What determines how savings account interest rates vary?
psyPhD asked:
I’m going to open a savings account, but all of them seem to say that the stated interest rate may change after you open the account. How then do I know which account will give me the best interest rate, if they all change at any time for any reason?
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I’m going to open a savings account, but all of them seem to say that the stated interest rate may change after you open the account. How then do I know which account will give me the best interest rate, if they all change at any time for any reason?
March 23rd, 2009 at 5:14 am
Rtes are variable, not fixed. They fluctuate based on the market and what the Fed rate is at the time. When the Fed cuts rates, generally that can lead to banks cutting rates.
CD’s are fixed savings accounts for fixed periods of time. So if you prefer a fixed rate you can go there. The savings rates may not just go down, they could also go up…which is what makes CD’s less attractive at certain times.
There are sites like bankrate.com that list uptoday rates for all savings and cd’s in the market. It’s not convenient to keep switching between companies and opening new accounts, however, just to get a slightly higher rate. So best to find a company that is consistently in the top tier of highest rates. For example, for savings, Emmigrantdirect.com is always one of the highest. ING used to be, but thier focus is now on spending alot on advertising and balancing that with lower rates.
If you are not ready for online savings accounts such as these, do your research of local banks. Many historically offer the worst rates. So CD’s may be the best option then. Do your research on everyone’s CD rates. Also, check with local credit unions. They can offer higher rates usually, since they are not profi thungry as most regional banks.
March 23rd, 2009 at 8:37 pm
Short form: You don’t know. Rates on savings accounts are determined by individual banks based on whatever they want. How much they wish to attract new deposits is actually the biggest factor.
March 26th, 2009 at 4:30 pm
Look for banks that have records… over the years, of being consitantly in the top 5% of rates. Examples of FDIC insured banks (on-line) that have done this are;
March 29th, 2009 at 2:16 am
Do not open a savings account.
You need to buy Municipal Bonds.