America's Best Rates 4Th Quarter, 2020 - Savings, Money Market and CD Rates?
The savings accounts of American consumers have been among the financial casualties of COVID-19. A combination of the recession and the Federal Reserve's interest-rate policies has driven interest rates on savings accounts, money market accounts and CDs to record lows.
The latest America's Best Rates survey studied savings accounts, money market accounts, 1-year CDs and 5-year CDs throughout a cross-section of the banking industry. Here are some highlights of that survey:
- Falling interest rates have cut the amount of interest earned by the average savings account by 66% over the past year.
- Average rates on savings accounts, money market accounts, 1-year CDs and 5-year CDs are at the lowest levels ever recorded by this survey. The data on savings and money market accounts goes back more than eight years.
- Online accounts remain the best way to fight back against falling interest rates. The average rate for online accounts was substantially higher than the average for traditional, branch-based accounts in all four categories of this survey.
|Rate Type||Savings Accounts||5-Year CDs|
|4th Quarter 2020 Average||0.13%||0.40%|
|4th Quarter 2020 Top Rate||0.69%||1.00%|
|Average Online Rate||0.42%||0.57%|
|Average Branch-Based Rate||0.04%||0.35%|
Both the weakness of the economy and the trend in Federal Reserve monetary policy suggest that low interest rates may be here for some time. Since rates don't seem likely to suddenly rise on their own, the only path to getting more out of your bank accounts may be to shop for a better deal.
Those better deals are certainly available to be had. To help you find them, the sections below identify the best accounts and major trends in each category of accounts.
America's Best Savings Account Rates: 4th Quarter, 2020
These were the ten best savings account interest rates during the final quarter of 2020:
|America's Best Savings Account Rates: 4th Quarter, 2020|
|Rank||Bank||2020 Q4 Avg. APY|
|1st place||SFGI Direct||0.69%|
|2nd place||Salem Five Direct||0.68%|
|3rd place||Axos Bank||0.63%|
|4th place||Synchrony Bank||0.63%|
|5th place||American Express National Bank||0.60%|
|6th place||Ally Bank||0.60%|
|7th place||Marcus by Goldman Sachs||0.55%|
|8th place||Discover Bank||0.55%|
|9th place||Sallie Mae Bank||0.53%|
Rates in the above table that appear to be equal are actually separated by a small fraction of a percent.
Average savings account rate: 0.136%
During the fourth quarter of 2020, the average savings account rate fell for the seventh consecutive quarter.
The fourth quarter of 2020's average savings account rate of 0.136% was the lowest ever recorded in this survey. The previous record low was 0.160%, set in the second quarter of 2015.
There remains a large gap between the best interest rates and the average, meaning that most customers could still find opportunities to earn more interest despite the falling rate environment.
In particular, customers of very large banks should consider making a change.
The four largest banks in this survey, each of which has over $1 trillion in deposits, paid savings account rates of 0.04% or lower during the fourth quarter. That's less than 1/3 of the average rate, and less than 1/10 of the top rates in this survey.
Average online savings account rate: 0.421%
For years, online savings accounts have consistently offered interest rates that are significantly higher than rates on traditional, branch-based savings accounts.
The average online savings account rate of 0.421% is nearly ten times the average interest rate on traditional savings accounts. For banks, online accounts have cost advantages over accounts that need to be serviced through a traditional branch, and banks often pass those savings along to their customers in the form of higher rates for online accounts.
America's Best Money Market Rates: 4th Quarter, 2020
The following were the ten highest money market rates during the 4th quarter of 2020:
|America's Best Money Market Account Rates: 4th Quarter, 2020|
2020 Q4 Avg. APY
|1st place||Axos Bank||0.62%|
|2nd place||Sallie Mae Bank||0.58%|
|4th place||CIT Bank||0.54%|
|5th place||First Internet Bank||0.52%|
|6th place (tie)||Ally Bank||0.50%|
|6th place (tie)||American Plus Bank||0.50%|
|6th place (tie)||Synchrony Bank||0.50%|
|9th place||TIAA Bank||0.45%|
|10th place||Virtual Bank||0.41%|
Average money market rate: 0.121%
The average money market rate declined for the sixth consecutive quarter during the last quarter of 2020.
The average of 0.121% is the lowest money market rate recorded in this study's history, which dates back to early 2012.
As with savings accounts, there are still opportunities to find clearly better rates on money market accounts despite the low rate environment. The top rates in the above table are all three to five times the average money market rate.
