Best Money Market Rates & Accounts – July 2017

Updated August 7, 2017

Traditional banks are paying very low interest rates on money market accounts. For example, Bank of America pays between 0.03% and 0.06% APY. Fortunately, you do not need to settle for such ridiculously low rates. You can easily find the best money market rates at internet banks paying 1.05% or more. If you put $50,000 into Bank of America’s account at 0.03%, you will only earn $15 of interest over one year. That same money in an account paying 1.05% would earn you $525 of interest. And you can typically open and fund an online money market account in less than 10 minutes.

MagnifyMoney has searched for money market accounts paying the highest interest rates – and this list gets updated monthly. Here are the best rates for April 2017:

1. Top Choice: Sallie Mae – 1.30% APY, no minimum balance and checks available

If you have student loan debt, you probably are not very excited to see Sallie Mae at the top of this list. However, many people are unaware that Sallie Mae also operates an internet-only FDIC-insured bank with some of the best interest rates in the country. You can earn 1.30% APY, compounded daily and paid monthly. There is no minimum balance and no monthly maintenance fees. You will have check-writing capabilities (although the standard money market limit of six per month applies to this account). The easiest (and best) way to fund and access your funds is via electronic transfer from your existing checking account. If you want a simple account with no fees and check access – this is a good bet. Sallie Mae has just recently increased the APY (it was previously 1.15%), making this one the best rates in the country.

2. High Rate: ableBanking – 1.30% APY, $250 minimum, but no check-writing

ableBanking is a division of Northeast Bancorp, a community bank headquartered in Maine since 1872. The bank has over $1 billion in assets, and your deposit would be FDIC insured up to the legal limit. At 1.30% APY, this is the highest money market rate that we have been able to find (from a bank) in the country. There is now a minimum deposit of $250, no monthly fee and you do not need to be a resident of Maine (any US resident can open an account). Unfortunately, the account does not come with check-writing privileges and there is no ATM access. You can deposit and access your funds via ACH (electronic transfer), which can take a couple of days. Just remember: there is a limit of 6 withdrawals per calendar month. When we called to ask questions about the account, we could reach a customer service representative very quickly. This is a good new option (just added to the list in June) from a small bank with a great high rate.

3. High Rate: Self-Help Credit Union – up to 1.35% APY, $500 minimum deposit and minimum balance

Self-Help is a credit union that anyone can join. If you don’t live, work or worship in one of their eligible counties, you can join by donating $5 to the Center for Community Self-Help. The contribution is tax deductible and will make you eligible for credit union membership. (You can learn more about how to join the credit union here.) At a credit union, your funds are insured up to $250,000 – but it is by the NCUA instead of the FDIC. The money market offers an APY of 1.26% on balances from $500 to $500,000. Even better – you can earn 1.36% on balances above $500,000. However, you need to deposit at least $500 and the balance during the month cannot go below $500 – otherwise you will be charged a monthly maintenance fee. You are allowed 6 free withdrawals or transfers from the account each month (including checks).

4. Good Rate: EverBank – 1.21% APY, $5,000 minimum deposit (1-year intro APY)

EverBank, recently acquired by TIAA-Cref, is a rapidly growing bank that conducts most of its business online (even though it is based in Florida). In 2017, EverBank has become very aggressive on interest rates. Its products have regularly made our list of best CD rates, and – not surprisingly – it also appears on the best money market list. This is a great product, but you should be aware of a few pieces of fine print. The APY is only valid for one year. EverBank does promise that the rate, after the first year, will “never stray from the top 5% of competitive accounts.” Just be prepared for a lower rate after 12 months. You need at least $5,000 to open the account. You will only earn the 1.21% APY on balances up to $250,000. There is no monthly account fee.

5. Good Rate for Big Deposits: Capital One 360 – 1.10% APY on balances above $10,000 (0.60% on balances below)

Capital One has become more aggressive in recent months on the rate that it pays for online CDs and money market accounts. Capital One is focused on big balances: if you don’t have a lot of money, you can get much better deals elsewhere. But if you have a lot of cash and want another FDIC-insured account, Capital One is a strong option. You earn 0.60% APY on the first $9,999.99 that you deposit. You will then earn 1.10% APY on deposits from $10,000 up to $250,000. There is no monthly fee associated with the account.

6. Favorite Online Package: Ally – 0.85% APY, no minimum deposit, and link to free checking

Ally Bank is a very popular internet-only bank. Although the interest rate on the money market account is not the highest, Ally does offer a very competitive overall package – particularly if you link the account to an Ally checking account. The checking account has no minimum balance and no monthly fee. You can link your money market account to your checking account to provide overdraft protection. Money would be transferred to your checking account with no transaction fee if you ever made a mistake. You would be able to access your money market account with your Ally ATM card, which has free AllPoint access and up to $10 of non-Ally ATM fees reimbursed every month. This money market account is a nice way to provide yourself with overdraft protection while earning interest. If you don’t need check-writing capabilities on your savings, you would still be better off with Ally’s savings account.

