Savings account rates fall to record lows
Consumers keep stuffing cash into savings accounts
and losing money in the process. It's like stuffing a sausage casing
that has a hole in the end.
Bankrate.com's Fall 2003 Savings Account Survey of
passbook and statement savings interest rates shows savers continue
getting a raw deal. Interest rates have reached an all-time low
since we began tracking them in 1987. These super-low rates don't
even come close to keeping up with the economy's low inflation,
so you lose money.
The national average interest rate for passbook accounts
in the country's top 10 metropolitan markets is 0.50 percent, down
nearly 17 percent since our spring 2003 survey. The average interest
on statement savings accounts fell more than 23 percent to 0.46
percent. Click here to see the full survey.
Even though rates are skimpy just about everywhere,
there's a significant difference between what you'll earn at a bank
vs. a thrift or savings institution. The national average for banks
is 0.38 percent on passbook accounts and 0.30 percent on statement
Thrifts, on average, are paying 0.60 percent on passbooks
and 0.62 percent on statements.
There are also regional differences. Where you live
plays a role in how much interest your money earns. Institutions
surveyed in metro Detroit pay the most; an average of 0.93 percent
for passbook accounts and 0.77 percent for statement accounts. At
the other end of the spectrum is metro Philadelphia, with an average
0.29 percent for passbooks and 0.32 percent for statements.
Nancy Bush, an independent analyst and owner of NAB
Research LLC, in Annandale, N.J., says banks keep dropping rates
because they know consumers have few alternatives. She says the
steep rise in deposits may be due, in part, to insecurity stemming
from Sept. 11 and the threat of terrorism. Consumers may feel a need
to hold high levels of cash. It's a decision, she says, that isn't
"Look at the debt levels. Consumers don't seem
to be paying down debt, they're taking on new debt. Given the rate
they're paying on credit and the rate they're getting on deposits,
it's not an economically sound decision."
If you're determined to sock away money in a deposit
account, at least get the best interest rate. You can find a better
deal if you're willing to shop for the best place to park your savings
and not settle for convenience.
A quick scan of Bankrate's high
yield money market accounts shows several institutions, generally
Internet banks, offering a 2 percent annual percentage yield or
better. That's just about keeping pace with inflation, but at least
you're breaking even. Some banks require as little as $1 to open
the account, and have no fees and no minimum balance requirements.
You'd have to lock up your money for about a
year to earn 2 percent with a certificate of deposit from our list
of 100 highest CD yields.