When I was in business school, I was taught that an inverted yield curve is an extraordinary precursor of a recession. Indeed, the empirical evidence is there. Of the five recessions since 1980, all have been preceded, by 6 to 18 months, by an inversion of the 2 and 10-year Treasury rates.

The yield curve now is getting close to flat (it is not inverted), and that is causing a lot of economists to appear on Bloomberg and CNBC fretting about a potential recession as early as late 2018.

What causes the correlation? Could this time be different?

I think, this time, that the inverted yield curve could be sending a different signal.

First, I am looking at the cause of the flattening yield curve. In particular, this time the compression of the yield curve is clearly caused by a true global debt environment. For the last decade, as the US has been recovering, 10-year and longer US Treasury bonds have been purchased by the Chinese and other purchasers. While this has enabled the US to fund its extraordinary debt and deficit in a way that might not otherwise have been possible, it has also prevented US government debt rates from expanding to offer a rate of return on long term debt that might be reasonably expected. Extraordinarily low inflation in the US has also been a factor.

Even as short-term rates have come up, there has been steady demand preventing long-term rates from going up as well. When the US 10-year moved above 3%, a couple of weeks ago, the dollar strengthened dramatically against every major currency as foreign accounts moved into dollars to chase yield. In fact, low long-term debt yields globally may continue to compress US debt rates, even as inflation creeps up

Second, I am looking at why a yield curve has led to past recessions. The fact that banks borrow at short-term rates and lend at long term rates and that banks have been pressured when the yield curve compresses or inverts has been a factor in each recession (and was the major cause of the 2008-2009 crisis).

But, in the post-crisis world, the major money center banks are operating in a way that involves much less interest rate risk. The major money center banks are lending short term with instruments like credit card loans at much higher rates than ever before. They have issued home equity loans that are more tied to short-term rates (see rates here). And, many of them are still making fortunes by paying 0.01% to 0.03% on deposits (you can get a better rate on short-term savings and money market accounts here). To boot, they have issued billions of dollars in structured notes that provide a hedge from interest rate risk and enable them to pay nothing for their capital for the full duration of an inversion.

So, I would submit that this time could be different, and while interest rate movements affect your own finances, the compression and possible inversion may say very little about the US economy.

As we begin May 2018 and approach the second and third meetings of Jay Powell’s tenure as Chairman of the Fed, we are continuing to see savings rates firm up.

While savings rates are improving, they are not where we expect to see them this time next year and still well below any historical norm. To boot, the yield curve is lacking slope. So while BestCashCow is the most comprehensive site listing savings and CD rates, we continue to urge caution when it comes to CD rates, especially those longer than one year.

This month, we’d therefore prefer to focus just on five savings and money market products that we find particularly interesting. We’re highlighting these products not only because the current rates are attractive, but because there has been some discussion in our conference rooms about banks that offer teaser rates and then lower them. We don’t believe either that these five banks have engaged in such tactics or that they will be lowering their rates as the Fed moves the Fed Funds rate higher.

So, here are five savings accounts that we would bet will continue to be competitive.

1. EBSB Direct – 1.80% Online Money Market rate

EBSB Direct is a familiar name to many who have followed the online deposit account space for the last few years. At various points, they have aggressively courted savers, and this rate represents a consistency in that approach. Earlier this year, their rate had been 1.57% and 1.44%. EBSB Direct has great reviews on BestCashCow. High net worth depositors will appreciate the fact that the rate is extended to all deposits up to $2 million, and that as a subsidiary of East Boston Savings Bank, a Massachusetts chartered bank, DIF insurance covers that amount.

2. Purepoint – 1.75% Online Savings rate

We wrote about Purepoint in April and we have written about the bank before. As a subsidiary of one of Japan’s largest financial institutions and as an aggressive player in the US market that seems determined to gain market share, we’d bet on Purepoint to continue to raise rates as the Fed moves.

3. Marcus – 1.60% Online Savings rate

With generally outstanding reviews on BestCashCow, we think that Marcus is a good place to stash cash. Marcus is also a subsidiary of Goldman Sachs and if you listen to their executives on Bloomberg or CNBC, you’ll see that they have made a real commitment to the online savings and CD spaces and we doubt they will be doing anything other than raising rates as the Federal Reserve moves. To boot, Marcus is perhaps the only one of the major online banks where it seems very safe to go well over FDIC-insurance limits.

Editor’s Note: Marcus is an advertiser of BestCashCow. Please read our Advertiser Disclosure here.

4. Personal Savings by American Express – 1.55% Online Savings rate

Amex’s online savings product was once the highest rate around in 2009 and 2010 when they were offering 0.90% while other rates had fallen below that level. While Amex hasn’t been as quick to raise rates out of the zero-rate environment as many others have, their reviews on BestCashCow indicate that they provide outstanding customer service. It certainly isn’t a bank that is going to be treating its current long-standing savings customers any worse than new customers.

