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Online Savings & Money Market Account Rates 2020

Online Savings & Money Market Account Rates

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Tumble-a-thon Thursday as Savings Rates for Many Banks Drop

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

Over the last couple of days, many of the top savings rates have dropped. The downward trend in savings rates continues.

Over the last couple of days, many of the top savings rates have dropped.  The downward trend in savings rates continues and while just two weeks ago DollarSavingsDirect offered a 4% APY savings rate, those days look long over.  Banks, clearly sensing that they can attract deposits well below 4% have followed each other lower.  Now, a rate above 3% is competitive.   At this pace, it's not unfathomable to think that over the next couple of months top savings rates could go as low as 2 - 2.5% APY. 

Recent rate cuts have come from many of the banks that led the rate tables over the last couple of months.  They include:

  • VentureBank which dropped 82 basis points from 3.3% APY last week to 2.48% APY today.
  • ClearSky Accounts dropped from 60 basis points from 3.75% APY to 3.15% APY
  • Everbank dropped 45 basis points from 3.18% first year APY to 2.73% first year APY.
  • Flagstar Bank droppped 45 basis points from 3.18% APY to 2.74% APY.
  • DollarSavingsDirect dropped 30 basis points from 3.5% APY to 3.2% APY.

Looking at the savings rate table, the days of 4% APY savings account rates are now long gone.  As the chart below shows, there has been a slow, steady erosion in rate that shows no sign of abating. 

The Fed and Treasury's attempts to re-liquify the banking sector seem to be working, but at the expense of savers, who have months of low rates to look forward to. 

Still one must have look at it from a relative perspective.  Even at 3% APY, these rates are better than what you'll get at a big bank.  According to their websites, Bank of America's Regular Savings account is offering a rate of .2% APY, and Chase Savings is offering the whopping rate of .01% APY.

And when you consider that inflation is at its lowest in years (they're even talking about deflation), a 3% APY rate may not be as bad as it seems. 

Compare the top savings and money market account rates.

JP Morgan Chase's Staley Says Money Funds Biggest Systemic Risk

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Head of JP Morgan Chase's investment unit, James Staley, says that money market funds are the biggest risk to the financial system now.  With over $4 trillion parked in money  markets, they are lightly regulated and hold no reserves should something go wrong.

He is quoted in a Bloomberg article as saying:

“What keeps me up at night most of anything we do at JPMorgan Asset Management is the money-market fund space,” Staley said at a discussion hosted today by Credit Suisse Group AG in Davos, Switzerland. “One of the things that has to come out and get a lot more attention and discussion is how do we take the systemic risk posed by money funds out of the system?”

Last September, the collapse of one of the largest money market funds, the Prime Reserve fund led to a run on money markets that was only stopped when the Fed stepped in with guarantees (what hasn't the Fed guaranteed).  

Now, many are reexaming money  market funds to determine just how much of a problem they pose.  Money market funds are comprised of highly rated short term debt as well as cash to meet any redmpetions and ensure liquidity.  They were considered a very safe investment vehicle.

But with a wave of bankruptcies predicted, even high quality, short term corporate debt may be risky.  As we've learned, the ratings agencies have their own agendas and can't be fully trusted.  So even if they rate a bond highly, it is not necessarily safe.  The sudden collapse of Lehman Bros. led to the fall of the Prime Reserve Fund.

The Group of 30, an independent policy organization whose members include Larry Summers and Treasury Secretary Tim Geithner have proposed either forcing money market funds to either adopt banking industry controls (reserve funds, more regulation) or give up their goal of maintaining a $1 NAV.  In essence, accepting regulation and reserves would make money markets into bank deposits, while not accepting would turn them into bond funds.

What does this mean for the average investor?  Be cautious and investigate your money market holding.  If you have free cash from your brokerage account invested in a money market fund you may want to take another look and feel comfortable with what the funds are invested.  Money market fund yields continue to fall, making them a relatively poor investment compared to FDIC money market and savings rates.  And unlike FDIC insured bank accounts, your money markets can lose value.      

Money Market Fund Returns Drop to Record Lows

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

Market market fund rates dropped to record lows this week driven by the drop in short term treasury yields.  The top money market fund rate according to BestCashCow is the Vanguard Prime / MMF Investor paying a 7 day trailing yield of 1.64%.  That's down from a top rate of 2.56% in June 2008 and 4.36% in January 2008.

Per Bloomberg:

The average seven-day yield on taxable money-market funds fell below 0.50 percent for the first time in history, to 0.48 percent for the week ending yesterday, according to data compiled by IMoneyNet of Westborough, Massachusetts. Tax-free and municipal money funds remained at an all-time low of 0.29 percent for the second week.

Money market funds, unlike money market accounts are not FDIC insured, although some money may be insured in the wake of the Fed's action to shore up money market funds.  In September of 2008, the Fed announced it was backing money in money market funds that were deposited before September 19, 2008 for a period of one year.

Still, it's hard to get excited about money market funds at these low rates.  Investors may want to consider savings and money market accounts that are paying over 2 percentage points more in interest and are FDIC insured up to $250,000 through December 31, 2009 and $100,000 after that.