Savings Accounts Earn Even Less Now, Believe It or Not

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If you were wondering if savings accounts could pay any less on that money you’ve been stashing, they can. 

The average interest rate on a regular U.S. savings account with less than $100,000 fell to 0.04% from 0.05% this week, reaching its lowest level on record, and falling to a new historic low for the second time in seven months, according to the weekly update the Federal Deposit Insurance Corp. released Monday. The FDIC began tracking the average for insured bank locations in 2009. 

While the decline makes a negligible difference, practically speaking, it shows just how unprecedented the circumstances are. The COVID-19 pandemic has exacerbated factors that keep interest rates low: Not only is the Federal Reserve keeping its benchmark interest rate at nearly zero to stimulate the economic recovery, but as consumers hang on to more of their money, banks can tap swollen levels of deposits to make loans.

The average rate is now less than half of what it was one year ago, but for a deposit of $10,000, the difference is just $5 in interest over a year. The average hasn’t been any higher than 0.10% since 2012, and for a good chunk of the last decade, it was stuck at the pre-pandemic low of 0.06%.

Other types of accounts, like certificates of deposit (CD), high-yield savings accounts, and money market accounts, offer slightly higher interest rates, though often with more restrictions on withdrawals or minimum deposits. The average money market rate currently stands at 0.06%, while a 12-month CD earns 0.15%, and a 5-year CD, 0.31%, according to the FDIC.

The flip side of low savings rates is generally lower borrowing costs. Record low mortgage rates, for instance, have fueled a surge in home sales.

To calculate the national rate, the FDIC uses the published annual percentage yields (APY) at up to 80,000 FDIC-insured institution locations each week.