E-Trade Savings Account APY Decreases to 0.95%

E-Trade just lowered the rate on their E-Trade Savings Accounts to 0.95%. Apparently this APY is still five times the national average.

I did open an E-Trade savings account with one dollar in order to generate a $25 account opening bonus. Other than that I am not a big fan of regular savings accounts, since their APYs fluctuate a lot. The savings and checking accounts generally follow the trend in the Fed Funds rate, which has recently been hovering at historic lows near zero. When the fed funds rate starts increasing it is a good idea to keep your savings in a high yield savings or checking account, instead of parking them in a CD.

When rates are low however, the best way to earn money risk free is to extend the maturity duration of your CD. Right now GMAC Bank has a pretty decent one year CD rate at 2.80% for a $500 minimum deposit.

Another possibility is opening a high yield rewards checking account and earn some extra interest when you fullfil the obligations to the bank.

This post was included in the Carnival of Personal Finance #205: Pay it Forward Edition