The Fed Hikes Rates — Here’s How Much More You Can Earn on Your Money

Smiling woman holding dollars
Photo by Billion Photos / Shutterstock.com

The Federal Reserve raised the federal funds rate again today in a vote that surprised few people.

It marks the third hike of the year — and the eighth since the Fed started increasing its benchmark rate again less than three years ago.

With the federal funds rate now in a range between 2 percent and 2.25 percent, there’s a lot you can and should do to minimize the amount of interest you pay on debts, as we detailed after the past rate hike in June. Interest rates on most types of debt will only go higher if the Fed continues hiking rates, as many experts expect.

If you’ve already secured the best possible mortgage rate and are otherwise debt-free, however, today’s Fed vote is another story. It represents an opportunity to earn more money on your cash savings while barely lifting a finger.

Making bank

As recently as 18 months ago, returns on savings accounts and CDs were awfully meager. But as we reported in August, rates have jumped in recent months:

Not so long ago, 1 percent was considered a great return. But now, it’s easy to find returns well north of 2 percent — with some banks inching ever closer to the magic 3 percent mark.

As the Fed has continued to raise the federal funds rate, competitive institutions such as online banks have been paying increasingly higher interest rates.

Earned interest is passive income — the best kind. To seize that extra cash, all you have to do is find the best interest-bearing account for you and park your money there.

Finding the best savings account and CD rates

The fastest way to do this research is to let a free online resource like Money Talks News’ account comparison tool do it for you.

You tell it your state, opening deposit amount and how long you’re willing to let that cash sit. The tool will then spit out a list of high-paying accounts.

Looking for a certificate of deposit? The comparison tool tells me you can earn a big, fat annual percentage yield (APY) of 2.5 percent on a 12-month CD over at Sallie Mae Bank. There are no monthly fees, and the minimum opening deposit and minimum balance are $2,500.

If you drop $10,000 in that account, you’ll be looking at $253 in effectively free money one year later, assuming the bank compounds daily. I used the U.S. Securities and Exchange Commission’s compound interest calculator to compute that in seconds, by the way.

Prefer the flexibility of a money market savings account? MTN’s comparison tool tells me you can still earn an APY of 1.85 percent over at CIT Bank. Moreover, there’s no monthly maintenance fee, and the minimum opening deposit is only $100.

Choosing a bank account

While an online tool can identify high-paying accounts for you, it can’t tell you what type of savings vehicle is best for you. Only you can determine whether a CD, savings account or money market account suits you best right now.

Don’t worry. This isn’t hard, either. Just think about your financial needs and goals — specifically, how much interest you want to generate and how much access you need to your cash while it’s earning a high yield.

Interest and access are the main differences between a CD and a savings account, which includes money market accounts.

CDs generally pay the highest interest rates, but the trade-off is that they are also the most restrictive.

You must be prepared to avoid touching your savings at all for a predetermined time period, which could be as short as three months or as long as three years. You will usually incur a penalty if you withdraw funds from a CD before the predetermined time period expires.

Money market accounts generally pay lower interest rates than CDs but offer the most flexibility. You can withdraw money up to six times per month without incurring a penalty, according to the U.S. Consumer Financial Protection Bureau.

How are you capitalizing on Fed rate hikes? Share with us by commenting below or over on Facebook.

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

Read Next
This Pastime Can Keep Your Brain Sharp as You Age
This Pastime Can Keep Your Brain Sharp as You Age

It’s never too late to benefit from taking up this type of activity.

8 Things You Should Never Put in a Microwave
8 Things You Should Never Put in a Microwave

A microwave can be a busy cook’s best friend. But heating certain things in a microwave can cause disaster.

7 Surprising Features That Boost Your Home Value
7 Surprising Features That Boost Your Home Value

You can add value to your home without hiring a contractor to do expensive renovations.

5 Reasons You Should Claim Social Security ASAP
5 Reasons You Should Claim Social Security ASAP

Experts often recommend postponing claiming your Social Security retirement benefits. But there are situations in which you should start taking the money sooner.

17 Home Maintenance Tasks That Save You Money
17 Home Maintenance Tasks That Save You Money

Here’s how to cut household costs and maintain your property’s value.

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.

How to Buy Gas At Costco Without a Membership
How to Buy Gas At Costco Without a Membership

The warehouse club often has some of the cheapest gas in town. Here’s how you can get it as a nonmember.

10 Things to Stop Buying If You Want a Clutter-Free Home
10 Things to Stop Buying If You Want a Clutter-Free Home

If you like to keep things simple, avoid these purchases.

If You Find This Thrift Shopping, Buy It
If You Find This Thrift Shopping, Buy It

Vacuums from this brand can last a half-century, if not longer — and they’re hot on the resale market.

A Simple Way to Silence Robocalls Today
A Simple Way to Silence Robocalls Today

A few steps can keep your phone from ringing when a spammer calls.

This Company Makes the Best Tires in America
This Company Makes the Best Tires in America

Driver satisfaction with tires is at an all-time high, but one brand stands out.

This Health Issue Can Hint at Dementia Years in Advance
This Health Issue Can Hint at Dementia Years in Advance

One type of pain is especially associated with cognitive decline.

Can I Switch to Spousal Social Security Benefits When My Ex Dies?
Can I Switch to Spousal Social Security Benefits When My Ex Dies?

Knowing when to claim can help you maximize benefits.

Medicare Will Not Cover These 6 Medical Costs
Medicare Will Not Cover These 6 Medical Costs

Don’t let these health care expenses catch you off guard in retirement.

8 Things You Should Always Buy on Amazon
8 Things You Should Always Buy on Amazon

The giant retailer shines when it comes to these things, from basics to hard-to-find specialty goods.

5 Ways to Get Amazon Prime for Free
5 Ways to Get Amazon Prime for Free

Hesitant to drop $119 a year on an Amazon Prime membership? Here’s how to get it for free.

5 Ways to Fill Your Pantry With Free Food
5 Ways to Fill Your Pantry With Free Food

Anyone can take advantage of these resources.

Beware This Hidden Ingredient in Rotisserie Chicken
Beware This Hidden Ingredient in Rotisserie Chicken

Something foul may lurk in those delicious, ready-to-eat birds.

If You Find This Thrift Shopping, Buy It
If You Find This Thrift Shopping, Buy It

This iconic dinnerware is prized for everyday use as well as reselling for profit.

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.

6 Reasons You Should Stop Hiding Cash at Home
6 Reasons You Should Stop Hiding Cash at Home

Stashing money around the house is anything but harmless.

5 States With the Worst Health Care for Retirees
5 States With the Worst Health Care for Retirees

All of these states are located in the same region of the nation.

12 Deep Discounts Available on Amazon This Friday
12 Deep Discounts Available on Amazon This Friday

These items are steeply discounted — but the deals won’t last long.

5 Products You Should Never Buy Generic
5 Products You Should Never Buy Generic

Sometimes the brand-name version is clearly superior.

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.