December 2018 Update – Five Nationally Available Online Savings And CD Accounts that Recently Raised their Rates

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Savings and CD rates continued to firm in November.   And, while much was made in the last few days concerning Fed Chairman Jay Powell’s unprecedented equivocation to presidential harassment, the Fed will likely raise the Fed Funds rate to 2.25% to 2.50% in December.   Here are 5 savings and CD accounts that recenrly raised their rates:

  1. MySavingsDirect – 2.35% Savings Rate, No Minimum Balance

MySavingsDirect is a division of Emigrant Bank, a large New York-based bank.   While we have cautioned in our newsletter last month (hyperlink) that Emigrant has a customer-unfriendly history of locking rates down in one subsidiary and becoming competitive in another, we also note that for the time being they continue to be competitive with this brand, having raised the rate 10 basis points in mid-November.   Customer reviews indicate that while MySavingsDirect accounts are easy to find and easy to open, ACH transfers from some institutions, including Morgan Stanley and Merrill Lynch, are not possible. 

2.   CIT Bank Savings Builder – 2.25%, Requires $25,000 Balance or a $100 minimum plus addition of $100 a month

CIT Bank is not a newcomer to the online savings game.   While they have not been consistently competitive with their online savings rates, their recent actions indicate a strong initiative to keep their rates above all other well-recognized names.   In November, they raised the rate on the savings builder account by 10 basis points to 2.25%.   There are two ways to qualify for the savings builder account – either to maintain a $25,000 balance or to open the account with $100 and deposit at least $100 during each monthly measurement period (between the 4th day of each month until the 4th day of the following month).   We think CIT is likely to remain competitive and named it one of our best bets for 2019 (hyperlnk).

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

3.   Ally Bank – 2.25% No Penalty CD.   Requires $25,000.    

We have been a fan of Ally’s No Penalty CD’s for some time and have encouraged those depositors with over $25,000 to take a look in prior monthly updates.

We also recently wrote about No Penalty CDs and the opportunity that they present here (https://www.bestcashcow.com/no-penalty-cds-may-offer-an-easy-way-to-boost-to-your-savings-rates.html).

Ally raised the rate on this No Penalty product twice in November.   Since this product can be terminated easily, those invested in it can quickly move to the higher rate each time it is raised.  

See and compare all of the best special CD rates here.

We have recommended caution around long-term CDs for some time.   However, if the Federal Reserve is going to be tempering its moves in 2019, short term CDs will become interesting.    

4.   Live Oak Bank – 2.85% 1-Year CD, $2,500 Minimum

Live Oak Bank is a small North Carolina bank that entered the online banking marketplace earlier in 2018.   They have not been a consistent competitive player – they have not raised their online savings rate as fast as many competitors, and they have from time to time lowered CD rates.   However, at the time of this publication, their 1-year CD rate stands at 2.85% - a rate that is not only well above the more recognized online banks, but that we think has very little risk.

Check out the best 1-year CD rates here.

5.   Virtualbank – 3.06 2-Year CD, $10,000 Minimum

We’d be a little bit more cautious about 2-year CDs.   VirtualBank does not have uniformly good customer reviews on BestCashCow, but they recently raised their 2-year CD rate to 3.06% which now stands as the top 2-year rate on BestCashCow’s 2-Year online CD rate table.   Depending on where you live, you may find still higher 2-year rates at banks and credit unions near you.   We don’t believe that savings and CD rates are going down anytime soon, but if believe otherwise, this one might be worth a look.

Have a great month and Happy Holidays.


Money Is On Sale

If you turn on the TV, open the Sunday newspaper, or log on to anything, you’ll see that while the holiday season is about family and friends, it is also about savings money and getting the best deals (when spending money).

What is being overlooked is that you can also get great deals now on savings money.   For the first time in a decade, online banks, brick-and-mortar banks, and credit unions are all competing hard for your cold, hard cash.

Over the last couple of months, we see not just promotional rates but a campaign of attractive incentives competing for your hard-earned deposit dollars.  Ally recently offered depositors bringing new cash a 1% bonus up to $1,000 (that promotion has now ended).

