Bank account interest rates are rising – how to take advantage

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Editor’s note: The APYs listed in this article are current at the time of publication. They can fluctuate (up or down) when the Fed rate changes. Select will be updated as changes are made public.

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

Interest rates, which you may already be familiar with since they are often mentioned when it comes to loans and mortgages, also affect the money in your bank account. Money in your checking and savings accounts may earn interest, and the APYs of these accounts are also affected by Federal Reserve interest rates.

Below, select details on what you need to know about your bank account interest rate and why you might 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 increase in your account’s APY. This is because the Federal Reserve, the central bank of the United States, has gradually raised rates to help slow the pace of inflation. Chances are your bank has followed suit.

That’s good news for consumers, because interest earned on 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 get the most out of it.

How to Choose and Maximize a High Yield Savings Account

With a high yield savings account, you can earn a considerable amount of interest (at least compared to standard checking and savings accounts). Unfortunately, many traditional banks offer checking and savings accounts with near-zero interest rates, which means your money is essentially losing value due to inflation because it’s not growing. But with the cost of living rising, any additional method of fighting inflation is worth considering.

To ensure you get the maximum amount of interest, be sure to put your hard-earned money in a high-yield savings account such as Varo Savings or *American Express® High Yield Savings Account.

It should be noted that these types of accounts should not be treated as a checking account. If you regularly withdraw money, it defeats the purpose of having a high-yield savings account and your interest income will be much less because it will reduce the accumulating power.

A good use for 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 the long term, you’ll probably want to invest your money in the market in index funds, which have much greater growth potential if you have a long-term investment horizon.

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

  • The highest annual percentage yield, or APY, possible
  • User-friendly website and mobile app
  • Easily accessible customer service
  • No minimum deposit or minimum balance
  • It’s insured by the FDIC
  • No charges

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

SoFi Checking and Savings

  • Monthly maintenance fees

  • Minimum deposit to open

  • The 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.

  • Network of free ATMs

    More than 55,000 free ATMs within the Allpoint® network

  • Reimbursement of ATM fees

  • Overdraft fees

    Free overdraft coverage is available; however, SoFi requires $1,000 in monthly direct deposit entries to unlock it

  • Mobile Check Deposit

Advantages

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

The inconvenients

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

Varo savings account

Bank account services are provided by Varo Bank, NA, Member FDIC.

  • Annual Percentage Yield (APY)

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

  • The minimum balance

    None; $0.01 to earn savings interest

  • Monthly fee

  • Maximum transactions

    Up to 6 free withdrawals or transfers per statement cycle *Cycle withdrawal limit of 6/instructions is waived during the Coronavirus outbreak under Regulation D

  • Excessive transaction fees

  • Overdraft fees

  • Offer a current account?

  • Offer an ATM card?

    Yes, if you have a Varo bank account

Advantages

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

The inconvenients

  • 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)

  • The 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 *Cycle withdrawal limit of 6/instructions is waived during the Coronavirus outbreak under Regulation D

  • Excessive transaction fees

  • Overdraft fees

  • Offer a current account?

  • Offer an ATM card?

Advantages

  • 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

The inconvenients

  • Minimum balance of $100 to open an 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 current account
  • No ATM access

Marcus by Goldman Sachs High Yield Online Savings

Goldman Sachs Bank USA is a member of the FDIC.

  • Annual Percentage Yield (APY)

  • The minimum balance

    None to open; $1 to earn interest

  • Monthly fee

  • Maximum transactions

    Up to 6 free withdrawals or transfers per statement cycle *Cycle withdrawal limit of 6/instructions is waived during the Coronavirus outbreak under Regulation D

  • Excessive transaction fees

  • Overdraft fees

  • Offer a current account?

  • Offer an ATM card?

Advantages

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

The inconvenients

  • No option to add a current account
  • No ATM access
  • You cannot deposit a check through 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 tick these financial boxes before applying:

Although an emergency fund is a basic financial tool, in some cases your money may be better spent elsewhere.

At the end of the line

As Americans continue to battle the effects of inflation, rising interest rates should help slow the rise in the price of daily consumer goods. If you’re looking for a way to earn passive income and a place to keep your emergency fund, transferring your money to a high-yield savings account can definitely be worth it.

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*National Bank American Express is a member of the FDIC.

Editorial note: Any opinions, analyses, criticisms or recommendations expressed in this article are those of Select’s editorial staff only and have not been reviewed, endorsed or otherwise endorsed by any third party.

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