Online Banks Stretch Rate Advantage Over Traditional Banks in Fourth Quarter

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Average online bank rates rose in the last quarter of 2012 according to MoneyRates.com's quarterly America's Best Rates survey, increasing their edge over average traditional bank rates, which showed no improvement over the same period. This gain for online banks heightened the already substantial advantage they held over traditional banks throughout 2012.

Online banks are turning a theoretical advantage into an actual advantage, offering customers higher rates on deposits. Getting several times more interest gives customers more of an incentive than ever to try online banks.

Average online savings account and money market account rates jumped again in the fourth quarter of 2012 according to MoneyRates.com’s America’s Best Rates survey. The increase defied the trend at traditional banks, which saw their rates fall or remain flat during the quarter, and placed the average rates at online banks up to five times those of traditional banks.

The average savings account rate at online banks increased from 0.58 percent in the third quarter to 0.60 percent. The average money market account rate at online banks rose from 0.60 percent to 0.65 percent. These gains marked the second consecutive quarter in which average online bank rates rose against a backdrop of falling or stagnant average rates at traditional banks.

This rising advantage put online banks well ahead of traditional banks for average yields. The average savings account rate at online banks outpaced the average rate at traditional banks (0.11 percent) by more than 400 percent. The average money market account rate at online banks offered nearly four times the interest of the average rate at traditional banks (0.17 percent).

“Online banks are turning a theoretical advantage into an actual advantage,” said Richard Barrington, senior financial analyst for MoneyRates.com. “We’ve known all along that without the burden of supporting extensive branch systems, online banks had a cost advantage over traditional banks. We are increasingly seeing online banks using that advantage to offer customers higher rates on deposits.”

The top rates measured in the survey also rose over third-quarter results, signaling that the top banks may be competing more aggressively to offer the highest-yielding account and the importance that savers compare interest rates. The top money market rate measured in the survey – 1.05 percent – marked a relatively sharp rise over the previous quarter’s top money market rate of 0.91 percent. The top savings account yield also increased from the third quarter.

“The continued rise of average online rates and the changing banking habits of Americans have increased the potential benefits of switching to an online bank,” said Barrington.

“Getting several times more interest gives customers more of an incentive than ever to try online banks,” Barrington said. “At the same time, many customers would prefer online banking anyway, simply because it fits with a lifestyle that is more geared toward electronic communication, and less tolerant of paper records.”

Here are the top 10 banks for savings account rates in the fourth-quarter America’s Best Rates survey:

(Note: Some results that appear to be ties are the result of rounding.)

1. Ally Bank – 0.95 percent        
2. American Express Bank – 0.90 percent
3. Sallie Mae Bank – 0.90 percent
4. MetLife Bank – 0.85 percent
5. Discover Bank – 0.80 percent
6. EverBank – 0.76 percent
7. ING Direct – 0.75 percent
8. Mile High Banks – 0.57 percent
9. Capital One Bank – 0.53 percent
10. Zions Bank – 0.50 percent

Here are the top 10 banks for money market account rates in the fourth-quarter America’s Best Rates survey:

(Note: There are 12 banks listed below because of a four-way tie for ninth place.)

1. Sallie Mae Bank – 1.05 percent
2. Ally Bank – 0.95 percent
3. MetLife Bank – 0.85 percent
4. (tie) Everbank – 0.76 percent
4. (tie) Nationwide Bank – 0.76 percent
6. Discover Bank – 0.70 percent
7. AIG – 0.68 percent
8. Mile High Banks – 0.60 percent
9. (tie) Acacia Federal Savings Bank – 0.50 percent
9. (tie) First Mariner Bank – 0.50 percent
9. (tie) OneWest Bank – 0.50 percent
9. (tie) Zions Bank – 0.50 percent

For the full analysis, please see America’s Best Rates 2012 Q4: Online banks press their advantage.

Methodology
America’s Best Rates are calculated from savings account rates and money market account rates recorded in the MoneyRates Index throughout the previous quarter. The MoneyRates Index is a composite of 100 banks, including the 50 largest U.S. banks by deposit amount, plus another 50 mid-sized banks. This sampling was constructed to be broadly representative of the general banking environment.

About MoneyRates.com
MoneyRates.com has been a leading source of information on bank rates, personal finance, savings accounts and investing since 1999. The site provides the highest rates on CDs, money market accounts and high-yield savings accounts. The Web Marketing Association awarded a Financial Services Standard of Excellence to MoneyRates.com in the 2011 WebAwards competition. MoneyRates.com is owned and operated by QuinStreet, Inc. (NASDAQ: QNST), one of the largest Internet marketing and media companies in the world. QuinStreet is committed to providing consumers and businesses with the information they need to find, research and select the products, services and brands that best meet their needs. The company is a leader in visitor-friendly marketing practices. For more information, please visit QuinStreet.com.

Press Contact
Andrew Heilman
775-784-3842
pr(at)moneyrates(dot)com

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