3 Questions To Ask Before Opening A Money Market Account

1. Should I open a savings account or a money market account?

Many years ago, money market accounts were higher risk and paid higher returns. The financial crisis of 2008 changed all of that. Money market accounts are now FDIC-insured up to the legal maximum ($250,000 per institution per individual). Interest rates are now very similar – and there is no material difference. In other words – choose whichever account you want.

In general, you tend to get slightly lower interest rates on money market accounts because you have check-writing capabilities. The best savings accounts pay at least 1.15% APY – very similar to the rates on this page. But at Ally, for example, you can get 1.00 APY on a savings account (no check-writing) and 0.85% on the money market account (with check writing).   

We have written a full explanation of the difference between money market and savings accounts here.

2. Am I willing to make a longer term commitment? 

Savings accounts and money market accounts pay much lower interest rates than CDs. Right now you can easily get a 1-year CD paying 1.35% APY (with only a $2,000 minimum). You can find the best CD rates here. If you build a CD ladder, you can take advantage of 5-year rates that are now as high as 2.30%.

Money market accounts are great places to keep money that you might need immediately. But the interest rate on a money market account can change right away, at the bank’s discretion. To lock in a higher interest rate, you should consider a CD. If you need to get access to your CD early, would forfeit interest (typically from 3-6 months). In most circumstances, putting more of your money into CDs can really help boost your returns.

3. Is a money market account the same as a money market fund? 

No, money market accounts (offered by FDIC-insured banks) are not the same as money market funds (most likely sold by your broker). In fact, we really don’t know why people even buy money market funds in the current environment.

For example, Vanguard offers the Prime Money Market Fund. Like other money market funds, this one “invests in short-term, high-quality securities.” Its objective is to keep the fund trading at $1 and generate a decent return. Right now that return is 0.89% – a bit lower than the returns you see from the money market accounts listed in this article. However, money market funds do not have FDIC insurance.

Most people compare the return of a money market fund (sold by their broker) to the interest rate paid by a traditional bank (0.03%, sold by their local bank teller). As a result, they are willing to take the risk of a money market fund. However, as you can see from the best money market accounts in this article, you can get FDIC insurance and beat the return of most funds. Why earn 0.89% with no FDIC-insurance when you can easily earn 1.05% and have FDIC insurance.

The post Best Money Market Rates & Accounts – July 2017 appeared first on MagnifyMoney.

The Best CD Rates – August 2017

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Updated August 7, 2017

If you are looking for a better yield on your savings, a high rate CD (certificate of deposit) offered by an online bank could be a good option. Internet-only banks offer much better interest rates than traditional banks. For example, a 12-month CD at Bank of America would require a $10,000 minimum deposit and would pay only 0.07%. At an online bank, you could earn 1.40% with only a $2,000 minimum deposit. (If you would rather get a savings account or money market with no time restriction, look at the best savings accounts or best money market accounts).

This list is updated monthly – and competition has become much more intense in May. A number of banks that were in our April report have been replaced in May as rates continue to inch higher.  Here are the accounts with some of the best CD rates:

  • 1-Year CD: Synchrony – 1.40% APY, $2,000 minimum deposit

With a $2,000 minimum deposit you can earn a healthy 1.40% APY. Synchrony (formerly part of GE) has a very large store credit card business. For example, if you open a credit card at Old Navy, it is issued by Synchrony. Synchrony gathers online deposits (without branches) to fund its store card business. Your deposits are FDIC insured up to the legal maximum, and Synchrony is a publicly traded company.

  • 6 months – 6 years: GS (Goldman Sachs) Bank – 0.60% – 2.30% APY, $500 minimum deposit
  • GS Bank is is the online consumer bank of Goldman Sachs (the large investment bank). Your funds are FDIC insured, and Goldman offers very competitive rates. Even better: there is only a $500 minimum deposit. So, if you don’t have enough money to meet the minimum deposit of the other banks on this list, or you are looking for another bank for your savings, GS is a good option. Here are the rates (which are within a few basis points of the best rates in the market):
    • 1-year: 1.40% APY
    • 2-year: 1.55% APY
    • 3-year: 1.90% APY
    • 5-year: 2.25% APY
    • 6-year: 2.30% APY

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  • 3 months – 10 years: Discover Bank – 0.35% APY – 2.35% APY; $2,500 minimum deposit

Discover is known for cash back credit cards. However, Discover has also quietly built a leading internet bank that offers checking accounts, savings accounts and CDs. Discover has invested in a mobile banking app (not found with other companies, like Synchrony) and strong on-shore customer service. Although Discover does not always have the highest rate, it is very close (within basis points) across all durations. If customer service and digital tools (like apps) are important to you, Discover is an excellent consideration. Note: Discover offers a wide range of maturities, and you can get a CD rate with a duration as short as 3 months or as long as 10 years.

