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Online Savings & Money Market Account Rates 2022

Online Savings & Money Market Account Rates

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No Safety in Current Savings Rates

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In the current dreadful economic environment, online savings accounts may provide security of your principal (as long as you stay within FDIC limits), but the rates can fall out from under you in a second.

The current economic environment is pretty miserable and the only place to hide is in cash.

But, when you hide, don't rely on the interest rate that is advertised.  The reality is that there is no guarantee that you will be getting that rate from one day to the next. 

In this environment, banks will compete for deposits with one another on any given day.  The next day, the economy will deteriorate, short term treasuries will fall (as will expectations about a Fed rate hike), a bank or two may go under, and the rate that is being offered may fall.

Plenty of banks, including Countrywide and One United, have lowered their savings rates over the last couple of days.  As a result, short-term CDs are beginning to look like a much more attractive way to get through this period without seeing the interest rate that you are earning decline immediately.    The exception, of course, is the Everbank program, which is guaranteed for new depositors for 3 months (so is effectively a CD).

Auction Rate Securities Problem Ends As It Began - quietly

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Without great fanfare, this problem has begun to wind down.

For me, the auction rate security problem was the cause of many sleepless nights.  In the middle of February, my broker suddenly let me know that all of my cash which he had advised me to move into auction rate securities over the last several years, was illiquid until further notice.  He told me that the auctions had failed and that I would be getting higher rates to compensate me for my loss of liquidity.  He could not assure me when I would get out of these bonds which led to many sleepless nights as I needed the liquidity.

As the months rolled by, the excuses mounted, as did the obvious and clear indicators of impropriety on the parts of all of invvestment banks (see some of the earlier acticles posted by me and others on   Little by little, one by one, many of these things got called away.  It started with the municipal and state issues that did not want to, or could not, pay the heavy default rates, and earlier this month, some of the major financial institutions that use auction rate preferreds to leverage their portfolios, including Nuveen, finally gave into the court of public opinion and got rid of theirs.

I understand that Pimco and Blackrock still have not agreed to refinance or refund the holders of their crooked issues.  Folks at these organizations should be ashamed that they are continuing to force investors to be illiquid so that they can get higher returns.  I believe that they soon will come under pressure to get rid of their auction rate preferreds, leaving these instruments to be a remnant from 2008.


Treasury Yields Fall, Market Tanks and Only Cash is Safe

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Markets are tanking. This is a terrible time to be invested.

Stock markets are just beginning a long decent.

Commodities have done well, but that has been largely driven by hedge funds.  The funds will now sell to preserve gains (cover losses from equity markets).  There will be a cascading effect across all commodity classes which will be exascerbated by a global market decline.

Inflation is spiraling out of control.  The Fed is not addressing it, and now looks increasingly unlikely to do anything.  Treasury yields on 2 year, 5 year and 10 year Treasuries have fallen by 30 bps over the last week.  Your cash will earn less now in spite of inflation.

Cash is still the best place to be for the moment.  I think investors though should be jumping on some of the short term CD offerings before they go away (one year or less is my preference).  These rates are being held at these levels as banks compete for deposits, but they are unlikely to stay there now as we head into a deep, deep recession.

These are scary times folks.  It is OK to run for cover.

Check current savings rates here.