Safety is just a little sweeter for savers at Bread Financial . That’s because the online bank just lifted the rate on its 1-year certificate of deposit to a fresh high. Bread boosted the rate on its 1-year CD by 5 basis points this week to an annual percentage yield of 5.05% — a new high and a threshold that’s 55 basis points above the median rate, according to Stephens. One basis point is equal to one one-hundredth of a percentage point. Look to other competitors to up the ante on CDs as institutions jockey for deposits. “We expect more deposit rate competition will pressure our online banks to raise median rates +50bps, matching the highs,” Vincent Caintic, analyst at Stephens wrote in a Monday note. Four institutions in Stephens’ coverage also raised yields for online savings accounts this week. Discover Financial Services hiked rates to 3.6%, a 10 basis point boost, while American Express increased its rate by 25 basis points to 3.75%. SoFi added 25 basis points to its rate, landing at 4%. LendingClub pushed its rate higher by 25 basis points to 4.25%. Savings accounts and certificates of deposit are some of the beneficiaries of the Federal Reserve’s higher interest rate regime since the central bank has raised rates eight times over the past year. The 1-year Treasury , for instance, now has a yield of about 4.4%. In turn, banks must compete for savers’ dollars since investors have an array of “safe” places to earn interest on cash. The added benefit for the institutions, particularly as a ” run on the bank ” hobbled Silicon Valley Bank, is that savers are punished if they try to break CD before it matures. They lose some of the interest they’d otherwise receive, depending on the CD’s term. Savers also get some protection on their bank CDs. These instruments are covered by the Federal Deposit Insurance Co , which insures bank deposits up to $250,000 per depositor, per FDIC insured bank and per ownership category. – CNBC’s Michael Bloom contributed to this story.
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