Chances are you enjoyed the playground seesaw as a child. Seated across from your best friend on the long narrow board, you pushed up with your feet, and your friend went down. Down, up. Up, down. Over and over. Laughing all the way. Yet as adults, the seesaw effect can hold less appeal — often dizzying — particularly when it comes to interest rates on your deposit accounts. That’s why we pulled together this list of things to know, so you can stay informed and keep a level head during times when interest rates are in decline.
What goes down will come up.
We can all agree it’s much more fun to be on the upside of the seesaw than the down. The same could be said of our economy. If you look back over the course of history or follow current trends, you will find interest increases and decreases over time. However, no one could have predicted COVID-19’s ripple effect. The Federal Reserve made several emergency interest rate cuts — all designed to prevent economic fallout. This has led to lower rates on your deposit accounts, including checking, savings, money market, and CD accounts, resulting in disappointed savers.
Now is not forever.
Deposit rates are generally tied to several economic factors. As the Federal Reserve tries to boost the economy, interest rates generally decrease. Think of it as the circle of life. Low rates encourage businesses and individuals to borrow money. They use that money to buy more goods and services. That creates jobs and reduces unemployment. More wage-earning workers buy more goods and services. And finally, the economy grows and recovers. We’ve seen it happen throughout our nation’s history.
Related: How to Keep Changing Interest Rates in Perspective
It may seem like the sky is falling. It’s not.
When your friend jumps off the seesaw, it really hurts to land. You could say that’s what’s happening with CD interest rates right now. For the past few years, CDs have been a go-to strategy for savers. The rates are fixed for the term of the CD, which means that the rates won’t go down during the term of the CD. The longer the term, the better the annual percentage yield (APY). However, in a rate-declining environment, those great CD rates are going to lower as well.
What worked yesterday may not work tomorrow.
CDs, the “old reliable,” have been the go-to for savers because of higher interest rates when compared to other deposit account offerings like saving accounts. Right now, with interest rates low across the board on deposit accounts, this “go-to” savings strategy is less appealing now than before.
You may have more options than you think.
In today’s environment, there is very little rate difference between saving accounts, short-term CDs, and long-term CDs. While no one can predict the future, there are other things you can do to help you stay on track with your savings goals.
Approximately 80 percent of Americans are searching for ways to organize and maximize their money. If you’re one of them, the following tips can help you generate meaningful savings, regardless of the interest rate environment. Better yet, they’ll allow you to save faster and smarter.
- Brainstorm your goals: To determine what a strong financial future looks like for you, make a list of your saving priorities. Having trouble getting stated? Begin with one simple question: What makes you happy? Once you determine your savings goals, check out our savings by age guide to determine how much you should have saved.
- Bring it to life: Create and name your own virtual envelopes with buckets, available in our Online Savings Account, for each of your goals and try to give them timelines. Research shows this step increases the likelihood of success. It also allows you to manage your priorities and track your progress.
- Make savings automatic: Schedule a regular transfer from your checking to savings when you normally get your paycheck. It will keep you from being tempted to spend those set-aside funds and get you in the habit of spending less than you make. And the added benefit: Your savings will quietly and painlessly grow. Learn how you can put your savings on autopilot.
- Fire it up: Look for tools that will help you grow your money faster. For example, there are options in our Online Savings Account that identify “safe to save” money based on behavioral patterns in your primary checking account and move that money into savings automatically. Others round up your debit card purchases to the nearest dollar and move the difference directly into savings. These types of boosters accelerate your savings, making it fast and easy to set more money aside. Learn how microsaving a little bit at a time can help you reach your goals.
- Pat yourself on the back: Take time to track your progress and congratulate yourself on what you’ve accomplished regularly — it could be monthly or even quarterly. The name of the game with savings is not necessarily speed but consistency.
Comment on this article
Comments
Prof P. on August 13, 2020 at 1:51pm
An upbeat &informative article about interest rate changes.
Charles F. on August 13, 2020 at 1:55pm
Sure wish Credit Card interest would go down. Why just savings? and rarely credit cards?
Robert G. on August 13, 2020 at 2:06pm
Very disappointed ALLY lowering interest rates AGAIN this year!
Ally on August 13, 2020 at 2:07pm
Hi Robert, we hear your frustration. Our rates are determined by a variety of factors, including conditions in the marketplace and the competitive environment.
Miffed on August 13, 2020 at 2:08pm
I took advantage of your 1.1% rates less than 2 months ago. Just got my second "We're lowering your interest rate" message." Time to start looking for other options.
Lynn C. on August 13, 2020 at 2:10pm
Getting rid of the Federal Reserve would make me happy! All they seem to do is lower interest rates in order to boost the stock market for people who already have the money. SHAM!
Someone n. on August 13, 2020 at 2:15pm
I find it just a little too convenient that my interest rate changed (-.2%) the day after I made a call to CS about Ally's APY (possible increasing it or obtaining better options) for money I have (might turn into HAD) in an Ally savings account.
barry a. on August 13, 2020 at 2:26pm
looking elsewhere
Manuel A. on August 13, 2020 at 2:31pm
Let me know your CD rates for one and two years. Thank you.
