If you aren’t already earning as much interest as possible on your savings, now is a great time to find a bank with a better rate.
The Federal Reserve increased the benchmark federal funds rate on Dec. 19, putting it in a range between 2.25 and 2.5 percent. That marked the fourth hike of 2018 — and the first time since 2008 that the Fed had hiked rates that many times in one year.
For folks carrying many types of debt, a rising federal funds rate can lead to higher interest rates, making it costlier for them to carry debt. We detailed this after the June 2018 increase. But a rising federal funds rate also prompts banks to offer higher rates on savings.
So, if you have savings in the bank or can afford to set money aside there, now is the time to maximize the passive income you earn off those savings.
This means shopping around and possibly switching to an account that is paying a higher annual percentage yield (APY) than you currently earn.
An easy way to do this is to use a free online resource like the Money Talks News account comparison tool. It shows you the APYs of multiple institutions at a glance based on personalized factors like your location and balance.
4 banks offering great rates
To illustrate how much you stand to benefit from comparing APYs and switching banks, we’re rounded up several institutions with accounts that were paying at least 2 percent APY as of Wednesday morning.
For reference, the national average APY for savings accounts is currently a measly 0.09 percent, according to the Federal Deposit Insurance Corp. The national average for money market accounts is 0.16 percent.
Banks with higher savings APYs include:
- CIT Bank’s Savings Builder Account — up to 2.45 percent
- Goldman Sachs Bank USA’s Marcus Online Savings Account — up to 2.05 percent
- Ally Bank’s Online Savings Account — 2 percent
- Discover Bank’s Online Savings Account — 2 percent
With those kinds of rates, you could see a significantly better return on your savings. And you could easily earn even more — north of 2.7 percent APY — by getting a certificate of deposit (CD) instead of just switching savings accounts. Use our account comparison tool to find the best CD rates.
The above rates are just examples. The best bank for your money may not be one of those listed above.
If you decide to open a CD or switch banks, consider more factors than just the APY. Some accounts require you to maintain a minimum balance, for example.
What’s your take on the benefits of a rising federal funds rate? Sound off below or on our Facebook page.