ADVERTISER DISCLOSURE

NerdWallet Interest Rate Monitor: Deposit Accounts that Beat Inflation – September 2012

You can trust that we maintain strict editorial integrity in our writing and assessments; however, we receive compensation when you click on links to products from our partners and get approved. Here's how we make money.

September 2012

Inflation causes the purchasing power of a dollar to decrease over time. As such, it especially hurts consumers who are trying to save money or who are living off of fixed incomes (such as pensioners, social security beneficiaries, etc.) — without a competitive interest rate to offset inflation, money allocated as savings will, over time, lose value in real terms.

NerdWallet scanned the banking landscape to find the most competitive interest rates such that consumers and savers can end up in a “net-positive” situation.

NerdWallet’s Interest Rate Monitor – September 2012

Latest CPI Release: September 14, 2012 (for August 2012 statistics)

12-Month Inflation Rate: 1.70%

Highlights

Select deposit accounts that beat inflation:

Checking and Savings Accounts

Type Institution APY Max*
Checking Citizens FCU 2.25% $25,000
Savings Genuine Parts CU 2.02% $75,000
Savings Aflac FCU 2.01% $100,000

*Interest may still be paid for amounts above the maximum, but at lower rates.

Time-Deposits (CDs)

Term Institution APY Min
5-Year Self Reliance Federal Credit Union 3.05% $500
5-Year Birmingham Police Credit Union 2.38% $1,000
5-Year Security First Federal Credit Union 2.36% $5,000
5-Year Progressive Credit Union 2.32%
3-Year Encompass Federal Credit Union 2.02% $500

Some institutions may have membership eligibility restrictions. For a comprehensive list of deposit rates, refer to NerdWallet’s rates tool that lets you search for the best savings account rates across over 7,000 banks and credit unions.

The importance of finding the right deposit account

Consider a consumer with $20,000. At various yields, the inflation-adjusted value of the deposit after just one year (assuming constant inflation) is drastically different.

Action Yield Inflationary Effect Net Effect* Net Gain/Loss
1) None 0% -1.70% -1.70% -$334
2) Deposit in a Big Bank Savings Account .01% -1.70% -1.65% -$324
3) Invest in the Highest Rate CD Identified 3.05% -1.70% 1.33% +$265

*Net effect = (1+yield)/(1+inflation)

Trends

  • Fewer accounts that beat inflation were identified (1,016 savings/CD accounts yielding greater than 1.70%).  Inflation returned to 1.70% this month, up from a one-month dip to 1.4% in the last period. Subsequently, many savings vehicles struggled to keep up. Our recent survey returned one-fourth the number of accounts offered in August (4,054).
  • Credit unions offer higher rates than competing institutions. 80% of accounts identified with a rate greater than 1.70% were a credit union product, the highest percentage seen in the past three months. Just 20% (205) were not credit unions.
  • Savers must lock down their deposits for longer periods of time in order to achieve a competitive rate. 80% of the CD products beating inflation were for 5-year terms. 14% were 4-year CDs, and just four accounts were for 1-year terms or less.

It is important to know the differences between different types of deposit accounts. If liquidity is a primary concern, you would be best served by a savings or checking account with the highest rate available. In this interest rate environment, savings accounts and even some checking accounts can be nearly as competitive as a short-term CD, but without the same withdrawal restrictions.

Does your bank or credit union offer an exceptionally high interest rate on a deposit account? Email us at rates@nerdwallet.com