Sovereign Bank money market account interest rates fall sharply

Sovereign Bank's financial situation must be improving lately since they are no longer offering hefty new account bonuses and the interest rates they pay on money market accounts have fallen sharply. Granted, the Federal Reserve has slashed their rates even more sharply, but some banks still pay high interest rates to attract capital. I can only guess that Sovereign is now doing well enough to not need to work as hard to attract capital. I do know that sometime in Q1 they expect to become fully-owned by Banco Santander.

Back in late September a new money market account with a $10,000 balance earned 2.75% APY. $25,000 earned 3.25%. A 12-month CD earned 4.25%.

Today, a new money market account with a $10,000 balance earns 1.75% APY. $25,000 earns 2.50%. A 12-month CD earns 2.80%.

The good news is that these rates are still better than an average money market mutual fund and these bank deposit accounts are FDIC insured.

The actual rates your account earns depends on when you open the account. The bank updates their new account rates every Friday. How long they keep an open account at a given rate is still a mystery to me. Fortunately, my account is still earning the 3.25% APY rate, but that rate could fall at any time.

Capital One Online Savings still earns 3.25% APY for $10,000 minimum and First National Bank of Omaha earns 3.25% APY for no minimum. GMAC Bank pays 3.75% APY, but that is if you can stomach the stigma of the association with General Motors. All of these bank deposit accounts are FDIC insured.

-- Jack Krupansky