Savings and CD Rates Continue Fall Even As Economy Stabilizes

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

Savings and CD rates continued to drop over the summer even as the stock market went on one of its longest winning streaks in history, shooting above 9,000 and getting giddy analysts to call for it to rise above the 10,000 mark before long.

August 17, 2009 Update

I wrote the following back in June, before the lazy days of summer:

"Individual bank rates may fall a bit from here but for the most part rates seem to have bottomed, as shown by the chart below. Even savings accounts, the most liquid and sensitive to the Fed Funds Rate (currently at 0%) has flatlined and is no longer on its steep downward slope. Indeed, we've even seen a few banks increase their rates."

Ah, if only that were true. Savings and CD rates continued to drop over the summer even as the stock market went on one of its longest winning streaks in history, shooting above 9,000 and getting giddy analysts to call for it to rise above the 10,000 mark before long.

As the chart below shows, there was nothing to be optimistic about from a savings or cd rate perspective. The average savings account rate according to the BestCashCow rate table is paying 1.8% APY. And those are the top rates in the country! If you walk into Bank of America or Chase, they'll ask you to pay them - practically. Last year at this time, the average savings rate was 3.6% APY. Nothing to write home about but still a lot better than today. The story is much the same with CDs.

The average 12-month CD rate is only slightly better than the savings account rate at 2% APY and banks will pay you 3.22% APY to lock your money in for 5 years.

As the chart below shows, the spread between savings rates and 36-month CD has remained fairly steady over the summer - both have gone down!

So what's a saver to do? With the economy looking like it's on the mend and the Fed and government still pumping trillions, it's hard to justify locking money into a long-term CD. The time to do that was 18 months ago when rates were 5% APY+. For now, I think it's best to stay short-term and wait. An improving economy will force the Fed to eventually raise rates, and that will cause yields to start rising.

SavingsandCDRateAnalysis

The spread between the average BestCashCow savings rate and 36 month CD rates remains steady as the economy stabilizes and investors, banks, and consumers wait to get the next read on where the economy is going.

SavingsandCDRateSpread


Dollar Savings Direct / Emigrant Starts to List Its Foreclosed Homes on Its Online Banking Site

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I haven't seen this before. I suppose that it is a sign of the times.

Emigrant Direct and Dollar Savings Direct (both owned by Emigrant Bank) has started to list its foreclosed homes for sale on its online banking website.

They have put a link to "real estate opportunities" just below the sign in for online banking accounts.

While it seems a little unusual, it makes sense for the bank to use this avenue to get exposure for its inventory of foreclosed homes and to try to a direct to market approach with these properties through its deposit vehicles.

 


WTDirect Offering $150 Bonus to Open Savings Account

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WTDirect is at it again, offering $150 to open a savings account. This is similar to a promotion they ran last year.

WTDirect is at it again, offering $150 to open a savings account.  This is similar to a promotion they ran last year.

Deposit $50,000 into a WT Direct savings account by July 31, 2009, keep the money in their through October and the $150 will be added to your account balance.  WT Direct is paying a lower bonus for smaller deposit amounts:

Bonus amounts start at $25 for the first $10,000 and increase by $25 for each additional $10 deposited, up to the $150.

WT Direct is currently offering 1.76% APY on its savings accounts for the first 60 days.  If your balance falls below this amount after the 60 days, the rate falls to .15% APY. Compare WT Direct's rate to other savings and money market rates on the BestCashCow rate tables.