Best Bank Account Interest Rates - Summary for July 10, 2018

The odds that the Fed will hike rates two more times this year appear to have gone up slightly from last week. The June jobs report that was released last Friday improved the odds. In June, 213,000 jobs were added which was above economist expectations. However, wage growth was a bit below expectations, and the unemployment rate increased slightly as more people returned to the job market. Overall, the jobs report should be considered good news for savers hoping for two more Fed rate hikes in 2018. According to this MarketWatch article:

The June employment report gives the Federal Reserve a green light to continue to raise interest rates at what’s been shown to be its preferred once-every-three-months pace, economists said Friday.

The minutes from the Fed’s June meeting were released last Thursday. The minutes showed that there was discussion about risks that increasing tariffs could hurt the economy. There was also discussion about the flattening of the yield curve and the risk that an inverted yield curve could lead to a recession. Anything that weakens the economy will give the Fed reason to pause its rate hikes.

The 10-2 spread (the difference between the yields of the 10-year and 2-year Treasury notes) has fallen a bit in the last week. The difference between the 2-year yield (2.59%) and 10-year yield (2.87%) is now only 28 bps (down from 30 bps last week). The drop is due to the long-term yields rising less than the short-term yields.

Treasuries continue to be a competitive alternative to CDs. They become even more competitive when the tax advantages of Treasuries are considered. For more discussion on the pros and cons of Treasuries Notes compared to CDs, please refer to this DA Forum thread and this DA blog article.

The odds of additional Fed rate hikes in 2018 went up some in the last week according to the Fed funds futures. The chance of at least one more rate hike this year still looks solid. Those odds are 94.9%. The odds of at least two rate hikes have risen above 50-50. The odds are now 58.1% (up from 48.5% last week).

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

Treasury Yields:

• 1-month: 1.88% down from 1.91% last week (0.95% a year ago)
• 6-month: 2.15% up from 2.12% last week (1.13% a year ago)
• 1-year: 2.36% up from 2.33% last week (1.23% a year ago)
• 2--year: 2.59% up from 2.53% last week (1.40% a year ago)
• 5--year: 2.77% up from 2.72% last week (1.93% a year ago)
• 10-year: 2.87% up from 2.83% last week (2.38% a year ago)
• 30-year: 2.97% up from 2.96% last week (2.93% a year ago)

Fed funds futures' probabilities of future rate hikes by:

• Sep 2018 - up by at least 25 bps: 86.8% up from 77.4% last week
• Dec 2018 - up by at least 50 bps: 58.1% up from 48.5% 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 has finally reached a 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:

• Salem Five Direct eOne Savings (+20 bps to 2.05% APY up to $1m)
• Customers Bank Ascent MM Savings (new, 2.03% APY for $25k+)
• Citizens Access Online Savings (new, 2.00% APY for $5k+)
• Northpointe Bank Ultimate Savings (-10 bps to 1.95% APY for $25k+)
• Sallie Mae Bank Money Market (+15 bps to 1.90% APY)
• Capital One 360 Money Market (+15 bps to 1.75% APY for $10k+)
• Ally Bank Online Savings (+10 bps to 1.75% APY)
• Discover Bank Online Savings (+10 bps to 1.75% APY)
• Barclays Online Savings Account (+10 bps to 1.75% APY)
• Quorum FCU HighQ Savings (+50 bps to 1.75% APY)
• Alliant Credit Union Savings (+10 bps to 1.70% APY)
• HSBC Direct Savings (new, 1.70% APY)

We have a new internet bank. Citizens Access was launched on Monday, and it looks promising that Citizens Access will be a strong competitor for the long term. This is the internet bank of the $122-billion Citizens Bank, N.A., and it appears they have put the resources into the internet bank to maintain competitive savings account and CD rates and to maintain an online platform and customer service that allow customers to easily manage their accounts. The current Online Savings Account rate of 2.00% APY for balances of $5k+ tops our lists for a non-promotional-rate savings account. The bank is emphasizing that it intends to “offer market-leading rates, with no promotions or teasers.” Only time will tell if they are able to accomplish this over the long term. Please see my Citizens Access review for more details.

Another new internet savings account was launched recently. The Pennsylvania-based Customers Bank (which has over $10+ billion in assets) launched the Ascent Money Market Savings Account with a 2.03% APY on balances of $25k+. Instead of creating a new website, Customers Bank just added a special landing page for this online account. Please see my Ascent Money Market Savings review for more details.

