Shop Around While Rates Are Down


The Federal Reserve, in a statement Wednesday, said it planned to keep interest rates at "exceptionally low levels for some time." While that's good news for the economy, it's not necessarily the best news for your savings account. It may be time to revisit where you are keeping your money.

The Fed controls the federal funds rate, a key interest rate linked to the rates banks offer on deposit accounts. When the federal funds rate goes down, banks tend to lower the interest rates they offer on deposit accounts. But the relationship isn't necessarily a direct one. Even though the federal funds rate remains untouched, interest rates on accounts can still fluctuate. "Most banks are anxious to keep deposit funds flowing in," says Gregory Miller, chief economist with SunTrust Banks (Stock Quote: STI). "So they are going to price their interest rates competitively with other banks."

That means some banks, and some types of accounts, will have better rates than others, so get ready to shop around for the best deal. To get the latest in interest-rate information from banks in your area, enter your ZIP code in the CD marketplace.

For instance, if you live in the New York metropolitan area, you could be earning 2.0% interest on a savings account from Bank of Smithtown (Stock Quote: SMTB) with a $2,500 minimum deposit. Alternatively, you could open a money market account at Intervest National Bank (Stock Quote: IBCA), earning 2.8% with the same minimum.

If you know you won't need immediate access to your money, consider a certificate of deposit (CD) as a way of boosting the interest your money is earning. A 12-month CD from Park Avenue Bank (Stock Quote: PABK) in New York earns 3.15% with a $1,000 minimum.

Although it makes sense to shop around for the best rates, consider the various limitations and restrictions of a particular account before depositing money. For example, money market accounts allow only a limited number of transactions each month, and early withdrawals from a CD can trigger hefty fees and penalties.


—To find rates in your area, search by entering your ZIP code on the CD section of

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