America’s Best Rates Q2 – Which Accounts Offer 4X The National Savings Rate?

Written by Richard Barrington

Financial Expert

Edited by Kristin Marino

Managing Editor

Savings account rates experienced a setback in the second quarter of 2016, though smart bank rate shoppers could still take advantage of high-interest accounts.

A streak of three straight quarters with rising savings account rates was broken in the second quarter, a step backward in what was beginning to look like a positive trend for savers. Even so, the highest rate in America’s Best Rates survey conducted by MoneyRates rose during the quarter, showing that deposit customers who shop actively for rates can mitigate some of the damage done by low interest rates.

Though money market account rates still trail savings account rates overall, they fared a little better in the second quarter, breaking even after a streak of four straight quarterly increases. Despite a challenging rate environment, in both the money market and savings account categories, there are better alternatives that offer high interest account rates.

Top 10 best savings account rates

The average savings account rate slipped by two-tenths of a basis point in the second quarter to 0.232 percent. However, the top rate in the survey rose to 1.10 percent, and there are still nine of roughly 100 banks surveyed that offer savings account rates of 1 percent or better. In other words, consumers have a number of opportunities to earn more than four times the average rate.

Here is the top 10 list for savings account rates, featuring eleven banks this quarter since there is a tie for the tenth spot:

Online savings accounts continue to show an overall advantage over traditional, branch-based savings accounts. The average rate for online savings accounts was 0.654 percent, nearly nine times higher than the average for traditional savings accounts of 0.075 percent.

Top 10 best money market account rates

On the money market side, the overall average of 0.204 percent was the same as last quarter. While this average is lower than the savings account average, and there are fewer money market accounts in the survey offering rates of 1 percent or better, the top money market rate is actually slightly higher than the top savings account rates.

Here are the top 10 money market rates from the survey:

Here again, online accounts show a significant advantage over traditional accounts. In fact, while money market account rates were flat overall during the second quarter, the average online rate rose by six-tenths of a basis point to 0.556 percent. This is nearly five times the average for traditional money market accounts. That average fell by one basis point, to 0.118 percent, during the quarter, so not only are online rates higher than traditional rates, but they seem to be moving in opposite directions.

Where do rates go from here?

The setback in savings account rates after they had been rising for the better part of a year reflects what appears to be a slowdown in economic growth. This might get worse when the effects of Britain’s decision to leave the European Union begin to be felt. The Brexit vote occurred too late in the second quarter to have a meaningful impact on the current rate survey, but if Treasury yields are any indication, downward pressure on deposit rates might be more evident in the third quarter. Five-year Treasury yields slipped to a three-year low in the first two weeks following the Brexit vote.

One factor that could push rates in the opposite direction (i.e., higher) is that inflation has firmed up in recent months, supported largely by rising oil prices. If inflation is indeed making a comeback, deposit customers have better hope that interest rates reverse themselves and start rising, otherwise, they will be losing more of their purchasing power to rising prices.

Overall, the mix of falling savings account rates and potentially rising inflation makes for a challenging environment that calls for consumers to be especially choosy about where they put their money.