How I Boosted My Savings Account Rate by 413 Percent

Woman Stacking Coins
Photo by Lisa S. / Shutterstock.com

Time and compound interest are among the best wealth-building aids.

That makes it all the more important to ensure your savings are earning as much interest as possible now that interest rates are finally rising again.

I’ve increased the return on my own savings by 413 percent by doing just that.

How to tell if your interest rate is competitive

Before you can ensure your savings are earning as much interest as possible, you need to know what your money is currently earning and what other banks are currently paying.

If you don’t know how much your savings account is earning, check your latest statement or log into your account online and look for the annual percentage yield (APY).

For other banks’ current interest rates, consult a free online resource like Money Talks News’ bank account search tool. Check only the “Savings/Money Market” box if you want to limit the search results to those types of accounts. You can also use the tool to search for rates on interest-bearing checking accounts and certificates of deposit.

The fastest way to earn more on your savings

For folks who have yet to switch to an online bank, the fastest way to get a higher interest rate for your savings is to leave a big brick-and-mortar bank for a competitive online bank.

My spouse and I did this about two years ago.

We moved our savings account from a major national bank that was giving us an annual percentage yield (APY) of about 0.3 percent, to an online bank that was offering an APY of about 1 percent at that time. So, right there we more than tripled our rate of return.

Then, as the Federal Reserve continued to increase the federal funds rate, we saw our return rate climb faster at the online bank.

Today, the old bank is paying 0.4 percent on the same type of account we had there. Meanwhile, the online bank is paying 1.65 percent for savings accounts with our balance. So, we are now earning about 413 percent more interest than we would be getting today if we had not switched banks.

This is typical of online banks. They generally pay higher interest rates because they have lower overhead costs than traditional banks. They also tend to be quicker to raise their interest rates after the Federal Reserve raises the federal funds rate. To learn more, check out “Why It’s Time to Consider Internet Banks.”

What the federal funds rate means for your savings

The federal funds rate helps drive up the interest rates that banks pay on accounts like savings accounts. But you need not understand the fine details of this mechanism to capitalize on it.

As far as it concerns your money that is sitting in the bank, all you need to understand is that:

  1. The Fed has been raising the federal funds rate since December 2015. And the Fed is only expected to continue raising it.
  2. Interest-bearing bank accounts such as savings accounts tend to pay increasingly higher interest rates over time as the federal funds rate rises.

In other words, if you make sure your savings are earning as much interest as possible now, they will likely earn increasingly higher interest rates as time and Fed rate hikes go on.

What’s your take on savings account rates these days? Share your thoughts below or on our Facebook page.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
The 14 Most Deadly Car Models
The 14 Most Deadly Car Models

These vehicles are involved in fatal accidents at least twice as often as the average car.

8 Surefire Ways to Get Rid of Debt ASAP
8 Surefire Ways to Get Rid of Debt ASAP

Here’s how to pay off debt fast and pain-free.

10 Ways to Nail Savings on Your Remodeling Project
10 Ways to Nail Savings on Your Remodeling Project

Here’s how to save on your next remodeling project with discounted materials and more tips and tricks.

16 Products That Solve Everyday Annoyances
16 Products That Solve Everyday Annoyances

These items put an end to the daily irritations that bug you the most.

Prepare to Pay More for These 31 Drugs in 2021
Prepare to Pay More for These 31 Drugs in 2021

More than 700 prescription medications have seen price hikes so far this year. Here’s a look at the worst.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
7 Kirkland Signature Items to Avoid at Costco
7 Kirkland Signature Items to Avoid at Costco

Even if it seems you save a bundle buying Costco’s Kirkland Signature brand products, they may not be the bargain they appear to be.

Am I Eligible for My Mother’s Social Security Benefit?
Am I Eligible for My Mother’s Social Security Benefit?

Can an adult daughter tap into her late mother’s benefit?

9 Things You’ll Never See at Costco Again
9 Things You’ll Never See at Costco Again

The warehouse store offers an enormous selection, but these products aren’t coming back.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

This Surprise Factor Can Raise Your Risk of Dementia
This Surprise Factor Can Raise Your Risk of Dementia

Nearly half of U.S. residents may face this threat.

Organize Your Home With These 10 Thrift Store Finds
Organize Your Home With These 10 Thrift Store Finds

Resolve to be clutter-free in 2021 with these secondhand purchases.

11 Laws You Could Be Breaking Without Knowing It
11 Laws You Could Be Breaking Without Knowing It

Seriously? Fibbing about the weather is a crime? This and other little-known legal traps await the unwary.

Is This Treatable Condition Causing Your High Blood Pressure?
Is This Treatable Condition Causing Your High Blood Pressure?

Researchers say too many doctors are overlooking this potential source of hypertension.

13 Things Seniors Can Get for Free — or Almost Free
13 Things Seniors Can Get for Free — or Almost Free

There are many ways to get cheap or free services and goods after reaching a certain age.

These Are the 3 Best Used Cars You Can Buy
These Are the 3 Best Used Cars You Can Buy

These vehicles boast reliability, safety and long-lasting value.

6 Legal Documents Retirees Need — but Don’t Have
6 Legal Documents Retirees Need — but Don’t Have

Few retirees have all of these documents that are crucial to their golden years — especially during a pandemic.

Internet Providers Can’t Charge You for This Anymore
Internet Providers Can’t Charge You for This Anymore

Starting this month, your ISP no longer can bill you for this fee.

21 Items to Cut From Your Budget That You Won’t Even Miss
21 Items to Cut From Your Budget That You Won’t Even Miss

Start off the new year by implementing these small-but-smart savings strategies. They’ll soon add up.

15 Painless Ways You Can Cut Costs in 2021
15 Painless Ways You Can Cut Costs in 2021

Follow these tips to save, so you’ll have money for things that really matter.

9 Small Expenses That Are Bleeding Your Budget Dry
9 Small Expenses That Are Bleeding Your Budget Dry

Keep more of future paychecks by eliminating these budget-busting unnecessary expenses.

11 Huge Retirement Costs That Are Often Overlooked
11 Huge Retirement Costs That Are Often Overlooked

Does your retirement budget account for all of these costs?

7 Tricks to Cleaning Your Bathroom Faster
7 Tricks to Cleaning Your Bathroom Faster

These tips can get your bathroom sparkling with little time and no elbow grease.

7 Bank Accounts With Extra Perks for Seniors
7 Bank Accounts With Extra Perks for Seniors

These accounts offer exclusive discounts and other perks — including interest — to older customers.

10 Times You’re Right to Be a Cheapskate
10 Times You’re Right to Be a Cheapskate

Clever shoppers can save money without sacrificing quality. Here is how to do it.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.