Savings and Certificate of Deposit Rates Still Tumbling - Jan 23, 2009

January 23, 2008 Update

The big news this week was the drop today in DollarSavingsDirect's savings rate from 4% APY to 3.5% APY. DollarSavings represented the last 4% APY savings rate and its drop, along with several other banks brought the average rate on savings accounts from the BestCashCow rate table down below 3% APY.

The other big drop was in 12 month (1 year) CD rates, with the average rate falling a whopping 40 basis points from 3.32% APY to 2.93% APY. This was impacted by the removal of First Command Bank from the rate charts after they informed us their accounts are not available to the general public.

As the chart shows, rates continue to drop with no end in site. Looking at the chart, it seems possible that they may bottom out in the 2% APY average range, meaning that rates could come down by another percentage point before the cuts are done. If you locked in a CD in October you should be very happy with that move.

The changes from the pervious week are:

• Savings Accounts: 7 basis point drop from 3.06% to 2.99% APY
• 1 Year CD: A whopping 40 basis point drop from 3.32% to 2.93% APY
• 3 Year CD: 13 basis point drop from 3.26% to 3.13%APY
• 5 Year CD: 18 basis point drop from 3.82% to 3.64% APY

Note: 100 basis points represents 1%. Thus a drop by 100 basis points would be a drop from 4% to 3%.

Here are the rate of drops for the past five weeks since the Fed dropped rate, in percentage points.

• Savings Accounts: -.07, -.05, -.11, -.04, -.05 , -0.7
• 1 Year CD: -.14, -.24, -.16, -.11 , +.08 , -.40
• 3 Year CD: -0.0, -.33, -.13, -.09, -.16 , -.13
• 5 Year CD: -.01, -.36, -.08, -.01 ,- .17 , -.18