Years of low interest rates have caused savers to throw their hands up in frustration. They can’t find any place to get a decent yield on savings. The search is especially important for savers who need to keep a substantial amount of cash safe as an emergency fund. Savers’ hopes rose a bit when the Federal Reserve started to raise its benchmark interest rate last year, but that very slight increase has had little effect on savings accounts, money-market accounts, interest-paying checking accounts and certificates of deposit (CDs). The recent average yield for money-market accounts was just 0.18%…for savings accounts, 0.16%…for interest-paying checking accounts, 1.67%…and for five-year CDs, 1.38%.
But with a little effort, you can do better.
Bottom Line Personal asked banking expert Ken Tumin where savers can find the best interest rates now. Below are the best recent rates at a variety of financial institutions…
Money-Market and Savings Accounts
Interest rates have crept up from last year, especially at some online banks and small traditional banks that emphasize online banking. The online options often offer more attractive rates than brick-and-mortar giants such as Chase and Bank of America, but you may have to bank through electronic transfers, ATMs and/or debit cards.
Best recent deals at primarily online banks, each starting with the highest yield…
All America Bank Mega Money Market: 1.25% annual percentage yield (APY) for deposits up to $35,000 (equals $377 interest on savings of $30,000)…0.5% on the portion of the balance above $35,000. This is primarily an online bank, but there are seven branches in Oklahoma. ATM cards are available, but fees may apply at ATMs other than All America ATMs and are not reimbursed. AllAmerica.Bank
Incredible Bank Savings: 1.17% for deposits up to $249,999.99…0.05% on the portion of the balance above that. ATM cards are not available for this online-only bank. IncredibleBank.com
Salem Five Direct eOne Savings: For new accounts, 1.1% for deposits up to $500,000. ATM cards are available for this online-only bank, but fees may apply and are not reimbursed. SalemFiveDirect.com
SFGI Direct Savings Account: 1.06% on all amounts. ATM cards are not available for this online-only bank. SFGIDirect.com
UFB Direct Savings: 1% on the portion of the balance above $24,999.99…0.2% for deposits below $25,000. ATM cards are available for this online-only bank, but fees may apply and are not reimbursed. UFBDirect.com
If you prefer a traditional bank with many brick-and-mortar locations, consider the following, with recent yields indicated…*
BBVA Compass ClearChoice Money Market: 1.1% on the portion of the balance from $10,000 to just under $5 million…0.05% for amounts under $10,000…0.25% for $5 million or more. The bank operates a total of nearly 700 branches in Alabama, Arizona, California, Colorado, Florida, New Mexico and Texas. BBVACompass.com
Capital One Bank Essential Savings: The APY is as high as 1.1% in some states on the portion of the balance from $10,000.01 to $1 million for the first six months (0.5% after six months)…0.5% above $1 million…0.1% for $10,000 and below. The bank has more than 800 branches in Connecticut, Delaware, Louisiana, Maryland, New Jersey, New York, Texas, Virginia and Washington, DC. CapitalOne.com
These typically offer some of the highest rates on FDIC-insured accounts without having to tie up your money, as well as online banking, networks of affiliated ATMs, some ATM-fee reimbursements and no service charges. But they also may require that you make 10 to 15 debit card transactions each month…pay at least one bill online each month…sign up for paperless statements…and/or arrange at least one direct deposit per month. If you don’t meet such requirements, you usually wind up with a default interest rate of less than one-tenth of 1%.
Highest yields recently…
Northpointe Bank Ultimate Checking: 5% for balances up to $5,000. Above that amount, 0.1%. Although the only branch is in Grand Rapids, Michigan, you can bank online or at most ATMs in the US. If monthly requirements are met, you receive refunds of up to $10 in ATM fees per month. Northpointe.com
Lake Michigan Credit Union Max Checking: 3% for balances up to $15,000. Above that amount, no interest. This credit union has about 40 branches in Florida and Michigan, and you can bank online and at more than 55,000 ATMs nationwide in the Allpoint payment network. If you meet monthly requirements, you receive reimbursements for up to $15 in ATM transactions a month. Membership in the credit union outside Michigan’s lower peninsula requires just a $5 donation to the ALS Association. LMCU.org
Main Street Bank Kasasa Cash: 2.25% for balances up to $25,000. Above that amount, 0.25%. Although the only two branches are in Michigan, you can bank online or at most ATMs in the US. If you meet monthly requirements, you receive ATM-fee reimbursements of up to $12 per month. MSBMI.com
Certificates of Deposit
Long-term CDs remain unattractive, given that interest rates are likely to rise over the next few years. My advice: Check your local bank or credit union for limited-time promotional rates on CDs. They can be superior to the best CD rates available nationally.
Highest-yielding nationally available short-term CDs recently…
Connexus Credit Union one-year CD: 1.1%. $10,000 minimum. There are 13 branches in Minnesota, New Hampshire, Ohio and Wisconsin. To become a member if you don’t work for certain companies or live in certain communities in these states, you can join the Connexus Association with a $5 donation. ConnexusCU.org
Colorado Federal Savings Bank one-year CD: 1.25%. $5,000 minimum. Online banking only. ColoradoFederalBank.com
Veridian Credit Union 25-month CD: 1.7%. $1,000 minimum. There are 27 branches across Iowa. To become a member if you don’t live or work in certain counties in Iowa or Nebraska, you must register with Dwolla, a national digital payment network (registration is free). VeridianCU.org
E-Loan two-year CD: 1.55%. $10,000 minimum. Online banking only. ELoan.com
Alternative: Consider a five-year CD that offers a competitive initial rate and a modest early-withdrawal penalty.
Example: Xcel Federal Credit Union five-year CD offers a 2.2% rate but penalizes you just 180 days of interest for early withdrawal. That’s the equivalent of a 1.66% rate if you closed the CD after two years to take advantage of rising interest rates. $5,000 minimum to earn interest. Xcel has three branches in New Jersey and one in New York City. To become a member if you don’t work for one of several dozen businesses, you can join the American Consumer Council for a $5 donation. XcelFCU.org
*At traditional brick-and-mortar banks, annual percentage yields may vary by state.