{"id":768,"date":"2025-01-25T16:40:03","date_gmt":"2025-01-25T16:40:03","guid":{"rendered":"https:\/\/finzexpert.com\/blog\/high-yield-savings-accounts-are-still-a-good-deal\/"},"modified":"2025-01-25T16:40:03","modified_gmt":"2025-01-25T16:40:03","slug":"high-yield-savings-accounts-are-still-a-good-deal","status":"publish","type":"post","link":"https:\/\/finzexpert.com\/blog\/high-yield-savings-accounts-are-still-a-good-deal\/","title":{"rendered":"High-Yield Savings Accounts Are Still a Good Deal"},"content":{"rendered":"\n<div data-testid=\"companionColumn-0\">\n<div class=\"css-53u6y8\">\n<p class=\"css-at9mc1 evys1bk0\">You\u2019ve probably been discouraged to see the interest rate on your high-yield savings account fall during the past couple of months. But your money is still earning much more than it would in a traditional savings account \u2014 and more than inflation.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">Rates paid on cash in savings accounts have been dropping since the Federal Reserve began cutting its key interest rate in September as inflation cooled. The central bank cut rates again, by a quarter point, at its meeting this month, and another cut in December is seen as likely, though not certain because of a recent uptick in inflation.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">Banks are following the Fed\u2019s lead in gradually reducing interest rates. Even so, the rates paid on federally insured high-yield savings accounts, many offered by banks that operate solely or mostly online, are still beating inflation, which was 2.6 percent on an annual basis in October.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">\u201cHigh-yield savings accounts are still attractive relative to traditional savings accounts,\u201d particularly for emergency or \u201crainy day\u201d funds that savers want to be able to tap into quickly, said Alan Bazaar, chief executive and co-chief investment officer at Hollow Brook Wealth Management in Katonah, N.Y.<\/p>\n<\/div>\n<aside class=\"css-ew4tgv\" aria-label=\"companion column\"\/><\/div>\n<div data-testid=\"companionColumn-1\">\n<div class=\"css-53u6y8\">\n<p class=\"css-at9mc1 evys1bk0\">Online banks were offering rates of 4 percent or higher this week, compared with a national average rate of just 0.56 percent for all types of savings accounts, according to the financial site Bankrate. If you put $5,000 in a savings account for a year at the average rate, you\u2019d earn just $28, compared with about $200 with a high-yield account. (At some of the biggest national banks, which are offering just 0.01 percent, you\u2019d end up with a measly 50 cents.)<\/p>\n<p class=\"css-at9mc1 evys1bk0\">Just a few years ago, savers were getting 1 percent on their deposits at best, so 4 percent is nothing to scoff at, said Ted Rossman, a senior industry analyst at Bankrate. High-yield accounts can also be attractive for funds needed in the not-so-distant future \u2014 say, for a child heading to college or for retirees looking to set aside cash for living expenses.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">The accounts can generally be set up quickly online and funded by electronically depositing funds from your checking account. Withdrawals can typically be transferred out within one or two business days. Mr. Rossman advised pairing an online high-yield savings account with a traditional checking account at a brick-and-mortar bank so you can visit a branch if needed.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">A few banks and credit unions continue to offer rates of 5 percent or higher on savings accounts \u2014 but generally they are less familiar institutions or have special requirements, like making a large initial deposit or minimum monthly deposits. LendingClub Bank offers 5 percent but may pay a reduced rate unless you deposit at least $250 a month. <a class=\"css-yywogo\" href=\"https:\/\/www.pibank.com\/\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">Pibank<\/a>, an online brand of Miami-based Intercredit Bank, is advertising 5.5 percent nationally. <a class=\"css-yywogo\" href=\"https:\/\/www.santander.com\/en\/press-room\/press-releases\/2024\/10\/santander-launches-openbank-in-the-us-expanding-its-consumer-banking-business-nationwide#:~:text=New%20York%2C%20October%2021%2C%202024,branch%20network%20in%20the%20Northeast.\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">Openbank<\/a>, the new digital arm of Santander Bank, is advertising 5 percent with a minimum deposit of $500. (The rate isn\u2019t available, however, in many states in the Northeast.)<\/p>\n<p class=\"css-at9mc1 evys1bk0\">Savers shouldn\u2019t be put off simply because a bank isn\u2019t a household name, as long as their money is insured by the Federal Deposit Insurance Corporation, Mr. Rossman said. Look for the logo on the bank\u2019s website or check the agency\u2019s <a class=\"css-yywogo\" href=\"https:\/\/banks.data.fdic.gov\/bankfind-suite\/bankfind\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">BankFind<\/a> tool. (Deposits are generally protected against a bank failure for up to $250,000 per depositor per bank. To check your coverage, use the F.D.I.C.\u2019s <a class=\"css-yywogo\" href=\"https:\/\/edie.fdic.gov\/calculator.html?\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">calculator<\/a>.)<\/p>\n<\/div>\n<aside class=\"css-ew4tgv\" aria-label=\"companion column\"\/><\/div>\n<div data-testid=\"companionColumn-2\">\n<div class=\"css-53u6y8\">\n<p class=\"css-at9mc1 evys1bk0\">It\u2019s true that more Fed rate cuts are anticipated, Mr. Rossman said, but the pace is expected to slow. Even as rates fall, banks are operating in a competitive environment, and some may still offer higher rates to attract customers. Openbank\u2019s rates will change, \u201cbut we expect to remain very competitive,\u201d said Swati Bhatia, head of retail banking and transformation at Santander.