Although community banks are often overlooked, they can rival-ââ¬âand often exceed-ââ¬ânational banks in savings account interest rates.
Are you disappointed in the current interest rates offered by national banks for conventional savings accounts? The solution may be no further away than your local community bank. Like credit unions, many community banks are concerned with the needs of local customers and they invest in community development. Many community banks also have less restrictive lending practices and are willing to consider other factors such as character and family history before making decisions on loans.
While big banks such as Bank of America are currently offering interest rates as low as a 0.10% APY on regular savings accounts, many community banks are offering interest rates at 2.00 and above. In Pennsylvania, Dollar Bank is offering a 2.00% APY on balances below $20,000 for their FreeMONEY Savings Account if you have a Dollar Bank FreeMONEY Checking or e-Checking account.
Other community bank offers require a little more footwork. For example, the North Middlesex Savings Bank is currently offering a 2.25% APY for their Simply Save account. To earn the maximum interest rate, the account must have at least one $50 deposit posted during the interest cycle, but the deposit must be made in person at a banking branch. If you are a resident of that community, the savings interest rate may be worth a monthly trip to the bank.
The bottom line: never discount local banks while researching interest rates just because the bank doesn’t have a national presence. Some community banks do not allow people to submit applications unless they live in a community area, however, so always check with bank before completing your application.
For the best information on savings and money market account interest rates, click on the "Savings" tab above.
The financial strength of an insurance company should be an important consideration before you buy a policy. Hereââ¬â¢s why.
You may know the financial strength of your bank and of the companies in your stock portfolio, but do you know the financial strength of your home and auto insurance company? Economic instabilities can drastically affect a marginal company, and if there’s a catastrophic event that results in multiple policy claims, the financial strength of an insurance company may impact claim payments. Although insurance companies typically purchase reinsurance (a practice where portions of risk portfolios are transferred to another company to reduce the likelihood of having to pay a large obligation), if an insurance company has a bad financial rating, this can reduce their ability to obtain reinsurance. Additionally, if an insurance company goes insolvent, reinsurance doesn’t apply. This, in turn, can reduce their ability to pay you—the policyholder—when needed.
An insurance rating system, such as that developed by A.M. Best or Standard & Poor’s, analyzes the ability of insurance companies to meet its ongoing insurance policy and contract obligations. You should use extreme caution before signing up for insurance with any company rated “B” or below. That auto insurance policy company XYZ just quoted you may be 20% cheaper than any quote received from other companies, but what will that policy be worth if you have an accident and can’t get your insurance company to pay according to your contract?
You can register for a free basic subscription account at both A.M. Best and Standard & Poor's to research your insurance company’s financial strength. It’s always a good idea to check on your insurance company’s financial strength rating at least once a year, and always check out the rating before signing up for a new policy.
The Federal Reserve released its FOMC Statement today and there were no surprises. The Fed reiterated its support for "exceptionally low levels of the federal funds rate for an extended period." That means savers will continue to earn almost no rate of return on savings accounts and very little on longer-term certificates of deposit. This may force many investors to think about putting cash into other investments, such as bonds.
The statement pointed out that Europe's problems along with a detoriating real estate market and high levels of unemployment will keep the economy subdued for some time to come. Those expecting a roaring V-shaped recovery are starting to realize that's not going to happen. At this point, the world economy is one more shock away from falling back into recession.
For savers this is more of the same. Savings rates and CD rates will continue to drift lower. The bright side has been the significant slide in mortgage rates since peaking in mid-April. The average 30-year mortgage rate is now 4.76%, down from 5.25 in April 2010.
Low rates will also continue to support the stock market. Dividend stocks like Verizon (VZ), AT&T (T), and Pfizer (PFE) lead Dow stocks in terms of yield and offer those needing income one way of generating it. Verizon for instance pays 6.85% versus an average savings rate of 1.31%. But unlike FDIC bank stocks, they also offer the potential loss of principle.
The good news for savers and bond holders alike is the absence of inflation. According to the Fed statement:
"Prices of energy and other commodities have declined somewhat in recent months, and underlying inflation has trended lower. With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to be subdued for some time."
Those spreading panic about soaring inflation in 2009 were dead wrong, at least so far. The economy needs a strong heartbeat to stir inflation and all we have now are some sporadic pulses. Despite any sign of inflation, gold remains near a 52-week high as investors remain spooked about Europe's sovereign debt issues.
