If you’re like many Americans, you’re in no hurry to open a savings account – many have low interest rates, and you’ll earn next to nothing in interest. According to the FDIC – the people who insure your money, among other things – the national average interest rate on savings accounts is only .06%.
For some savings, we suggest sticking to a bank account – your deposits are insured by the aforementioned FDIC, and for something like an emergency fund, it’s important that you’re not going to lose any money. Plus, you want easy access to your funds.
But what about a savings option that could actually earn you a little money? How do you find high-interest savings accounts or the best interest rates at big banks?
Turns out, neither a savings account nor a big bank is always your best option. Keep reading for four great ways to earn money on your savings.
1. A high-interest short-term CD
We’re heading into fall and oftentimes banks will offer seasonal promotional rates for new customers (or even existing customers) who open a CD (less commonly known as a certificate of deposit). If you’re thinking: "I don’t want to lock my money up for years," keep in mind that some banks offer promotional rates for short terms, like 12 month CDs or even less time than that. And, if you can swing socking your cash away for up to a year, you may be able to earn more interest than you would in a typical savings account.
This also gives you time to look around for higher savings rates. Soon enough, the CD term will end and you can move your money again. For example, I just opened a special promotional 11 month CD paying 1.30 percent interest at Citizens Bank. This means I can’t access the money until August 2017 without a penalty, but with some planning, I can go without the funds for a year while earning ten times more interest than I was earning in my regular Citizens Bank savings account.
2. A savings account at an online bank
If you like walking into a bank branch to deal with tellers, an online bank might not be for you. However, a higher interest rate may be more important than face-to-face communication. For example, a savings account at Synchrony Bank offers a 1.05 annual percentage yield (APY) and you’ll earn a one percent interest rate at Ally Bank. With either of these online banks, there is no minimum balance and no monthly fees.
3. An interest-bearing online checking account
While you can open an interest-bearing checking account at your brick-and-mortar bank, oftentimes interest rates are so low that it isn’t worth the time it takes to open an account. Not only that, but you may need to keep a high balance every month in order to waive monthly account fees. If you don’t meet this minimum balance and are charged a monthly fee, this may negate any minimal interest you earn on that account.
For this reason, we recommend checking accounts at online banks that offer both higher interest rates plus no fees. For example, the FDIC-insured Aspiration is an online investment firm that offers a checking account product with no monthly fees and free access to ATMs around the world. Better yet, there’s no required minimum balance. The interest rate is one percent for balances higher than $2,500 and .25 percent on balances up to $2,499.99. Aspiration’s Summit checking account was ranked one of the top checking accounts in 2015 by Money Magazine.
4. A credit union
Whereas sometimes you have to be a member of a particular trade union or work for a certain employer to bank at a non-profit credit union, this isn’t always the case. Many credit unions are open to the community and offer better interest rates on savings vehicles than national and even local banks. Chicago-based Alliant Credit Union, for example, offers an interest rate of almost one percent (.995 %) on its high-yield savings account. To become a member, you can either live in the Chicago area or belong to a particular organization, including Foster Care to Success, which serves thousands of foster teens across the U.S. The best way to find and compare rates at credit unions is to shop around and keep your eyes peeled for credit unions offering deals. You can also go to mycreditunion.gov, which will help you locate credit unions in your neighborhood. For another resource, check out this list of great credit unions that anyone can join.
Time is money
If you decide to switch accounts or open a new one, it can take time to research all of your options before choosing an account that will offer the highest rate. Just keep the end game in mind: Once you open your new account, your time invested in research will yield more money in the bank.