How to Get the Best Savings Account Rate: 4 Tips
Interest rates on savings accounts have been very low over the past two years. Yet there is a big difference between the rates of many large banks and the rates of the most successful institutions.
In addition, rates are expected to rise a little in 2022. The Federal Reserve is expected to raise rates several times this year, which should translate into higher rates on the best performing savings accounts.
You won’t make a massive return on a savings account, but you don’t want to earn 0.01% when you could earn up to 0.6%. Here are some tips for getting the best rate on your savings.
1. Research Current Savings Account Rates
The first step to getting the best annual percentage yield (APY) is to understand what is considered competitive in today’s interest rate environment. The best savings accounts today pay around 0.6% APY, so aim for something around that mark.
Don’t immediately write off the big banks, though. Although the big banks don’t usually pay high rates, they may offer additional benefits such as better rates if you use other banking services, such as a mortgage, loan, investment service, or account. running.
Local credit unions are another option. They are non-profit, member-owned institutions that distribute their profits to their members. This can translate into higher savings rates.
2. Compare High Yield Savings Accounts Online
Doing a more focused search comparing high yield savings accounts is an easy way to find the best APYs. Most of these accounts are from online banks (but not all), so make sure you’re comfortable with online banking. Online banks are as safe as ordinary banks.
When comparing accounts, look for features and associated fees. Don’t settle for superficial information. Make sure you understand all costs and fees associated with each account, minimum balance requirements, restrictions and penalties, and past account issues such as data breaches. Also, make sure you understand how you can access and transfer your money.
If the bank has low or no fees and helpful tools, factor that into your assessment. You might be willing to choose a bank with a slightly lower APY if their tools help you save more money over time.
3. Avoid tiered interest rates
Some banks offer tiered interest rates to reward customers who maintain higher balances. Savings accounts can offer bonus rates if you deposit at least $10,000 or $25,000, for example.
However, you can find high yield accounts that pay the same yield on all balances. You don’t invest so much in a savings account to take advantage of a good interest rate that you miss a better opportunity to invest some of those funds elsewhere, where returns may be higher. In many cases, excess cash can be better invested in the market with a target annual rate of return of 6-8%.
4. Avoid teasing rates
The best interest rates available may be short-lived. Banks may offer “incentive rates”, which are attractive interest rates used to entice new customers to open a savings account. Banks can significantly reduce the interest rate after just a few months.
To avoid this, stick with banks that have a long reputation for offering competitive rates on savings accounts.
You may also need to maintain a minimum balance and meet other requirements to get the high rate. Always check the fine print explaining the terms of the fare.