Four Ways to Deal with Low Bank Rates

At first you might not have noticed when bank rates slipped below 1% and headed toward zero. Then, you might have been excused for thinking these low bank rates were only temporary. By now--after a year of seeing your deposits yield a negligible amount of interest--you may be completely fed up. The question is, how do you channel that frustration into something productive?

While it won't bring back the juicier bank rates of a couple years ago, there are things you can do--four things, at least--to nudge bank rates higher.

Of course, your individual actions won't have an impact on bank rates as a whole. Bank rates are partly a function of macroeconomic forces, partly a function of the market's interpretation of how those forces are evolving, and partly a function of bank profitability and policy.

Taking Action: Four Steps to Higher Yields

Still, you don't need to change the national level of bank rates--you just need to change your own. Any of these four steps just might give you a little boost in your interest yield:

1. Switch from a savings to a money market account. Savings and money market accounts are very similar, and if you don't move money in and out of your account on a frequent basis, you probably wouldn't notice the difference between savings and money market accounts. However, there is a difference in rates. According to the Federal Deposit Insurance Corporation (FDIC), at the beginning of March 2010, the national average for savings account rates was 0.21%. At the same time, money market rates averaged 0.32%.
2. Pool your deposits. Switching from savings to money market accounts has an especially high impact if you are able to pool your deposits into one large account. Based on FDIC figures for "jumbo deposits"--accounts greater than or equal to $100,000--this kind of pooling doesn't help with savings accounts, but it does help with money market accounts. Savings account rates for jumbo deposits only average 0.21%, the same as for savings accounts in general. However, jumbo money market accounts average 0.48%, or 0.16% higher than the average rate for non-jumbo deposits.
3. Ask your bank for a better deal. As mentioned earlier, the size and type of account you have can affect the interest rates you get, but sometimes the reason for differences in bank rates isn't so obvious. It may be more of a marketing decision--at any given time, a bank may be using higher rates to promote certain types of accounts. Periodically, look at your bank's Web site to see what special offers they have, and ask your bank representative whether you can take advantage of any promotional deals.
4. Shop actively for the best interest rates. Of course, it's not just your current bank that may be running special promotional rates--MoneyRates.com presents a wide field of competitive bank products. Some offers may be very short-term in nature, so you won't want to change every time you see a slightly better rate--but if your bank rates consistently trail other offers on the market, it may be time for a switch.

The mission here isn't to move bank rates as a whole, but simply to get your interest rates a little higher. Still, if more people acted as educated and demanding consumers, that might eventually push average rates higher as well.