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Online Savings & Money Market Account Rates 2020

Online Savings & Money Market Account Rates

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US Faces Extraordinary Risk of Economic Catastrophe – Much like 2004 Atocha Scenario

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Even if the polls indicate that Hillary Clinton is the likely next President, there is a high risk right until the day of election that outside influences could cause the US to elect a President who is in the best case "unfit".

Donald Trump and his surrogates have spouted complete nonsense for months, and appeal strongly to a single segment of the US population.  There is also a highly reactionary element of the US population that may already realize that he is unfit to leave his gilded perch above 5th Avenue (and is unfit to serve in any elected role), but who just might vote in his favor in the event of a terrorist attack in the weeks immediately preceding the election.  It goes without saying that Donald Trump’s election and his economic policies would lead to immediate and unprecedented global economic crises.

Unfortunately, the scenario isn’t entirely unprecedented.  As it entered 2004, Spain had the strongest economy in Europe.   Under Prime Minister Jose Maria Aznar and the Partido Popular (PP), Spain’s economic policies were attracting investments of large multinationals from around the world.  Aznar also lead Spain to be active in the US-led campaign in Afghanistan and was preparing to deploy troops to Iraq, which was highly controversial.

Aznar had been decisively leading in polls prior to the general elections scheduled for the Spring of 2004.  However, when Al Qaeda operatives struck Madrid’s Atocha station on March 11, 2004, they not only killed 192 and injured over 2000, but also caused Aznar to be defeated days later by Jose Luis Rodriguez Zapatero and the Spanish Socialist Workers’ Party.    In the years that followed, Zapatero and the Socialists pursued a xenophobic policy that removed Spain from involvement in military campaigns abroad.  They also adopted economic policies that laid waste to the Spanish economy.

One way to partially protect oneself from a similar situation in the US is to move money now to online savings accounts and short term CDs.

Editor’s Note: Unlike the situation that the US faces, Jose Luis Rodriquez Zapatero was not a Donald Trump.   While he destroyed the Spanish economy, he did not wage war against minorities or women in Spain.  He did not unilaterally control access to nuclear weapons.   While the US faces a risk of a similar scenario, it faces a still much greater risk to the country, and to putting world civilization in danger in the current election.

Now is a Good time to Check Your FDIC and NCUA Coverage

With the election of a real estate heir unprepared to serve as the President of the US, and the increased potential of a new financial crisis, this is a great time to check to be sure that your bank deposits are financially secure.

I recently had a drink with a friend who I consider to be moderately smart who proceeded to explain to me that he had all of his savings concentrated in one or two online savings account, including over $1 million in a savings account at a bank that appeared for at least 24 hours after the Brexit vote to be spiraling towards receivership.

Having money in excess of the Federal Deposit Insurance Corporation ("FDIC") limits - or National Credit Union Administration ("NCUA") limits for credit unions - defies the very point of having a savings account, and exposes you to unnecessary risks.  There are so many FDIC insured banks with strong savings and short term CD rates that even the very wealthy can divide their money in $250,000 increments in a way to avoid overexposing themselves to a bank failure.  (The super wealthy – those with tens of millions of dollars in cash - should look at CDARS programs to protect their assets from bank failures).

What is covered?

FDIC insurance is pretty simple.  All you need to know is that it covers bank accounts, such as checking accounts, savings accounts and Certificates of Deposit.  It does not cover other products you may purchase from a bank, such a mutual funds, commodities, annuities, or life insurance.   (In the event of a bank failure, SIPC insurance may protect certain securities from disappearing, although it does not insure the value of those securities).  The attraction in FDIC insurance is that backed by the full faith and credit of the US.  As long as you stay within the limits, every penny in your bank accounts is going to be deposited in an account with your name on it the day after the bank becomes insolvent.

To be fully insured, you must make sure that your deposits follow the FDIC guidelines and limits.  These guidelines are based on different account ownership categories, with up to $250,000 of coverage allowed for each category of account ownership you have in one bank, not by how many accounts you have in that bank.  It is important to understand that if you have a CD with $250,000, a savings account with $250,000, and checking account with $100,000 at the same bank in the same ownership category, you are exposed to the bank in the amount of $350,000.

The account ownership categories are:

1.  Single Accounts

A single account is a deposit held in one person’s name only or held in account for one person only.

2.  Certain Retirement Accounts 

This includes Traditional IRAs, Roth IRAs, SEP-IRAs, SIMPLE IRAs and self-directed defined contribution plans

3.  Joint Accounts

A joint account is a deposit owned by two or more people.

4.  Revocable Trust Accounts

In general, the owner of a revocable trust account is insured up to $250,000 for each unique beneficiary.

5.  Irrevocable Trust Accounts

Irrevocable trust accounts are held in connection with a trust in which the owner gives up all power to cancel or change the trust.

6.  Employee Benefit Plan Accounts

These are a deposit of a pension plan, defined benefit plan or other employee benefit plan that is not self-directed.

7.  Corporation/Partnership/Unincorporated Association Accounts

Deposits owned by corporations, partnerships, and unincorporated associations, including for-profit and not-for-profit organizations.

8.  Government Accounts (also called Public Unit accounts)

The United States, including federal agencies

  • Any state, county, municipality (or a political subdivision of any state, county, or municipality), the District of Columbia, Puerto Rico and other government possessions and territories
  • An Indian tribe

For complete guidelines for each type of ownership category, the FDIC has prepared this page.   If you have specific questions about your own circumstances you should use the FDIC’s Electronic Deposit Insurance Estimator.

What about NCUA coverage?

The National Credit Union Administration provides very similar, though not identical coverage, to the FDIC that is also based on a $250,000 cap for each ownership category (with similar ownership category) for federally chartered credit unions.  State chartered credit unions may also be protected so long as they display the NCUA logo on their website and in their facilities.   If you think you may be in excess of NCUA limits at a single credit union, you should download and read the NCUA’s insurance brochure

While all banks listed on are insured by the FDIC, please note that we also provide information on state chartered credit unions on that are not insured by the NCUA (this information can be found on the credit union's information page).

Check the best online savings rates and leading CD rates.

Starting to Look Like Japan - One-Year CDs Offer Small Upside, But Miniscule Risk

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With long CD rates compressing and yields in savings accounts enigmatic, this is a good time to look at one-year CDs.

Global markets are continuing to reward risk and to provide very little yield in risk-free assets.  While rates were expected to go up in 2016, we have seen a decline in long-term rates in the US (caused by a dramatic drop in long term rates in Europe).  We have also seen rate compression in risk free assets (US Treasuries and now CDs).  In 2014 and 2015, 5 year CDs offered rates as high as 2.50% APY.  Now, even the best rates are closer to 2.00% APY (see the best rates here).  Savings rates are barely holding constant with only a couple of the leading online rates holding above 1%.  It seems that we are all starting to look like Japan where savers have been rewarded with extraordinary low interest rates for decades.

Find all of the best savings rates – online and locally – here.

As we look at a continuation of what has become a virtual zero rate phenomenon, a handful of banks are offering 1 year CD rates at or above 1.25%.  In fact, the best CD rate available online today is 1.35% with a $5,000 minimum deposit.  If you have money that you are resigned to keeping in cash and that is earning 0.90%, you can easily pick up an additional 50% return by getting into a one-year CD.

Ok, I hear you.  I know that the actual pick up here is pretty low.  In fact, you would need to move over $222,000 from an account earning 0.90% to a CD earning 1.35% just to make $1,000 more over the next year.  And, that $1,000 is going to be fully taxable at the federal, state and local levels.  However, if savings rates do not rise and you continue to earn 45 basis points more by being in short tern CDs, the additional gain becomes real.  As the Japanese have found, when waiting for savings rates to rise, one year quickly turns to two, and two to 10 or 20, and the value of the additional interest, when compounded, does become meaningful.  Using BestCashCow’s savings booster calculator makes this clearer.

Rates may be going up, but it is clear that they are not going to be rising very fast.  If you have money that you cannot keep in risky assets (such as the stock market) and that you are unlikely to need for the next year, it may be time to start shifting into 1-year CDs.  If savings rates were to spike or if you need your money for an unforeseen expense, you can ordinarily get it back by paying a modest early termination penalty (Sallie Mae, Colorado Federal and BAC Florida all have penalties on their 1-year CDs that are only 3 month of interest).  

See the best one-year CD rates - online and in banks and credit unions near you - here.