The Federal Reserve will have raised interest rates four times in 2018, and may raise them two or three more times in 2019.    As banks (and credit unions) review their 2019 deposit goals, the “sales” are vigorous and ongoing and likely to continue.

The sales are in savings rates.   You can find them on BestCashCow’s online savings page.    Be sure to check rates at local banks and local credit unions as well.    You’ll find that many smaller and less well-known institutions are also running sales too. 

Sales are also in CD rates (where some 1-year rates are now pushing 3%).  The especially pronounced sales in long-term CD rates, are especially impressive, where many local banks are offering 5-year CD rates that look and feel astronomical compared with what the public has been conditioned to seeing over the last decade.  Be sure also to check BestCashCow’s list of special CDs.   (BestCashCow continues to recommend extreme caution signing up CDs longer than one-year).   

Sales are real today.  The special deals on interest bearing accounts and deposit products can generate 5 times, 10 times, and, in a few cases, 20 times the national average rates.  With rates as amazing as those highlighted on BestCashCow, you need to ask yourself why one would continue to let Chase, Citibank, Wells Fargo, Bank of America and others take your money for nothing now?


Federal Reserve Chairman Jerome Powell Bows to President Trump, Setting Dangerous Precedent

Jerome Powell in his speech this morning at the Economic Club of New York stated that the Federal Reserve is “just below” its neutral rate.

The Federal Reserve is poised to raise the Fed Funds rate by 25 basis points to 2.25% to 2.50% in December.   The Fed had previously indicated that it would bring the rate above 3% in 2019, meaning that there would be another 25 point move in March, one in June, and at least one more in the second half of the year, perhaps two.

By so publicly moving away from the 3% neutral rate, Chair Powell has bowed to pressure from a President, adjusting his policy to accommodate a man who is browbeating him on Twitter, expressing his regret at having chosen him for the position, and publicly musing about firing him.

I suggested earlier that Trump could successfully and legally fire Powell.  At the bare minimum, what Powell made clear today is that he likes his job and doesn’t want to be fired.

However, Powell also crossed a line and created a dangerous precedent.   A strong Federal Reserve is data dependent and takes action to protect the economy, not to protect a President, a dictator, or his family’s real estate empire.

It is my view that we are likely to face tremendous inflation over the next year.  Inflation is already apparent in the costs of goods and services, the result of an hourly minimum wage that is now $15 in most of the country, and increased costs of transportation that will likely escalate unless oil and gas prices continue the precipitous decline we have seen the past two months.

Raising the Fed Funds rate, perhaps well above its neutral rate, could very well be necessary to stomp out inflation, and failure by the Federal Reserve to be responsive could result in a decline in the real value of just about every asset class (except perhaps precious commodities like gold).   By bowing to pressure from the President, the specter has now been raised that we could find ourselves in 12 months time with a Federal Reserve that is not acting independently but rather responding solely to a dictator’s interests.

It is a dangerous precedent indeed. 


Ray Dalio’s Advice is Not For You

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Ray Dalio is a Greenwich-based hedge fund manager.   I don’t know Ray, but by all accounts he is a very successful operator with excellent performance and a smart guy.

Dalio has recently been playing his hand at making far out comments in order to gain attention.  Dalio is generally very discrete and responsible (for example, he did not go on CNBC when Bitcoin hit 19,000 and say it was going to 40,000 like other frequent CNBC guests).    Nonetheless, his latest piece of advice is not for you.

You see, Dalio stated to CNBC that saving money in cash is “the worst thing you can do.” 

Dalio correctly stated that cash is tax disadvantaged and that you are taxed on interest at ordinary income rates, making cash a less advantaged asset class from a tax perspective than many of other alternatives where income generated has favored treatment (dividends from equities, for example) and where capital gains can be achieved.

But, Dalio overlooks the fact that cash is always going to be there from day to day.   You won’t loose 2/3rds of it as you did in 2000 – 2002 or as you did in 2008 – 2009, or as many of his Greenwich-based hedge fund brethren have done in a rising stock market over the last several years.    And, if you aren’t old enough to remember those periods or familiar with these types of losses, you can read about the losses people have recently had on bitcoin or look at the market’s fall in just the week after Dalio’s comments.

