For many years, one of the best places to put your money was in a high-yield savings account. These specialized savings accounts offered higher-than-average interest rates, and they gave absolutely anyone the opportunity to make more money by simply saving more money. You could make a few hundred extra dollars each year just by leaving your money in a high-yield savings account.
But in recent months, things have changed. Suddenly, high-yield savings accounts are no longer offering the impressive interest rates they once were. And as increasingly more high-yield accounts lose their once-high interest rates, people are wondering: is it even worth it to have a high-yield savings account anymore?
Wojciech Dziadosz / ShutterstockWith the financial industry and individuals everywhere facing uncertainty about the future, now is a good time to consider if your money is in the right kind of accounts. And if you’ve heard about high-yield savings accounts, you should determine whether or not they’re still offering any value.
Savings Interest Rates Have Fallen Significantly
It’s no secret that interest rates have fallen dramatically since early 2020. On March 15, the Federal Reserve announced an emergency rate cut that dropped the federal funds rate from 1.00 to 0.25¹. And in response, banks across the country followed suit, slashing their own interest rates.
As a result, bank customers have watched their once-impressive savings interest rates fall from as high as 2.2 percent to less than 1 percent². High-yield savings accounts suddenly lost a lot of earning potential.
But that doesn’t necessarily mean that your high-yield savings account is now a bad banking choice. According to industry professionals like Lindsey Bell, chief investment strategist at Ally, high-yield accounts are still a good option because they’re insured by the FDIC³. And if you need to access your funds in a pinch, you’ll have no problem getting your money out of a high-yield account.
High-Yield Savings Accounts Still Offer the Best Bank Rates
Though interest rates have fallen significantly, you may want to hang onto your high-yield savings account. There is the potential for interest rates to rebound and begin rising again in the future. But, even more importantly, high-yield savings accounts are still offering some of the highest interest rates available.
Though today’s lower rates might not seem so great in comparison to the rates of the past, they’re still great in comparison to what traditional savings accounts offer. High-yield savings accounts are offering rates that are more than 10 times better than any other option.
Right now, high-yield accounts are offering interest rates like the following⁴:
- Discover Online Savings Account, 1.01 percent APY.
- Ally High Yield Savings, 1 percent APY.
- Marcus High Yield Savings, 1.05 percent APY.
- Varo Bank Savings Account, 1.21 to 2.80 percent APY.
Compare those rates to the basic savings account interest rates offered by big-name banks, such as⁵:
- PNC Bank, 0.01 to 0.99 percent.
- Bank of America, 0.01 to 0.06 percent.
- U.S. Bank, 0.01 to 0.05 percent.
- Chase Bank, 0.01 to 0.05 percent.
The difference between these two types of savings accounts is still shocking. Rates may be lower, but the interest rates of high-yield savings accounts are much better by far.
And, as CNBC notes, a high-yield savings account returns interest at a rate that’s at least 16 times higher than the national average on traditional savings accounts⁶. So, if you want to grow your savings without doing much at all, a high-yield savings account is still a great choice.
Other Long-Term Options Offer More Interest
If you want to grow your money at a more rapid rate than traditional and high-yield savings accounts can offer, you do have other options.
There are a number of financial products you can choose to get a great return on your money. You just need to know what your options are and whether they work for your unique needs.
Instead of a high-yield savings account, you can opt for a Certificate of Deposit (CD). CDs offer great interest rates – and the rate is fixed, meaning it won’t decrease over time. You can earn more with a CD with interest rates like Marcus’s No-Penalty CD, which offers 1.55 percent for seven months⁷. But keep in mind that you can’t take your money out of most CDs without facing a penalty.
A money market account is another high-interest option. Money markets are similar to savings accounts, but they can be more restrictive – many have withdrawal limits and balance minimums⁸. Money market accounts are a great choice for those who have more cash on hand to put into a savings account. If you can meet the requirements, you may be able to enjoy a higher interest rate.
Before you rule out any financial product, make sure to do your research. Search online to compare the types of accounts available. Check out their interest rates, their requirements, and any special limitations you must meet. With this research, you’ll be prepared to choose an account or product that suits your financial needs or goals.
