ING Direct’s new interest rate cut

March 3rd, 2009 · 2 Comments

I received an e-mail yesterday informing me that ING Direct has once again cut the interest rates on their savings, checking, and CD accounts.  For those keeping track, it’s been less than two weeks since their last rate drop. Only two weeks!

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ING Direct's Online Checking

The following rates are effective 2009.03.03 and my previous numbers are from their last change on 2009.02.18. Here are the current rates by ING Direct account type:

  • The Orange Direct Savings account dropped to a 1.65% APY (previously 1.85% APY).
  • The 6-month and 9-month CD rates stayed the same at 1.25% APY
  • All CD terms between 12 months and 36 months are now 1.50% APY (previously 1.75% APY).
  • The longest CD terms of 48 and 60 months are now 1.75% APY (previously 2.00% APY).
  • Electric Orange’s rate for less than $50,000 stayed the same at 0.50% APY, but…
  • Electric Orange’s rate for $50,000 to less than $100,000 dropped to 1.75% APY (previously 1.95% APY), and…
  • Electric Orange’s rate for above $100,000 dropped to 1.95% APY (previously 2.15% APY).

I’ve got to believe these rapidly plummeting rates are a result of two factors.  In my opinion, the biggest factor is the high inflow of money coming into the bank in these types of accounts.  People are now saving instead of spending,  and others are still pulling cash out of other investments and moving it to guaranteed income accounts like savings accounts.   The bank has to put that money to use somewhere to be able to pay any interest on it at all and the options to do that right now have got to be pretty grim for them.  Averaging all these new, low rate, investments in with any previous longer term investments just brings the average rate that they can pay out down.

The second factor is expirations on higher yielding investments that the bank might have made in the past.  For example, Treasuries, or bonds, or more likely their own loans to customers.  For the latter, there is alot of refinancing going on as consumers try to lower the interest rates they pay.  And the other factor is the rising number of defaults means the loan portfolios just aren’t performing anywhere near what the face value rates are.  Treasuries have been at super low yields for awhile now.

Given the pace at which these rate drops are coming, I’m guessing we’ll still see more of them over the next month.

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Tags: Savings

2 responses so far ↓

  1. 1 ING Direct’s Orange Savings now yielding a 1.40% APY | Geographic Independence // 2009.07.06 at 8:20 am

    […] and today, ING Direct lowered the yield on their Orange Savings Account to 1.40% APY.  Their previous rate change in early March had established a 1.50% APY, so this is only a 0.10% […]

  2. 2 Dan - Bank Vibe // 2012.04.17 at 2:07 pm

    ING’s rates have plummeted huge since ’09, but then so have all banks and credit unions. I think the major factor is that the FED is keeping key rates so low. Savings rates usually rise and fall in conjunction with mortgage rates (and other loan-side rates) so until those rise, I doubt we’ll see much movement on the savings side.

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