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Online Savings & Money Market Account Rates 2021

Online Savings & Money Market Account Rates

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An Entirely New Risk to Applying for Online Savings Accounts has been monitoring the best savings rates nationwide for over 15 years, and for the first 14 plus, the situation for the consumer was very straightforward.

You’d check to see what the best savings rate is on a site like ours or, click through to apply and, voila, you’d be making more interest on your cash than you could possibly be making anywhere else.

Recently, we’ve seen an influx of so-called “fintechs” in the financial space.  Fintechs are designed to do nothing that a traditional bank cannot do.  They basically lend and borrow money (without the consumer protection of the FDIC or NCUA), facilitate financial transactions, etc.  From a consumer standpoint they offer ease of use (an IPhone application) and sometimes lower transaction costs.  In return, the consumer is forgoing the regulatory protections and parting with their personal identifying information (address, social security number, drivers license) and willingly or unwillingly creating a trove of information that can be used to market to them.

And, in the post-Facebook world, this personally identifying information has real value.  Anyone who questions whether real value can be made off of this information need only look at the types of travel rewards that major credit card companies offer just to get a credit card in your hands.   (Compare all of the best credit card sign-up bonuses here).

Against this backdrop, smaller banks are struggling to compete.   Yet, many of these banks do not need new deposits (or customers) as they are also flush with cash and the entire economy is awash in liquidity.   Hence, we are now getting reports of smaller lesser-known online banks that are “offering” savings rates or CD rates that are well above those of their larger competitors, and are walking people through the online application process and summarily rejecting all applicants (or the vast majority of applicants), either through an outright rejection notice or through never responding (and denying any knowledge of the application).   Unfortunately, this is an easy way for them to build their valuable databases with your personal information and that is worth more to them right now than having you as a customer.

It pains us to see this occurring with regulated banks and credit unions.   And, it pains us to expose that this is happening.  But, we have received so many reports from readers of this happening in 2021 and we’ve seen it from own experiences.   So, yes, it is happening.

And, the question becomes what you can do as a customer to protect yourself and your personally-identifying information.   We recommend the following steps.

1.  Err towards the better-known, more established online banks.  These banks are always competitive over the long-haul and they don’t refuse customer accounts. While you may make a few basis points less, these banks are not going to take your information and refuse you as a client.  You’ll find at least thirteen of these to choose from: Marcus, Ally, Synchrony, CIT, CitizensAccess, American Express, Purepoint, CapitalOne, Barclays, CIBC, TIAA, Sallie Mae and Discover.  On the credit union side, places like Navy Federal Credit Union, Pentagon or Alliant are not going to deny your application if you meet the Field of Membership Requirements.

2.  Consider established banks with strong local or national reputations that are spending large amounts of money to establish national online brands.  These banks are also unlikely to refuse you as a client.   In our observation, there are currently at least eight of these that are currently among the most competitive savings and CD issuers nationally, include Comenity Direct (New York), Amboy Direct (New Jersey), Live Oak Bank (North Carolina), Salem Five (Massachusetts), CFG Bank (Maryland), First Foundation (California), Merrick (Utah), Zions (Utah), TAB Bank (Utah).

3.  Read the reviews on banks and credit unions that you have not heard of.  Except in egregious situations where we are inundated with customer complaints and the bank or credit union has refused to provide an explanation, BestCashCow is not going to remove savings and CD offerings from our site.   But, unlike sites like Bankrate or Nerdwallet, we do offer verified customer reviews, linked from our table of the best online savings rates.   You should read these.  If people are reporting that they are unable to open accounts (either through the bank’s outright rejection or non-response), you should take these reports seriously.

It seems absurd to imagine that a bank would want just your personal information and not want your hard earned money, especially when you are essentially offering to lend it to them at below 1% or a fraction of the current inflation rate (thanks Federal Reserve!)  But, yes, this is really happening.

Federal Reserve Ends March Meeting Without Any Plans to Raise Interest Rates in 2021

The Federal Reserve concluded its 2-day March meeting today with no change in the Fed funds.

