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Savings account rates keep shrinking
By
Laura Bruce • Bankrate.com
Savings account holders get no respect. While other
fixed-income vehicles are seeing interest rates creep upward, the
returns on savings accounts keep dropping.
Bankrate.com's Fall
2004 Savings Account Survey of passbook and statement savings
interest rates shows returns at an all-time low since we began tracking
them in 1987.
The national average for passbook accounts in the
country's top 10 metropolitan markets is 0.42 percent. That's a
2.3-percent drop since spring 2004 and a 16-percent decline since
fall 2003, when the rate was 0.50 percent.
Statement savings account rates came in a basis point
lower, at 0.41 percent vs. 0.42 percent last spring and 0.46 last
fall.
As you might expect, thrifts, or savings banks, offer
much better rates than "regular" banks. The national average
for passbook accounts at savings banks is 0.52 percent, while the
average at traditional banks is 0.27 percent. On a statement savings
account, the national average at a thrift or savings bank is 0.56
percent vs. 0.27 percent at regular banks.
Where you bank plays a role in how much interest you'll
earn. In the top 10 metropolitan areas, the highest-yielding thrift
accounts are in Detroit, where the passbook average is 1 percent.
Washington, D.C., has the lowest average thrift yield at 0.35 percent.
Nevertheless, pair those super-low rates with inflation,
even tame inflation, and the money you keep in a savings account
is losing buying power every day that prices are rising.
Most financial institutions apparently see little
reason to raise rates on savings accounts. They have your checking
account and perhaps a credit card or a loan. It's likely that you're
using the savings account for convenience, not because of the great
return.
But if you keep a significant amount of money in a
savings account, why not get the most for it? A high-yielding money
market account won't lock up your money, and with an online account
you can transfer funds from your checking account to the money market
account and vice versa in an instant.
Bankrate.com tracks yields
on money market accounts. You can find the best rates in your
city or nationwide. Currently, there are more than 15 banks, primarily
online, offering 2 percent or better for the same money you're keeping
in the bank for as little as 0.27 percent interest.
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