2018 Rate Trends for Savings Accounts - Online Accounts Rise the Most

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The last Fed meeting of 2018 is scheduled to start Tuesday. The FOMC statement should be released on 2:00pm Wednesday. A rate hike is expected which will move the target federal funds rate range to 2.25% - 2.50%. A Fed rate hike on Wednesday would be the fourth rate hike this year and the ninth rate hike since the Fed began normalizing rates in December 2015. The gradual rate hikes this year may not repeat in 2019. There have been signs the Fed may decide to slow down or pause rate hikes in 2019. We’ll see on Wednesday if the Fed indicates any changes for 2019.

How will the Fed’s action on Wednesday and its forecasts for 2019 affect deposit rates? To help answer that question, we did an analysis of our proprietary banking data with a focus on savings account yields since the Fed started raising rates.

Savings Account Rates Continue To Rise

During the time when the Fed first started to hike rates, savings account rates were slow to respond. Only minor savings account rate gains were visible for the first three Fed rate hikes. That started to change after the fourth Fed rate hike in June 2017.

The following chart is an updated version of the September chart. It details how savings account rates have changed at online banks, brick-and-mortar (B&M) banks and credit unions. The average rates at each of the three types of institutions are plotted starting in September 2014 and ending on December 2018. The chart is based on savings account data from more than 6,000 banks and credit unions.

savings account rates - online banks vs. brick and mortar banks

The most apparent aspect of the chart is the yellow line which shows the rise of the average online savings account rate. A slow rise can be seen until June 2017. At that point, the slope begins to steepen. Another steepening of the slope began in March 2018. From March 2018 to December 2018, the average online savings account APY has risen by 50 bps from 1.02% to 1.52%.

Less noticeable is the rise of the average savings account rates for B&M banks and credit unions. The dark blue line represents the average savings account rate for B&M banks, and the light blue line represents the average savings account rate for credit unions. Both of these lines have been relatively flat, but that has been changing in the last year. Even for these institutions, savings account rates have been rising in 2018.

Brick-and-Mortar Banks Overtake Credit Unions

During the years of the zero interest rate environment, credit unions generally offered higher savings account rates than the B&M banks. This can be see in the chart. From September 2014 to March 2018, the average savings account rates at credit unions were around two basis points above the average savings account rates at B&M banks. That started to change in 2018. In June 2018, B&M banks had overtaken credit unions. The average savings account rate at B&M banks was 0.21% vs. 0.20% at credit unions. That spread held constant as both averages increased, but recently that spread has widened. In December 2018, the average savings account rate at B&M banks was 0.26% vs. 0.23% at credit unions.

Why has savings account rates at B&M banks overtaken credit unions? More and more B&M banks have been introducing their own online savings accounts that must be opened online. These online accounts are designed to compete with the online-only banks and prevent customers from moving all of their deposits to the online-only banks. Several credit unions have also introduced online savings accounts for this same reason, but this is a little more common at the B&M banks. Thus, we’re seeing the average savings account rate rise more at B&M banks than at credit unions.

The following are two interactive charts of this same data which show additional details. The first chart shows the average rates from savings accounts at online banks, B&M banks and credit unions. The second chart focuses in on just B&M banks and credit unions to highlight the B&M banks overtaking credit unions. A summary of these details is listed below the interactive charts:

  • Average savings account yields as of December 13, 2018 are as follows:
    • 0.26% at B&M banks
    • 0.23% at credit unions
    • 1.52% at online banks (almost 6x the yield of B&M banks)
  • For the year 2018, the percent yield increases of average savings account yields are as follows:
    • 44% at B&M banks
    • 21% at credit unions
    • 60% at online banks
  • Percent yield increases of average savings account yields for all of 2017 are as follows:
    • 13% at B&M banks
    • 6% at credit unions
    • 32% at online banks

As can be seen in the data, savings account rates at all three institutions have been rising, with the largest increases occurring in 2018.

Online Savings Account Rates Continue to Dominate

The average savings account rates at B&M banks and credit unions have risen significantly, but they’re still much lower than the average rate at online banks. As of December 13, 2018, the average savings account yield at online banks is 1.52%, which is almost 6x the yield at B&M banks (0.26%).

Online savings accounts with rates much higher than the online average are readily available.

The highest nationally-available online savings account yield is 2.50% as of 12/17/18. This is up 85 basis points from early January when the highest yield was 1.65%.

