Best Money Market and Savings Rates February 6, 2014: Top Savings Rates at 1.00 Percent

Long term bond rates have fallen the past two weeks because of the uncertainty in the equity markets worldwide. The markets first reacted negatively to the Federal Reserve tapering their monthly purchases and have also fallen on a very weak manufacturing report released this past Monday.

The Fed provided so much liquidity to the equity markets the past several years that changing these policies sent stock market prices lower across the globe. Now that the Fed is "taking the punch bowl away," investors are selling equities and heading for the exits. The Dow fell more than 5 percent in January, its worst performance in several years. A safer place right now for your money is in good old fashioned deposit accounts. Don't expect much of a return since rates are low but at least your principal is safe with the FDIC's protection as long as you keep your deposits below $250,000.

The best money market account rates and savings account rates are unchanged this week as long term bond yields fell. The best money market rates this week are at 0.90 percent and the best savings rates are at 1.00 percent this week. The best CD rates this week are slightly above those rates at 1.04 percent with an APY of 1.05 percent.

Savings rates, money market rates, and CD rates are currently low and will remain near current levels until the Federal Reserve increases the fed funds rate. The new Fed "Chairperson," Janet Yellen, took over the reins from Ben Bernanke this past Monday. Janet Yellen and Ben Bernanke's policies are pretty much aligned, so analysts don't expect any change in the Fed's current policies.

We don't expect any across-the-board changes in deposit rates until sometime in 2015, which is when the Fed is expected to increase the fed funds rate. There will be some banks and credit unions increasing rates sometime in 2014, but don't expect any large increases from current rate levels.

Best Savings Rates at 1.00% APY

The best savings rate in our national rate database this week is from First Trade Union Bank at 1.00 percent with an APY of 1.00 percent. First Trade Union Bank has a minimum opening deposit of $2,500 for a savings account. This bank's savings rate is considerably higher than the average savings rates this week, including the national average jumbo savings rate.

We have several banks in our database offering savings rates at 0.90 percent, just below First Trade Union Bank's rate. Barclays Bank, GE Capital Retail Bank, CIT Bank, and The Palladian PrivateBank are all offering a rate of 0.90 percent. Barclays Bank has no minimum opening balance for a savings account, GE Capital Retail Bank's minimum opening deposit is $500, The Palladian PrivateBank has a minimum of $10,000, and CIT Bank's minimum is $25,000.

Average Savings Rates and Money Market RatesNational Average Savings Rates/Money Market Rates at 0.46%

The current national average savings/money market rate on account balances of at least $10,000 is at 0.46 percent. The average rate on account balances of at least $25,000 is at 0.54 percent and the average for account balances of at least $50,000 is at 0.59 percent.

In the FDIC's Weekly National Average Rate and Rate Caps Survey, the national average savings rate is currently at 0.06 percent.

Best Money Market Rates at 0.90%

The highest money market rates in our database this week are at 0.90 percent. We have two banks offering that rate, Sallie Mae Bank and Union Federal Savings Bank. Sallie Mae's minimum opening balance for a money market account is $0 and Union Federal Savings Bank's minimum opening balance is $2,500.

The second top money market rate in our database this week is from EverBank at 0.86 percent. EverBank's minimum opening balance for a MMA is $1,500. The third highest rate this week is from three different banks, Ally Bank, Mutual of Omaha Bank, and GE Capital Retail Bank at 0.85 percent.

The minimum opening balance for a money market account at Ally Bank's minimum is $0, Mutual of Omaha Bank's minimum opening balance is $5,000 and GE Capital Retail Bank is $10,000.

Higher Interest Rates in the Future

While we have pretty much given up hope for across-the-board increases in interest rates this year, 2015 will bring us higher rates. Last December, the Fed polled its members and 12 of the 17 members believe there will be a need for "policy firming," (aka: a higher fed funds rate) in 2015.

The forecasts for the fed funds rate varies from a low of 1.25 percent all the way up to 4.25 percent. Where the rate actually ends up in 2015 is anybody's guess but interest rates are moving higher.

A 1.25 percent fed funds rate will send the top savings rates and money market rates above 2.00 percent and perhaps as high as 2.50 percent. 1 year bank CD rates will also move above 2.00 percent and possibly as high as 2.50 percent.

A 4.25 percent fed funds rate would send interest rates on variable rate accounts above 5.00 percent. 1 year CD interest rates would also move above 5.00 percent. The last time we saw CD rates that high was just before the recession in 2007 when Washington Mutual was so desperate to shore up their deposit reserves, they were offering 1 year CD rates at that rate.
Author: Brian McKay
February 6th, 2014