MoneyRates 2011 resolution #3: Shop for the best CD rates, savings rates, and money market rates
March 04, 2011
MoneyRates.com begins each year by outlining 12 monthly resolutions to help you improve your financial situation. The idea is that rather than making one grand resolution that is forgotten before the snow is melted, you are better off tackling a series of manageable tasks throughout the year.
This month's resolution is to shop for the best CD rates, savings account rates, or money market rates you can find. That may seem like a major premise of this web site every month, but when was the last time you did it? The idea behind the monthly resolutions is to create a trigger for action.
Basics of shopping for rates
When comparing rates, keep the following in mind:
- Be clear on what you want. The best CD rates at longer terms will generally beat rates on savings accounts or money market accounts, so if you can afford to lock your money up for a year or more, that's where you should be looking. Otherwise, stay with more flexible accounts.
- Don't be swayed too much by "teaser" rates. A temporary rate to lure customers won't help you much in the long run. At best, it can be a tie-breaker between two banks whose ongoing rates are about the same.
- Consider money market and savings accounts side-by-side. Usually, the distinctions between them are minor, and unless you make frequent withdrawals, those distinctions shouldn't matter much anyway.
Why shop for better rates now? For one thing, it may be the only way of earning a meaningful interest rate. According to the FDIC, the average rate on savings accounts currently is 0.16 percent, the average rate on money market accounts is 0.22 percent… you get the picture. Do you really want to settle for that?
Also, the economy is in a state of flux. That could mean that there will be more changes in bank rates going forward than we've seen over the past year.
Settling for anything close to average when there are much better rates out there is the same as leaving money on the table. In this economy, there are few people who can afford to do that.