Banks really, really, really want your money. And that's good news for savers in an otherwise dismal interest-rate environment.
Overall, average yields for certificates of deposit and savings accounts haven't dropped nearly as much as other interest rates, particularly the federal funds rate, which the Federal Reserve slashed from 2% in October to 0.25% in December.
By contrast, the average rate on a one-year certificate dropped a little more than half a percentage point, to 1.92%, in the same period, according to Bankrate.com. Savers who shop around a bit can find several banks offering rates over 3% on both one-year CDs and on high-yield savings accounts.
Imperial Capital Bank of La Jolla, Calif., for example, recently offered a 3.85% yield on a one-year CD, while GMAC Bank of Midvale, Utah, was paying 3.75%. Meanwhile, Dollar Savings Direct of New York City paid 4% on its savings account with a $1,000 minimum deposit, and Flagstar Bank of Troy, Mich., offered 3.55% with a $1 minimum.
- Play the video to the right for more advice from Liz Pulliam Weston.
For an interesting experiment, you might try Money Aisle, which auctions off your deposit to the highest-bidding bank. It's fun and doesn't require a commitment.
A number of small banks and credit unions are even offering rates over 4% -- on checking accounts. Some, including Crossroads Bank of Illinois, recently advertised yields above 6%. So-called rewards checking has numerous restrictions for users, but it's a trend that has picked up speed as banks' need for money has grown.
"Banks are still very hungry for consumer deposits," said Greg McBride, a senior financial analyst for Bankrate.com. "They're keeping returns high relative to where they are in the rest of the economy."
More from MSN Money
Why savers are suddenly attractive
Why aren't banks following the rate trend down to the basement? Two reasons:- Bad loans. Capital losses from bad mortgages and other loans mean many banks need to build up their reserves. To do that, they need your deposits.
- Scaredy-cat investors. Banks used to be able to sell most of the loans they made to investors and then use the proceeds to make more loans. With skyrocketing defaults, investors have gotten much pickier, making loan sales an expensive way to raise money. It's cheaper to get more deposits from savers and lend that money.
You won't get the best rates leaving your money in a traditional big-name bank, however. As ever, scratching out decent yields means shopping sites such as MSN Money, Bankrate.com (for the best CD and savings rates) and Money-Rates.com (for rewards checking).
Video on MSN Money
Why cash is importantBanks are so eager to win and keep depositors, MSN Money's Jim Jubak says, that if you have a little green right now you’ll be able to negotiate a better rate on a CD or money market account.
You may be asking yourself: Why bother? With rates so low, does a percentage point or two really matter?
The answer: probably. If your money is sitting in a traditional savings account, earning less than 1%, you're losing ground to inflation and taxes. Working to get a better return can help you preserve the purchasing power of your money, even if it won't make you rich. You might even get ahead a little, now that the inflation rate has dropped precipitously.
"You're better off earning 3% with 1% inflation," Bankrate's McBride said, "than you were earning 4% when inflation was 5%."
Continued: Yield isn't everything
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