Interest rates for bank accounts are rising — here’s how you can take advantage

Editor's Note: APYs listed in this article are up-to-date as of the time of publication. They may fluctuate (up or down) as the Fed rate changes. Select will update as changes are made public.

While the economy recovers from the effects of the Covid-19 pandemic, inflation, unfortunately, has skyrocketed to 40-year highs. As a result, the Federal Reserve has decided to raise interest rates.

Interest rates, which you might already be familiar with since they're often referred to regarding loans and mortgages, also affect money sitting in your bank account. Money in your checking and savings accounts can earn interest, and the APYs of these accounts are affected by Federal Reserve interest rates as well.

Below, Select details what you need to know about your bank account interest rate, and why you may want to consider switching banks to take advantage of the latest rate increase.

If you already have a high-yield savings account, you may have noticed a recent hike in your account's APY. That's because the Federal Reserve, the central bank of the United States, has been gradually raising rates to help slow down the pace of inflation. Chances are, your bank has likely followed suit.

This is good news for consumers since the interest earned on the money in your high-yield savings account can further bolster your savings. However, it's important to be strategic about your account to ensure you're getting the maximum return from it.

How to pick and maximize a high-yield savings account

With a high-yield savings account, you can earn a sizable amount of interest (at least in comparison to standard checking and saving accounts). Unfortunately, many of the legacy brick-and-mortar banks offer checking and savings accounts with near-zero interest rates, which means your money is essentially loosing value due to inflation as it does not grow. But with the rising cost of living any additional methods of fighting inflation are worth considering.

To ensure you're getting the maximum amount of interest, make sure you're putting your hard-earned money in a high-yield savings account such as Varo Savings or *American Express® High Yield Savings Account.

It's worth noting that these types of accounts should not be treated like a checking account. If you're regularly pulling money out, it defeats the whole purpose of having a high-yield savings account and your interest earnings will be much less as it will lessen the power of compounding.

A good use of a high-yield savings account is to store money for your emergency fund and other medium to long-term goals like a down payment on a house or car. It's important to note that if you're saving for long-term you'll likely want to invest your money in the market in index funds, which have much more growth potential if you have a lengthy investing time horizon.

There are dozens of high-yield savings accounts available on the market, both through in-person and online banks. While the benefits of each account vary, you should be looking for these core features:

• The highest annual percentage yield, or APY, possible
• A user-friendly website and mobile app
• Customer service that is easily accessible
• No minimum deposit or minimum balance
• It's FDIC-insured
• No fees

Here's a look at some of our favorite high-yield savings accounts that are currently available.

When choosing a high-yield savings account, it's equally important to ask yourself the following questions and make sure you can check off these financial boxes prior to applying:

• Is your high-interest debt paid off?
• Are you able to keep up with your monthly bills?
• Are you filling your retirement accounts, such as your 401(k) or Roth IRA?

While an emergency fund is a core financial tool, in some cases, your money may be better used elsewhere.

As Americans continue to struggle with the effects of inflation, rising interest rates are anticipated to help slow the rise in the price of everyday goods. If you're looking for a way to earn passive income and a place to keep your emergency fund, moving your money to a high-yield savings account can definitely be worth it.

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*American Express National Bank is a Member FDIC.

* SoFi members with direct deposit can earn up to 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. There is no minimum direct deposit amount required to qualify for the 4.60% APY for savings. Members without direct deposit will earn up to 1.20% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Interest rates are variable and subject to change at any time. These rates are current as of 12/12/23. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.