Rates for savings and money market accounts rose overall for the third consecutive quarter. That means more money is flowing into the accounts of bank deposit customers. But before you celebrate, recognize that the spoils from this trend are not being distributed equally. Some consumers are benefiting much more than others.
To make sure you are benefiting from rising bank rates, understand which banks are paying the best savings account rates and where rates are rising most quickly.
For example, the average savings account rate rose by 0.05 percent over the past three quarters. This is not earth-shattering news, but it is a step in the right direction. However, upon closer inspection, only a handful of banks are moving more aggressively to offer customers better savings account rates while other banks are standing still or worse.
By the fourth quarter of 2017, the average savings account rate had risen 0.05 percent -- but the average online savings account rate had risen 0.17 percent, or more than three times as fast. Meanwhile, the average savings account rate at a traditional branch-based bank went in the opposite direction, losing a little under 0.01 percent over the same period of time.
An even more dramatic difference can be seen by comparing the best-in-class savings accounts to the rest of the pack. Since average rates began rising after the first quarter of 2017, the top ten banks in the MoneyRates America's Best Rates survey have increased their savings account rates by an average of 0.35 percent, or seven times the overall average increase. Meanwhile, fully two-thirds of all savings accounts did not raise their rates at all during the same period.
The following lists show the savings and money market accounts that have been leading the way toward higher rates.
Savings account rates increased by 1.6 basis points during the fourth quarter of 2017, to an overall average of 0.274 percent. The following were the ten best savings account rates during the quarter:
Savings account rate
Salem Five Direct (ABR platinum medal winner)
CIT Bank (ABR gold medal winner)
SFGI Direct (ABR silver medal winner)
4th place (tie)
Nationwide Direct (ABR bronze medal winner)
4th place (tie)
Synchrony Bank (ABR bronze medal winner)
American Express Bank
Every one of these accounts raised its rate during the fourth quarter, so they are not just the leaders but they are doing what it takes to stay ahead of the pack.
As has been the case in recent years, online savings accounts generally offer a clear advantage over accounts offered by traditional bank branches. The average online savings account rate is now 0.808 percent, more than 12 times the average traditional savings account rate of 0.066 percent. Every one of the top ten savings account rates was for an online account.
Money market account rates increased by 3.2 basis points during the fourth quarter, to an average of 0.251 percent. The following were the top ten best money market rates during the quarter:
Money market account rate
UFB Direct (ABR platinum medal winner)
Sallie Mae Bank (ABR gold medal winner)
Able Banking (ABR silver medal winner)
Capital One 360 (ABR bronze medal winner)
First Internet Bank
Nine out of these ten money market rates increased during the fourth quarter.
Here again, there was a meaningful advantage for online accounts. The average online money market rate is 0.729 percent, compared to 0.126 for traditional, branch-based accounts. Eight out of the top ten money market rates in the survey were offered by online accounts.
Rising deposit rates are a positive for consumers; but remember, most savings account rates have not risen over the past three quarters. The same is true for money market accounts. Only a handful of banks have raised their rates dramatically over that time period.
In other words, the trend toward higher rates is being carried by a relatively small number of banks. If you want to benefit from that trend, you should check out the banks on the above lists.
If the trend in the latter part of 2017 is any indication, 2018 is shaping up to be an exciting year for deposit accounts -- especially for those consumers who choose the right banks to be part of that trend.