Best Interest Rate Banks

What a crazy last few weeks! Almost every major online bank has dropped their rates twice in the last two weeks. That’s right, twice! I won’t go into the exact chronology of who dropped to what rate and then dropped to what rate, but suffice it to say, your best bets right now are to lock in a good certificate of deposit rate and then try to wait things out. Forget the money markets, forget trying to get a good rate with high yield savings accounts, to ensure a good rate you’ll have to go with a certificate of deposit.

The damage, as it now stands is:

• Dollar Savings Direct - 3.50% APY
• FNBO Direct - 2.60% APY
• EverBank - 3.51% APY Promotion Rate
• WTDirect - 2.81% APY
• E*Trade - 2.50% APY
• ING Direct - 2.20% APY

If you’ve checked out the front page of Best Interest Rate Banks lately, you’ve seen the latest rates as of early January 2009 and they are ugly.

The highest rates barely peek over 3.00% and there isn’t much we can do about it. The best thing you can do is lock in a good CD rate at whatever bank you’re at and wait for better times.

One bank you might want to consider is Dollar Savings Direct with their 4.00% rate, which will likely fall very soon.

If you have the means, you might consider putting a little in the market or even in into some municipals bonds, which are offering slightly higher yields.

Bank rates will be low, and going lower, for the foreseeable future.

As both banks decreased their high yield savings rates recently, ING Direct to 2.75% APY and FNBO Direct to 3.25% APY, both increased their CD rates.

ING Direct CD Rates

It looks like we’re in the world of dropping interest rates as the Fed looks to combat a recession, banks are anticipating that they’ll cut rates in the next meeting (after the emergency cut just a few short weeks ago). Today, two banks lowered their rates by a quarter of a percent.

HSBC Direct lowered the yield on their high yield savings account to 2.60% APY and FNBO Direct dropped their savings account to 3.25% APY (from 3.50%). If you’re looking for dependable guaranteed rates, look towards CDs. ING Direct just increased some of their CD rates. I keep an updated list of the best 6, 12, and 18 month CDs.

If you’re looking for an updated list of the best CD rates, Blueprint for Financial Prosperity is keeping tabs on the rates for all the major banks offering a high yield on a term of less than 18 months. Current leader is a bank I’ve never heard of, Dime Direct, with Washington Mutual, or what’s left, taking 2nd with their 5.00% APY online CD. (the lowest rate on the list is E*Trade with their 3.10% APY 12-month CD). The list includes the bank, whether it has an associated high yield savings account, the last updated rate date, the rate, the term, and the minimum deposit. The list currently tracks thirteen banks.

Here’s the full list of Blueprint’s best CD rates.

ING Direct just upped the interest rate on their 18-month CD to a very competitive 4.50% APY. If you look at the ING Direct CD rates, you’ll notice that only the 18-month term CD has been changed.

ING Direct’s Orange Savings Account hasn’t had a high interest rate in quite some time so it’s a welcome change to see their CDs starting to lead the way compared to other banks.

Some notes about their CDs - there is no minimum and an early withdrawal penalty of 6 months (this is true for CDs above 12 months).

HSBC Direct announced today that their online savings account interest rate would be falling to 2.60% APY. While this isn’t enough to cause anyone to withdraw their funds to put it in another bank, it’s enough to change where people will put their next dollar. FNBO Direct’s rate is still 3.50% APY and WaMu has a 3.75% APY rate, though recent concerns about their liquidity has damped people’s enthusiasm for them.

A couple months ago, Washington Mutual offered 5.00% APY on their year-long certificates of deposit. It was a rate that was very very juicy considering it trumped many of the rates offered by other banks. Bankrate’s own overnight CD rate monitor currently says 12-month CDs are offering 3.69% APY, so WaMu is beating that by a full percent. ING Direct’s rate is 4.00% and HSBC Direct’s rates aren’t even close in the 12-month CD, so WaMu’s rate is certainly something to consider if you’re looking for some short term interest.

You don’t have to use any of WaMu’s other services, you can just opt for the CD and manage it entirely online (you have to manage it online, you can’t visit a branch to open). The CD has a minimum of $1,000 and no fees according to their fee sheet.

One option that some are saying is that you should open their checking/savings combination so that you can take advantage of the 3.75% APY if you ever cash out the CD and need to figure out what you want to do. I will be taking this route because the 3.75% is much higher than my current checking account rate of 0.00%. There’s certainly no cost to opening (the savings account will charge fees if you have less than $300 in the account) so you might as well take advantage.

This little public service reminder is for all the folks who have an account at HSBC Direct. HSBC Direct’s rate of 3.50% APY is set to expire on September 15th, 2008. We don’t know yet what the new rate will be but the expiration date is a mere week away. The last time they extended the rate, they announced it at least a week ahead of the expiration date, so it stands to reason that the rate may slip from that 3.50% APY number.

While no high yield interest rate on any savings account is set in stone, they aren’t CDs, the other banks with high rates include Washington Mutual with a savings & checking combo offering 3.75% APY and FNBO Direct’s savings account offering 3.50% APY.

Less than two weeks after their last rate increase, ING Direct has updated and increased their CD rates once again, with their 12-month Certificate of Deposit going from 3.70% APY to 4.00% APY: