Best Savings Account Rates Remain Just Under 1.00% as Fed Continues to Taper

The Federal Open Market Committee has slowly been pulling back on their stimulus measures to keep a lid on interest rates. Since the beginning of 2014, the FOMC has slowed their monthly purchases of long term bonds and mortgage-backed securities (MBS) from $85 billion a month to $55 billion a month.

Slowing their monthly purchases will eventually lead to higher interest rates on long term bonds and mortgage rates. As far as higher deposit rates such as savings account rates, money market rates, and CD rates we will have to wait until the federal funds rate is increased. Deposit rates are directly tied to the fed funds rate so when the FOMC increases the rate, financial institutions follow suit by increasing deposit rates. When the FOMC decreases the fed funds rate, financial institutions follow by quickly lowering their deposit rates.

The FOMC hasn't increased the fed funds rate yet but the Fed Chairperson, Janet Yellen, hinted that a higher fed funds rate might happen sooner than expected. Until last week's FOMC meeting and press conference, most of us believed the FOMC would increase the fed funds rate in the summer of 2015 because most of the Fed Committee members forecasted a need to tighten monetary policy at that point.

In last week's press conference, which you can view below, Janet Yellen inadvertently said there might be a need to tighten (Fed speak for a higher fed funds rate) six months after they stop their monthly purchases. If Yellen's assumption is correct, we may see a higher fed funds rates in the spring of 2015, instead of the summer of 2015.

Higher interest rates on mortgages is not ideal news for home buyers but higher deposit rates are encouraging for those who rely on interest income from deposits. Ever since the financial crisis deposit rates have been extremely low. The current national average savings account rate reported by the FDIC is at 0.06 percent. The average money market account rate is slightly higher at 0.08 percent.

The good news is that the best savings rates and money market rates are many times the FDIC national average. Currently the best savings rate in our database is at 0.95 percent, which is more than 15 times the national average rate. The best money market account rate is at 0.90 percent, more than 11 times the national average rate.

Below are lists of the highest savings account rates and highest money market account rates available this week:

Highest Savings Account Rates

  • CIT Bank 0.95% APY

  • GE Capital Retail Bank Optimizer Plus 0.95%

  • Barclays Bank 0.90% APY

  • GE Capital Retail Bank 0.90%

  • The Palladian PrivateBank 0.90%

  • Ally Bank 0.87%

  • Colorado Federal Savings Bank 0.85% APY

  • Discover Bank 0.85% APY

  • FNBO Direct 0.85%

  • American Express 0.80% APY

Highest Money Market Account Rates

  • Sallie Mae 0.90% APY

  • Union Federal Savings Bank 0.90% APY

  • EverBank 0.86% APY

  • GE Capital Retail Bank Optimizer Plus 0.85%

  • Ally Bank 0.85% APY

  • Mutual of Omaha Bank 0.85% APY

  • First Internet Bank of Indiana 0.80% APY

  • ableBanking, a division of Northeast Bank 0.80% APY

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Author: Brian McKay
March 31st, 2014