Money Markets Offer Checks

First, let’s look at how these products work. A money market account is basically a savings account, but pays more than many regular savings or checking accounts. Right now the average yield on money market accounts is 1.3%, nothing to write home about but you do get a small return on your money.

Money markets usually allow you to write a limited number of checks, and money market rates can fluctuate. MMA rates are typically not locked down.

CD Rates Vary Based on Term

Certificates of deposit tie up your money for specific periods of time for the privilege of earning interest. CDs can have a maturity of a few weeks to several years. The longer your money is in a CD, the higher the rate of interest you can get. Right now, the average 2-year CD rate is 1.96%.

If you want your money to stay safe, CDs offer FDIC insurance up to $250,000 per individual. But you won’t have access to your money during the term of the CD and have to pay a penalty for early withdrawal.

There have been many articles and blog posts focusing on who might be next. This New York Times article and this CNN article review the financials of a few troubled banks.

After IndyMac was seized – the seventh bank to fail since the credit crisis began last summer, and the second-largest bank to fail in the Federal Deposit Insurance Corp.’s 75-year history – stocks in nearly all the nation’s banks were clobbered Monday as the market bet that there will be more failures. This is a tough time to be investing in banks.

If your deposits are under the FDIC limits, you don’t have worry about losing any money. However, there is a risk that the receiver of the failed bank decides not to continue the CD term. The new bank is free to close the CD early. The early withdrawal penalty would be waived. This is what happened when NetBank closed last year. Some CD holders had their NetBank CDs closed early by ING Direct. On the positive side, you are also free to close the CD early without an early withdrawal penalty.

He is fighting to keep the economy afloat after mighty blows from the housing and credit crises, while trying to contain inflation.

For now, the priority is shoring up the economy, Bernanke suggested in an appearance before the House Financial Services Committee. He pledged anew to slice a key interest rate and help the economy, which many fear is on the verge of a recession, if not already in one.

“The economic situation has become distinctly less favorable” since the summer, the Fed chief told lawmakers.

Since then, the housing slump has worsened, credit problems have intensified and the job market has deteriorated. Bernanke said that combination of bad news has made people and businesses more cautious about spending and investing, further weakening the economy.

The country should prepare for “sluggish economic activity in the near term,” Bernanke said. Concern is growing about the possible return of stagflation, when stagnant growth is combined with rising inflation, for the first time since the 1970s.

Here are some of the recent rate cuts and decreases:

• AmTrustDirect e-Savings / e-Money Market – 4.10% APY for e-Savings / 4% APY ($50K+) 3.75% APY ($25K+) 3.5% APY for e-Money Market (down from 4.60% e-Savings / 4.50% all tiers e-Money Market)
• Corus MMA – 4.32% APY (down from 4.50%)
• Flagstar MMA – 4.25% APY (down from 4.40%)
• FNBO Direct Savings – 3.85% APY (down from 4.30%)
• Capital One/Costco MMA – 3.70% APY (down from 4.05%)
• EmigrantDirect Savings – 3.60% APY (down from 4.05%)
• BancoFortuna Savings – 3.60% APY (down from 4.05%)
• GMAC MMA – 3.50% APY (down from 4.00%)

1. GMAC Bank’s Money Market Savings dropping from 4.75% to 4.50%
2. Countrywide’s SavingsLink dropping from 5.50% to 5.35%
3. Presidential Bank’s Premiere Savings dropping from 4.90% to 4.60%
4. Bank of America’s Money Market Savings from 4.45% to 4.29%
5. ING Direct’s Saving Account from 4.30% to 4.20%

With falling interest rates and no end in sight, it may be wise to lock in a high CD rate while you still can.

Perhaps there needs to be another category for the banks that are making two big rate cuts. E-LOAN did this with two 25 basis point rate cuts. Now GMAC Bank has done it. GMAC Bank dropped its Money Market Yield from 4.90% to 4.75% APY. Before the Fed rate cut, it had been 5.30% APY. If you’re looking to lock in a high rate, be sure to check out the current cd rates.