Another similarity with savings accounts is that the very largest banks offer money market rates that are well below the overall average. That means that customers of those mega-banks have an especially good opportunity to earn more interest if they change banks.
Average online money market rate: 0.347%
Online money market accounts offer a clear rate advantage over traditional branch-based accounts. The average online money market rate of 0.347% is better than five times the average rate on traditional money market accounts.
The rate advantage of online accounts is no fluke. Throughout the history of the America's Best Rates study, online accounts have consistently offered clearly better rates than traditional accounts. This rate advantage has held true in both rising and falling interest rate environments.
The Best 1-Year CD Rates: 4th Quarter, 2020
The following were the best 1-year CD rates during the 4th quarter of 2020:
|America's Best 1-Year CD Rates: 4th Quarter, 2020|
|2020 Q4 Avg. APY|
|1st place||American Plus Bank||0.72%|
|3rd place||Marcus by Goldman Sachs||0.64%|
|4th place||Ally Bank||0.64%|
|5th place||First Internet Bank||0.63%|
|6th place||Synchrony Bank||0.60%|
|8th place||Discover Bank||0.56%|
|9th place||Ridgewood Savings Bank||0.53%|
|10th place||Beal Bank||0.51%|
Rates in the above table of the best CD rates that appear to be tied are actually separated by a small fraction of a percent.
Average 1-year CD rate: 0.237%
The 1-year CD rates still represent an advantage over savings and money market rates. However, since CDs commit the bank to paying a rate throughout the term of the CD, banks are especially quick to lower CD rates once rates start to fall.
Because of that, CD rates over the past year fell by a much greater amount than savings or money market rates.
As the table above shows, even as rates overall have fallen, some banks continue to offer significantly better rates. A rate advantage on a CD is especially valuable because it can be locked in for the term of the CD.
Average online 1-year CD rate: 0.416%
The average rate for online 1-year CDs is more than twice the average for 1-year CDs serviced by traditional bank branches.
That rate difference gives you an especially good reason to consider online accounts for your CDs. After all, the nature of a CD is that there typically aren't any transactions or changes made for the duration of the CD's term. That means there's little value in having the account serviced by an in-person branch if you can get a higher rate through an online account.
The Best 5-year CD Rates: 4th Quarter, 2020
The following were the best interest rates for 5-year CDs during the last quarter of 2020:
|America's Best 5-Year CD Rates: 4th Quarter, 2020|
|2020 Q4 Avg. APY|
|2nd place||First Internet Bank||0.96%|
|3rd place||Ally Bank||0.96%|
|4th place||Tompkins Trust Company||0.90%|
|5th place||Synchrony Bank||0.84%|
|6th place||Ridgewood Savings Bank||0.83%|
|7th place||Popular Bank||0.80%|
|8th place (tie)||Main Street Bank||0.75%|
|8th place (tie)||National Exchange Bank and Trust||0.75%|
|8th place (tie)||Security Bank of Kansas City||0.75%|
The rates for second and third place that appear to be tied are actually separated by a small fraction of a percent.
Average 5-year CD rate: 0.400%
Just as CDs generally offer higher rates than savings or money market accounts, longer-term CDs offer higher rates than shorter term CDs. Basically, the longer you are willing to commit your money, the higher the rate you are likely to earn.
So, even though rates on 5-year CDs have fallen by more than rates in any other category in this study, they still are higher than rates on other type of accounts.
As the table above shows, you can increase the rate advantage of 5-year CDs by shopping for one of the best rates. There are several options that allow you to lock in a much-higher-than-average rate for the term of the CD.
Average online 5-year CD rate: 0.573%
The average online CD rate is more than 0.20% higher than the average CD rate offered through traditional branches.
Even if you are used to banking at a branch, a 5-year CD would be an ideal way to try online banking. Considering that you would typically leave a 5-year CD in place for the entire term with no need for interacting with the account, online accounts offer a clear rate advantage with little loss of convenience or service.
America's Best Rates: Identifying Consistently High Rates
Rather than base the America's Best Rates savings, money market, and CD account rankings on a single snapshot in time, MoneyRates looks to identify the most consistently competitive accounts by averaging rates throughout each calendar quarter. Rates available to customers with a $10,000 balance and no broader relationship with the bank are used for this survey.
Further, to provide a representative view of banking trends, the analysis is based on the MoneyRates Index, a consistent sample of accounts reflecting a cross-section of the retail deposit industry. The MoneyRates Index is comprised of 50 of the largest retail deposit institutions in the United States, plus 25 smaller banks and 25 medium-sized banks.