Top Savings Rate Tumbles to 1.75% APY - Savings and CD Average Rates Resume Fall

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After remaining steady for the past three weeks, average savings rates and cd rates dropped over the past week. Perhaps more significantly, the top savings rate tumbled.

After remaining steady for the past three weeks, average savings rates and cd rates dropped over the past week. Perhaps more significantly, the top savings rate tumbled.

Savings Rates

Average rates dropped from 1.36% APY to 1.34% APY. The drop unfortunately was led by rate leaders. Southern Community Bank dropped the leading non-promotional rate from 2% APY to 1.75% APY. Franklin Synergy also dropped their rate from 1.65% APY to 1.6% APY. For promotional rates, Everbank remains on top with their 3-month introductory bonus rate of 2.25% APY. After the three-month period, the rate drops down to 1.26% APY for a blended one year APY of 1.51% APY.

I never thought I'd see the day when average rates would go to 1% APY but at this point we're getting awfully close.

CD Rates

The average 1-year CD dropped from 1.61% APY to 1.57% APY. First City Bank continues to hold the top spot with a 1.80% APY CD. First City Bank is in bad financial shape and has been operating under a FDIC Cease and Desist Order since 10/09. Tennessee Commerce Bank maintained the second spot at 1.70% APY.

The average 3-year CD rate also dropped by 2 basis points from 2.47% APY to 2.45% APY. The top spot continued to be occupied by USAA Federal Savings Bank, which offers a 2.65% APY CD with a minimum deposit of $175,000. The next highest rate is Acacia Federal Savings at 2.50% APY and a $500 minimum deposit. Acacia dropped their rate this past week from 2.65% APY.

The average 5-year CD rate dropped the most over the past week moving from 3.17% APY to 3.12% APY. We infrequently see the 5-year drop by more than the other shorter terms.

USAA continues to have the top rate at 3.31% APY. Everbank which holds the second highest rate dropped from 3.30% APY to 3.25% APY. Two weeks ago Everbank was offering the same CD for 3.39% APY.

The Market and Interest Rates

The recent volatility in equity and bond markets has dampened some of the rate pressure from a strenghening economy. Whie Treasury yields rose today with the stock market surge and the news of Europe bailing out debt-ridden economies, Treasury yields are still lower than they were several weeks ago. Throw in jitters about sovereign debt default and yo-yo-stock markets, and repeated statements from Bernanke that rates will remain low for an extended period, and you have the environment that could push savings rates down to 1% APY.


The chart below shows that while the spread between different deposit accounts is still high but is flattening or coming down. The spread between savings and 3-year CD rates has dropped for the past six weeks. While savings rates have continued to come down, 3-year CD rates are coming down even faster. The ratio between 1-year CDs and 5-year CDs has remained steady over the past month.


Sol Nasisi
Sol Nasisi: Sol Nasisi is the co-founder and a past president of BestCashCow, an online resource for comprehensive bank rate information. In this capacity, he closely followed rate trends for all savings-related and loan products and the impact of rate fluctuations on the economy. He specifically focused on how rates impact consumers' ability to borrow and save. He also has authored a wee

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  • Shorebreak

    May 13, 2010

    Simply amazing. We are witnessing the financial destruction of savers, mostly elderly, who have prudently put money into safe monetary vehicles, like FDIC insured certificate of deposits, over many years as a supplement to their income from Social Security or other pensions. Imagine, having $1 million in a 5 year CD yielding 3 percent would only generate $30k a year in income. Savings deposits yielding 1 percent are even more dismal.

    Yet the outlook is not good, with the Fed repeating the mantra " rates will remain low for an extended time", expectations of rate rises any time soon are dashed month after month. Will savers be forced to put their money into more risky financial products or will they tough it out for another year?

    With falling rates at banks, credit unions, and at on line financial institutions it won't be long before many savers throw in the towel and put their funds into dividend producing equities and bonds. Unfortunately, at some point, like always, the markets will correct and these income investors will spend many sleepless nights bemoaning the fact that their principal is disappearing into thin air.

    It's the old question of what to do? Meanwhile, one just sits back and watches their stream of income deteriorate further while the banksters on Wall Street pop champagne corks and throw confetti in the air as the markets go ever higher and higher.

    Thanks Sol for monitoring the world of dropping deposit rates. At least we know how bad it really can get for savers.

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