Even the large and well-established online banks are offering savings account rates that are much higher than the online average. On December 29, 2017, I reviewed the 10 top savings accounts from the large internet banks with assets above $10 billion. The average yield of those 10 online savings accounts was 1.33%. The average yield of those top 10 has increased to 2.08% as of 12/17/18. Interestingly, this is an increase of 75 bps, the exact increase of the federal funds rate since that time.

You can find the highest rates by using our savings account table and money market table.

Large Banks Launch New Online Savings Accounts

Fueling the acceleration of online bank yield increases have been new online savings accounts launched in 2018 by several large banks. I listed five of these online savings accounts in September. Below is an updated list of these with one additional bank. Yields are current as of 12/17/18:

  • 2.35% APY (PNC High Yield Savings) at PNC Bank, $368.6 billion in assets
  • 2.35% APY (High Yield Online Savings) at Vio Bank, division of MidFirst Bank, $16.5 billion in assets
  • 2.25% APY (Online Savings) at Citizens Access, division of Citizens Bank, N.A., $126.9 billion in assets
  • 2.16% APY (CIBC Agility Savings) at CIBC Bank USA, $27.1 billion in assets
  • 2.05% APY (HSBC Direct Savings) at HSBC Direct, part of HSBC Bank USA, N.A., $172.4 billion in assets
  • 1.90% APY (Premium Savings) at E*TRADE Bank, $48.9 billion in assets

PNC Bank is the latest large bank to introduce a high yield online savings account. In October, the bank introduced an online savings account called the PNC High Yield Savings. It currently has a 2.35% APY on all balances. PNC is only offering the account in areas which do not have PNC branches.

The fourth largest U.S. bank by assets, Citibank, has also come out with an online savings account. However, Citibank doesn’t appear to be committed to a high yield for the long term. Thus, I’m not adding it to the above list. Citibank is only promoting a 2.15% interest rate for the first three months. After the promotional period, the rate falls to B&M levels. The promotional rate also requires a large balance of $25k, and it must be opened in a checking account package.

In July of this year, Citizens Bank launched a new internet division called Citizens Access.

Both MidFirst Bank and CIBC Bank introduced new versions of their online savings accounts. MidFirst Bank’s new online savings account is under its new Vio Bank internet brand. CIBC Bank didn’t create a new internet brand, but it gave its online savings account the name CIBC Agility Savings.

This year HSBC Bank decided to bring back HSBC Direct with a competitive online savings account rate, while E*TRADE Bank decided to introduce a new online savings account called the Premium Savings Account.

In the years between 2005 and 2009, HSBC Bank via HSBC Direct and E*TRADE Bank used to offer online savings accounts with very competitive rates. As the zero interest rate environment took hold, HSBC’s online savings account rate fell to near zero while other online savings rates held up much better. E*TRADE Bank decided in 2009 to shrink its banking business due to large mortgage-related losses during the housing crisis. First, the rate of its popular online savings account, the Complete Savings Account, became uncompetitive in 2009. Then in 2010, E*TRADE arranged with Discover Bank to transfer Complete Savings Accounts to Discover Online Savings Accounts for customers without E*TRADE brokerage accounts.

Savings Account Rates in 2019

The gradual Fed rate hikes this year may not repeat in 2019. There have been signs the Fed may decide to slow down or pause rate hikes in 2019. We’ll see on Wednesday if the Fed indicates any changes for 2019.

This study has shown that in 2018, online savings account rates have responded closely to Fed rate hikes. We should see similar savings account rate hikes if we see additional Fed rate hikes. If it appears the Fed is slowing down its rate hikes, banks will likely also slow down savings account rate hikes. The added online bank competition should help put upward pressure on the rates, but the Fed and the health of the economy are the main rate drivers.

This study has also shown how much deposit rates vary. Many banks, especially the large B&M banks, continue to keep their rates low hoping that inertia will prevent most of their customers from moving their money. Consumers who shop around for the best rates and who embrace online banks will be able to benefit the most from higher interest rates.

To review the top Savings and Money Market rates, both nationwide and state specific, please refer to our Savings Account rates table and Money Market Account rates table.

