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Closing out the 5th Year of Low Money Market Savings Rates

Closing out the 5th Year of Low Money Market Savings Rates

Heading into the end of 2013 and the 5th year of low savings interest rates, this year looks to be the last year as interest rates are expected to move higher in 2014. The main reason that savings rates, money market rates, and CD rates will be moving higher in 2014 is because of a higher federal funds rate.

The Federal Reserve Open Market Committee (FOMC) has kept the federal funds rate in a targeted range of zero percent to one quarter percent since December 2008. This policy has forced deposit rates at banks and credit unions down to record lows. The Federal Deposit Insurance Corporation (FDIC) releases weekly national average rates and all rates are at or near record lows.

The current national average savings rate in the FDIC's rate survey this week is at a paltry 0.06 percent. The national average money market account rate isn't much better at 0.09 percent. Average bank CD rates are just as low in the survey. The national average 6 month CD rate this week is at 0.12 percent and the national average 1 year CD rate is at 0.12 percent.

Rates are low but 2014 will bring relief for those who rely on interest income from certificates of deposit, savings accounts, and money market accounts. The FOMC has stated that they plan to increase the federal funds rate when the unemployment rate falls. The big question is how low the rate has to fall in order for the federal funds rate to be increased, which will in turn increase deposit rates.

The current unemployment rate is 7.0 percent and since last December the Fed has said they will keep the fed funds rate at current levels until the rate falls below 6.5 percent. Now several committee members are suggesting either lowering that level to 5.5 percent or even dropping the idea of tying the fed funds rate to the unemployment rate.

One way or another, interest rates on deposit accounts will be moving higher in 2014. Long term bond rates and mortgage rates have already moved higher this year and will continue to move higher next year. Savings rates and money market rates will move above 2.00 percent and likely as high as 3.00 percent. 1 year CD rates will also move to the 2 percent to 3 percent range.

Below are current lists of the best savings rates and money market rates:

December's Best Savings Rates

  • The Palladian PrivateBank 1.00%

  • CIT Bank 0.90%

  • Barclays Bank 0.90%

  • GE Capital Retail Bank Optimizer Plus 0.90%

  • Ally Bank 0.85%

  • American Express Bank 0.85%

  • FNBO Direct 0.85%

  • Colorado Federal Savings Bank 0.85%

  • Discover Bank 0.85%

December's Best Money Market Account Rates

  • Sallie Mae Bank 0.90%

  • EverBank 0.86%

  • Ally Bank 0.85%

  • GE Capital Retail Bank Optimizer Plus 0.85%

  • First Internet Bank of Indiana 0.80%

  • ableBanking, a division of Northeast Bank 0.80%

  • Bank of Internet USA 0.75%

  • Discover Bank 0.70%

Author: Brian McKay
December 12th, 2013