For the past 10 years, it’s seemed hardly worth putting any money in the bank. When the country was deep into recession, the Federal Reserve slashed interest rates to nearly zero to stimulate the economy. More recently, in light of improving jobs growth and healthy corporate earnings, the Fed has begun to increase rates.
You can now earn a decent guaranteed return from bank savings, money market accounts and certificates of deposit
(CDs). How much money you earn can vary widely, depending on where you choose to put it. Generally speaking, the longer you are willing to tie up your money, and the less likely you’ll need to take it out early, will give you the best rates. But there are a few things to keep in mind.
• At the time of this writing, some credit unions required high minimum balances — $25,000 in some cases — to earn a 1.75% annual interest.
• Other online-only institutions will pay a 1.85% yield for a money market savings account, with much lower account minimums. However, getting your questions answered online can be a challenge.
• CDs have been paying higher yields lately — up to 2.5%for 12 months, and around 3% for 29 months, but many carry hefty penalties for early withdrawals.
• Depending on your individual circumstances, a money market account or online savings account may be preferable to a CD, since the money market and savings accounts generally don’t impose withdrawal restrictions.
In any case, be sure to read the fine print of any bank offer. These disclosures will reveal any rules or restrictions that come with the product.
Banks are once again offering competitive savings rates, and that is a good thing for consumers. Now is a good time to a take a fresh look at your savings options.