Since 2020, interest rates have been at an all time low, which has put pressure on the interest rates you earn while your money is with a bank. When you look even farther back than 2020, interest rates have had downward pressure even prior to the pandemic. With the fed tightening interest over the past few months and in the coming month’s, effective rates have jumped up for those with a high-yield savings account.
It’s important to note, just because you have a savings account, it doesn’t mean it’s high-yield. Retail banks like Bank of America, Chase offer savings rates of currently .01% (Chase) – .03% (Bank of America). While high-yield lenders like Ally and Sofi offer .90% and 1.15%.
If you are going to hold on to cash for a prolonged period of time, it makes sense to compare rates. The difference between Chase and Sofi is 1.14%, which is a significant opportunity loss for you as an investor.
There are numerous things to consider when opening a savings account, this is what we look for when choosing a banking institution:
- The highest annual percentage yield, or APY per year, the higher the rate the more earnings.
- It’s FDIC-insured, you don’t want to bank with someone that doesn’t this. If they go bankrupt, your money is at risk.
- No minimum deposit or minimum balance, these may not matter if you plan on saving more than the minimum.
- No hidden fees are important as they will eat into your yield.