5. Ally Bank – 1.50% Online Savings rate

While Ally occasionally offers some great 11-month No Penalty CD products, the rate on their savings account has trailed their competitors a little bit for the last half a year. That’s OK, because we have every bit of confidence that Ally will always remain among the highest offered savings rates. We also know that they won’t be quietly lowering their savings rates while they give new customers better ones. Their TV advertisements promise as much.

Before opening an online savings or money market account, we also encourage you to check local bank rates and local credit union rates.

It has been over 15 years now since I opened my first online savings accounts with ING Direct (now Capital One 360) and HSBC Direct (now HSBC Advance). In that time, I have experienced a lot of different service levels and experienced certain frustration (many that I share with BestCashCow readers as I see from the comments on our tables).

Let me begin by saying that I can deal with not making my funds immediately available through long hold times, although 10 business days at Sallie Mae Bank is the absolute maximum I will tolerate. I can also deal with ACH transfers that take a couple of days, although I find Marcus’s and Purepoint’s immediate outbound transfers to be a real selling point versus their competitors.

What I cannot deal with are the following.

1. Touching my Money with Silly Fees. A paper account maintenance fee that users cannot get out of is a pure outrage in an online bank (Incredible Bank). Even with a deposit of $250,000, it reduced the interest earned by about 5% a month (and much more than that for lower deposit amounts). While I am not aware of any banks that are currently charging outbound transfer fees, I have seen banks in the past charge fees of $3 to $5 per transfer. I find it attractive when a bank like Marcus says “We will never ever charge you a fee”.

2. Limiting my Ability to Access My Money. While I am a co-founder of BestCashCow, I have never ever had my portfolio entirely in cash. Rather, I am a self-directed investor who frequently needs to access my cash in order to buy bonds and equities. The very nature of a savings or money market account is that you are getting liquidity. A CD sacrifices liquidity. If I need $100,000 from a savings account, and a bank tells me that I can only have $3,000 right now, I find it patronizing and condescending regardless of their savings rate. I have seen this a lot from some of the lesser known banks on BestCashCow’s tables, but the major online banks (Marcus, Synchrony, Ally, Purepoint, CIT, Barclays, Amex) have never played this game.

3. Not Providing a Fully Functional Website. The major online banks are competing to provide the best interfaces and the best mobile apps (at the moment, I believe Ally has the best mobile apps). But, some banks cannot even seem to offer a working website with high availability times (for example, Banco Popular). Others are angling for your deposits with websites that haven’t been enhanced since 1998 (IGobanking, VirtualBank, Colorado Federal). It is 2018 already! I might be inclined to open an online CD with a bank that doesn’t offer a fully functional website, but I wouldn’t put my savings and money market money in one that doesn’t.

4. Not Showing Inbound Transfer Information Instantaneously. When a online bank takes $500 from a corresponding bank, that information should be listed immediately as a credit to the online account or at the very least as a pending inbound transfer. With some smaller online banks, I’ve had to make a phone call to confirm that they have drawn the money and will credit me. That’s time on the phone that I could be spending doing something else.

5. Providing limited phone support. The great news here is that with most of the major online banks, it is virtually never necessary to pick up the phone to speak with someone. However, if you ever need to, it is nice to know that someone is there. I have been surprised by the absence of phone hour support at some major online banks on the weekend (eg. Sallie Mae Bank). But there are comments in the BestCashCow tables from users who have been simply unable to access phone support at some of the smaller online banks (AbleBanking, VirtualBank).

6. Excluding existing customers from receiving the best savings and money market rates. I have saved the one fault that I really find terribly outlandish until the end. Now that rates are rising, some banks have found it profitable to advertise their new rates, but continue to give existing depositors a lower rate. Of the major online banks, only CIT Bank has incorporated this game into their business model (even now drawing customers in with a savings rate and then to turn and offer a still higher money market rate to new customers). The good news with CIT is that they do allow you to “upgrade” to the higher rate with a phone call. Other banks (like Flushing Bank, through its IGoBanking and BankPurely subsidiaries) require that you apply for an entirely new account to get the higher rate. Still others simply treat existing account holders like pariahs (BestCashCow and our affiliates do not classify Salem Five as an online bank as a result of their long history of quietly lowering the rates that they provide to existing customers without providing any disclosure or evidence of the new rate on their website, as well as their violations of numbers 1 and 2 above).

Now that online savings rates are going up so much faster than those of the major money center banks (Citibank, Chase, Wells Fargo and Bank of America), opening an online savings account as a place to stash your cash makes more sense than it ever has before. But, you should also carefully consider the experience of others. For this reason, we recommend looking at the star system and the comments provided by other BestCashCow users with a bank listing on our rate tables.

Always check savings and CD rates from banks and credit unions near you.

The above article mentions online banks that have been or are current advertisers on BestCashCow and our affiliates. Please read our Advertiser Disclosure.