Why you should open a high-yield savings account now

Federal Reserve Raised interest rates seven times in 2022And one more time This is February. Higher interest rates, now at a 15-year high, are driving up the cost of borrowing for mortgages and other types of debt Higher interest rates make it more expensive to carry a balance on your credit card.

But not all news is negative. Higher interest rates can be a good thing on your savings, especially if you’re considering opening one High Yield Savings Account. A high-yield savings account is a savings account that typically pays a higher interest rate or yield than a traditional savings account. In this article, we’ll discuss what you need to know about high-yield savings accounts and why now might be a good time to open a new account. You can easily explore your local high-yield options here to see how much you can make or use the table below to get started.

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High yield savings interest rates then and now

In October 2020, the average standard savings account earned around 0.05% interest, while banks and credit unions offered annual percentage yields (APYs) at least 10 times (0.50%) higher. By 2021, interest rates were rising and as a result, the top high-yield savings account rates averaged around 3.70%.

Fast forward to 2023 and average interest rates for the top High Yield Savings Account About 4.07%. This rate is 3.5 points higher than in 2020. Based on the numbers above, a $1,000 deposit with no further contributions would have earned you $5 in 2020 in a high-yield savings account with 0.50% interest. In contrast, that same deposit figure at 4.07% would earn $40.70 in 2023.

These numbers suggest that 2023 is an advantageous time to put your savings in a high-yield savings account, especially compared to a conventional savings account that has an average interest rate of 0.35%. Federal Deposit Insurance Corporation (FDIC).

If you want to start earning significantly more interest on your current savings, start now by exploring your high-yield savings options here.

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How to Open a High-Yield Savings Account

Before you sign up for a high-yield savings account, you’ll want to look at what your current bank and others have to offer Typically, you’ll find your best rates in a high-yield savings account with a credit union or online bank. As with any financial product, this is the smart thing to do Shop around and compare multiple offers to help ensure you get the best available rate. When you’re reviewing different offers, be sure to consider any bank fees, such as monthly maintenance fees.

Once you’ve chosen a financial institution to open a high-yield savings account, you can open your account by filling out an application and funding your account with an initial deposit. Once your account is activated, your deposits can start earning interest. Use the table below to start reviewing some high-yield savings options based on ZIP code.

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How high will high-yield savings rates be in 2023?

No one can predict with certainty what will happen to interest rates and, consequently, high-yield savings rates in 2023. However, it stands to reason that if interest rates continue or even rise, APYs on high-yield savings accounts will remain strong.

In December, the Federal Reserve indicated that it would raise rates above 5% in 2023, where it would remain throughout the year. February’s rate hike brought the federal funds rate to a range between 4.50% and 4.75%, with further rate hikes unlikely.

All of which bodes well for savings rates. KiplingerA personal finance magazine, predicts the savings rate for high-yield savings accounts to peak at 5.5% APY in 2023. Even if inflation continues to cool, there is no indication from the Fed that it plans to cut interest rates anytime soon, so high-yield savings account APYs are poised to remain strong for the foreseeable future.

A final note

In the past, federal regulations prevented you from making more than six withdrawals per month. Many banks charge extra withdrawal fees. However, the government has suspended withdrawal limits during the pandemic. It is worth noting that some banks still only allow you to make six monthly transactions and then charge you a fee for each transaction. If you find yourself needing to withdraw a lot of money every month, be sure to check with the bank about their withdrawal policies. High Yield Savings Account.