(UPDATE: UFB Direct cut its savings rate to 0.80% APY on Feb. 28.)
Looks like online savings accounts are going to dole out even less in interest. American Express Bank and UFB Direct, two popular online banks, have slashed their rates significantly — moves that likely preview what’s to come from other major online banks.
Today, American Express Bank cut the rate on its high-yield savings account from 0.90% APY to 0.75% APY.
Also, UFB Direct made several rate reductions in the past few weeks. On Jan. 17, the online bank’s Airline Rewards Savings account paid a 1.30% APY. Currently, the rate is a 0.85% APY.
These actions can be blamed on the Federal Reserve’s updated forecast, which continues to apply downward pressure on savings rates. In late January of this year, the Fed said the economic climate will lead to “exceptionally low” interest rates until late 2014.
The national savings rate average is 0.33% APY, according to the banks tracked by MyBankTracker.
Here are the top seven savings accounts available nationwide (as of Feb. 24, 2012):
|Bank||APY||Minimum opening deposit|
|Sallie Mae Bank||0.85%||$0|
TIAA Direct, the recently launched online banking unit of TIAA-CREF, offers the top national savings rate of 1.25% APY. Many online banks tend to offer high rates to attract new customers and deposits.
UFB Direct used to offer the leading savings rate at 1.30% APY while competitors struggled to maintain a 1.00% APY. Just look at where it is now.
In the past, the two biggest online banks — ING Direct and Ally Bank — offered savings rates that were competitive but often fell short of rates offered by newer entrants to online banking, such as Discover Bank and Sallie Mae Bank.
As the savings rates from the younger online bank start to slip, ING Direct and Ally Bank are likely to reduce rates as well.
Keep an open eye for that.