February 2020 Update – Five Ways to Improve Your Online Savings Rate in 2020

January 2020 ended with more than enough headlines to scare anyone into cash. Between Coronavirus spreading in China and the possibility that it may be a generation before the U.S. has a president not named Trump, there is a lot to be scared about. Friday, January 31 saw the Dow drop 600 points and the S&P go down by 58.

Just because you are moving to cash doesn’t mean you have to sit by and take any rate offered.

Most of the major online banks have recently lowered their rates, as the Fed has lowered its rate, to 1.70%. Since that rate still lies on the top end of the Fed Funds target rate of 1.50% to 1.75%, we think a 1.70% APY in an online savings account is fair. It just isn’t the best you can do.

Here are five ways to beat that rate:

First, as of February 1, 2020, BestCashCow shows several online savings rates above 2.00% and many more that are close to 2.00%. Some of these are new entrants and some of these banks have held their rates at or above the best savings rates for a while. In particular, Fitness Bank is offering 2.20% for those who are active (or looking to become active), and CFG Bank is still offering 2.15% in their online savings account.

Second, consider savings rates at local banks and credit unions near you.

Third, you may want to look to short-term CDs with that money in excess of that you require to maintain your liquidity. Many one-year CDs are still being offered above 2.00%, and they will protect you from the possibility of further declines in the savings rate as we work our way through 2020. Read this article for more of my thoughts on short-term CDs here.

Fourth, consider one-year CD rates at local banks and credit unions near you.

Fifth, if all else fails and you find earning so little in interest to be upsetting, infuriating, etc., this could be a good time to consider depositing money with a bank that pays you in American Airlines AAdvantage miles instead of interest. You can learn more about Bask Bank's AAdvantage miles-earning account here.

Have a great month!