Want the highest savings account interest rate? Do this now
In today's economy plagued by nagging (if cooled) inflation and higher interest rates, it can be hard to find a silver lining. While interest rates have hurt prospective homebuyers and homeowners looking to refinance, they have at least raised the benefit of opening high-yield savings and certificate of deposit (CD) accounts. Rates on these types of deposit vehicles have exponentially increased in recent years, making them a great place to protect and grow your hard-earned money.
That said, like all financial products and services, there are some smart ways to take advantage of these accounts, especially now. In particular, if you're solely interested in obtaining the highest savings account rate, there is one approach you should strongly consider taking.
Start by exploring high-yield savings accounts here to see how much more you could be earning.
Want the highest savings account rate? Consider an online bank
There are multiple ways to secure a high rate for your savings account, but arguably the best way is to open an online account. Many online lenders and banking institutions offer interest rates upward of 4% right now, which means you're losing money by keeping your savings in a regular account. The average rate on a regular account is currently just 0.40%, according to the FDIC.
For further context, compare what you would make by depositing $5,000 in a regular account versus an online high-yield one. After one year with the regular account, you will have grown that amount to $5,020. But with a high-yield account, your bottom line will have moved to $5,200.
And that's at the 4% interest rate! If you shop around for a high-yield account online, you could potentially find an interest rate 12 times higher than what's available with a regular account. That's a lot more money to earn for very little effort on your part.
Why do online banks offer higher interest rates?
Online banks are exactly that - online. As such, they don't often have the same overhead costs banks with brick-and-mortar locations do. They can pass on some of those savings to account holders through higher interest rates.
This doesn't mean your current bank or credit union doesn't also have competitive rates. It just means you're more likely to find the very highest savings account rates with an online institution rather than a bank with multiple physical branches.
Other considerations
While online banks generally offer the highest savings interest rates, they're not for everyone. Many account holders like the personal touch in-person banking provides. While you will be able to speak with a representative from an online bank on the phone or via an online chat, you won't be able to pop in during the week or on the weekend to complete your banking as you would with a bank that has a location in your neighborhood.
Similarly, it may be trickier to make deposits and withdrawals. While some online banks provide debit cards, others may not. In these instances, you may have to complete your banking using an institution you can link with your online one. From there, you can make the appropriate withdrawals and transfers as needed.
The bottom line
Interest rates on high-yield savings accounts are exponentially higher than just a few years ago, making now a great time to open one. If you're on the hunt for the highest rate possible, consider looking for an online account. Because online banks have less to pay without in-person locations, they almost always offer higher rates on these accounts than their counterparts with physical locations can.
Get started with an online savings account today and start earning more money!