We’ve seen several past banks start internet banks that became disappointments. One old example was HSBC and its HSBC Direct. Way back in 2007, HSBC Direct was offering a promotional 6% APY on its Online Savings Account. The Online Savings Account rate remained competitive for a while after 2007, but the rate eventually sunk to very low levels.

HSBC is trying again. They brought back their HSBC Direct with an online savings account. The current rate of 1.70% APY lags the savings account rates of the big internet banks (most are now at 1.75% APY). So there’s little reason to move money into HSBC Direct. However, if they’re serious, perhaps they’ll bring back a competitive promotion that's similar in competitiveness to what they offered in 2007.

The number of savings and money market accounts with yields of 2%+ is growing. Salem Five Direct is the latest existing internet bank to reach this milestone. Its eOne Savings account now earns 2.05% APY for balances up to $1 million. However, this is a promotional rate that’s only intended for new eOne Savings customers. Existing customers have reported success when requesting rate upgrades. Please see my eOne Savings review for more details.

In addition to the standard type of savings and money market accounts, I’m including semi-liquid accounts to the list that offer higher rates. They have more liquidity than most CDs, but they don’t have the liquidity of the standard savings account which allows unlimited deposits and up to six withdrawals (most types) per month. The intent is to provide options for higher rates than standard savings accounts, but with fewer deposit and withdrawal limitations than standard CDs.

I was going to include AgFed Credit Union’s No Penalty CD (2.40% APY). However, this CD special has just ended.

The other special savings account is still available. It’s the High Rate Quarterly Account from the easy-membership CommunityWide Federal Credit Union. This account has a 2.10% APY for balances of $500 and above. The special nature of this account is that penalty-free withdrawals are only allowed for the first five days of each calendar quarter. Any other withdrawals have a penalty of 30 days of interest on the amount withdrawn. Deposits can be made at anytime. Being able to add deposits at any time is an advantage of this compared to no-penalty CDs. However, unlike no-penalty CDs, there’s no guarantee of the rate remaining competitive. The High Rate Quarterly account has a long history of low rates before the recent rate hike. The odds of this account rate remaining ahead of the top internet savings account rates over the long run is questionable. Please see my High Rate Quarterly review for more details.

Not all banks raised their savings account rates. Northpointe Bank ended its offer of 2.05% APY guaranteed for one year. The rate dropped to 1.95% APY.

With savings and money market accounts, you never know how long a top rate will last. Even if it’s not a promotional rate, the bank is always free to lower the rate to a non-competitive level. The only exception is if there’s a rate guarantee period, but those guarantee periods eventually end. One thing to look at is the account rate history. This certainly doesn’t guarantee long-term competitiveness, but it can show if the bank has been serious about being competitive for the long term.

Sallie Mae Bank’s Money Market account has remained competitive since January 2017 when it first broke 1% APY. In the last year, the rate has steadily increased and has remained in the high end for internet banks. Last week’s rate hike kept the account near the top. The account rate increased 15 bps to 1.90% APY for all balances.

Most savings account rates of the large internet banks have reached 1.75% APY. The latest ones to reach this rate include Capital One 360 Money Market, and the online savings accounts of Ally, Barclays and Discover.

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’s now at 2.04%. Fidelity Money Market Fund isn’t far behind with a 7-day yield of 1.85%.

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.

Reward Checking Accounts

There continues to be little change to my list of nationally available reward checking accounts. In the last two weeks, none of the nationally-available reward checking accounts had any changes.

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.

As I mentioned above, the AgFed Credit Union 30-month No Penalty CD offer just ended. With a 2.40% APY, this no-penalty CD was an exceptional deal which is why the deal lasted only nine days.

The list of CDs with terms around 3 years with 3%+ APY has been growing. We now have eight CDs with 3% APY. The latest one is the 41-month CD special at Veridian Credit Union. This has a 3.00% APY for a $1k minimum deposit and a 3.10% APY for a $100k minimum.

The two best short-term CD deals are currently the 15-month CD at MainStreet Bank (2.80% APY) and the 9-month CD at Andrews FCU (2.75% APY).

For 5-year CDs, we now have five easy-membership credit unions offering APYs in the range of 3.25% to 3.30%, and just recently, KS StateBank has raised its 5-year internet CD rate to 3.25% APY.

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:

Reward Checking Accounts:

• Best Reward Checking Account Rates

• Noteworthy Accounts Available Nationwide:

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

• Investment Discussion Forum

• Series I Savings Bond Purchases from May 2018 through October 2018

Removed, Rates Too Low