In today's uncertain interest rate environment, it is hard to know where to put your money.
On one hand, you need liquidity: Experts say you need enough to cover several months' expenses, in case of an emergency or job loss. On the other hand, you don't want all your cash sitting in a low-yielding checking or savings account, earning little if any interest and getting eaten up by fees.
Unfortunately, competition between big brick-and-mortar banks won't help you much these days, said Alex Matjanec, co-founder of bank comparison site MyBankTracker.
"Many banks already have the maximum deposits they want to carry," he said. "They recognize they don't necessarily have to offer the best rates."
But luckily there are still options for people looking to get a little more bang for their buck, particularly for those willing to try small or online-only banks, as well as credit unions. Here are three types of cash you might be sitting on — and some smart places to put it.
If you are losing money on your checking account, you can do better.
That might seem challenging, since many come with minimums and fees that deplete your balance each month. But finding a bank that skips maintenance fees and reimburses out-of-network ATM charges can save you big, said Matjanec.
"Most consumers don't have enough cash that 1 percent interest will let them make money on their money," he said. "Yet something like ATM fees can make a difference of hundreds of dollars a year."
The account you use regularly shouldn't be costing you: Consider switching to an FDIC-insured online bank like Aspiration, which reimburses all third-party ATM fees and earns 1 percent interest on balances above $2,500.
Depending on your current income and obligations, you might need to keep on hand anywhere from three months' to two years' worth of expenses.
"You always have to have a baseline of what you need to survive," said Matjanec. "For a lot of people, it's enough to have $3,000 in checking and another $7,000 in savings, and then you are safe to lock away anything above that to earn more."
Of course, for families or anyone with mortgages, rent, car insurance and other costs, the right savings number might be double that or more, said Matjanec. To figure out what you need, add up your monthly costs and round up by about 20 percent for missed expectations, he said.
Then shop around. High-yielding savings accounts earn nearly as much as CDs today, but also allow for up to six transactions per month, making them perfect for break-glass-only-in-case-of-emergency type scenarios.
For cash you won't need for a year or two, you might be willing to trade some liquidity for a higher interest rate — say, with a certificate of deposit or CD account that guarantees a certain APY if you don't withdraw for a set period of time. (If you take out the money early, you get hit with a penalty.)
But these accounts come with a danger: If the Federal Reserve hikes interest rates, you might kick yourself later for locking up your cash at today's ultra-low yields.
Unfortunately, one category of accounts designed to provide flexibility in case of rising interest rates — so-called "rising rate CDs" — are looking less generous than traditional accounts, according to a recent analysis by Bankrate.com. Bump-up CDs, for instance, give you a chance to switch to a higher rate partway through the account's term, but offer lower yields than traditional CDs upfront.
"What you're trading away at the front end is far too much," said Greg McBride, chief financial analyst at Bankrate.com. "Rates are not rising fast enough soon enough for you to be able to capitalize on higher rates before the CD matures."
For example, McBride said, a one-year CD that offers 0.95 percent interest would have to see its rates rise to about 1.71 percent within the first six months of the term to ultimately beat a traditional one year CD paying 1.33 percent.
If those interest rates all sound better than what you're currently earning, again, do your homework. There are at least a dozen one-year CDs that pay more than 1.2 percent interest.
Plus, longer-term bump-up CDs may still have an edge, McBride said. A five-year account with America First FCU, for example guarantees at least 2.3 percent interest, with one chance to bump your rate.