Americans are experiencing interest rate hikes on variable mortgages, revolving credit card debt and new home loans. But – aside from the intended consequence of Fed interest rate hikes helping to stem inflation – there’s another little silver lining: your money in the bank may earn more interest.
Discover: the best high-yield savings accounts
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High-yield savings accounts and certificates of deposit may see interest rates increase, but not immediately. Fortunately, any potential interest rate hikes on your credit card debt will also take time to show up, as companies must provide 45 days notice before raising rates or fees.
Peter Tanous, founder and chairman of Lynx Investment Advisory, told Forbes that banks react to changes in interest rates in different ways. “They’re slow as molasses to raise the rates they pay on deposits,” he said.
Currently, the national average interest rate for savings accounts sits at just 0.07%, according to GOBankingRates.
You may be able to earn more on your savings by choosing an online savings account with higher returns. Don’t forget to factor in bank charges, which could offset your interest income. GOBankingRates highlighted Sallie Mae Bank’s SmartyPig account with an APY of 0.70% as one of the best savings accounts for its high returns and no monthly fees.
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However, the extra interest you’ll collect on a savings account is unlikely to keep pace with double-digit inflation – or even offset the rise in credit card interest rates you might experience if you have a balance. Yet every extra dollar in your pocket counts when you’re saving for a rainy day, which is really the point of keeping money in an easy-to-access bank savings account.
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