Related Pages: banking tools and data

Comments
DAfan
DAfan   |     |   Comment #1
The stock market looks like its collapsing. December will be the last rate hike for awhile.
gregk
gregk   |     |   Comment #2
It was Fed QE & ZIRP that drove up the market for years. But now the demand comes forth that appropriate FED policy normalization be suspended to preserve those ill-begotten gains. Something is rotten in Denmark.
Mi k Mulveny
Mi k Mulveny   |     |   Comment #3
I agree completely.
Brokered
Brokered   |     |   Comment #5
Nothing is normal when debts are what they are. Unsecured student loan debt alone is around 1.465 trillion. Let's see that for what it is: $1,465,000,000. Or, 1465 million. And, glory be, it's unsecured debt. Now that's a disaster waiting to unfold!

"Over 2.7 million borrowers owe in excess of $100,000, of which, about 700,000 owe $200,000 or more, according to data from the U.S. Department of Education."

It's actually quite funny that so much was lent to so many for so little. Gosh, we've become awfully stupid.
Test3
Test3   |     |   Comment #12
$1,465,000,000

You missed a few zeroes!
Make America Corporate Socialist Again
Make America Corporate Socialist Again   |     |   Comment #28
Yup.
The old Depression Era saying was, "The Rich get richer and the Poor get poorer."
The post Great Recession saying should be, "The 1%% get richer and to hell with anyone else."
Or, is that the FED's official mandate now?
It'll be interesting to see if they chicken-out on the December rate hike.
deplorable 1
deplorable 1   |     |   Comment #7
Just wait until the next FED meeting where Powell will speak more dovish about interest rate hikes and the stock market will shoot back up again. If you recall during the Obama years if there was even a mention of the FED thinking about ending QE or raising rates the market would tank.
payl sion
payl sion   |     |   Comment #23
Mr. D why do you say that as if it is the past tense?

Today's economy is just as fragile!

MAGA
deplorable 1
deplorable 1   |     |   Comment #34
The economy isn't fragile at all I was talking about the stock market which up until recently was rising at the same time as interest rates. I think now that interest rates are going back to more normal levels some investors are getting spooked. This is why Trump is hammering the FED and why Powell will be speaking more dovish. The stock market isn't the economy and it has been acting very irrational recently.
???
???   |     |   Comment #4
I see more and more Restricted Local Memberships with reasonable interest rates being featured.
Is this because DA is finding it harder to find National Open Membership institutions with high rates?
I am aware of questionable future interest hikes, but are the CU / Banks getting nervous?
deplorable 1
deplorable 1   |     |   Comment #6
In the past prior to the housing crisis I found that the B&M banks would beat the rates at credit unions 99% of the time other than the rare local special(for savings accounts). Things changed during the 0% years and while I don't use credit unions much for savings their CD specials have beat the banks on a regular basis. Banks have been slow to respond to rising interest rates after nearly 8 years of 0% and I'm worried that any loss of momentum from the FED will cause them to stop hiking. It is starting to look like 2019 may be the year to start locking in long term CD's unless we get a rise in inflation to keep the FED on track. This is one area where I but heads with the president trying to put pressure on the FED although I do understand his reasoning behind it.
payl sion
payl sion   |     |   Comment #20
Alas, the future was made clear when Herr President cut taxes at the top of the economic cycle, throwing the country further in debt in return for $500 employee bonuses. No bonuses this year equals slowdown, obvious except to a very few.
Rosedala
Rosedala   |     |   Comment #24
payl sion, did you do better under Herr Communist 2008-2016 President???
Anonymous
Anonymous   |     |   Comment #25
Trump Rules !
Luvcd
Luvcd   |     |   Comment #26
Rose is a rose is a rose...The I/me generation is alive and well!
Make America Reformed Again
Make America Reformed Again   |     |   Comment #31
Yes, I did.
That's because next year I'll have to pay taxes for the first time since I've retired.
Entirely due to "tax reform".
Ya, I live in California.
There's a cold front coming thru this week.
Today's high is going to be below 70.
Brrrrrh!
deplorable 1
deplorable 1   |     |   Comment #35
@MARA: So you live in a high tax state which is controlled 100% by tax and spend liberals(Democrats) and you probably just lost some of your SALT deduction because you have a large house/mortgage. This makes you angry at Trump. Poor folks like me got a good tax cut out of this deal while wealthier folks got hammered yet the media still tried to characterize this as a tax cut for the rich.
payl sion
payl sion   |     |   Comment #36
Inheriting $20 billion tax free is not getting hammered, Dr. D.