  • 1-Year CD: Popular Direct – 1.60% APY, $10,000 minimum deposit

BankDirect, launched in 1999, is a division of Texas Capital Bank. The bank pays competitive rates on savings products. Unfortunately, the user interface and experience still looks like it was created in the 1990s. Your deposits will be insured up to the FDIC maximum. You can only get this APY with a minimum $10,000 deposit.

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  • 1-Year CD (from a credit union): PenFed – 1.31% APY, $1,000 minimum deposit – must become a credit union member

PenFedPenFed is a credit union that offers very competitive interest rates. You need to join the credit union in order to benefit from their products. If you have a military or government affiliation, it is free to join. Otherwise, you would need to join an organization like Voices for America’s Troops, which costs $14.00. Once you are a member, you can open PenFed products (including this certificate) online. Your deposit would be insured by the NCUA, which is the National Credit Union Administration. There is a $1,000 minimum deposit for the one-year certificate – making this a good option if you don’t have the $5,000 required for EverBank. And if you are willing to give up a few points of yield to support a credit union, PenFed is a nice choice.

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  • 2 Year CD: Synchrony – 1.65% APY, $2,000 minimum deposit

Synchrony increased interest rates this month on 2-year CDs (Last month Capital One was on the list, at 1.45%). Just remember that FDIC insurance is based upon your total relationship with a bank across all accounts. If you are building a CD-ladder, make sure you keep your total relationship balance at Synchrony below $250,000.

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  • 3-Year CD: Connexus Credit Union – 2.00% APY, $5,000 minimum deposit

Connexus is a credit union that anyone can join (so long as you make a donation of $5 to the Connexus Association). Your deposit is insured by the NCUA (which is like the FDIC, but for credit unions). Once you are a member of the credit union, you can also take advantage of other products offered by the credit union. This is one of the best APYs we have seen from a credit union for a three year CD.

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  • 3-Year CD: EverBank – 2.00% APY, $5,000 minimum deposit to open

ever_bank1EverBank increased the 3-year CD rate dramatically in May to 2.00%. You need at least $5,000 to open the account, and your deposit is FDIC-insured. After EverBank’s acquisition by TIAA-Cref, it has become very aggressive on interest rates, to the benefit of consumers. You can earn these rates on deposits up to $1,000,000.

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  • 5-Year CD: Synchrony – 2.35% APY, $25,000 minimum deposit

Synchrony has also increased its 5-year CD rate. You need at least $25,000 to take advantage of the 2.35% APY. If you have less than $25,000 you will get a 2.30% APY rate (but need at least $2,000). After clicking on “Apply Now” you will be taken to their standard CD landing page. Make sure you select the 60-month option. Just remember: if you close the CD early, you would be hit with a 365 day interest penalty. That means if you close the account in the first year, you would actually lose some of your initial deposit. You won’t get rich with a 2.35% APY, but it has been a long time since we have seen rates this high. By comparison, the rate at Bank of America on a 5-year CD is only 0.15%.

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3 Questions To Ask Before You Open A CD

1. Should I just open an online savings account instead? 

With a CD, the saver and the bank make stronger commitments. The saver promises to keep the funds in the account for a specified period of time. In exchange, the bank guarantees the interest rate during the term of the CD. The longer the term, the higher the interest rate – and the higher the penalty for closing the CD early. With a savings account, there are few promises. You can empty the account without paying a penalty and the bank can change the interest rate at any time.

If you have a high level of confidence that you do not need to touch the money for a specified period of time, a CD is a much better deal. However, if you think you might need to use the money in the next couple of months, a savings account is a much better idea.

You can earn a lot more interest with a CD. Imagine you have $10,000 and know that you do not need to touch the money for two years. In a high-yield savings account earning 1.10%, you would earn $221 over two years. If you put that money into a 1.50% CD, you would earn $302. Given the ease of switching to an online CD, the extra interest income is easy money.

2. What term should I select? 

The early withdrawal penalties on CDs can be significant. On a 1-year CD, 90 days is a typical penalty. And on 2 and 3 year CDs, a 6-month penalty is common. The impact of the penalty on your return can be significant. If you opened a one-year CD with a 1.25% APY and closed it after six months, you would forfeit half of the interest and earned only 0.63%. You would have been better off with a savings account paying 1.05%.

The worst case scenario is with the longest CDs. 5-year CDs usually have a one-year penalty for taking out funds early. If you open a 5-year CD and close it quickly, you could actually end up losing money.

Given the early penalties, you need complete confidence that you will not need to withdrawal the money early. Ask yourself this question: “do I have 90% confidence that I will not need access to the cash during the CD term?” If you don’t have confidence, go for a shorter term or a savings account.

