Popular online banks ING Direct and Ally Bank have cut the savings rates in the past week — making their CDs and Savings Accounts less attractive.

When the Fed was faced with changing national rates at the first 2011 meeting they decided not to act, keeping interest rates low. As expected, savings rates dropped as the economy makes its way toward a sustainable recovery.

Lifeless High-Yield Savings Accounts

Online high-yield savings accounts that offered over 5.00% APY prior to the recession have become lackluster savings vehicles as strict monetary policy keeps interest rates at all-time lows.

In the past two months, yields on the online savings accounts from HSBC Advance, Sallie Mae Bank, Discover Bank, and Zions Bank have fallen.

BankOld APYNew APYProduct page
HSBC Advance1.00%0.90% (as of 1/11/11)View offer
Sallie Mae Bank1.30%1.25% (as of 2/1/11)View offer
Discover Bank1.25%1.20% (2/2/11)View offer
Zions Bank1.11%1.06% (2/15/11)View offer

Currently, the online savings account with the highest yield is offered at American Express Bank, which is paying 1.30% APY.

ING Direct and Ally Bank Rate Cuts

When the biggest names in online banking start cutting their rates, it is usually a grim sight for savers, who begin veering into riskier investments such as stock, mutual funds, and bonds. It is also a signal for smaller banks to start decreasing their rates as well.

ING Direct made widespread cuts for its savings and CD rates, making their products seem highly unattractive.

BankOld APYNew APYProduct pageING Direct ProductOld APYNew APY (as of 2/23/11)Rate Change (APY)
HSBC Advance1.00%0.90% (as of 1/11/11)View offerOrange Savings Account1.10%1.00%- 0.10%
Sallie Mae Bank1.30%1.25% (as of 2/1/11)View offerIRA Savings1.10%1.00%- 0.10%
Discover Bank1.25%1.20% (2/2/11)View offer12-Month CD and IRA CD1.00%0.75%- 0.25%
Zions Bank1.11%1.06% (2/15/11)View offer18-Month CD and IRA CD1.00%0.75%- 0.25%
24-Month CD and IRA CD1.25%1.00%- 0.25%

Ally dropped rates on its online savings and money market accounts to 1.05% APY, still topping rival bank ING Direct, but hardly impressive.

BankOld APYNew APYProduct pageING Direct ProductOld APYNew APY (as of 2/23/11)Rate Change (APY)Ally ProductOld APY (as of 2/18/11)New APY (as of 2/22/11)Rate Change (APY)
HSBC Advance1.00%0.90% (as of 1/11/11)View offerOrange Savings Account1.10%1.00%- 0.10%Online Savings Account1.09%1.05%- 0.04%
Sallie Mae Bank1.30%1.25% (as of 2/1/11)View offerIRA Savings1.10%1.00%- 0.10%Money Market Savings1.09%1.05%- 0.04%
Discover Bank1.25%1.20% (2/2/11)View offer12-Month CD and IRA CD1.00%0.75%- 0.25%
Zions Bank1.11%1.06% (2/15/11)View offer18-Month CD and IRA CD1.00%0.75%- 0.25%
24-Month CD and IRA CD1.25%1.00%- 0.25%

Rate-chasers who have accounts with ING Direct and Ally may find the changes as a reason to head for greener pastures. It may not be a good move when other banks are likely to soon follow in their footsteps.

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