Savings Account Interest Rates Drop Again

As expected after the 0.75% Fed rate cut, the interest rates on savings accounts aren’t doing so hot. From the classic Capital One 360 dropping to 0.75% APY (still $50 bonus), to the formerly high-flying FNBO Direct landing at 0.85% APY.

My old 6.01% promo rate at Everbank was nice for 3 months, but is now gone as well. I’m happy that my core account at Washington Mutual is holding steady at 4.75% APY, at least for now (read my review). It’s hard to go back to lower rates, but still remember when 3% was an awesome deal.

Other options?
If you’re looking to lock in a higher rate and willing to trade some flexibility, IndyMacBank has 7-month CD at 5.0% APY. If you’re looking to gamble and willing to jump through some hoops like mandatory debit card transactions, the First Arkansas Bank has a checking account paying 6.06% APY. Be aware, though, as it’s very unlikely his rate will last much longer. Try my Rate Chase Calculator to see how much you’ll make if the rate difference is the same for a month (even that might be optimistic), and keep in mind the potential lost days of interest.


  1. I follow the Best Current APY thread at FatWallet and it seems as though WAMU’s the best reputable choice right now, although Countrywide’s offering 5%, has now been bought by BoA, and is of course FDIC insured. The Reward Checking accounts seem like too much work for only a few months and my wife no longer smiles upon my rampant account openings.

    Following the simplicity is best mantra, we settled on the Fidelity mySmartCash account. The core account is a 3% checking account (with ATM fee rebates), but you can hold a money market account such as FSLXX (historically around WAMU rates, currently 4.60%) within the core account. The nice thing is if you write a check for $20,000 and all your money’s in the MM fund the charge will automatically “overdraft” without any charges – so you’ve basically turned a MM fund into your checking account.

    They also offer that very nice 1.5% reward credit card on all purchases. So our checking, savings, and all credit card purchases (except for gas and groceries on our old Chase Rewards Plus card) are now all tied into one account.

    Now I just need to see if the wife will let me look at some of those tasty municipal resets…

  2. Yes, I remember when 3% was good (2005) and we flocked to Emigrant Direct.

  3. I opened up a Vanguard tax free money market (VMSXX- I believe) which returns a little more than 3%. (2.99% or 3.03% compounded) The kicker though is the benefit of it being tax free. This helps out since unfortunately I am in one of the higher tax brackets.

    I talked with my financial adviser and they suggested this type of account for anyone who is in the 25% or greater tax bracket (In 2008, thats making more than $78,850). Hope this may help someone who is debating where to place their liquid, rainy day assets.


  4. eLoan dropped to 4% immediately following the Fed cut. Not as bad as some but still below the current inflation rate of 4.08%.

    The Fed Tax “Rebate” (married w/3 kids!!) will take some of the sting out it. Now if only 30 yr fixed mortgage rates would get to 5% for a refi.

  5. I’ve been using OneUnited bank for a few months now at 5.30% APY. Interest paid quarterly.

  6. any thoughts on the schwab checking account?

    i currently am using a combo of ing (interest bearing) checking & the local wamu combo.

    the wamu apy is still chugging along, but ing has been disappointing

  7. Andrew – I, too, opened a schwab account as a holding container since my IRA requires you to buy in lots of $500. That way I am earning interest on my money while it sits. I believe it returns 4% and is a great alternative to the now low 3% at citibank, ing, etc, etc.

  8. Dan the Man says:

    I think you’re right to not expect abnormally high rates to remain high very long.

    Since the ING Savings account has dropped to 3.65%, I would suggest simply doing an instant transfer of funds into the ING Checking account and using that as a savings account. It pays a higher 4.0% for accounts with balances over $50,000. And for those that play the credit card 0% balance transfer game and may have $100,000 or more, the checking account pays 4.25% on your full banlance. This is as of 1/23/2008.

    Prior to the recent Fed rate cut, this rate was 4.80%. That’s not bad for a checking account.

    The advantage of the checking account is that it is NOT limited to the bank Reg D limitations of a max of 6 ACH withdrawls per month.

    Jonathan, with $128,000 in cash, it may be something to consider once WashMu drops their rates.

  9. I opened up a Vanguard tax free money market (VMSXX- I believe) which returns a little more than 3%. (2.99% or 3.03% compounded) The kicker though is the benefit of it being tax free. This helps out since unfortunately I am in one of the higher tax brackets.

    I talked with my financial adviser and they suggested this type of account for anyone who is in the 25% or greater tax bracket (In 2008, thats making more than $78,850). Hope this may help someone who is debating where to place their liquid, rainy day assets.

