles/commentary/commentary-the-dimensions-of-californias-pension-crisis/

My point is that California has severely underfunded persion fund.

They can't raise property taxes but some counties have total sales taxes of 9.75%.
Nick
Nick   |     |   Comment #48
Bert #47, you are correct for underfunded pension fund, however, the main reason are the promises for school teachers and firefighters and state employees retirement pensions, where 100K+ yearly retirement checks are not sustainable on long run. Second, the police forces are being promised $150+ pensions per year and the workers who contribute through their employers get pelted or being dumped from the plan. These people will go on welfare (alternative pension fund), paid and supported from sale and property taxes.
Something will have to give sooner or later, it is not sustainable on long run. It is not CalPERS fault alone, it is the bureaucrats in Sacramento who will ruin the pension system altogether, unless they find new ways to tax (again) the CA resident with an innovative or hidden tax. Some counties in CA have started adding firefighters fund and local union fees as an addition to the property taxes. If that spreads, it will become parallel taxing system.
Bert
Bert   |     |   Comment #49
State, local and the feds have promised great benefits but have never fully funded them in most cases. California has $400 billion in unfunded liabilities and debt from public pensions, retiree health care and bonds, financial analysts say.
Bert
Bert   |     |   Comment #51
Total state and local debt in California is 1.3 trillion
Nick
Nick   |     |   Comment #53
Bert, just look at this chart for CA spending, it says it all, there is no way to recover from the oblivion that may be coming soon. Those obligations are permanent now and only way out is to tax the residents to the bone and that may not be the permanent solution either do to moving goal post on the obligations piling up left and right.

https://www.usgovernmentspending.com/california_state_spending_pie_chart
deplorable 1
deplorable 1   |     |   Comment #56
It looks like the long end of the yield curve is finally starting to move up which is good news for us savers and the economy. For some reason the 10 year going to 3% today shocked the stock market. Why is this such a surprise with the FED raising short term rates and winding down their balance sheet? This is exactly what I expected to happen.
anon
anon   |     |   Comment #57
Ten year Schwab 3.25%

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