Is Your Cash Still Earning Zero?

Quick disclaimer: The views put forth in this commentary solely reflect my opinion.

In an earlier commentary (click here), we referred to a diversified portfolio as a toolbox and said having available cash is the best tool to manage short-term expenses, regardless of what it yields. Today, you may want to see if that tool needs an adjustment because better opportunities might exist.

Over the last two years, the return on cash – as measured by money market funds rates – has increased by nearly 1.75%.1 However, not all bank deposit rates have increased.

The key takeaway is for you to know that many banks have significantly increased their deposit rates. Some banks - like Discover Bank, Capital One, Barclays Online Savings, Ally Online Savings and other online banks - offer 1.75% or more on savings accounts, while others - like Bank of America, HSBC, Citibank and Wells - still offer close to 0%.2

All of the above-mentioned banks offer FDIC insurance for deposits up to $250,000 per depositor per insured depository institution. So, why have some of the bigger banks not increased deposit rates? The simple reason is: they likely haven’t had to. Banks that haven’t raised rates likely have more than enough deposits. Deposits are a major source of funds for banks. If you were able to borrow more than you need at 0%, would you voluntarily pay a higher rate? Probably not.

Since December 2015 the Federal Reserve - the “bankers’ bank" - has raised the overnight interest rate by 1.75%3 and expects more rate increases this year. Consequently, yields for money market funds4 and online banks will likely move in tandem, as they have thus far. So, if you are still earning near zero on your cash, now may be the time to consider some of these alternatives.

If you have any questions on where to find the best type of cash alternative for you, or want to learn more about them, please feel free to reach out…remember…that’s what I’m here for!


The information provided is general, educational and not intended as an offering of any specific products or services, nor considered as specific investment, legal or tax advice. Past performance is not indicative of future results. Individual situations can vary, and an individual assessment to your specific situation should be used.

Neither Eagle Strategies LLC nor any of its affiliates, employees or Financial Advisors nor Nicholas A. Silva or staff provides tax, legal or accounting advice. Please consult your own tax, legal or accounting professional before making any decisions.




4Securities offered through NYLIFE Securities LLC, member FINRA/SIPC, A Licensed Insurance Agency