  10. NateVille says: has only dropped to 4.5% apy. I’ve had them for a while now and haven’t had any issues to complain about although I rarely interact with a csr or the site in general.
    No atm card, they allow up to 20 external accounts and allow you to open multiple savings accounts within your sign on id – presumably in the spirit of ” Freedom Account” idea.

    I’m really disappointed with INGDirect – they’ve been one of the fastest and most pronounced reducers of their rates! I’m really searching for an alternative to their Electric Orange now. I’m using as an alternative to Orange savings savings for now.

    I’m just holding my breath now for FNBODirect to call their callable high rate 9m CD.

  11. ETrade dropped to 4.4%

  12. e*trade complete savings account now 4.40% was 5.05% and i did like it.

    is it safe to go with e*trade , are they trusty?

  13. How much % do they charge if someone want to borrow from them probably much more.

  14. I have Schwab checking..the interest rate is 3.21% and my other savings account is with E-Trade which is at 4.40%

  15. Does anyone know if I open the checking acct with wamu, can I choose not to get that Mastercard option? I already have a debit and CC.

  16. Cheapster Bob says:

    E-trade is perfectly fine if you have under 100,000 in there. They are FDIC insured like everyone else and has had hard times like everyone else.

    WAMU is in just as much trouble if not more then E-trade but seems to get a pass. E-trade is a great bank so let’s give them a break.

  17. Vanguard Prime Money paying 4.46% on 01-26-08. Checks for $250 or more. Open with $3000. Very easy to buy other Vanguard funds when ready.

  18. Ciel~

    I just opened the wamu accounts a couple weeks ago, and I didn’t have the option to not get the card. That being said, from what I know there’s really no disadvantage to having the credit/debit card as it doesn’t have a “line”, it’s not a “revolving account”, and they didn’t do a credit check to get it.

    Someone please correct me if I’m wrong.


  19. IndyMac has one of the lowest ratings. Check it on bankrate. It is insured, but do you want to deal with the hassle?

  20. I mentioned in another post that Wamu has a “Savings for Success Account” in Texas. You can place any amount, up to $500.00 per month for 12 months and they are paying 6.50%. I don’t this will bring in much of a return but it beats having small amounts sitting around earning 2 and 3 percent. You can change the monthly deposit amount but if you withdraw prior to the 12 month due date I believe you will be quite heavily penalized.

  21. I think with WaMu you need to get the debit card, but you can always just shred it if you really don’t want it. It’s not a credit card and there is no credit check, so why not enjoy the access to your account? It is annoying to have to open up another checking account, but I just closed my old one and switched over.

  22. You need to watch out with IndyMac Bank. They are being hammered into the ground due to their subprime mortgage portfolio. In fact, not sure if they are going to survive the year. The reason they have such a high yield is they are desperate for liquidity so 6 percent is actually a steal for them given that they can’t get this rate on the open market. You’ll also notice that Countrywide and eLoan have much higher rates but you can deduce why that is. Yes, FDIC insured but do you really want to go through the hassle for a few percentage points should they be taken over? Think it can’t happen?

    Bank and Thrift Failures

    Remember what happened with Northern Rock in Britain? Some of these places look very similar.

  23. In case this hasn’t been brought up already — IndyMac just axed a quarter of its workforce. This is on top of laying off 1,600 people (13%, if I do my math right) last fall, and a further 500-1000 cuts are anticipated in the next six months. Yeah, they’re hurting.,0,7302455.story

  24. @ mybudget360: Does Great Britain have an institution similar to the FDIC? My impression was that Northern Rock’s depositors rushed to get their money out because they had no government-backed assurance that their deposits would be safe.

  25. Indymac scares me, I don’t want anything to do with it. It strikes me that the stock market as it falls, and as savings rates fall, becomes a more interesting investment. Over the long run stocks will likely provide some very good results and this will likely look like a great value.

  26. yipes indymac sounds scary! think I will open WaMu acct after all. In the future if I happen to cancel are there any fees or anything? sorry, very new at this…

  27. Ross Hosman says:

    I too use WaMu for my primary account as I’ve had nothing but great service from them. Their website is top notch and the CSRs I have dealt with are very friendly.

    I just closed my citibank money market account as their website was horrible and also seemed to be pretty insecure. I still have accounts at ING (great website, great customer support and I use sharebuilder now), HSBC (I use this account as a primary savings point as there is no card associated with it so it makes it harder for me to spend money) and Capitalone (my backup emergency fund, their transfers are horribly slow though).

    I continue to have my paycheck mostly deposited in the local bank though as I like being able to go to a branch and speak to someone if need be.

  28. I’m still with Emigrant and they’ve lowered to 4.3%

    For me it’s only a difference of maybe $100 bucks if I am always switching to the highest rate.

