Fed's Rate Cut Tumbles Savings APYs!

[This post is written and copyrighted by FIRE Finance (http://firefinance.blogspot.com).]

While investors had speculated a rate cut of 0.5%, the Feds went ahead and surprised all with a 0.75% rate cut! This is the Federal Reserve's biggest interest rate cut in 18 years. The new rate of 3.5% is the lowest since September 2005. Though this act reflects serious concerns about a deteriorating U.S. economy, it will help lower some borrowing costs for consumers. But it is unlikely to be a panacea for all of our economy's ills.

How will it affect savers?

In simple words, the fed's rate cut means that savers will face lower returns on their money. And major banks have already begun to slash APYs for savings accounts:

• WTDirect's Savings Account rate has fallen from 4.90% to 4.30% APY
• IngDirect has slashed their Orange Savings rate to 3.65% APY. The rates for the Electric Orange Checking Account have changed as well.
  
  • $0-49,999.99 earns a 2.50% APY
  • $50,000.00-$99,999.99 earns a 4.00% APY
  • $100,000.00 or more earns a 4.25% APY
    
• Capital One's High Yield MMA is now poised at 3.50% APY after a series of cuts.
  

But all is not lost. Bankrate is still displaying banks offering savings APY* greater than 5.00% APY.

1. 5.30% APY - One United Bank, CA (Bankrate Rating: 3 star) - Min Balance: $1000.
2. 5.11% APY - AmTrust, OH (Bankrate Rating: 2 star) -Min Balance: $1.
• Note: Their eSavings rate is fixed for 90 days!
3. 5.05% APY- FNBO Direct, NE (Bankrate Rating: 4 star) - Min Balance: $1.

We are sure there will be further dips in the savings rates as more banks follow suit. Slowly a situation might arise where we might not save at a rate which is higher than the interest we are paying on our debts. Then it would make sense to use a part of our savings to lower our debts, else we will be burning money.

Since the markets are falling, it will pay off to research well about the credibility of the bank before moving our savings. We have been using AmTrust for years now. Thank God that they have not given us any reason to complain. We are looking forward towards your experiences with good savings APYs and the institutions offering them.

Image Source(s): iStockPhoto

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