E-Trade, whose complete savings account had been sitting at a nice 3.30% APY, is falling to 3.01%.
The bank directly relates the drop to the recent Fed rate cut, which will surely lead to other rate drops.
E-Trade's rate will be dropping at the end of the day, Friday 12/19/08.
ING Direct has dropped the rate of its Electric Orange checking account to a 0.5% APY for balances of less than $50,000.
For accounts with more money, the rate is a bit higher. Here's a full look:
I use an Electric Orange account as a secondary checking account, and I've never had a problem with it. It doesn't make sense to use it as a savings account — that's what the Orange savings account is for.
The news that the Federal Reserve cut a key interest rate to near zero on Tuesday may have pushed the stock market up more than 300 points, but for savers, there's a downside.
Almost consistently, when the Fed has cut rates, savings accounts have dropped in reaction.
While I'm not normally a rate chaser, there are still a number of great APYs available.
Dollar Savings Direct is at 4.00% APY, by far the highest available among the big names.
HSBC Direct, in line with many other online savings accounts, is dropping its interest rate to 3.00% APY.
We currently using HSBC Direct for our housing fund.
E-Loan, who burst onto the online savings scene with a 5.50% APY account, has dropped its rates dramatically — and didn't tell anyone about it.
The regular online savings account, which had been at 3.01% APY, is now down to 2.76% for balances above $10,000. Accounts with $5,000 to $9,999 will be receiving a 2.51% APY.
The worst of all? Accounts under $5,000 will be getting a 1.00% APY.
With that kind of crappy rate, you should definitely be moving your money if you're just starting out.
When the rates are rising, they'll certainly let you know. But when they're dropping, you need to constantly be looking out for changes.
It looks like E-Loan adjusted their rates sometime between Sept. 17 and Sept. 20. On 9/20, Interesting Money first reported the rate drop (and also expressed annoyance at E-Loan's lack of communication).
On 9/17, we blogged about E-Loan's new Savings Plus account and the online savings account was still at 3.01% APY.
The account now has a 4.00% APY (up from 3.75%), putting it at the top of highest online savings accounts.
When we first heard about Dollar Saving Direct, we wondered why Emigrant Bank was introducing a new account to compete with its own EmigrantDirect.
Bank Deals has a theory behind why Emigrant offers both:
Why does Emigrant Bank have two different online savings accounts? This seems to be a common technique for banks. They can use the new account to bring in money from new customers but they don't have to pay the high interest to existing customers who don't take the time to sign up for the new savings account.
It's always a good idea to keep your eyes on the best available rates. In addition to Dollar Savings Direct, check out FNBO Direct (3.50% APY), WT Direct (3.26% APY) HSBC Direct (3.25% APY), or ING Direct (2.75% APY).
While WaMu is currently having some problems — at least five companies are reportedly considering purchasing the bank — but since it is FDIC insured, you shouldn't worry about putting money into it.
APYs have been going up and down for the past few months with no obvious trend — just like the stock market.
E-Loan, which at one point had the highest online savings account, has introduced a new product: the Savings Plus account.
Offering a tiered APY, the Savings Plus Account requires monthly deposits of at least $100.
Accounts that do not have at least $100 deposited for more than 60 days will be converted into a standard online savings account, according to the terms of service.
Here's the breakdown on the tiered APYs:
Current users of E-Loan's online savings account can convert to a Savings Plus account.
Existing E-LOAN Savings Accounts can easily be converted to Savings Plus. Just log in, click "Transfer Funds" and set up a recurring deposit of at least $100 a month and type in Promo Code RREC08.
There are no fees with the account, but a $5,000 minimum is needed to open.
E-Loan's online savings account is currently offering a 3.01% APY.
There's a new online savings account competing for your money — the Dollar Savings Account from New York-based Emigrant Savings Bank — offering a 3.75% APY.
Emigrant Savings Bank also offers EmigrantDirect, an online savings account offering a 3% APY.
We're not quite sure what exactly the difference between the two accounts are — besides the obvious interest rate.
With a 3.75% APY, the Dollar Savings Account is the highest-yielding free online savings account, tied with WaMu.
It doesn't look like the rate is temporary, so it'll be interesting to see how long it lasts.
America has relatively low interest rates at a time when banks and credit intermediaries are curtailing loans and cutting bank lending. Low interest rates do not normally go with less borrowing. Low interest rates, or falling interest rates, should increase borrowing and lending whereas higher interest rates decrease borrowing and lending.
Low interest rates are part of the Federal Reserve Bank's current policy to keep up spending and avoid a recession at the same time home mortgage foreclosures help limit lending since defaulters restrict the banking sector's loanable funds.
As savers, we need borrowers or interest rates would be zero. In general, the fewer the borrowers the lower the interest rate, but we should worry too about the new mix of loans.
Banks are having trouble finding enough business and industry borrowers. In the search for new borrowers they keep turning to more consumer lending and promote the use of consumer spending and consumer debt with heavy advertising.
A recent New York Times article entitled "Given a Shovel, Americans Dig Deeper Into Debt" quotes an advertising executive. "One of the tricks in the credit card business is that people have an inherent guilt with spending." … "What you want is to have people feel good about their purchasing."
The article also reported from Federal Reserve Bank data showing the percentage of disposable income used to pay debt keeps going up year by year reaching 14.5 percent in 2007. That is one piece of data and one sign of the rising consumer debt among many signs including personal bankruptcies.
The growing reliance on consumer debt and consumption spending makes it harder for the Federal Reserve Bank to maintain the economy. Sure, they can lower interest rates, but credit card interest rates continue above 20 percent for millions of consumers.
The lower interest rate policy applies primarily to business loans, but essential consumer spending depends more on people's income rather than interest rates.
America must keep up consumption spending to prevent a recession but threats to continued consumption grow with the numbers who earn stagnate wages, or who are unable to pay credit card debts, or file for bankruptcy, or have reached credit limits. Defaults limited new loans.
Government spending and tax cuts will stimulate consumer spending, but government, especially the federal government, are already running big deficits.
These are tough times for savers with interest rates low and limited ability for the Federal Reserve Bank to stimulate the economy. As savers we are in the awkward position of hoping others will go on buying, buying, buying so that we can save.
As savers, we can't change the rest of the world, but we can avoid get rich schemes, pay our monthly credit card balance and do our best to avoid paying interest and fees even as we earn less from our savings.
Fred Siegmund covers America's jobs as part of work doing labor market analysis and projections for a client base of recruiters, trainers and counselors. Visit him at www.americanjobmarket.blogspot.com