  29. A word of caution on Wamu: This bank caused me a load of nightmare and a half. Their “Risk Operations Dept” blocked my accounts and set them for closing because they assumed that a balance transfer deposit check sent by Capital One is fake. Took me 2 months to untangle. Closed all my household accounts with them, never again. Real contempt for the client throughout the experience. No wonder they are tanking in my state. Bank commissioner will be promptly notified.

  30. WaMu’s been great for us. We’ve enjoyed the checking-savings setup since they had a 5.00% APY before the last round of rate cuts. It’s certainly looking like a steal right now, although I dutifully check the website every day to make sure that they haven’t cut the rate yet.

  31. Get ready………….Bernanke’s breakin’ out the cutting shears again…………..& not gonna stop ’til he’s COMPLETELY DEVALUED THE DOLLAR!!!!!

    Somebody outta write a book……….”Bernanke & the Adventures of the Incredible Shrinking Dollar!!!”

    But wait…………..Bernanke might not be happy w/ just a NATIONAL recession………, no……..he might just be lookin’ for a GLOBAL DEPRESSION!

  32. wamu rates dropping to 4.25% on 1/29/08

  33. If you already bank with Citi, their Ultimate Money account is not bad. It’s a 4.25% savings account. It must be linked to a checking account that has 2 bill pays on it. But I imagine most people have that anyway.

  34. Today, Citibank resets its Ultimate Money Account interest rate from 4.5% to 4.25%. Also, Wamu resets today its online Statement Saving Account rate from 4.75% to 4.25%.

    Is there a place we can still get a 5% or above saving account rate without the hassles (such as min balance, etc.)?

  35. Here we go again……………Bernanke to the damnation of the USA!!!!!

    Die Bernanke…………DIE!!!!!!!!!!!!!!!


    Why the $!#%#~! can’t that dude keep his finger off the trigger!!!

    P.S. Scratch those Citibank & Wamu rates……..they probably weren’t expecting the double-whammy!!! We’ll be back down to 1% Money Market rates before Summer at this rate!!!!!!

    anti-sign (Bernanke)

  36. Emigrant now 4.05%

    Come on Bernanke, take us all the way to the bottom, wontcha???

  37. ingdirect savings now 3.40%!!

  38. Here’s a little list………..

    Emigrant – 3.6%
    Citi – 3.25%
    Presidential – 3.5%
    HSBC – 3.55%
    INGDirect – 3.348%
    FNBO Direct – 3.85%
    Eloan – 3.75%
    Etrade – 4.4%

    Go Bernanke…………Goooooooooooooooooooooooo!!!! (socialist, beaurocratic, stubborn, neophyte!!!!!!!)

  39. Yikes. GMAC just dropped to 3.5% (from 4%) today.

    The WaMu Savings for Success account is looking more and more tempting now, even though it essentially ties your money up for one year.

  40. updates on Friday 2/8/2008:

    Citibank Ultimate Money Account: 4%
    Wamu Online Saving Account: 4.25%
    Etrade Complete Saving Account: 4.4% <– best rate

  41. OneUnited Unity Gold Account 4.6%, minimum $1k to open account.

  42. update:
    Citibank Ultimate Money Account: 4%
    Wamu Online Saving Account: 4%

  43. Etrade just dropped the rate from 4.1% to 3.45% all in one unannounced fell swoop

  44. bernie,
    thanks for updates. nowadays banks drop saving rates without any notice unless you check their website daily.

    Citi Ultimate Money Account 3.75% (dropped this past week)
    Wamu Online Saving 4%

  45. I’m too disgusted to check the rest………but………

    Emigrant now down to 3.30%!!!!!!!!!!!!!!!!

    Looking at some land in Mexico now using Bernanke Real Estate!! ;)

  46. Bernie Bildman says:

    In an effort to minimize my Etrade rate drop, I began looking at different banks, but in the end, opening yet another account in a bank that has higher rates only delays the inevitable…that sooner or later, they all will be dropping them. Thus when my money gets to the new bank, at some point, it also will tell me the same old story.

    Because I want access to all my money on a moment’s notice, I do not look for CD deposits etc

    Screwed again….the Euro-Dollar exchange is now over $1.53, and I had been living in Spain (plan to go back), with less money per month from my savings interest, and the exchange rate a real bummer, it is getting harder and harder to make ends meet, especially when you are retired, and living off of Soc Sec and interest. When I started going to Spain, the euro-dollar was $1.28 and interest was 5.05%


  47. Wamu went from an online savings rate of 5% to 3.3%. If you want to switch(since the rate drops to 0.125% if you don’t), you MUST call their 1 800 #. I didn’t know this and got a $4 overdraft charge since I took all the money out at once.

Speak Your Mind