Bank Account Interest Rates Are Rising — How You Can Take Advantage

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Editor’s Note: APYs listed in this article are up-to-date as of the time of publication. They may fluctuate (up or down) as the Fed rate changes. Select will update as changes are made public.

While the economy recovers from the effects of the Covid-19 pandemic, inflation, unfortunately, has skyrocketed to 40-year highs. As a result, the Federal Reserve has decided to raise interest rates.

Interest rates, which you might already be familiar with since they’re often referred to regarding loans and mortgages, also affect money sitting in your bank account. Money in your checking and savings accounts can earn interest, and the APYs of these accounts are affected by Federal Reserve interest rates as well.

Below, Select details what you need to know about your bank account interest rate, and why you may want to consider switching banks to take advantage of the latest rate increase.

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Bank account interest rates are on the rise

If you already have a high-yield savings account, you may have noticed a recent hike in your account’s APY. That’s because the Federal Reserve, the central bank of the United States, has been gradually raising rates to help slow down the pace of inflation. Chances are, your bank has likely followed suit.

This is good news for consumers since the interest earned on the money in your high-yield savings account can further bolster your savings. However, it’s important to be strategic about your account to ensure you’re getting the maximum return from it.

How to pick and maximize a high-yield savings account

With a high-yield savings account, you can earn a sizable amount of interest (at least in comparison to standard checking and saving accounts). Unfortunately, many of the legacy brick-and-mortar banks offer checking and savings accounts with near-zero interest rates, which means your money is essentially loosing value due to inflation as it does not grow. But with the rising cost of living any additional methods of fighting inflation are worth considering.

To ensure you’re getting the maximum amount of interest, make sure you’re putting your hard-earned money in a high-yield savings account such as Varo Savings or *American Express® High Yield Savings Account.

It’s worth noting that these types of accounts should not be treated like a checking account. If you’re regularly pulling money out, it defeats the whole purpose of having a high-yield savings account and your interest earnings will be much less as it will lessen the power of compounding.

A good use of a high-yield savings account is to store money for your emergency fund and other medium to long-term goals like a down payment on a house or car. It’s important to note that if you’re saving for long-term you’ll likely want to invest your money in the market in index funds, which have much more growth potential if you have a lengthy investing time horizon.

There are dozens of high-yield savings accounts available on the market, both through in-person and online banks. While the benefits of each account vary, you should be looking for these core features:

  • The highest annual percentage yield, or APY, possible
  • A user-friendly website and mobile app
  • Customer service that is easily accessible
  • No minimum deposit or minimum balance
  • It’s FDIC-insured
  • No fees

Here’s a look at some of our favorite high-yield savings accounts that are currently available.

SoFi Checking and Savings

  • Monthly maintenance fee

  • Minimum deposit to open

  • Minimum balance

  • Annual Percentage Yield (APY)

    Members with direct deposit earn 1.25% APY on the first $50,000 of their balances. Members without direct deposit will earn 0.70% APY.

  • Free ATM network

    55,000+ fee-free ATMs within the Allpoint® Network

  • ATM fee reimbursement

  • Overdraft fee

    No-Fee Overdraft Coverage is available; however, SoFi requires $1,000 of monthly direct deposit inflows to unlock it

  • Mobile check deposit

Pros

  • No minimum deposit to open an account
  • 1.25% APY with direct deposit
  • 2-day-early-paycheck automatically when you set up direct deposit
  • Save your change automatically with Roundups and set savings goals with Vaults
  • Get up to 15% cash back at local establishments
  • No foreign transaction fees

Cons

  • No reimbursement for out-of-network ATM fees
  • Not a standalone checking or savings account

Varo Savings Account

Bank Account Services are provided by Varo Bank, N.A., Member FDIC.

  • Annual Percentage Yield (APY)

    Begin earning 1.20% and qualify to earn 5.00% if you meet requirements

  • Minimum balance

    None; $0.01 to earn savings interest

  • Monthly fee

  • Maximum transactions

    Up to 6 free withdrawals or transfers per statement cycle *The 6/statement cycle withdrawal limit is waived during the coronavirus outbreak under Regulation D

  • Excessive transactions fee

  • Overdraft fees

  • Offer checking account?

  • Offer ATM card?

    Yes, if have a Varo Bank Account

Pros

  • High APY and option to earn even higher
  • No minimum balance
  • No monthly fees
  • Up to 6 free withdrawals or transfers per statement cycle*
  • ATM access at 55,000 fee-free AllPoint® ATMs with a Varo Bank Account
  • Offers 2 programs to help automate your savings

Cons

  • Cash deposits are only available through third-party services, which charge a fee

Vio Bank High Yield Online Savings Account

Vio Bank is a division of MidFirst Bank, Member FDIC.

  • Annual Percentage Yield (APY)

  • Minimum balance

  • Monthly fee

    None, if you opt for paperless statements (otherwise, $5 per month)

  • Maximum transactions

    Up to 6 free withdrawals or transfers per statement cycle *The 6/statement cycle withdrawal limit is waived during the coronavirus outbreak under Regulation D

  • Excessive transactions fee

  • Overdraft fees

  • Offer checking account?

  • Offer ATM card?

Pros

  • Strong APY
  • No monthly fees, if you opt for paperless billing
  • Up to 6 free withdrawals or transfers per statement cycle*
  • Easy-to-use mobile banking app

Cons

  • $100 minimum balance to open account
  • $5 monthly maintenance fee, if you don’t opt for paperless billing
  • $10 fee per transaction if you make more than 6 in a statement cycle
  • No option to add a checking account
  • No ATM access

Marcus by Goldman Sachs High Yield Online Savings

Goldman Sachs Bank USA is a Member FDIC.

  • Annual Percentage Yield (APY)

  • Minimum balance

    None to open; $1 to earn interest

  • Monthly fee

  • Maximum transactions

    Up to 6 free withdrawals or transfers per statement cycle *The 6/statement cycle withdrawal limit is waived during the coronavirus outbreak under Regulation D

  • Excessive transactions fee

  • Overdraft fees

  • Offer checking account?

  • Offer ATM card?

Pros

  • No minimum balance (just $1 to earn interest)
  • No monthly fees
  • Up to 6 free withdrawals or transfers per statement cycle*
  • Easy-to-use mobile banking app
  • Offers no-fee personal loans

Cons

  • No option to add a checking account
  • No ATM access
  • You can’t deposit a check via the mobile app

When choosing a high-yield savings account, it’s equally important to ask yourself the following questions and make sure you can check off these financial boxes prior to applying:

While an emergency fund is a core financial tool, in some cases, your money may be better used elsewhere.

Bottom line

*American Express National Bank is a Member FDIC.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.



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