Why you should open a high-yield savings account before the next Fed rate hike
Following a welcome pause in interest rate hikes in June — the first pause by the Federal Reserve since March 2022 — it looks like interest rates will be headed up again later this month.
Minutes that came out of last month's meeting showed that some officials were in favor of raising rates by one-quarter of a percentage point. While the 11 voting members of the Fed's interest-rate setting committee ultimately agreed to pause any bumps during their June 13-June 14 meeting, it's unlikely that they will keep rates untouched again when they meet again later this month. In fact, signs are strong that they will raise rates at least twice more in 2023, likely starting in July.
While higher interest rates make borrowing everything from mortgages to credit cards more expensive, there is a silver lining: The returns savers can obtain with their savings and certificates of deposit (CD) accounts. High-yield savings accounts, in particular, have been experiencing exponentially higher returns than those associated with regular savings accounts. To start earning more money, savers should strongly consider opening one in today's high rate climate.
Why you should open a high-yield savings account now
Interest rates on high-yield savings accounts are variable and tied to the federal funds rate. Unlike interest rates on CDs, which are locked for the full term of the CD, interest rates on high-yield savings accounts are liable to change. That said, rates on high-yield savings accounts are currently higher than they've been in years, with some online accounts offering 4.5% APY or higher.
By opening a high-yield savings account now savers will enjoy a rare win-win. They'll earn more interest on their current savings right away and they'll be ready to take advantage of any additional rate hikes that could be incoming later in July.
So start exploring your high-yield savings account options online now and start earning more today!
Other high-yield savings account benefits to know
While a higher interest rate is the primary selling point with a high-yield savings account, there are other attractive benefits savers should also know.
Accessibility and familiarity
There are no complications associated with opening and banking with a high-yield savings account. That's because these accounts function just like regular savings accounts do, just with higher interest rates. You'll be able to deposit money, withdraw and transfer as you do with a regular savings account. Some online banking institutions may even provide a debit card for you to use. So if you're concerned about learning the inner workings of a new type of account don't worry — a high-yield savings account will be readily accessible and familiar for you.
No fees and penalties
Have you ever worked to build up your savings account only to see the bottom line decrease anyway due to excessive fees and penalties? Fortunately, many high-yield savings accounts don't have things like minimum balance requirements or withdrawal limits. This gives you more freedom to bank as you wish without having to worry about your money being deducted to pay the bank fees and penalties. Just note that not every high-yield savings account comes without these fees, so you may have to do some minimal research to find the best one for you. Explore your high-yield savings account options here now or via the below table.
The bottom line
Increased interest rates aren't great for borrowers but they are good news for savers. With the presumption that the Federal Reserve will bump rates yet again later this month, now is a great time to take advantage by opening a high-yield savings account. Not only will you be able to earn more money on your existing earnings right away but you'll be ready to earn even more once the Fed adjusts rates upward. In addition, the accessibility and familiarity high-yield savings accounts have and the fees and penalties they don't, make opening one a smart move to make now.
Get started with a high-yield savings account today and start earning more interest!
