Interest rates on savings accounts are rising, but they are still low. Indeed, the national average interest rate on a savings account is only 0.07%, although you can find many online banks paying around 1% (you can see some of the highest paying savings accounts here). And even if those rates don’t stop you in your tracks, that doesn’t mean you shouldn’t save – experts say you’ll need 6-9 months of savings spending. But that means you’re probably wondering: where can I earn more?
A number of banks are now advertising higher savings rates, but, of course, you need to understand the fine print (and it’s often better to opt for one of the higher yielding accounts paying around 1%). Digital Federal Credit Union offers 6.17%, Blue Federal Credit Union offers 5.00%, Landmark Credit Union offers 7.50%, Mango Money online bank offers 6.00% and Consumers Credit Union and T online bank – Mobile Money both offer 4.00%. “It’s not that these advertised high-yield accounts are illegitimate, but they’re certainly not as impressive as they seem,” says Lauren Anastasio, director of financial advice at Stash. Adds Greg McBride, chief financial analyst at Bankrate: “Most accounts paying 4% to 7% only do so up to a limit”, and there are often other requirements outlined in the fine print so that you also get the high APY, like joining the credit union, for example.
Indeed, here are some of the fine print of these offers: Landmark requires direct deposit to earn the 7.50% APY, and you only get that percentage on up to $500. Mango Money requires at least $1,500 in signature purchases per month with the Mango prepaid card to qualify for 6.00% APY and only up to $2,500. Consumers Credit Union Rewards Checking requires $1,000 in monthly credit card purchases in addition to other requirements to qualify for 4.09% APY on up to $10,000.
If you do the math, based on the fine print, what you’d actually earn might not be worth the headache of moving accounts, the pros say. Anastasio gives this hypothetical example: “If you were to deposit $500 into an account that earns 6% per year, compounded monthly, at the end of the year, you would have earned just over $30. With rates as low as 0.10% on your remaining balance, the $30 might not be enough for the time and energy it would take to open and fund a new account,” says Anastasio. This means that to get the most out of your money, you may need to “open multiple accounts at different banks or just find one that pays a competitive return on your overall balance,” says McBride. (You can see some of the highest paying savings accounts here.)
You can opt for the latter: “There are online savings accounts at federally insured financial institutions that are available to consumers in all 50 states with no minimum deposit that pay up to 1.25% and increase . These accounts are literally accessible to anyone and the return is earned on your entire balance, which is an immediate 10x or more improvement over your current interest income,” says McBride.
No matter what you decide to do, if you see a savings offer now or in the future, read the fine print, research the financial institution and the offer, and verify it with reputable sources, Chanelle says. Bessette, banking specialist at Nerdwallet. “Always be sure to deposit money directly with a federally regulated and insured financial institution,” says McBride. Bessette adds, “They must be insured through the FDIC or NCUA or work directly with a bank or credit union that is. Another way to see if a financial institution is legitimate is to research any formal complaints or disciplinary actions that have been filed by sources like the Better Business Bureau or the Consumer Financial Protection Bureau,” says Bessette.