3. Should I consider my local bank or credit union? 

The interest rates shown in this article are all from online banks that offer products nationally. Our product database includes traditional banks, community banks and credit unions. If traditional banks offered better rates, they would have been featured in this article. The internet-only banks have dramatically better interest rates. That should not be surprising. Because internet-only banks do not have branches, they are able to pass along their cost savings to you in the form of higher interest rates.

However, you can always visit your local bank or credit union and ask them to beat the rates listed in this article. The chance of getting a better deal is extremely low (remember that Bank of America is only paying 0.07%), but you can try.

How To Find The Best Account

If you don’t find an account that meets your needs in this article, you can use the MagnifyMoney CD tool to find the best rate for your individual needs. Input your zip code, deposit amount and term. The tool will then provide you with CD options, from the highest APY to the lowest.

The post The Best CD Rates – August 2017 appeared first on MagnifyMoney.

Goldman Sachs Enters Consumer Deposit Market With GE Acquisition

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Updated May 6, 2016: Goldman Sachs has launched its savings account

1.05% Interest Rate with No Minimum Balance

GS BankGoldman Sachs has launched its long awaited online savings account. The bank, long known for serving the wealthiest individuals and corporations, is now offering a high yield savings account that requires only $1 to open. Here are the details of the product:

  • 1.05% Annual Percentage Yield (APY)
  • No minimum deposit – you can open the account with just $1
  • There is a deposit limit – you can only deposit a maximum of $250,000
  • You can access your money by electronic transfer, wire transfer or by check. Note: Synchrony Bank pays 1.05% but also provides an ATM card for easier access to your funds. The minimum deposit is $30 (instead of $1), but we think the ATM card makes it a superior offer.

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You should shop around. Interest rates as high as 1.20% are available for people with big balances. MagnifyMoney has a list of the best savings accounts here.

Goldman Sachs Purchased GE’s Savings Accounts

Goldman Sachs purchased $16 billion of GE Capital Bank’s consumer deposits. $8 billion of the deposits are online savings accounts and CDs, and the other $8 billion are brokered certificates of deposit. In addition to the deposits, the employees of GE Capital responsible for the deposit business have been transitioned to Goldman Sachs.

The acquisition accelerates two big trends in consumer banking. General Electric has decided to exit the consumer financial services market, and has been rapidly shedding businesses all over the world. Goldman Sachs is building out a consumer banking strategy as it diversifies its business. Earlier this year, it announced that it will be entering consumer lending. And now, with a meaningful consumer deposit business, it will be active on both sides of the balance sheet.

Without the cost of a branch network, Goldman Sachs is able to pay higher interest rates to consumers while still obtaining funding advantages. Goldman Sachs is looking to diversity its funding, and sticky consumer deposits can be attractive. As interest rates increase, consumer deposits, due to their inertia, are typically not as responsive to increases in interest rates.

Goldman Sachs: Building The Consumer Bank Of The Future

FinTech companies, largely in the Silicon Valley, have started to change the way financial services are delivered to consumers. Marketplace lending has brought a better product and experience to consumers, a higher return to investors and more advanced credit risk analytics to lending decisions. Internet banks, by avoiding branch networks, are providing savers with higher interest rates and banks with low-cost funding sources. Goldman Sachs is out to prove that even a large, existing bank can take advantage of these trends.

Goldman Sachs will be launching a digital lending business. It has hired a former senior executive at Discover to lead the expansion. With the acquisition of the GE deposit franchise, Goldman Sachs will be a formidable competitor to the large incumbent banks. Why receive 0.01% on your savings account from Bank of America, and pay 19% interest on your credit card to Citibank, when you can get 1% on savings and pay 12% on loans to Goldman Sachs? Because Goldman does not have a legacy business to defend or cost structure to rationalize, it is uniquely positioned to challenge the large consumer banks in America.

At the moment, the marketplace lenders are taking advantage of ultra-low interest rates to grow. Investors are pouring money into any investment that offers yield. However, as interest rates increase, having access to low-cost consumer deposits will become a competitive advantage. Deposit rates for consumers do not increase as rapidly as interest rates in general. Goldman Sachs could end up with a funding cost advantage in a rising rate environment. Not only would the large consumer banks suffer, but the Silicon Valley start-ups may find it harder to compete.

Good News For Consumers

Many people have an immediate, negative reaction when they hear the name Goldman Sachs. However, in the consumer deposit and lending space, Goldman Sachs will be a challenger brand. In order to win as a challenger, you need a better product, experience, or both. Consumer loans and savings accounts remain entrenched with four big lenders who became even bigger after the financial crisis. Consumers will benefit by having well-funded new entrants looking to steal market share. Goldman Sachs is both large and well-funded. Consumer should expect better rates on savings accounts and loans in the years to come, as competition intensifies.

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