Q: I've always been one to shop for the best CD rates, and compare money market accounts with savings accounts, etc. Still, I have to say I'm discouraged by today's rates. It's not just that they are so low, but they've barely moved in months. Is this it? Is sub-1% the new normal?
A: Your frustration is understandable. As you say, rates on CDs, savings accounts, and money market accounts seem stuck in a rut. Still, you should bear two things in mind before you give up on being an active consumer:
- While industry averages may not have changed over the past several months, the banking industry is incredibly diverse. With thousands of FDIC-insured banks competing for business, there are always dynamics involving individual banks even when the industry as a whole seems stagnant. In other words, the one advantage consumers have right now is that with so many choices, it still pays to shop around for the best savings accounts, money market accounts, or for the best CD rates if you don't mind locking your money up for longer periods.
- Financial developments can lull you to sleep for a while, and then change dramatically in the blink of an eye. So, while bank rates show little change lately, they are still worth following. For example, the economy seems stuck in neutral because employment isn't making much progress, but there are other factors in play. In a global economy, the impetus for growth might come from outside the U.S. On a more negative note, a flare-up of inflation could move bank rates. So, is sub-1% the new normal? Today's rates are still too much of an historical outlier to believe they are here to stay.
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