When I started formally tracking high-yield savings rates, with a shared online spreadsheet, it was common to see banks offering interest rates above 5.0% APY. That was in January 2008, and the economy is in a different situation now. According to the government, there has been no measurable inflation, and now interest rates for lending are held low to stimulate the economy. Savers suffer in these conditions.
Banking Deal: Earn 1.20% APY on an FDIC-insured savings account at Barclays.
Bankers were livid this past spring when Ally Bank, a re-branding of GMAC Bank which had been tainted by the bailout of General Motors, rose like a phoenix and maintained the same interest rate it had been offering in its previous incarnation. The director of the FDIC got involved to prevent Ally from using its bailed-out position to create an unfair competitive advantage over other banks.
The bank must now be confident that it is no longer on the FDIC’s bad side. Click here for the latest interest rate from Ally Bank. It’s a small increase, resulting in only 50 cents more a year on an initial $1,000 balance. It seems to be a signal, though weak, that Ally wants to be considered a stronger bank than others, but I don’t think it’s a signal that we should expect to see more banks raising interest rates.
I do have an account with Ally Bank and you can read my review of the Ally Bank savings account here.
Today’s interest rate increase should not be enough to convince someone to move all of their money into this one bank, but if you have the inclination, Ally is a good choice for a diversified portfolio of savings accounts because at this time, I would expect they will continue offering one of the highest interest rates for highly liquid accounts and despite FDIC’s funding woes, your money should be safe.
See the review of the best online savings accounts – updated November 13, 2009.
Updated September 24, 2015 and originally published August 28, 2009.