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">Despite the availability of higher rates, many people stick with low-interest accounts, perhaps because they don\u2019t realize what they are missing, according to a recent <a class=\"css-yywogo\" href=\"https:\/\/www.santanderus.com\/news_press_article\/misperceptions-preventing-americans-from-earning-more-on-their-money-ahead-of-holiday-season-santander-survey-finds\/\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">survey<\/a> of American adults from Openbank. The survey found that 40 percent of those with only a traditional savings account didn\u2019t know what interest rate their account paid. Plus, more than half of those with traditional accounts said they thought they would have to leave their main bank to open a high-yield account at another bank. (The online survey of 2,206 adults was conducted for Santander by Morning Consult.)<\/p>\n<p class=\"css-at9mc1 evys1bk0\">Here are some questions and answers about saving options:<\/p>\n<h2 class=\"css-13o6u42 eoo0vm40\" id=\"link-117d556c\">What other options are available for federally insured savings accounts?<\/h2>\n<p class=\"css-at9mc1 evys1bk0\">Savers can consider certificates of deposit, or C.D.s, which tend to offer higher rates than savings accounts but typically charge a penalty if you withdraw your funds before the term of the certificate is up. Penalties are typically a couple of months of interest, but can be more for longer-term certificates. C.D.s commonly come in terms of three months to five years.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">Even brick-and-mortar banks are offering rates at 4 percent or higher for C.D.s, depending on the term. In some cases, banks may require larger minimum deposits to get those rates.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">To avoid locking up your cash, Mr. Bazaar said, you might consider \u201cno-penalty\u201d C.D.s, which pay a lower rate but don\u2019t reduce your interest if you withdraw funds early.<\/p>\n<\/div>\n<aside class=\"css-ew4tgv\" aria-label=\"companion column\"\/><\/div>\n<div data-testid=\"companionColumn-3\">\n<div class=\"css-53u6y8\">\n<h2 class=\"css-13o6u42 eoo0vm40\" id=\"link-2ecc43bf\">What is a C.D. ladder?<\/h2>\n<p class=\"css-at9mc1 evys1bk0\">You can lock in current rates but have periodic access to your money by opening C.D.s with different terms. If you have $15,000, for instance, you might open three $5,000 C.D.s at terms of six months, nine months and 12 months. When the six-month certificate matures, you roll the money into a new 12-month C.D., and so on.<\/p>\n<h2 class=\"css-13o6u42 eoo0vm40\" id=\"link-27bfa5e3\">What other low-risk options are available for my cash?<\/h2>\n<p class=\"css-at9mc1 evys1bk0\">Money market funds, which you can open through a brokerage, invest in low-risk securities, like Treasury bonds, and are considered relatively safe investments. But they are not F.D.I.C. insured, and it\u2019s possible \u2014 although rare \u2014 to lose money on them. (They are different from the similarly named money market accounts, which are bank deposit accounts that also offer checking account features and typically are federally insured.)<\/p>\n<p class=\"css-at9mc1 evys1bk0\">Yields on money market funds have also been declining, but a group of large funds tracked by Crane Data still averaged <a class=\"css-yywogo\" href=\"https:\/\/cranedata.com\/\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">4.46 percent<\/a> as of Thursday.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">Getting higher yields than those offered by money market funds means taking on more risk, Mr. Bazaar said. Options that are riskier than money market funds, but less risky than investments like stocks, include \u201cshort-duration\u201d mutual funds, which typically invest in corporate bonds that mature in one year or less, Mr. Bazaar said. Currently, he said, yields of around 7 percent are available.<\/p>\n<\/div>\n<aside class=\"css-ew4tgv\" aria-label=\"companion column\"\/><\/div>\n","protected":false},"excerpt":{"rendered":"<p>You\u2019ve probably been discouraged to see the interest rate on your high-yield savings account fall during the past couple of months. But your money is still earning much more than it would in a traditional savings account \u2014 and more than inflation. Rates paid on cash in savings accounts have been dropping since the Federal [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":769,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8],"tags":[523,524,171,245,522],"class_list":["post-768","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-loan","tag-accounts","tag-deal","tag-good","tag-highyield","tag-savings"],"_links":{"self":[{"href":"https:\/\/finzexpert.com\/blog\/wp-json\/wp\/v2\/posts\/768","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/finzexpert.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/finzexpert.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/finzexpert.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/finzexpert.com\/blog\/wp-json\/wp\/v2\/comments?post=768"}],"version-history":[{"count":0,"href":"https:\/\/finzexpert.com\/blog\/wp-json\/wp\/v2\/posts\/768\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/finzexpert.com\/blog\/wp-json\/wp\/v2\/media\/769"}],"wp:attachment":[{"href":"https:\/\/finzexpert.com\/blog\/wp-json\/wp\/v2\/media?parent=768"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/finzexpert.com\/blog\/wp-json\/wp\/v2\/categories?post=768"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/finzexpert.com\/blog\/wp-json\/wp\/v2\/tags?post=768"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}