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Online banks have been increasing interest rates for savings accounts during most of the year, following the lead of the Federal Reserve to combat surging inflation with rising rates. But if your money is only earning the national average – or less – elsewhere, then you’re likely not maximizing your savings. And that’s sort of against the spirit of National Savings Day.
Fortunately, you can earn hundreds of dollars more per year just by switching savings accounts. Here’s how to get started today.
1. Find your current savings yield
Having money in a savings account doesn’t automatically mean the Fed’s rate increases are helping you. But after five Fed rate increases, the difference between 0.01 percent annual percentage yield (APY) – or even the national average of 0.16 percent – and what you could get from a high-yield savings account is growing.
You can easily earn 2 percent APY (or more) on a savings account at an online bank. That will earn you many times more than the national average in a year, without doing any more work.
How much could you earn? The median transaction account balance of $5,300 (according to the Fed) would earn around $106 of interest in a year, assuming the APY stayed the same for a year and you didn’t add or withdraw money. That same balance would earn just 53 cents at 0.01 percent APY and $8.48 at the national average of 0.16 percent APY over the same period.
So, go ahead and check your bank’s statement to see what APY you’re currently getting.
You can use Bankrate’s Simple Savings Calculator to see how much more you could earn in a competitive high-yield savings account compared to savings accounts at some of the big banks.
2. Research the highest rates available
Bankrate tracks the highest-yielding savings accounts for you. Compare rates to find the best account for you.
In addition to the rate, also consider the following criteria:
- Minimum opening deposit requirement
- Methods to transfer, deposit or withdraw money, such as an ATM card or mobile check deposit
- Whether the account has a monthly service fee
Remember that savings rates are usually variable, so picking a competitive yield is more than just going with the highest rate today since it could easily change tomorrow.
3. Open a new savings account
You can open an account at an online bank quickly and conveniently. Many online banks advertise that the process takes minutes. Generally, you’ll see your interest payments on your monthly statement. This is where you can watch your balance grow, thanks to compound interest – your interest earning interest over time.
Another option for finding higher interest rates on savings accounts is to look at credit unions. Many of the best credit unions offer attractive yields on savings accounts and share certificates.
Other ways to boost your payout
Savings accounts aren’t the only way to earn some extra money to try and keep up with inflation in this increasing rate environment.
Here are some other ways to earn more money or potentially a higher yield.
- Bank account bonus: Some banks offer bonuses for opening a new account. Generally, you’re more likely to see these offered for opening a new checking account at an institution that you don’t currently bank at. But since customers have the same checking account for an average of 17 years according to a January 2022 Bankrate survey, it might be worth reevaluating your checking relationship.
- CDs: A one-year CD at a competitive online bank generally earns a higher APY than the bank’s savings account. This could be a good way to earn a higher fixed APY, but you would also need to be OK with keeping your money tied up for the entire term of the CD.