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Rates on a variety of savings accounts are rising as the Federal Reserve raises interest rates. Looking for an account where you can save for a rainy day or for your retirement? Here’s a rundown of the best savings rates you’ll find today.
Related: Compare the Best High Yield Savings Accounts
Savings Rate Today: Traditional Savings Account
Traditional savings accounts, known as “statement savings accounts” in the banking industry, have been known to pay minimal interest in recent years. That is changing, thanks to the Fed’s campaign to raise interest rates to fight inflation. .
Today’s highest interest rate on a standard savings account is 2.19%, according to data from Bankrate.com. If you spot a basic savings account with a rate in this general area, you’ve found a good deal. A week ago, the best rate was also 2.19%.
The national average rate is just 0.13%, according to the most recent data from the FDIC, the government agency that insures bank deposits. But today’s average APY for a traditional savings account is 0.60%, according to Bankrate.
APY, or Annual Percentage Rate, indicates the actual return your account will earn for a year. It takes into account compound interest, which is the interest that accumulates on the interest in your account.
Savings Rate Today: High Yield Savings Account
High Yield Savings Accounts generally earn considerably higher interest than a conventional savings account. But the thing to know is that you will have to jump through a few hoops for the bank or the credit union. Often this means making a large deposit to open the account.
On high yield accounts requiring a minimum deposit of $10,000, the current best interest rate is 2.00%. It’s been unchanged for a week.
The average APY for these accounts is now 0.13% APY, down from 0.12% a week ago.
The current average is 0.29% APY for a high yield account with a minimum deposit of $25,000. This is above last week’s 0.24%.
Savings Rate Today: Money Market Account (MMA)
Money market accounts are savings accounts that exhibit some of the properties of checking accounts. Generally, you can write checks and take advantage of debit card privileges.
MMAs tend to pay slightly higher interest than a standard savings account. The FDIC says the average MMA rate is 0.14%, compared to 0.13% for a traditional savings account.
But today, the best money market accounts have rates as high as 1.73%. It is stable with the maximum rate of 1.73% from a week ago.
The average APY for an MMA is now 0.16%, down from 0.15% this time last week, according to Bankrate.
How to find a savings account
To find the best savings account for your needs, you must first answer the question: what exactly are you looking for?
An account where you can do your banking in person, in branch? This would exclude online banks only. An account that allows easy withdrawals? This could exclude any account that limits your monthly transactions. An account that pays decent interest? That would rule out a traditional savings account at one of the big banks, as you’ll likely only earn 0.01% or 0.02% APY.
Don’t choose any options until you’re sure you have a good idea of the fees you’ll be charged. Savings accounts can charge you monthly service fees, excess withdrawal fees, and fees for returned items (if you deposit bounced checks), among other things. These fees add up and can eat into your savings.
When shopping, check the reviews and ratings of financial institutions and be sure to choose one that will protect your money with federal insurance – from the FDIC or, in the case of credit unions, the NCUA.
How high can savings rates go?
It’s hard to say, it depends on the trajectory of inflation and the overall economy.
The highest interest rates in recent memory were seen in 1980 and 1981, when the Fed hiked its federal funds rate above 19%. This was in the face of runaway inflation that was driving prices up at an annual rate of more than 14%.
In the early 1980s, the typical five-year CD fetched nearly 12%, compared to less than 2% today, according to Bankrate data. Savings rates would eventually fall as inflation cools and the fed funds rate is brought down.