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America's Best Rates 2013 Q2: Deposit rates drag their feet

MoneyRates.com Senior Financial Analyst, CFA
July 22, 2013

After a long period of decline, long-term Treasury yields and mortgage rates finally reversed course in the second quarter of 2013, rising sharply throughout May and June. But for rates on savings and money market accounts, the trend was much more muddled, with some categories of rates rising and others falling.

In its latest America's Best Rates survey, MoneyRates.com found that average rates increased in the following categories in the second quarter: savings accounts overall, traditional bank savings accounts, large bank savings accounts, small bank savings accounts, large bank money market accounts and small bank money market accounts. At the same time, average rates decreased in the following categories: online savings accounts, medium bank savings accounts, money market accounts overall, online money market accounts, traditional money market accounts and medium bank money market accounts.

In all, that makes six categories in which rates climbed, and six in which they fell.

Despite the mixed results, one trend from past surveys persists: Online bank accounts continue to offer a clear advantage over traditional bank accounts across both the savings and money market categories. There was, however, some shuffling this quarter in the lists of top banks for savings and money market accounts.

America's Best Rates: savings accounts

Here are the 10 banks that posted the highest average savings account rates in the second-quarter America's Best Rates survey:

Bank

Savings account rate

1st place

Barclays Bank (ABR platinum medal winner)

0.958 percent

2nd place

CIT Bank (ABR gold medal winner)

0.881 percent

3rd place (tie)

American Express Bank (ABR silver medal winner)

0.850 percent

3rd place (tie)

FNBO Direct (ABR silver medal winner)

0.850 percent

3rd place (tie)

Mutual of Omaha Bank (ABR silver medal winner)

0.850 percent

3rd place (tie)

Sallie Mae Bank (ABR silver medal winner)

0.850 percent

7th place

Ally Bank (ABR bronze medal winner)

0.840 percent

8th place (tie)

Cole Taylor Bank

0.800 percent

8th place (tie)

Discover Bank

0.800 percent

8th place (tie)

GE Capital Retail Bank

0.800 percent

(Ed. note: GE Capital Retail Bank became Synchrony Bank in June 2014.)

The overall average savings account rate for the quarter was 0.192 percent, so the top banks offered rates that were more than four times the average, underscoring the benefit of shopping around for higher rates. Seven of the top 10 savings account rates were offered by online banks, and overall, online banks held a significant advantage over traditional banks. The average savings account rate at online banks was 0.578 percent, while the average rate offered by traditional banks was 0.125 percent.

Size had less of an effect on bank rates, with smaller banks having a slight edge over their larger counterparts. Banks with less than $5 billion in deposits offered an average savings account rate of 0.213 percent, about 2 basis points more than the overall average.

America's Best Rates: money market accounts

Here are the 10 banks that posted the best average money market rates in the second-quarter America's Best Rates survey:

Bank

Money market account rate

1st place

Doral Bank (ABR platinum medal winner)

0.950 percent

2nd place

Sallie Mae Bank (ABR gold medal winner)

0.911 percent

3rd place

Mutual of Omaha Bank (ABR silver medal winner)

0.850 percent

4th place

Ally Bank (ABR bronze medal winner)

0.840 percent

5th place

GE Capital Retail Bank

0.800 percent

6th place

Nationwide Bank

0.760 percent

7th place

EverBank

0.735 percent

8th place

Discover Bank

0.700 percent

9th place (tie)

OneWest Bank

0.500 percent

9th place (tie)

Zions Bank

0.500 percent

Overall, money market accounts offered an average rate of 0.175 percent during the second quarter. While the list of top money market accounts was split evenly between online and traditional banks, on average online-based money market accounts enjoyed the same type of advantage over traditional banks that online-based savings accounts held. Money market account rates at online banks averaged 0.550 percent, compared to 0.131 for money market accounts at traditional banks.

As with savings accounts, money market accounts at small banks had a slight advantage over the accounts at larger banks. The average money market rate at small banks was 0.203 percent, nearly 3 basis points more than the overall average.

Getting in step

The mixture of rising and falling rate trends in savings and money market accounts came during a period that saw some other rates clearly rising. Ten-year Treasury bond yields increased by more than 60 basis points during the second quarter, and 30-year mortgage rates increased by nearly 90 basis points.

Savings and money market rates have been slower to rise in part because they are shorter-term interest rates than Treasury bonds or mortgages, and in part because banks naturally loathe increasing their interest costs. However, the fact that some categories of bank rates did start rising in the second quarter may mean that deposit accounts are beginning to get in step with the broader interest rate trend.

Methodology

The America's Best Rates survey is based on an average of the interest rates offered throughout the calendar quarter, rather than on just a single snapshot of rates. As a result, the numbers represent rate levels that were offered consistently over time. The survey is based on the MoneyRates Index, which includes the 50 largest retail banks in the U.S. (as ranked by total deposits) and a sampling of 50 smaller banks.

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Rates / APY terms above are current as of the date indicated. These quotes are from banks, credit unions and thrifts, some of which have paid for a link to their website. Bank, thrift and credit union deposits are insured by the FDIC or NCUA. Contact the bank for the terms and conditions that may apply to you. Rates are subject to change without notice and may not be the same at all branches.

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