Have Bank Interest Rates Hit Bottom?
For the first time in what feels like over a year, banks are actually raising some of their rates. Very slightly, but still up. Ally Bank just raised their rates on their online savings account. Their 12-month CD is also up, while ING Direct has a 12-month CD rate of 2.10% APY. Not exactly exciting, but if rates are rising I’d be keeping my maturities short.
October 3rd, 2009 at 2:28 am
Definitely hit bottom, but I’m ALWAYS investing in long term durations i.e 5 yrs for yield maximization.
This is the right, and only way to go. You can check out my latest post.
Best
October 3rd, 2009 at 3:16 am
There are some interest checking accounts out there with double those interest rates (ecountybank.com, 4.65% APR). Easy requirements. Zero maturity period.
October 3rd, 2009 at 7:30 am
I disagree with both Financial and Nic. Locking your money away in a low rate CD for 5 years is downright goofy. The opportunity lost to invest that money in something better (which there is almost a guarantee to be) is way more important than locking in on that 2.9% rate.
Also there may be interest checking account with decent interest rates, but they are rarely easy. The one you mention for instance requires 10 debit card transactions every month among other things. Considering most decent credit cards give you 1% back, and most give you even more, making 10 debit transcations doesn’t look so enticing. Besides, there are plenty of months where I might not even use my card 10 times, and I certainly have no interest in keeping track any month.
In the interest of being totally honest, it is worth mentioning that ecountybank.com is gracious enough to give you a .02% APY if you don’t make the goal of 10 a month.
October 3rd, 2009 at 7:39 am
10 debit card transactions every month is fairly easy, I pay my cable bill and cell phone bill in $10 increments online with my debit card and satisfy my 10 transactions in a few minutes each month.
October 3rd, 2009 at 7:53 am
It’s cool Dave for us to disagree. There is no opportunity cost for the money I want to save for retirement. This is it, this is my allocated money to save.
I have other money available to use for private equity investments, stock market, etc. But, the 100% safe money I have is always going into the longest duration possible. It makes absolutely 100% financial sense. I earn a blended postive spread of around 3.5% right now due to my method, which equates to over $20,000/yr in EXTRA interest income.
In 10 years, a 3.5% extra spread would equate to over $100,000/yr in extra income. That might be goofy to you, but that’s a NO BRAINER risk free win for me.
October 3rd, 2009 at 10:17 pm
CD Laddering has been around for a while, but you have to make sure you’re okay with having your money locked up with possibly severe early withdrawal penalties. Having five laddered 5-year CDs means only one will mature each year.
A 3.5% positive spread could also possibly end up being a negative spread later, depending on the yield curve. It’s a good method over the long run to maximize yield if you are okay with the liquidity loss, but I wouldn’t treat it as a permanent bonus. Rates have dropped precipitously recently.
October 4th, 2009 at 11:28 am
I think interest rates could even dip a little bit lower. Did you see the latest unemployment rate? We’re not done with this mess by a longshot.
I wouldn’t lock up money in anything right now. I recently put half of our funds into the risky bets possible. Those with money are in a position to capitalize going forward.
October 4th, 2009 at 4:02 pm
lol, i would hope 0 is the bottom.
October 4th, 2009 at 9:05 pm
I sure hope this is the bottom. I’m really getting tired of seeing less than 2% returns on my savings. After inflation, that’s about zip!
October 5th, 2009 at 8:10 am
I think after inflation that is less than zip.
I think it’s important to always be working to a residual income of some kind to counter to the current economic reality.
October 5th, 2009 at 11:54 pm
The Reserve Bank of Australia has officially lifted interest rate by 25 basis points today as most economists expected. Although not good news for people with a mortgage but it is a good sign for a robust Australia economy.
So we could probably safely say that interest rates have bottomed out in Australia.
October 20th, 2009 at 5:43 pm
I’m getting 5.01% for my no minimum balance, free checking account.
Have you reviewed this Jonathan? http://www.kasasa.com
October 20th, 2009 at 7:42 pm
Kasasa is another “rewards checking account”, which I have mentioned before:
http://www.mymoneyblog.com/arc.....undup.html