August 2019 Savings and CD Update – Drawing a Line in the Sand

It is August and that means that you should be at the beach. While you are there, we suggest you draw a line in the sand.

Last week, the Federal Reserve moved to lower the Fed Funds rate to a range of 2.00% to 2.25%. In anticipation of the Fed move and throughout July, many well known online banks and branch banks lowered the rates they are offering on savings and money market accounts. In the several days since the Fed’s move, still others have followed suit.

However, there are some banks that have held their rates firm. We do not believe that you have to tolerate having your savings rate lowered, especially since the Federal Reserve indicated in its July 31 statement that it may be done lowering rates and that its next move may be to raise rates again.

As of today’s date, we could find 18 banks that are offering online savings and money market rates that are still above 2.30% APY in every state in the country. (Several others online banks have offerings above 2.30% APY that are not available nationally). Those who will not need access to their cash for five business days can also get rates at or above this level with Ally’s or Marcus’s No Penalty CDs. That is a total of 20 national offerings above 2.30%, and you may even find local rates at or above this level at banks and credit unions where you live.

With FDIC and NCUA limits at $250,000 for individuals and $500,000 for couples, it means that you can deposit up to $5 million as an individual and $10 million as a couple across these 20 banks and still be fully insured while earning 2.30%.

And, if you do not need complete liquidity, you can still earn even more than 2.30% in short term CDs.

For this reason, we recommend that your line in the sand be no lower than 2.30%. If your bank tries to lower what it is paying you below this level, we recommend that you look elsewhere.