The downward spiral of online savings account rates continues this week with both HSBC bank and ING Direct dropping their interest rates yet again. HSBC dropped it’s rate from 2.45% APY to 2.25% APY while ING Direct now offers the lowest rate with it’s recent drop to 1.85% APY (down from 2.20% APY last week).
As a whole, online savings accounts have seen their interest rates cut by nearly 66% over the last 2 and a half years. In September of 2007 ING Direct was offering a savings rate of 6.00% APY while all the other direct banking institutions had rates above 5 percent. Today, only one bank is offering a savings rate of above 3.00% APY and even their rates have seen a decline of 25% this year.
A recent study was conducted at Raddon Financial Group last spring in which they surveyed banking consumers in order to gauge their sentiment towards online banking.
If you buy into these percentages you can see that the majority of the population would not even consider using an online savings account – keep in mind this survey was conducted while online savings rates fluctuated between 3.5-6% APY.
The only promising trend I see is that while the interest rates may be dropping, the overall percentage of people invested in these savings vehicles is on the rise.
What do you think the percentages would be today if the same demographic was polled?