- Bank account interest rates have slowly increased since the Fed started raising interest rates.
- Some banks are raising savings rates faster than others, so you might earn more by switching.
- Buying savings bonds or building a CD ladder also might be worth considering.
If you’re ready to take charge of your savings and find ways to earn more interest on your money, here are five options to explore.
1. Ask your bank for an increase in your savings rate
While savings interest rates have tentatively increased in the last few months across various financial institutions, this doesn’t necessarily mean your savings account will see a sudden bump in its rate.
If your bank hasn’t made an announcement yet, Maggie Gomez, CFP® professional and owner of Money with Maggie, suggests asking your bank for an increase in the current rate you receive.
Gomez explains some financial institutions won’t immediately deliver a higher rate unless consumers get proactive.
“Later, to be more competitive, they’ll increase their rates more publicly, but I think it’ll be really slow,” Gomez adds.
2. Search online financial institutions for a high-yield savings account
According to the FDIC, the national average rate interest rate on savings accounts is 0.06% as of May 2022. However, several financial institutions pay much more than the national rate.
Jerel Butler, CFP® professional and founder of Millennial Financial Solutions, suggests looking at online financial institutions for competitive interest rates on savings accounts.
“It’s a little bit tricky with inflation going on,” Butler notes. “The best savings option for a typical savings account is an online savings account.”
How to calculate interest on a savings account
If you’d like to see how much interest you’ll earn over time on a specific account, you can use ourcalculator to help you. By clicking on “More details,” you’ll get a breakdown of your initial investment, total contribution, and total interest earned.
$10,685 Your balance after 5 years
Most banks earn compound interest daily. Meanwhile,usually earn compound interest monthly. If you’re not sure about your account’s compound frequency, contact your bank’s customer support.
3. Consider switching banks if the rate is worth it
Butler says you should also take the time to explore other financial institutions and compare different savings accounts.
“This is a great chance to take advantage of the rising interest rate market, and you may be able to take advantage of a welcome bonus at another bank,” adds Butler. “A lot of banks — as a result of the higher interest rates — are running special promotions, too.”
If you find a specific account that provides more compelling offers than your current bank, you might consider switching institutions.
4. Buy savings bonds
Savings bonds are federally issued debt securities. Lindsey Bell, chief markets and money strategist for Ally, says federally issued bonds are a safe investment option, although there are a couple of things to keep in mind.
“There’s a limit on what you can invest in those. They are also probably a little more volatile than a CD or savings account, so you have to take that into account,” explains Bell.
5. Build a CD ladder with short-term CDs if you find a competitive rate
Butler says building a CD ladder might be ideal if you find a competitive rate and are generally risk-averse. However, if you’re not risk-averse, Butler adds there are more options you should consider first.
CD ladders offer a way to take advantage of higher interest rates on CDs. Instead of depositing all your money into a single CD and locking your deposits for a set time, you’ll split your savings into a mix of term lengths.
Bell suggests sticking to CDs under one or two-year terms. If interest rates increase during the year, a CD ladder provides enough flexibility to buy a new CD once your short-term accounts mature.