Ally on August 13, 2020 at 2:35pm
Hi Manuel, you can check out our current rates here: http://www.ally.com/bank/savings/
Kristen on August 13, 2020 at 2:38pm
Detailed article! The tips have been consistent with each APY decrease. Rates have decreased for over a year from 2.2% (around June 2019; 1.9% in August 2019) to now 0.8% APY on all balance tiers. What sets Ally apart and makes Ally a top competitor for those looking to save and grow their money?
Paulette C. on August 13, 2020 at 2:41pm
This article didn't make me feel any better about the latest drop in interest rates. The last drop (which was only a short time ago) encouraged me to look elsewhere for savings options. While I did find a bank with better rates, I decided to leave my money (and my future expected house sale) in Ally. I'll be going back to that other bank - my main reason for being with Ally was the top interest rate - that's gone away.
david h. on August 13, 2020 at 2:50pm
the only reason I opened an online account was attractive interest rates. Now that rates are approaching 0, there doesn't seem to be any advantage to the hassle of not having a brick & mortar business to go to. I'm disappointed that Ally hasn't been able to buck this trend in a more positive way. I took the saving route to avoid the ups and downs of the stock market, but it looks like I'm being forced to go back there.
Larry P. on August 13, 2020 at 3:05pm
Maybe it is past time I checked with Discover and American Express.
j. M. on August 13, 2020 at 3:26pm
Ladies and gentlemen: Many thanks to your junior staff for staying up late, teaching the little guy how to make "horse-hockey" taste like Chateaubriand. For myself, I'd rather you saved your energy for counting the bank's fine dividends. It doesn't seem to me that Ally Bank has taken a hit, thanks to the infusion of $$ from the Fed ad the U. S. Mint. And I'll bet I'm not the only one of your customers that is laughing at this unashamed attempt at fakery. If I once held your outfit in some esteem, this "5 Things You Should Know" strangled it for good.
Eric s. on August 13, 2020 at 3:41pm
Ok, it’s understandable that rates have come down. It’s also why people are flocking to real estate and other “hard assets” (and risky maybe) during these times. Inflation will rise and rates will go up. Hopefully folks savings habits won’t be altered for ever before then.
Daniel S. on August 13, 2020 at 5:01pm
I picked ALLY Bank because of the high interest savings account. And while I'm not one of your larger account holders, if you keep lowering my rate, I'll be forced to take my business and money elsewhere. Respectfully Dan Stiffler
Ally on August 13, 2020 at 5:40pm
Hi Dan, we’d hate to see you go. The economic news is that interest rates are on the downswing, which impacts our rates.
Allen B. on August 13, 2020 at 6:33pm
Total BS>Rates have been low for decades>You have cut rates to the bone but I'll bet you haven't done the same with fees you charge>Before this pandemic, the economy & stock market were on fire but your rates on cd's & saving accts were not>Why not?Show some integrity & stop trying to justify your greed>
Peter B. on August 13, 2020 at 7:13pm
Yes there are always economic cycles over the years. Great if you have a regular income to save some, but for retirees such as I it is disastrous to have less than 1 percent interest on one's savings. If we did not have a pandemic, low rates are good for borrowers, but with COVID, how many new businesses will start? Not too many. Also, the treasury will suffer as tax revenues decline on savings. We are between a rock and a hard place.
Robert on August 13, 2020 at 8:05pm
I am tired of Ally Bank lowering my interest rate the day before my interest is due. Started a 2.20% and now down to .08%.
User on August 13, 2020 at 10:17pm
I got to say this is a great article Ally. A couple points to anyone who might be reading this (Especially due to the reduced interest rates): - The primary driver of your savings account should be income not interest. While it is nice to earn a decent interest rate on your savings, keep in mind those regular contributions to your savings are more important than any interest you might earn (The rates are still higher than a typical big bank). - Ally has been known in the past to raise rates as interest rates rise. If you leave your money in their savings account rest assured that they will raise the interest rates as interest rates rise (Important not all banks do this). - Ally does have nice features (especially the buckets which really help in terms of organization/goal setting). - If you have met your short term savings goals, and are lucky enough to have extra funds consider investing! Good luck and good health.
James F. on August 14, 2020 at 4:44am
Article was fine for someone just starting out. As a retiree that has been doing this for a while there was no new information. I understand the reason for the lower rates. I locked in some higher rates for our emergency funds a year ago with CD's. I don't need or want "Virtual Envelopes or Buckets" and am not happy with those items cluttering up my savings web page. I've been with Ally since the beginning and generally very happy with the service so please consider this a small creative criticism.
Ally on August 14, 2020 at 4:46am
Hi James, thank you for the comment and for being an Ally customer.
