Make The Banks Work For Their Money
Banks really, really, really want your money. And that’s good news for savers in an otherwise dismal interest-rate environment.
Overall, average yields for certificates of deposit and savings accounts haven’t dropped nearly as much as other interest rates, particularly the federal funds rate, which the Federal Reserve slashed from 2% in October to 0.25% in December.
By contrast, the average rate on a one-year certificate dropped a little more than half a percentage point, to 1.92%, in the same period, according to Bankrate.com. Savers who shop around a bit can find several banks offering rates over 3% on both one-year CDs and on high-yield savings accounts.
Imperial Capital Bank of La Jolla, Calif., for example, recently offered a 3.85% yield on a one-year CD, while GMAC Bank of Midvale, Utah, was paying 3.75%. Meanwhile, Dollar Savings Direct of New York City paid 4% on its savings account with a $1,000 minimum deposit, and Flagstar Bank of Troy, Mich., offered 3.55% with a $1 minimum.
For an interesting experiment, you might try Money Aisle, which auctions off your deposit to the highest-bidding bank. It’s fun and doesn’t require a commitment.
A number of small banks and credit unions are even offering rates over 4% — on checking accounts. Some, including Crossroads Bank of Illinois, recently advertised yields above 6%. So-called rewards checking has numerous restrictions for users, but it’s a trend that has picked up speed as banks’ need for money has grown.
“Banks are still very hungry for consumer deposits,” said Greg McBride, a senior financial analyst for Bankrate.com. “They’re keeping returns high relative to where they are in the rest of the economy.”
