August 24, 2022 – Forbes Advisor
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Rates on a variety of savings accounts are rising as the Federal Reserve raises interest rates. Are you looking for an account where you can park money? Here’s a rundown of the best savings rates you’ll find today.
Related: Compare the Best High Yield Savings Accounts
Savings Rate Today: Traditional Savings Account
Traditional savings accounts, known as “statement savings accounts” in the banking industry, have been known to pay minimal interest in recent years. This is gradually changing, thanks to the Fed’s campaign to raise interest rates to fight inflation.
Today’s highest interest rate on a standard savings account is 2.19%, according to data from Bankrate.com. If you score a basic savings account with a rate in this range, you’ve found a good deal. A week ago, the best rate was also 2.19%.
The national average rate is just 0.13%, according to the most recent data from the FDIC, the government agency that insures bank deposits. But today’s average APY for a traditional savings account is 0.60%, according to Bankrate.
APY, or Annual Percentage Rate, indicates the actual return your account will earn for a year. It takes into account compound interest, which is the interest that accumulates on the interest in your account.
Savings Rate Today: High Yield Savings Account
High yield savings accounts often earn much higher interest than a conventional savings account. But the thing to know is that you will have to meet strict requirements set by the bank or credit union. Often this means making a large deposit to open the account.
On high yield accounts requiring a minimum deposit of $10,000, the current best interest rate is 2.00%. It’s been unchanged for a week.
The average APY for these accounts is now 0.13% APY, down from 0.12% a week ago.
For a high yield account with a minimum deposit of $25,000, the current average is 0.29% APY. This is above last week’s 0.24%.
Savings Rate Today: Money Market Account (MMA)
Money market accounts are savings accounts that offer some of the benefits of checking accounts. Generally, you can write checks and take advantage of debit card privileges.
MMAs tend to pay slightly higher interest than a standard savings account. The FDIC says the average MMA rate is 0.14%, compared to 0.13% for a traditional savings account.
But today, the best money market accounts have rates as high as 1.73%. It is stable with the maximum rate of 1.73% from a week ago.
The average APY for an MMA is now 0.16%, down from 0.15% this time last week, according to Bankrate.
How high can savings rates go?
It’s hard to say, it depends on the trajectory of inflation and the overall economy.
The highest interest rates in recent memory were seen in 1980 and 1981, when the Fed hiked its federal funds rate above 19%. This was in the face of runaway inflation that was driving prices up at an annual rate of more than 14%.
In the early 1980s, the typical five-year CD fetched nearly 12%, compared to less than 2% today, according to Bankrate data. Savings rates would eventually fall as inflation cools and the fed funds rate is brought down.