Rock Bottom Bank Savings Account Rates? There's a Better Way

NEW YORK (TheStreet) — Pity the poor bank savers. They are saddled with a seven-year-old Federal Reserve policy that keeps interest rates at rock-bottom levels.

This week, bank savings rates were down to 0.066%, according to the BankingMyWay weekly bank rate tracker. That's barely ahead of the rate of inflation, which stands at -0.04%.

But there are better deals out there if you don't mind doing some digging. According to the most recent GoBankingRates survey of top U.S. bank savings rates, going smaller and going digital is the fastest path to higher rates of return.

"According to our data, the average savings account rate is only 0.18% APY nationwide," says Casey Bond, GoBankingRates' editor-in-chief. "However, online banks and local financial institutions stand out as consistently offering the best returns."

"Credit unions and online-only banks also tend to charge fewer fees, making these great options for depositors looking to keep pace with inflation and boost savings," Bond says.

According to the company's survey, MySavingsDirect offers the best savings rate in the nation, returning 1.25% APY on its MySavingsAccount. A bonus: The deal comes with few strings attached, with no fees and no minimum deposits. They survey is also bullish on credit unions, with Seattle-based School Employees Credit Union of Washington offering a whopping 6% APY on all of its savings accounts.

Industry experts say there are additional options than the standard, big-bank, low-rate savings accounts. Douglas Sheahan, president of ICCF Wealth Management in Winter Park, Fla., says banking consumers should shop around and, to get higher rates, be prepared to open new accounts and wait for a substantial amount of time – nine months to a year – while their money sits in the account per the stipulations of the new account.

"But don't lock up cash for more than a year, as interest rate increases are coming," he warns.

Or, bank savers can opt for so-called hybrid bank savings/checking accounts, which can offer higher rates of return. For example, Boston-based Radius Bank's Radius Hybrid account eliminates the need to transfer cash back and forth between accounts, doesn't charge any fees, has no minimum deposits and offers 1% APY on accounts with more than $2,500 stashed away.

Bank savers can also get creative and park their cash in an alternative account. "One of the most overlooked alternative to savings bank accounts and CDs are U.S. Savings Bonds," says Fred Rosenberg, a New York City forensic expert in securities arbitration. "They can add flexibility, liquidity, tax-deferred accumulation, inflation adjustments and safety. They are sold through banks and are in decline for no good reason, as savings bonds are competitive with money market and many savings accounts."

The takeaway is to go to where the best deals lie, preferable accounts with low or no fees. "The best savings account rates are tending to be online rather than at bricks-and-mortar banks, making those rates easy to find and compare online," says Rob Drury, executive director at the Association of Christian Financial Advisors in San Antonio. "Account fees can be reduced or eliminated by linking accounts in packages. Also, with rates being where they are, avoiding fees may be more important than interest rates, depending on the size of one's account. It's simply the mathematics that determines the best option."

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