Are you hammered?
worth the delete braggart
worth the delete braggart   |     |   Comment #39
READING YOUR POSTS
how dare you consider yourself poor !
Make America Obvious Again
Make America Obvious Again   |     |   Comment #30
I guess you missed the #1 reason for the market meltdown, the Trump Tariff Tirade.
Obvious except to a very few...
dollarsncents
dollarsncents   |     |   Comment #40
@#30, Just proves you can never satisfy everybody. There will always be winners and losers.
HighYield
HighYield   |     |   Comment #8
The last hike? Fed rate hikes coming to an end soon? If so, could online banks & credit unions begin reducing rates early next year? For the liquid or short-termers, the Marcus 13 month "no-penalty" CDs looks good at 2.25%. Or a short regular 6 month CD paying 2.40%. I better quit procrastinating.
Mi k Mulveny
Mi k Mulveny   |     |   Comment #10
There is no reason that the fed should change its plan to continue with interest rate increases.
HighYield
HighYield   |     |   Comment #15
I'm with you. Hope they do it. But its just kind of hard to sell, being that we have a "slowing economy and such low inflation", so say the financial pundits. I'm not greedy, I'd be happy with a simple savings account and a 3% or 4% yield. :)

But I do miss the Jimmy Carter days... and his 14% CD interest. Great for savers; but sucked for buyers. 
DCGuy
DCGuy   |     |   Comment #17
"The Depository Institutions Deregulation and Monetary Control Act of 1980 set in motion a series of steps designed to phase in the deregulation of bank deposits, permitting a wider variety of account types and eventually eliminating interest ceilings on deposits. By the subsequent Garn–St. Germain Depository Institutions Act of 1982, on December 14, 1982."

Jimmy Carter? During his presidency, I had a passbook savings account with 5.25% rate. The money market rate changes did not come into play until the Reagan administration (rates went to around 15%).. During the Jimmy Carter administration, I remember when a gallon of gas "broke the buck" level for the very first time in history. That probably hurt his reelection bid in 1980. Also, the Iran-Iraq war contributed to the price increase.
Milty
Milty   |     |   Comment #19
Bought our first house during Carter days . . . higher rates appeared to reduce demand and thus kept prices lower. So, it was actually a good time to buy, if you had a job and good credit.
Make America ReasonableAgain
Make America ReasonableAgain   |     |   Comment #32
That's precisely why they will do it!
"No reason."
Jennifer
Jennifer   |     |   Comment #9
Popular Direct's 5year CD just went up to 3.60% and i think others will follow. I can't wait to hear the announcement this wednesday at 2:00 from the Fed! Certainly hoping it will be an increase.
payl sion
payl sion   |     |   Comment #21
Whoa, where did you hear this???
gregk
gregk   |     |   Comment #11
Powell not hiking Wednesday would show he's Trump's little toady. But daring it could endanger his job.
Mick Mulvenon
Mick Mulvenon   |     |   Comment #13
Powell lost his nerve. He is a real chicken!
gregk
gregk   |     |   Comment #14
Plus a four letter word at the end.
HighYield
HighYield   |     |   Comment #16
What is the current inflation number, 2%? Not enough inflation to warrant much of a hike. If any. But I sure hope they do it. After taxes and inflation, my CDs and savings account are earning a big fat ZERO percent! (Retirement is overrated. LOL!)
payl sion
payl sion   |     |   Comment #22
Fed takes a vote, it is not Powell's decision.

Of course the rate is going to increase in December, nobody questions it.
Make America A Reality Show Again
Make America A Reality Show Again   |     |   Comment #33
Yup, the US government has sunk to a new level - a reality show!
"You're fired!"
King Saver
King Saver   |     |   Comment #27
I'll be extremely upset if the Feb buckles like a cheap accordion to the market and big mouth who likes to Tweet! The Fed has destroyed savers income over the last 10 years and now it's time to pay the piper. You have to understand all the talking heads that make appearances on the business channels don't give a darn about savers and all they care about is making cash at our expense!
Robb
Robb   |     |   Comment #37
@KingSaver...totally agree and that is reflected in the post Fed conference Q/A sessions. Virtually no one questions what the Fed has done to savers the past decade or why the government skews inflation low with stated facts which show inflation much higher than reported on a number of fronts. More than likely the questions are vetted well in advance as very few difficult topics are typically addressed. The majority of questions are slanted typically with a dovish bias.
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