Fed Keep Rates at 0% Offering No Hope for Savers

Fed Keep Rates at 0% Offering No Hope for Savers

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

The Federal Reserve released its FOMC Statement today and there were no surprises. The Fed reiterated its support for "exceptionally low levels of the federal funds rate for an extended period." That means savers will continue to earn almost no rate of return on savings accounts and very little on longer-term certificates of deposit.

The Federal Reserve released its FOMC Statement today and there were no surprises. The Fed reiterated its support for "exceptionally low levels of the federal funds rate for an extended period." That means savers will continue to earn almost no rate of return on savings accounts and very little on longer-term certificates of deposit. This may force many investors to think about putting cash into other investments such as bonds

The statement pointed out that Europe's problems along with a detoriating real estate market and high levels of unemployment will keep the economy subdued for some time to come. Those expecting a roaring V-shaped recovery are starting to realize that's not going to happen. At this point, the world economy is one more shock away from falling back into recession.

For savers this is more of the same. Savings and CD rates will continue to drift lower. The bright side has been the significant slide in mortgage rates since peaking in mid-April. The average 30-year mortgage rate is now 4.76%, down from 5.25 in April 2010.

Low rates will also continue to support the stock market. Dividend stocks like Verizon (VZ), AT&T (T), and Pfizer (PFE) lead Dow stocks in terms of yield and offer those needing income one way of generating it. Verizon for instance pays 6.85% versus an average savings rate of 1.31%. But unlike FDIC bank stocks, they also offer the potential loss of principle.

The good news for savers and bond holders alike is the absence of inflation. According to the statement:

"Prices of energy and other commodities have declined somewhat in recent months, and underlying inflation has trended lower. With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to be subdued for some time."

Those spreading panic about soaring inflation in 2009 were dead wrong, at least so far. The economy needs a strong heartbeat to stir inflation and all we have now are some sporadic pulses. Despite any sign of  inflation, gold remains near a 52-week high as investors remain spooked about Europe's sovereign debt issues.

 


Top Savings Rate Drops to 1.55% APY - CD Rates Steady

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

Savings and CD rate averages have held steady over the past two weeks although the top savings rate has dropped significantly. Two weeks ago the top savings rate was 1.75% APY and now the top rate is 1.55% APY.

Savings and CD rate averages have held steady over the past two weeks although the top savings rate has dropped significantly.

Savings Rates

Average rates dropped slightly from 1.34% APY to 1.31% APY. The top rate has come down significantly. Two weeks ago the top rate was 1.75% APY and now the top rate is 1.55% APY. One month ago, the top rate was 2% APY. So, in four weeks the top rate you could get on a savigns account has fallen significantly. For promotional rates, Everbank remains on top with their 3-month introductory bonus rate of 2.25% APY. After the three-month period, the rate drops down to 1.26% APY for a blended one year APY of 1.51% APY.

CD Rates

The average 1-year CD also remained steady at 1.57% APY for the fourth week in a row. First City Bank continues to hold the top spot with a 1.80% APY CD. First City Bank is in bad financial shape and has been operating under a FDIC Cease and Desist Order since 10/09. Acacia Federal Savings has moved into the second sport with a 1.65% APY CD.

The average 3-year CD rate is the only average to dropped slightly from 2.43% to 2.42% APY. The top spot continues to be occupied by USAA Federal Savings Bank, which offers a 2.65% APY CD with a minimum deposit of $175,000. The next highest rate is Acacia Federal Savings at 2.50% APY and a $500 minimum deposit.

The average 5-year CD rate remained steady this week at 3.12% APY after dropping from 3.17% APY four weeks ago. The average is now closing in on the 3% mark.

USAA continues to have the top rate at 3.31% APY. Everbank which holds the second highest rate dropped from 3.30% APY to 3.26% APY. A month ago Everbank was offering the same CD for 3.39% APY.

 

Savings,CDRateAnalysis

The spread between savings and 3-year CD rates dropped slightly and now stands at 1.11, from from a high of 1.24 in March. The ratio between 1-year CDs and 5-year CDs has remained steady over the past month and appears to have topped off. What does that mean? Both 1-year and 5-year CD rates have stopped dropping and are maintaining their relative ratios. The flat trends of the past month seem to support this conclusion. If the economy continues to improve I expect we'll see longer term CDs begin to move up first, followed by shorter maturities once the Fed looks poised to raise the Fed Funds Rate.

SavingsandCDSpreadAnalysis


WT Direct Offering Up to $500 Cash Bonus to Open Savings Account

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

WT Direct just launched a pretty rich savings offer today. When you open a savings account with them, they'll pay a cash bonus of $100 for every $10,000 you deposit, up to $50,000. That means you can make $500 for depositing $50,000 into the bank.

Looking for a relatively easy way to make $500? WTDirect just launched a pretty rich savings offer today. When you open a savings account with them, they'll pay a cash bonus of $100 for every $10,000 you deposit, up to $50,000. That means you can make $500 for depositing $50,000 into the bank. The offer is good until June 15.

You only need to keep the money in the bank for three months to receive the cash bonus.

So, let's take a look at the economics of the offer. $100 for every $10,000 deposited equals a 1% return. WTDirect is on the high yield savings account list with a rate of 1.16%. That means the effective rate of keeping your money with them for a year is 2.16%, which is the highest of any bank on the BestCashCow rate tables.

The nice thing about WTDirect's offer is you only need to maintain the money in the bank for 3-months. That means the annualized return is actually 4%.

WTDirect is the online division of Wilmington Trust Corporation (NYSE: WL), a $48.1billion asset financial services company with more than 2,500 people worldwide. The company was founded in 1903 by members of the duPont family.  It is the largest banking company in Deleware and the 15th largest personal trust institution in the United States.

The bank was rated 3 out 5 stars (Adequate) for its safety and soundness according to Bauer Financial.