CIT Bank today raised its savings rate from 0.90% APY to 0.95% APY. It follows a move from GE Capital Retail Bank earlier in the week to raise the rate on several CD terms. As the unemployment rate continues to drop, look for more and more banks to begin raising rates.
CIT Bank today raised the rate on its online savings account from 0.90% APY to 0.95% APY on balances above $25,000. For those with balances under $25,000, the rate increased from 0.85% to 0.90% APY. This moves continues to keep CIT close to the top online savings account rate in the country according to BestCashCow data.
This week has been a relatively active week for bank rate increases. GE Capital Retail Bank raised the rate on two CD terms:
60 Mo CD 100K from 2.05% APY to 2.15% on GE Capital Retail Bank
48 Mo CD 100K from 1.70% to 1.80% on GE Capital Retail Bank
In addition, Doral Direct increased the rates every so slightly on two of their CD terms:
36 Mo CD 0.5K from 1.20% to 1.21% on Doral Direct
48 Mo CD 0.5K from 1.32% to 1.33% on Doral Direct
Overall, rates on online savings accounts and longer-term CDs have been rising while the yields on shorter-term CDs continue to gradually drift down. The top, nationally available 1 year CD is Pentagon Federal Credit Union at 1.16% APY. Is the extra .21% in yield worth it to lock money up? I don't think so. Rates are moving up and it's possible by year end online savings account rates could be close to 1.16% APY anyway.
The unemployment rate now stands at 6.6%. The Fed has initially said that it would keep the Fed Funds rate low until unemployment reached 6.5%. So, we are close. It's clear from the recent rise in longer-term CDs, mortgage rates, and online savings account rates, that the long decline in bank rates is over. Barring any economic, political, or natural catastrophe, we are now entering a rising rate environment. For more on my thoughts about the nature of this enviroment, please read my 2014 Savings Rate Outlook.
It is a pretty good sign that the economy is heating up again when "fee-only" or "for-fee" financial advisors step back out from the woodwork. These folks should be avoided.
You need only to turn on CNBC for 5 minutes these days to hear the next market expert explain to you how they forecast the stock market’s 30% increase in 2013 and how certain they are that they know exactly where the market is going next. (I’ve never quite understood how stock market experts can have no qualifications but to be good at self-adulation, have decent PR and average marketing skills.) These folks – and an entire industry behind them – have been dusting off their marketing skills that they had left in the back of the closing in 2008. Many of them are back pushing “for-fee” or “fee-only” financial advisory services for which they charge anywhere from 0.70% to 1.00% as a flat fee on your asset base that they manage.
I myself have met with some of these folks. While I find stockbrokers to be lacking in many respects, I can say pretty much that I find the entire industry of fee only financial advisors to be not only lacking but disingenuous. Investment ideas that these folks have are never fully flushed out and can never really be explained with anything other than the most specious of arguments. Since these folks never really worked a real job and usually sport MBAs from places like Harvard, Wharton or Chicago, they really cannot back up their investment theses. They are cheerleaders for everything without deep knowledge. In fact, one even tried to explain to me on January 16, 2014 why Argentina was a great investment for Americans, an argument which was not only not plausible, but especially troubling since he had just returned from an annual vacation there (Argentina’s currency free fall accelerated with rumors of default that circulated the next day). Anecdotal evidence aside, these folks bring little to the table in terms of knowledge or insight into the market.
Since fee only advisors have no real inside knowledge, they wind up selling access to products that even moderately wealthy investors cannot otherwise invest in. For example, a fee-only advisor could get you into a fund of funds that is composed of investment in leading hedge fund managers for only a $300,000 investment, whereas accessing those funds of funds directly would otherwise require $1 million. While many investors would die to have someone like a Dan Loeb or Bill Ackman manage their money, accessing through a fund of funds is a watered down and expensive way to do it (these fund of funds usually charge their own management fees of 1 to 1.5%). When you add up all of the fees here, you are paying not just the investment managers’ fees, but the fund of fund fees and your own for profit advisor’s fees. The fees on top of fees on top of fees can easily total 3 to 4%.
Dan Loeb, Bill Ackman and many others are managers worth having on your side, but paying three levels of fees makes their continued exceptional performance necessary just to break even. They and their peers will need to collectively meet such a high hurdle rate to make investing through fee only advisors worthwhile. Most investors will find they will perform much better directly investing in individual stocks that they know and / or ETFs that match a strategy that they desire, and avoid all of these ridiculous fees by going to a discount brokerage.
Inside Edge: Pay Professionals for Professional Knowledge, but You Can See Cheerleaders for Free by Watching CNBC
It's Valentine's Day, or close to Valentine's Day and you are thinking about going out to eat with your significant other and wining and dining him or her with a nice, classy meal. The cost of such a meal is probably in the $200 - $300 range. For some, that's not a lot of money, for others, it might be the entertainment budget for the month, or for several months. So, how can you get the bank to pay for such a meal so that none, or almost none of the bill comes out of your own pocket? It's easy. Switch your money to an account that pays a decent interest rate when compared to the national average. Doing so can help you earn hundreds of extra dollars per year at no additional risk.
Right now, if you are like 80% of the individuals in this country, your extra cash is parked in a savings or CD account at a big bank, earning close to 0%. The average savings account rate according to BestCashCow is 0.13% APY. The rates from bigger banks are closed to 0.05% APY. In essence, the bank is paying you nothing for keeping your money there.
But there are banks that will pay over 7X the national average to deposit your money with them. According to the BestCashCow savings rate tables, the top online savings account rate is 1.00% APY. If you have $30,000 in your cash savings accounts, and you move this over to a higher paying account, the BestCashCow Savings Booster Calculator shows that you would earn approximately $182 after-tax dollars per year. Over ten years, that difference in what you would save by moving your money accumulates to $2,197. That's a lot of nice Valentine's Day meals.
In this example, the bank offering 1% APY is FDIC insured, meaning that you take no additional risk moving your money to the bank.
Take that extra cash you have set aside and put it to work. Opening an account online or at a physical branch takes less than 1 hour. It might one of the most lucrative hours you spend in a while.
There is competition for your money and some banks are willing and ready to pay you more. And in the process, impress your Valentine by showing him or her that you know how to grow your money the easy way.
