Contents
- Significantly increased rates, although not at the largest banks
- US Federal Reserve maintains rate hikes
- Another option for high-yield savings
With certain unexpected bank collapses and actions taken by US authorities to increase public trust in the financial system, banking has been on many people's minds.
The Federal Reserve's decision on Wednesday to raise its main interest rate for the ninth time since March 2017 was good news for savers seeking better returns.
The returns on savings accounts and certificates of deposit are the highest they've been in 15 years, according to Bankrate.com's senior financial analyst, Greg McBride.
Significantly increased rates, although not at the largest banks
After years of earning almost nothing, your most liquid funds — those put aside for emergency costs or short-term objectives such as a holiday fund or a down payment that you'll need within the next 12 months — may finally start collecting interest. Unless, that is, you continue to save your funds with the largest banks. They provide the lowest rates on savings accounts.
US Federal Reserve maintains rate hikes
Despite worries of a financial catastrophe, the Fed boosted interest rates again to combat inflation.
Rate of interest on federal funding
Bankrate reports that online high-yield savings accounts now offer rates as high as 5%, significantly above the national average of 0.23%.
McBride said, "You're leaving a lot of money on the table if you don't use an online bank."
Just be sure to select a bank that is FDIC-insured, so you can rest certain that your savings of up to $250,000 will be safeguarded in the event that the bank fails.
There are certain federally guaranteed one-year certificates of deposit with rates as high as 5.15 percent, significantly above the current national average of 1.62%.
Hence, comparison shop.
Another option for high-yield savings
In light of the current rate of inflation, which is 6%, Series I savings bonds may be appealing since they are meant to retain the purchasing value of your money. If you acquire an I Bond before the end of April, you may still get the current rate of 6.89%.
This pricing will remain in effect for six months if you make your purchase before to May 1. If inflation declines, the interest rate on I bonds will also reduce.
There are restrictions: the maximum annual investment amount is $10,000. The bond cannot be redeemed in the first year. In addition, if the investment is cashed out between years two and five, the prior three months' interest will be forfeited.
McBride said, "In other words, I Bonds are not a substitute for your savings account."
But, they maintain the purchasing power of your $10,000 if you do not need access to it for at least five years. Those who aim to retire within the next five to ten years may also find them useful, since they serve as a secure yearly investment that may be accessed during the first few years of retirement.
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