How the Fed's latest rate increase will affect your bank savings
But the Federal Reserve’s decision on Wednesday to increase its key interest rate for the ninth time since March last year brought welcome news for savers seeking higher yields on their money.
“Returns on savings accounts and CDs are the best in 15 years,” said Greg McBride, chief financial analyst for Bankrate.com.
They are offering the lowest rates on savings.
But online high-yield savings accounts now offer rates as high as 5%, well above the 0.23% national savings account average, according to Bankrate.
“You’re leaving a lot of money on the table if you don’t go to an online bank,” McBride said.
Another high-yield savings optionGiven today’s still-high rates of inflation — which is currently running at 6% — the Series I savings bonds may be attractive because they’re designed to preserve the buying power of your money.
You can still get the current 6.89% rate on the I Bond if you purchase it before the end of April.
That rate will stay in effect for six months if you complete your purchase before it resets on May 1.
If inflation falls, the rate on the I Bond will fall, too.
And if you cash out between years two and five, you will forfeit the previous three months of interest.
“In other words, I Bonds are not a replacement for your savings account,” McBride said.
Nevertheless, they preserve the buying power of your $10,000 if you don’t need to touch it for at least five years.