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Online Savings & Money Market Account Rates 2019

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

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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.


Fitness Bank is Offering 3% to Depositors Who Can Record 12,500 Steps a Day

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Fitness Bank is a new subsidiary of Georgia-based Affinity Bank and has unveiled a savings offer that will be interesting to some.

The bank aims to encourage a healthier lifestyle and therefore will reward savings customers based on their daily average steps.   You must download their app which will record the number of steps you take each day from your iPhone or Android device.    If you average above 12,500 steps per day, their current savings rate is 3% APY.  If you are just below that and above 10,000 steps a day, the rate falls to 2.50% APY.   And, if you average below 10,000 steps, this program is not for you as the rate can get down to 0.50% APY.

Those over 65 can open an account that has step numbers that are a little more generous.   They can achieve the 3% level with only 10,000 daily steps and the 2.50% level with only 7,500 steps.

The account requires only a $100 minimum to avoid fees, and the bank even has a leaderboard so you can compete against others to see how fit you are compared to them.   It is worth noting that the bank currently has very few customers or at least very few who are reaching the 12,500 step number (right now, there are only 11 customers at that level).

While it remains to be seen whether Affinity Bank can retain the 3% rate as interest rates fall through the remainder of 2019, I personally find this offer to be interesting.   If the rate holds, the account can be an attractive way to earn an above-market rate and improve your health at the same time.   For example, on $200,000, you could earn $500 more over the next year than you would make were you to lock into a 1-year CD now at 2.75%.

But, I would note that the 12,500 step number can be tough to reach or exceed on a constant basis.   I am very active and I currently have a health insurance program that gives me $1 for each day that I reach that same number.   Since I do not always like to carry my IPhone with me when I am working out, running or biking (and I don’t wear an IWatch), this program really wouldn’t work for someone like me (it might have worked well back when I had a small IPhone SE).    For some, however, I can imagine it will work very well.

Editor's Note: Following the publication of this article, BestCashCow received user feedback indicating that inbound tranfers are limited to $2,500 per day and outbound transfers are limited to $15,000 per day.   This restriction is not disclosed in the bank's literature and is only apparent after you have opened and funded an account and try to use the transfer system.   This restriction, a requirement that transfers be scheduled a week in advance and an interface that is unduly dififcult to use have caused us to determine that this account will be inappropriate for most and not to list it as an online bank account in our tables.

Editor's 2nd Note: On September 1, 2019, Fitness Bank lowered its top tier rate from 3% to 2.75%.


What is Jerome Powell Really Afraid Of?

Jerome Powell has been testifying in front of Congress for the last two days.   You have no doubt heard snippets of his testimony on the evening news or in the financial media.   Of note, if Trump calls him to fire him, he will say “no, … the law clearly gives me a four year term and four year term and I fully intend to serve”.

However, when Powell is done playing tough guy and testifies about his view of the economy, it is in fact clear that his views have evolved and he is succumbing to Presidential harassment.

Powell is a student of the economy and he believed when he came to be Federal Reserve Chairman that a neutral Fed Funds rate would be just under 3%.   In fact, this time last year, he insisted that his intention was to bring the short term Fed Funds rate temporarily just above 3%.   Powell reasoned that with a neutral rate at that level, the Fed would have the bullets to shoot in order to fight the next economic slowdown.

The economic slowdown never came, yet the Fed never got above a near term target between 2.25% to 2.50%.     Rather, the President and his allies (Larry Ludlow, etc.) began calling for an immediate cut of as much as one full percentage point.   CNBC and Bloomberg became full of pundits (know-nothings) explaining that the Fed had overshot.   Even the NY Times editorial board today called for the Fed to cut rates.  

Powell is too smart to really believe that we should be cutting rates.   But, he is afraid of confrontation, especially with the President.  (I, incidentally, believe that the President may have the legal right to fire the Fed Chairman).   He, therefore, is testifying about how he is afraid of every economic risk imaginable in order to lay the foundation for cutting rates.

The economic risks that Powell cites are (excluding Brexit) general and always present risks to the economy.   They were just as present a year ago when Powell wanted to normalize the Fed funds rate higher than where it is today. Powell knows that.

And so, he is going to sit by and let’s the Republicans try to juice the economy into some sort of unsustainable 3% growth rate over the next year.   He has decided that casinos can be fun (perhaps even Trump casinos).

However, by lowering rates right now, Powell just may make the US the new Japan of the last 30 years or Europe of the last decade.   We have not had a normalized neutral Fed Funds rate since the 2008 financial crisis; failure to get there and the loss of independence of the Fed are likely to have real consequences down the road.