The difference between the rates available on a savings account at a traditional bank and those available at an online bank is significant.
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It’s been more than a decade since the savings rate has been this high. And with the Federal Reserve expected to raise the funds rate even more this year, at least three banks are now offering high-yield savings and checking accounts with 5% annual percentage yield, or APY — though in some cases you can Might be better off with slightly lower rates (lots of banks are paying upwards of 4%) and fewer hoops to jump through.
Ryan Burke, general manager of Invest at M1, says, “As markets continue to be volatile and inflation continues to rise, higher returns on deposit accounts offer a potential measure of protection against financial volatility.” The Fed raises rates, we are able to offer higher rates in return.”
Money pros say that finding the right account can mean the difference between hundreds, even thousands, of dollars on the table each year. And compared to the national average, the rate of return on some bank accounts can be significant: According to government data, the national average savings account APY is 0.35%. For returns in excess of 14 times that amount, take a look at these three banks and credit unions:
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Consumer Credit Union Free Rewards Checking: 5.00% APY
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Balances up to $10,000 are eligible for one of the highest available rates in the high-yield savings market today with this high-yield checking account from Consumers Credit Union. Its access to 30,000 ATMs and 5,000 shared branches across the country sets it apart from many high-yield savings accounts. Write unlimited checks, and take advantage of online features
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Varo Savings Account: 5.00% APY
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Make the required $1,000 electronic deposit for your paycheck, pension or government benefits from your employer or government agency, with a positive balance in both a Vero bank account and savings account at the end of the month, and you’re eligible. But be sure to read the details: Balances that don’t meet the requirements and exceed $5,000 earn only 3% APY.
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Sentier Bank, Connect Savings: 5.00% APY
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Link your checking and savings accounts to qualify for this savings rate. Just make sure to make the minimum deposit and follow the steps in the fine print.
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key ideas
How are some banks able to offer APYs not seen since the 1990s? Melissa Weiss, wealth advisor and associate partner at RegentAtlantic Wealth, says it’s really the only tool some banks have to entice new customers to their various product lines.
“Online savings banks attract business by offering higher rates,” says Weiss, adding that deposits at banks like Ally, which currently offer 3.40% APY, the primary gateway to its “consumer digital capabilities.” While traditional banks may not offer the rates available at online savings banks, “they can offer the widest range of personal services and relationships at local branches,” she says.
, “If the economy enters a recession this year, we would expect the Fed to lower rates and stimulate economic activity.”,
To be sure, the difference between the rates available on a savings account at a traditional bank and those available at an online bank is significant. At the end of the first year, you’ll earn $500 if you maintain a Consumers Credit Union Free Rewards Checking account with the required maximum balance of $10,000 for the 5% APY. While this may sound modest, compare it to the average 1.36% APY and it’s only $68. With a Varo Savings Account with a minimum of $5,000, the annual income comes to $250 with a 5% APY rate.
Since banks typically don’t have many other ways to attract customers besides bonus packages and stability, MaxMyInterest CEO Gary Zimmerman says to focus your selection process for a new savings account on the interest rate offered. The best strategy is to do That is, of course, “as long as the bank is Federal Deposit Insurance Corporation-insured,” he says. By verifying that the bank you’re using is FDIC-backed, your savings are also insured for the first $250,000.
Another important consideration, Zimmerman says, is liquidity. “Many banks offer high teaser rates on how much money you can deposit or withdraw,” he explains, adding the high rates promoted by many banks “only apply to the first few thousand dollars on deposit, or you have to set up Are required to make direct deposit or make a certain number of debit card purchases each month.
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