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Online Savings & Money Market Account Rates 2021

Online Savings & Money Market Account Rates

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Sell In May And Go Away?

We have all heard the old stock market adage: “Sell in May and Go Away.”   But, anyone who has followed the market for the last few decades knows that the adage only held true in 1999 and 2008.   Even if you had sold in May 1987, you would have missed a tremendous run into October of that year.

But, this year there are too many telling signs to discard the adage.   The stock market is up over 16% since its Christmas Eve 2018 low (the S&P has moved from 2350 to 2900), for its best four-month start to the year in over 3 decades.   All indices appear poised to eclipse all time highs.   But, it isn’t just the pace and the intensity of the move up.   Valuations are entirely out of whack in some favored sectors.  For example, casual service restaurant stocks like Starbucks and McDonalds are trading at PE ratios over 25x and PEG ratios over 2x.   Some REITs are trading at similar valuations, regardless of asset quality.   And, then in the wake of the Lyft, Pinterest and Zoom IPOs, people are no longer speaking about PE and PEG ratios, but instead trying to rationale 15 + Sales – to – Earnings ratios (remember 1999 anyone?).

To boot, there is still so much that can go wrong.   While we have heard about the UK and the possibility of a hard Brexit catastrophe for 2 years, the risk is still sitting out there for the second half of 2019 (the new deadline is October 31).   Likewise, in the US, over the same period, we’ve worried about an egomaniac in the oval office who appears increasingly irrational and unhinged, and while the economic risks associated with the underlying situation have not materialized, the risks to the market remain.   We also seem to have North Korea brewing again.

As the Wall Street Journal pointed out this past weekend, many institutional investors are wondering whether to lock in their gains for the year and go away.

Longer-term investors, unlike many institutional investors, face the risk of being forced back into a market that is still higher at a later date.   They also may face significant capital gains taxes.   Its hard to sell out of a rising market, but it just might be a pretty prescient move to raise cash now.

See the best savings rates here.

Another Benefit of No Penalty CDs Quickly Comes to the Fore

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Six months ago, I wrote on BestCashCow about the benefits and disadvantages of No Penalty CDs.    At the time, my analysis focused heavily on the opportunity to gain a small amount of yield over savings accounts with no risk and very little inconvenience.   So long as you do not need to access you cash for 10 days, the two main drawbacks are that you ordinarily need to close (and reopen) the entire product in order to make even a small withdrawal and you need to monitor rates in a rising rate environment to be sure that you are still earning a competitive rate (BestCashCow makes monitoring rates easy here).

My article was based on the assumption that savings rates would continue to rise in the manner in which the Federal Reserve was guiding at the time and that we would see savings rates over 3% in 2019.   Since then, the Federal Reserve has lost its independence from the Executive branch and its most recent guidance indicates that it isn’t going to be raising the Fed funds rate in 2019.   CD rates had already begun coming down before the President (directly and through Stephen Moore) and Larry Kudlow launched an attack last week on Jerome Powell, demanding an immediate 50 basis points reduction in the Fed Funds rate in order to combat an inverted yield curve.

It is now highly unlikely that savings rates are going to be increasing as we go through 2019, and it is very possible that they could fall from here.   That makes any opportunity to earn a premium over your current savings rate very attractive, and it also makes it attractive to lock in such a rate for around a year.  But, you should be hesitant to go out much longer than a year as there is not much of a premium in longer term CDs at the moment and the Fed is still guiding towards a Fed Funds raise in 2020).     

As of this writing, you can still find a one-year CD that yield 2.80% or more.   You can find those rates online.   You can also find them at banks near you and credit unions near you.

In an environment where rates are not going up and where there is a still premium in one-year CDs, the main reason that people resist one-year CDs is the early withdrawal penalties.   Most online banks charge a penalty of at least 3 months interest should you require your cash before maturity, and this penalty can invade principal.  Some banks and credit union charge more than others for early withdrawal.

No Penalty CDs do not bear the risk of an early withdrawal penalty and enable you to lock in a rate for about a year.

As of this writing there are three interesting No Penalty CDs being offered by major online banks.   Purepoint is offering 2.60% on their 13-month, Marcus is offer 2.35% on their 13-month and Ally is offering 2.30% on their 11-month.   At each of these banks, these rates not only represent a premium over the comparable online savings rate, but also prevent your rate from falling.   You, however, may still find higher online savings rates from other banks, but you’ll bear the risk of falling rates during this year in which the direction and independence of the Federal Reserve has become less certain.

You can always check No Penalty CD rates along with other special term CD rates here.

Editor's Note: On April 9, 2019, Purepoint lowered their 13-Month No Penalty CD rate from 2.60% to 2.50%.

April 2019 Update – With the Fed on Pause, Here are 5 Savings and CD Products to Consider

Rate information contained on this page may have changed. Please find latest savings rates.

The Fed’s March meeting ended with guidance that it is going to keep the Fed Funds rate on hold until at least early 2020 and the Trump Administration is actively campaigning for an immediate reduction in the rate in order to fight off an inverted yield curve.  

Against this new reality, those who have cash that they aren’t going to need for a while might want to consider CDs.

Here are some products that we find particularly compelling:

1.  Colorado Federal Savings Bank – 2.86% 1-Year CD, $5,000 Minimum

CSFB has been around for a while, and while they have never been competitive on the online savings side, their online CDs have been attractive.   After raising their CD rates on March 15, their one-year CD is one basis point above the next highest rate.   Their early withdrawal penalty is 3 months interest.   It is a smaller bank so you should be careful not to go above FDIC limits.

2. CitizensAccess – 2.85% 1-Year CD, $5,000 Minimum

CitizensAccess has gotten positive reviews on BestCashCow since launching in 2018.   Their accounts are easy to open and manage online and the penalty for early withdrawal is also only 3 months interest.  

Check out the best 1-year CD rates here.

3.  Purepoint – 2.60% 13-Month No Penalty CD, $10,000 Minimum

Even with the change in the Federal Reserve’s disposition, many are hesitant to lock their money in for a year.  We recently recommended, therefore, that people take a new look at No Penalty CDs.   Within the No Penalty CD space, Purepoint’s 2.60% 13-Month No Penalty CD is the most attractive.   It represents at least a 10 basis point premium on the best savings accounts (and a 25 basis point premium on Purepoint’s savings account) and does not have the liquidity risk of CDs.  

Check out other No Penalty and Special Term CD rates here

4.   My Savings Direct – 2.40% Savings Rate, $1 Minimum Balance.

My Savings Direct is owned by Emigrant Bank.   While Emigrant has disappointed customers by lowering rates and playing games in the past, they have held their savings rates constant for the last few months and may have moved beyond their past games.   For now, their rate is one of the best rates available online with no minimum balance.

5.    CIBC Bank – 2.39% Savings Rate, No Minimum Balance

CIBC is one of Canada’s largest banks and launched its US online bank in late 2018.  CIBC was among the first to raise their rates when the Federal Reserve raised the Fed Funds to its current level in December.   Given that they are a new entrant to the space and eager to gain a foothold in the US online savings market, we think that they will be among the last to lower rates if the Fed really begins to change course through 2019.  The bank’s online savings account has no minimum balance.

See and compare all of the best online savings rates here.

Have a great month.