Savings accounts interest rates getting closer to zero

The Federal Reserve announced last week its plan to keep short-term interest rates close to zero until 2014. This might result in lower interest rates on bank accounts, according to Smart Money.

Savings accounts rates could get closer to 0 percent in the next 12-18 months, Dan Geller, executive vice president at Market Rates Insight, told Smart Money. Even with rates for federal funds staying around 0 to 0.25 percent since the end of 2008, banks keep on lowering interest rates on accounts. Meanwhile, the average rate on for savings accounts dropped from 0.4 percent in November, to a current 0.36 percent, according to MRI.

The average yield for one-year and five-year certificate of deposits have been 0.33 percent and 1.57 percent. Individuals will have to deal with the near zero rates for another three years before any significant progress is seen, senior financial analyst at Bankrate.com, Greg McBride, told Smart Money.

Even with the low interest rates, many Americans have continued to save their money.

Americans took advantage of a rise in incomes to increase their savings but halted their spending during December, according to the Chronicle with Bloomberg.

Commerce Department figures showed purchases during that month changed only slightly, as they were up 0.1 percent in November, according to Chronicle with Bloomberg. Bloomberg News surveyed 77 economists and found the median estimate was a 0.1 percent sales increase. Incomes had the biggest increase in almost a year, resulting in a four-month high for savings.

"A pause in spending is not a bad thing if it has the income behind it," Jonathan Basile, an economist at Credit Suisse in New York who projected correctly that spending wouldn't change, told Bloomberg. "Household saving is really the main source of future spending."

If the Fed decided to raise the interest rate, it would encourage consumers to save money instead of spending it at a time when hiring and investing are lacking, and rates for savings accounts might not even go up, according to Business Insider.