Spring 2003 Passbook/Statement Savings Interest Rate Survey
By Laura Bruce • Bankrate.com

A lot of people who cashed out stock accounts during the market downfall and stuffed their money into savings accounts to keep from losing it are still losing it. Just not as fast.

Bankrate.com's spring 2003 survey of passbook and statement savings interest rates shows that interest rates are continuing to plummet. Once again, rates have reached an all-time low since Bankrate.com began tracking these rates in 1987.

The national average interest rate for passbook accounts is 0.60 percent. That's down from 0.80 percent last fall and 0.87 a year ago. Passbook accounts, in which customers track their deposits and withdrawals in a little book, are fairly rare.

Traditionally, passbook accounts have paid less than the more modern statement savings account. But in this survey, the results are equally dismal. The national average for statement savings accounts is 0.60 percent, down from 0.82 last fall and 0.92 a year ago.

If you put $500 in a savings account and left it there for a year, you'd get $3 interest, since the rate and the yield are the same. If you were in the 27 percent tax bracket, that $3 would be whittled down to $2.19. Subtract 3 percent for inflation and you have about $487 in buying power.

You pay a price for that safety. Fixed income options aren't too attractive these days, especially if you demand the liquidity of a savings account.

A money market account isn't much better. It requires a higher minimum to open, and you'll earn an average 0.69 percent, according to Bankrate's latest weekly survey; but you'll keep the money liquid.

If you can afford to let the money sit for a bit, the national average rates for CDs are ranging from 1.03 percent for three-month CDs to 2.90 for five years.

You can beat the national averages on CDs by checking Bankrate.com's 100 highest.

A much better bet is the I bond. If you buy before the end of October 2003, you'll receive a 4.66 percent annual rate for the first six months you own the bond. The rate will change in November, and you'll earn the new rate after the initial six months.

The catch is you must own the I bond for 12 months, and you'll pay a three-months' interest penalty if you cash out in less than five years. But even if you cash out at the end of the first year, you'll likely net 3 percent after the penalty, according to Dan Pederson, author of "Savings Bonds: When to Hold, When to Fold, and Everything In-Between".

Finding the right checking account can save you money on fees. That can help you offset those low savings account yields. See Bankrate.com's latest Checking Account Survey.

-- Updated: May 5, 2003