The median forecast is for no change in interest rates through 2023 with 4 Fed officials seeing rate hikes in 2022 (up from 1 previously), and 7 Fed officials seeing them in 2023 (up from 3 previously).

It is surprising that the Federal Reserve members remain so dovish with so few hawkish members wanting to move interest rates to address inflation, which it now predicts will be above 2.40% in 2021, before  dipping slightly below 2.00% in early 2022 and again rising to a level which is moderately and sustainably  above 2%.

The Fed’s new policy, first articulated in December, of moving away from its dual mandate and decoupling short-term interest rates from inflation, is forcing people into high-risk investments in order to maintain the purchasing power of their savings.   Earning a fully taxable 0.40% or 0.50% on your deposit accounts will lead to a diminution in your real value when measurable inflation is much higher.

The Federal Reserve continues to be concerned with downside risks to GDP and labor markets by COVID-19.   Chairman Powell is also clearly concerned above virus variants and does not want to take his foot off of the accelerator when it comes to market accommodation and Federal Reserve interventions until we are well clear of the virus.  The Fed therefore is prepared to let the market run hot.  While this policy may be appropriate in order to assure the economy gets through the COVID-19 era without economic scaring, it is also pushing capital towards equity valuations that make little sense, and products like bitcoin and non-fungible tokens (NFTs) that make even less.   Even those who know to be cautious when they hear the mantra “this time is different” are having a difficult time resisting the temptation to jump into frenzies in order to maintain the real value of their assets.. 

While it isn’t a good time to be a saver, it isn’t a great time to be a bond investor either.   A lot of people are getting excited about the steepening of the yield curve with the 10-year US Treasury yields at 1.68% and the 30-year US Treasury yields at 2.44%.   I think that these rates should not be bought as they are more than likely to go higher in the very short term.

Compare savings rates here.

Compare 1-year CD rates here.

Bask Bank Is A Very Compelling Option For Anyone Looking to Travel in the Post-COVID-19 World

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

We are still in the midst of an horrific pandemic but we have vaccines going in arms now and that is a good time to look at how and when you are going to travel when this pandemic ends and it becomes easier to do so.

I last wrote in some detail about Bask Bank's proposition in February, having first written about it in December 2019.

I found Bask Bank very compelling when it was launched by Texas Capital Bank back then.   It provided a chance to earn lots of American Airlines AAdvantage® miles instead of cash.   Since I frequently have extracted 5 to 6 cents in value per mile when redeeming AAdvantage® miles for tickets to Hawaii or Europe, I advised folks to consider seriously stocking up on this AAdvantage currency with rates so low.

The comments to these two articles are full of analyses by readers comparing interest income with miles, both before and after considering tax consequences (Bask Bank will send you a 1099 that reports all miles earned at 0.42 cents per mile).  While I found Bask Bank to be instantly compelling since I value AAdvantage® miles so highly and did not view a detailed pricing mechanism, these readers’ analyses showed that in many scenarios they were effectively purchasing AAdvantage® miles for under a cent a piece when compared to the prevailing interest rates at the time.

Since those articles were written, we went through a period where nobody was thinking about traveling or earning airline miles.   But, as we come out of that period, it is clear that American is going to survive and AAdvantage® miles will again have value to those who want and need to travel by air.

At the same time, interest rates have come down dramatically and they aren’t about to rise any time soon.  While the small promotions that Bask Bank offered earlier in the year are largely expired (you will still earn 1,000 AAdvantage® miles for a new account with over $5,000), Bask Bank is still offering 1 point per dollar on deposits annually.   Since the best online savings rate is now 0.75% APY and most of the top online one-year CD rates are below that level (compare online CD rates here), those who crunch numbers will find that you can now effectively buy (or earn) AAdvantage® miles at well under 1 penny a point.

And, for anyone who travels or is familiar with the American AAdvantage® program, that is a no-brainer.