Best Interest Rates for Savings Accounts and CDs – Updated August 2015

percentage2Our family keeps a year’s worth of expenses (not income) put aside in cash reserves; it provides financial insurance with the side benefits of lower stress and less concern about stock market gyrations. In my opinion, emergency funds can actually have a better return on investment than what you see on your bank statement.

I don’t chase rates nearly as much as I used to, but it still pays to shop around. Too many places are paying ZERO or close to it – the Megabanks, short-term US Treasuries, and money market sweep funds. Do you know what Chase offers on a 1-year CD? 0.02% APY. Bank of America on their 10-year CD? 0.15% APY. Meanwhile, the rates below vary from 1% up to over 3% annualized.

Best Currently Available Interest Rates
Here is a brief roundup of the best interest rates available on deposits backed by the full faith and credit of the US government (FDIC-insured, NCUA-insured, US Treasury Bonds, US Savings Bonds). I will try to sort them from the shortest to longest maturities.

    High-yield savings accounts

  • It seems every bank has their own online savings account, with the best accounts with long-term competitive rates earning around 1% APY. These savings accounts can change their interest rate at any time, so if you’re going to just pick the highest one, be ready to move your money.
    Short-term guaranteed rates (under 1 year)

  • Everbank Yield Pledge Money Market and Interest Checking account both offer 1.60% APY guaranteed (balances up to $150k on the Money Market) for the first 6 months for new accounts. Since it is fixed, this is essentially a 6-month CD with a higher rate than any other 6-month CD rate out there and with no early withdrawal penalty to worry about.
    Flexible Savings Bonds

  • “Series I” US Savings Bonds offer rates that are linked to inflation. Unfortunately, “I Bonds” bought right now will earn nothing for the first six months, and then a variable rate based on ongoing inflation after that. For new money, I would wait until mid-October when the next rate adjustment is announced. More info here.
    Rewards checking accounts

  • These unique checking accounts pay above-average interest rates, but with some risk. You have to jump through certain hoops, and if you make a mistake you won’t earn any interest for that month. Rates can also drop quickly, leaving a “bait-and-switch” feeling. But the rates can be high while they last. Consumers Credit Union offers up to 5.09% APY on up to a $20k balance, although 3.09% APY is easier to achieve unless you satisfy a long list of requirements. I list this one because the rate is guaranteed until December 31, 2015.
    Certificates of deposit

  • If you have a large cushion, it’s quite likely to just sit there for years. Why not put some money in longer-term investments where you can still take it out in a true emergency and pay an early withdrawal penalty. Synchrony Bank (formerly GE Capital Retail Bank) is offering a 5-year CD paying 2.25% APY $25k+ balances (2.20% APY for $2k+) with an early withdrawal penalty of 180 days interest. For example, if you withdraw from this CD after 2 years and pay the penalty, your effective rate earned will still be 1.69%. Capital One 360 also has a similar 5-year CD.
  • Other notable CDs… USAlliance FCU has a limited-time, callable 25-month CD paying 2.27% APY (anyone can donate to eligible charitable organization to gain membership). E-Loan Bank has a 5-year CD paying 2.45% APY but with a big early withdrawal penalty of two years of interest.
    Longer-term Instruments

  • Willing to lock up your money for 10+ years? Did you know that you can buy certificates of deposit via Vanguard’s bond desk? These “brokered CDs” offer the same FDIC-insurance and are often through commercial banks like Goldman Sachs. As of this writing, you can get a 10-year CD maturing 8/12/2025 that pays 3.05% APY. Prices will vary regularly.
  • How about two decades!? “Series EE” US Savings Bonds are not indexed to inflation, but they have a guarantee that the value will double in value in 20 years, which equals a guaranteed return of 3.5% a year. However, if you don’t hold for that long, you’ll be stuck with the normal rate which is quite low (currently a sad 0.50% APY). Think of it as a huge early withdrawal penalty. You really want to be sure you’ll keep it for 20 years.

How about my money? In terms of the opportunities above, I have opened an account at Everbank in the past for the promo rate and I have usually try to buy the max in US Savings I Bonds each year (no EE bonds, too long of a commitment). I don’t currently juggle any rewards checking accounts nor do I have any deposits with any other banks mentioned above. It’s just not worth it me to switch right now.

Besides some older CDs at higher rates, I keep a good chunk of my money at Ally Bank because right now they are the all-around “good enough” bank for me. Sure I could eek out 1.05% in a savings account somewhere, but Ally Online Savings is paying a 0.99% APY (as of 8/6/15) which serves as a no-fee overdraft companion to my Ally Interest Checking with ATM fee rebates. Along the same lines, I could get 2.25% in an outside bank’s 5-year CD, but Ally has 2.00% APY on their 5-year CDs and a relatively short 150-day early withdrawal penalty. A rate difference of 0.25% on $10,000 over a year is $25, and I’m not sure that’s enough to open a CD at another bank when my current Ally CDs mature.

All rates were checked as of 8/6/15.

Comments

  1. josefismael says:

    LMCU Max Checking is another interesting account “instrument”. 3% up to 15k, and still some hoops to jump through, BUT: You can make your initial fund with any credit card (except amex) WITHOUT FEES. So if you’re looking to get a decent rate as well as earn some points (perhaps toward a status/companion airline upgrade) they’re worth a look….

    https://www.lmcu.org/banking/checking/checking_max.aspx

  2. Thank you for the info, Jonathan.
    Would Vanguard’s 10 year brokered CDs be eligible for IRA contributions? Is there a minimum amount requirement?

  3. Makes no sense to lock in cash for 5 years in a rising interest rate environment. Keep you cash in short term securities and roll into longer term as rates rise. The yield curve and inflation will kill you otherwise.

  4. Thanks Jon! I have been debating moving some of my emergency fund into I-Bonds, but now certainly isn’t the time!

  5. Everbank requires Social Security Numbers for beneficiaries (POD) accounts. Would this be an issue for anyone out there not to open an account? Since I’ve read it is not the norm.

Speak Your Mind

*