Since the Great Recession, the U.S. economy has seemed to change direction as often as the wind. But at least one trend has stood throughout this period, much to the dismay of savers everywhere: historically low deposit rates.
After recent speculation that the Federal Reserve may raise rates – or at least signal new intentions to raise rates soon – the Fed today reiterated its commitment to low rates in the statement from its latest meeting.
For depositors, these words confirmed that the era of abysmally low rates on savings accounts, money market accounts and certificates of deposit will remain for the foreseeable future.
“The Fed’s low-interest-rate policy has been a boon to borrowers, but devastating to people who have seen the interest on their savings wiped out,” says Richard Barrington, CFA, senior financial analyst for MoneyRates.com.
Yet not all hope is lost for savers. One unique feature of today’s interest rate landscape is that the range of deposit rates, in a way, has never been wider.
How so? While the average savings account is paying a dismal 0.06 percent annually, the top accounts in that category are offering rates near 1 percent. That means you can find rates roughly 15 times the national average if you’re willing to shop around today – something that’s not usually possible in a normal interest rate environment.
In more concrete terms, that means a $100,000 nest egg can today either earn about $60 annually in a savings account with an average rate – or nearly $1,000 in an account that pays a leading rate.
“It’s easy to look at these small percentages and dismiss the differences as trivial,” says Barrington. “However, when you look at it in dollar terms, it’s clear that shopping for rates is still worth the time.”
Yeah but still …
OK, so fraction-of-a-percent advantages still may not be enticing enough for you to switch banks, particularly if your current balance is below $100,000. But ignoring the trends in banking today may cost you more dearly once rates finally reverse course and begin to rise.
While rates remain low overall, a number of banks – many of them online-only institutions – have led the pack for competitive rates for some time now. This apparent eagerness for deposits makes them some of the best institutions to watch when rates finally start climbing – and the discrepancies between bank rates take the shape of percentage points instead of basis points.
To help acquaint you with some of the current deposit-rate frontrunners, here are some of the top-paying banks, in no particular order, as revealed by recent MoneyRates.com research.
This UK-based financial giant took a bold step into the U.S. retail banking space in 2012 with the introduction of a line of online-only accounts. Its savings account rate has stood at highly competitive levels ever since, earning that account a top-three finish in the MoneyRates.com America’s Best Rates survey – a quarterly study that examines the savings and money market rates offered by top banks – in each of the last four quarters.
2. Synchrony Bank
Like Barclays’ vehicles, Synchrony has online savings accounts. Also like Barclays, Synchrony has signaled an aggressive desire for consumer deposits through its industry-leading rates in recent months. Its savings account topped that category in the second-quarter installment of America’s Best Rates, posting an average annual percentage yield of 0.95 percent over that period.
3. Doral Bank
Not sure about the online-banking thing? As the top branch-based institution for savings accounts in the latest America Best Rates survey, Doral Bank may have what you’re looking for. The only caveat? The award-winning Doral rates were offered through its New York-based branches, so if you want high rates and branch-based service, you’ll need to be positioned accordingly. (Doral also has U.S. branches in Florida, but as of this writing, its rates there were well below that of its New York-based offerings).
4. Ally Bank
Despite slipping slightly in the last America’s Best Rates survey – it finished sixth place in the savings account category and tied for third in the money market account bracket – Ally can still claim a certain consistency in its rates: Its savings account topped the rankings in MoneyRates.com’s Best Savings Account 2014 feature, a study that averaged four quarters of rate data to identify the top-performing accounts for the year. Thus if you’re looking for a bank that has a strong history of competitive savings account rates, you could certainly do worse than Ally.
5. Your local midsized bank
The America’s Best Rates data also measures how well specific categories of banks are paying on their accounts. (In case you couldn’t guess from the list above, online banks are the foremost standout category, offering average rates several times that of those at brick-and-mortar banks.) But if you’d like to stay local and branch-based in your banking, you may do best to skip both the behemoths and the micro-banks: Midsized banks, or those with between $5 billion and $10 billion in deposits, offered average rates more than 10 basis points higher than their smaller and larger counterparts – though their average of 0.28 percent is still well below all of the banks noted above.
While the Fed’s inaction may be yet another disappointment to depositors, it might also be seen as a call-to-arms for them to reject today’s average deposit rates. As a bonus, when the Fed finally does nudge rates upward, having an account that offered decent rates throughout the hard times may suddenly pay off in a much bigger way.