If you’re like most people, you probably have a savings account that you contribute to on a regular basis. While it’s important to save for the future, it’s also important to make sure that your money is working as hard as possible for you. With interest rates at an all-time low, it’s more important than ever to maximize the interest rate on your savings account. Here are three tips on how to do just that.
Savings Accounts: Why Interest Rates Matter.
Interest is the cost of borrowing money or the rate of return on investment. It is calculated as a percentage of the principal amount, which is the original investment or loan. For savings accounts, interest is paid by the bank to the account holder for keeping money in the account. The higher the interest rate, the more money the account holder earns.
How do savings account interest rates work?
Savings account interest rates are determined by a number of factors, including the Federal Reserve’s target rate, inflation, and competition among banks. The Fed’s target rate affects all other interest rates in the economy and is influenced by economic conditions such as inflation and unemployment. Inflation reduces the purchasing power of money, so savers need to earn a higher interest rate just to keep up with rising prices. Competition among banks also plays a role in setting savings account rates; if one bank raises its rates to attract customers, others may follow suit in order to stay competitive.
The Best Ways to Maximize Your Savings Account Interest Rate.
When you are looking for a savings account, it is important to compare the interest rates that different banks are offering. This will help you choose the account that will give you the most return on your investment. There are many websites that can help you compare the interest rates of different banks, such as Citibank Net Banking and NerdWallet.
Consider a high-yield savings account.
A high-yield savings account is a type of savings account that offers a higher interest rate than a traditional savings account. This means that you will earn more money on your deposits. Many online banks offer high-yield savings accounts, so it is worth considering this option if you want to maximize your earnings.
Use an online savings account.
An online savings account is another option to consider if you want to earn more interest on your deposits. Online banks typically offer higher interest rates than brick-and-mortar banks, so this is a good way to boost your earnings. You can open an online savings account with any number of banks, including Ally Bank and Capital One 360.