For those people who aren’t billionaires and who are dependent on maintaining their current asset levels in order to secure the education of their children, cash is a necessary and appropriate place to be and it can be an appropriate place to be with a substantial part of your portfolio for long periods.

To boot, cash doesn’t earn the 0.09% that Dalio assumes that it earns when he says that it doesn’t keep up with inflation.  The leading online savings accounts are paying upwards of 2.25% at the moment, and 1-year online CDs can be found at 2.70%.   Dalio needs to familiarize himself with the rates on BestCashCow (or our competitor’s sites) before he makes incorrect statements such as that.

Note to Ray Dalio, as of the date of this article, cash, even if it were only earning 0.09%, has outperformed the stock market, the bond market, EM, bitcoin and real estate in 2018.   It is certainly looking like it might outperform these asset classes in 2019 as well.


A Lesson for your Kids about Math and Money

It’s very hard to figure out when and how to discuss money with your children.  It’s almost as difficult, surprisingly, as talking with them about sex.  But there is an easy way, one that also gives them at the same time an unusual introduction to math, especially fractions and multiples.

Today, banks (and there are an unusually large number of both online banks and brick-and-mortar banks) compete with one another to offer the best interest on both short and long-term money accounts and CDs.  In fact, there is a dizzying array of offers out there of constantly changing rates.

For parents and children the new environment and competing banks offer a perfect opportunity for introducing easy to grasp but highly important skills in money management concepts and division and fractions.  Equally, bank interest rate competition also provides an environment of very low risk, making things both fun and safe.   Many online banks – including Ally and CIT – make it particularly easy to open a savings account for minors.   Such a savings account is a far safer place to put allowance, presents or earnings than trying to teach your kids to experiment with small stock purchases as a way to introduce concepts of income generation and the like.

What makes it all even better for introducing math and money matters to children is that there are a number of sites, including BestCashCow, where the primary focus is on tracking and making easily available changes and fluctuations of interest and CD rates over short periods of time and across the spectrum of the nation’s banks. 

In particular, this site and RatesAndInfo.com have great calculators that offer a real resource to demonstrate to your kids the value of compounding money throughout their lifetimes, and the importance of incremental improvements in a savings rate when compounded over time.


BestCashCow's Best Bets in Online Savings and Money Market Accounts for 2019

The Federal Reserve moved in September 2018 to a 2 – 2.25% Fed Funds rate, and savings and money market rates are now firmly above 2%.    

Interest rates are poised to go up again in December 2018.  Unless Trump fires Jay Powell, the Federal Reserve will likely continue to raise rates in 2019 until it reach its stated 3% + neutral rate by end of the year.

Not everyone checks BestCashCow.com or competing sites every day in order to get the best savings rates.   In fact, there are people who don’t even check monthly or quarterly.   And, most people just don’t like the hassle of moving around large amounts of cash in order to continue to get a competitive rate as rates rise.

For these people, BestCashCow has developed our Best Bets in Online Savings and Money Market Accounts for 2019.   On this list, you will find the five online bank accounts that have correlated the strongest with each Federal Reserve move (the highest beta).   For each of these accounts, we have recorded a savings or money market rate increase either just before or within days of each Fed Funds rate increase over the course of 2018.  

If interest rates continue on their current trajectory, we believe that with these 5 online savings and money market accounts, you are most likely to wake up on December 31, 2019 and learn that your savings rate has increased with each Fed move over the course of the year.

Excluded from this list are those banks that have maintained rate competitiveness over the course of 2018 but have exhibited a tendency towards requiring existing depositors to move their money between accounts (from savings to money market or vis-a-versa) or from one brand to another in order to get the best rate.   It isn’t that we don’t like these banks and these rates, but this list is designed for those depositors who want to go to sleep for 2019 and do not want to worry about whether they are earning a very competitive savings or money market rate.

Here is BestCashCow's list:

  1. Citizens Access
  2. CIT Bank
  3. Sallie Mae Money Market
  4. Marcus Savings
  5. Purepoint

See the best online savings and money market rates today

Advertiser Disclosure: This list contains advertisers and non-advertisers.   No bank, advertiser or non-advertiser, has provided any consideration for inclusion in this list.   Please read our advertiser policy here.