Steven D. on August 14, 2020 at 7:14am
This article is moronic! It has absolutely nothing to do with today's investing/savings environment and offers no real solutions. Rather than suggesting one should make "virtual envelopes with buckets" and "pat yourself on the back" for investing savings in a bank that offers low interest and limited incentives, perhaps you might suggest assigning a portion of savings to another institution that is offering a bonus for maintaining a level of savings over a defined time period. Or, searching out improved CD rates at lesser known institutions.
Billy W. on August 14, 2020 at 9:17am
Your continuous reduction of savings account interest rates will most likely cause me to move my account to a higher paying institution. I started looking yesterday and found Vio that is paying 1.01%. Your latest 20% reduction is the straw that broke the camel's back!
Carrie B. on August 14, 2020 at 12:21pm
This is the second change this year . None of my other banking institutions have done this. . I am not happy about this and will begin searching other banks now because of it
Philip M. on August 14, 2020 at 12:42pm
As of August 12, 2020. I opened a joint online savings account with the second of 7 grandchildren to help with college tuitions. In two days you lowered the interest rate from 1 .00 percent to .80. I had to speak with 4 representatives in order succeed. I'm 76 and a retired schoolteacher. I have followed your rate declines over the past four months. I have been an Ally customer from the beginning of Ally in 2009. What has happened to LOYALTY?
charles on August 14, 2020 at 7:24pm
great motivational article
Ally on August 14, 2020 at 7:52pm
Thanks for reading, Charles.
Zuke on August 16, 2020 at 9:25pm
The article doesn't seem to mention what should be done with the cash/CD money. Just wondering.
H on August 17, 2020 at 1:57pm
How about an article about the millions of older Americans who worked hard, saved for their retirement, lived within their means and had a expectoration of earning some income from their savings. Every time the rates go down, we take a pay cut and once again end up subsidizing the borrowers. Must be nice to go out and by a new car and use a retires income to help make the car payments. Where to you suggest the retired go to make up for their lost income?
Hoyt W. on August 18, 2020 at 10:19am
This is a nonsense article! We are not interested in all the "Fluff" ways you list. We put our money in Ally to earn more interest than we were earning in the brick and mortar banks. That appears to have been a bait and switch tactic starting at over 2% and we have watched it rapidly dwindle down to .80. You mention the Fed making emergency reductions in their rates. Why haven't we seen anything about that on the news, either real or fake? It looks like it is time to start looking again to see where we can put our money to make it grow. It appears that online banks, including Ally., is not the answer!
Susan on August 19, 2020 at 6:54am
This article offers no options to invest vs savings accounts. I already know “how to save”.
CityguyUSA on August 25, 2020 at 7:16pm
And why are rates declining? I remember when I grew up we got 6% for years and year and year and now you can't even spit out 1% because of fucking greed and a corrupt Fed!
Mark M. on August 27, 2020 at 4:31pm
FYI with the continuing lowering of Ally interest rates, my wife and I will likely move $15,000+ out of Ally to a competitor with the opportunity to earn just over 4%, instead of less than 1%.
Ed on August 27, 2020 at 6:14pm
Pay off your mortgage faster with your saving that aren't earning you as much as your mortgage interest rate and you will be paying less in interest on that mortgage every month, and your homes equity will grow faster.
The S. on August 27, 2020 at 11:44pm
Thank you! Wonderful article with exceptional analogies.
Ally on August 28, 2020 at 6:19am
We love hearing this! Thanks for reading.
Steven D. on August 28, 2020 at 7:13am
Thank you for this follow on article to your last "savings plan" article. In this article, you appropriately point out savings considerations beyond the traditional strategy of CDs, savings accounts, etc. and suggests the individual search for other ways to maximize their investment opportunities. I appreciate your effort to inform potential investors, even though Ally may not offer such add-on opportunities.
LF on August 28, 2020 at 9:34pm
There's a lot of reasoning in here as to why it's going down. There's a lot of titles hinting that it could go back up. But in the content, there is not a single word about it returning to its original values as the economy recovers. This did zero to easy my fears.
Jeanette M. on September 16, 2020 at 9:15am
Been with Ally Bank for 6 years plus you have given me much excellent infor-mation there Kudos to Ally Bank for being such an efficient bank thank you fpr your efficiency etc
Ally on September 18, 2020 at 10:03am
We love hearing this, Jeanette! Thank you for being an Ally customer. ❤
Chris on September 24, 2020 at 3:24pm
This is garbage. Started my account at 2.2%, slowly but steadily its now at .06%.... At .06 what's the point of even having this account. I'd make more going out and picking up soda cans for an hour. I might as well leave the money in my banks savings account at that rate!
lb on September 26, 2020 at 7:27am
Ally is now one of the lowest savings rates in comparison with other online bank providers. It was previously one of the best. If the rate keeps tanking im personally going to look elsewhere. Its been reduced like 3-4x this year its excessive and there isnt really an excuse, pandemic aside.
Charles H. on February 24, 2021 at 11:34am
Okay. Now it's time for Ally to raise rates again. They are making more money on 10 yr. bonds than the saver is making.