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Banking

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

As the Fed raises interest rates, banks are beginning to pay out higher APYs for consumers.

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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.

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Bank account interest rates are on the rise

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.

SoFi Checking and Savings

SoFi Bank, N.A. is a Member FDIC.
  • Annual Percentage Yield (APY)

    Members with direct deposit earn 4.60% APY on savings, no minimum balance needed. Members without direct deposit earn 1.20% APY on savings balances, and everyone earns 0.50% APY on checking balances.

  • Welcome bonus

    Earn a $300 welcome bonus when you direct deposit a total of $5,000 or more within 25 days of your first direct deposit. Get a $50 welcome bonus when you direct deposit between $1,000 and $4,999.99 within 25 days of your first direct deposit.

  • Fees

    No monthly fee and no excessive transaction fees.

  • No-fee overdraft protection

    No-fee Overdraft Coverage up to $50 for SoFi members with $1,000 or more in total monthly direct deposits. Purchases exceeding $50 are declined.

  • Offer ATM card?

    Yes, this account offers a debit card that allows purchases and ATM withdrawals. Terms apply.

  • Offer checking account?

    Yes, bundled with savings account.

  • Maximum transactions

    Up to 6 free withdrawals or transfers per statement cycle. Transaction amount limits apply.

Pros

  • A welcome bonus of $300 with direct deposit totaling $5,000 or more within 25 days of your first direct deposit. Or a welcome bonus of $50 with direct deposit totaling between $1,000 and $4,999.99 within 25 days of your first direct deposit
  • Strong 4.60% APY with direct deposit
  • No minimum balance or deposit needed
  • No monthly fees
  • Comes with checking account and ATM access
  • Receive your pay check in your account up 2 days early automatically when set up direct deposit
  • Save change automatically with Roundups and set savings goals with Vaults
  • No foreign transaction fees
  • FDIC insurance up to $2 million through the SoFi Insured Deposit Program

Cons

  • Non-direct deposit APYs are low compared to other high-yield savings accounts
  • No reimbursement for out-of-network ATM fees
  • No physical branches

Varo Savings Account

Bank Account Services are provided by Varo Bank, N.A., Member FDIC.
  • Annual Percentage Yield (APY)

    Begin earning 3.00% APY and qualify to earn 5.00% APY if meet requirements

  • Minimum balance

    $0.01 to earn interest

  • Monthly fee

    None

  • Maximum transactions

    Up to 6 free withdrawals or transfers per statement cycle

  • Excessive transactions fee

    None

  • Overdraft fee

    None

  • Offer checking account?

    Yes

  • Offer ATM card?

    Yes, if have a Varo Bank Account

  • Terms apply.

Pros

  • Strong APY and option to earn even higher
  • No minimum deposit and low minimum balance
  • No monthly fees
  • Option to add a checking account with ATM access
  • Offers 2 programs to help automate your savings

Cons

  • Have to meet requirements to earn higher APY
  • Cash deposits are only available through third-party services, which charge a fee

Vio Bank Online Savings Account

Vio Bank is a division of MidFirst Bank, Member FDIC.
  • Annual Percentage Yield (APY)

    1.10%

  • Minimum balance

    $100 to open

  • Monthly fee

    None, if you opt for paperless statements (otherwise, $5 per month)

  • Maximum transactions

    Up to 6 free withdrawals or transfers per statement cycle *The 6/statement cycle withdrawal limit is waived during the coronavirus outbreak under Regulation D

  • Excessive transactions fee

    $10 per transaction

  • Overdraft fees

    N/A

  • Offer checking account?

    No

  • Offer ATM card?

    No

Terms apply.

Pros

  • Strong APY
  • No monthly fees, if you opt for paperless billing
  • Up to 6 free withdrawals or transfers per statement cycle*
  • Easy-to-use mobile banking app

Cons

  • $100 minimum balance to open account
  • $5 monthly maintenance fee, if you don't opt for paperless billing
  • $10 fee per transaction if you make more than 6 in a statement cycle
  • No option to add a checking account
  • No ATM access

Marcus by Goldman Sachs High Yield Online Savings

Goldman Sachs Bank USA is a Member FDIC.
  • Annual Percentage Yield (APY)

    4.40% APY

  • Minimum balance

    None

  • Monthly fee

    None

  • Maximum transactions

    At this time, there is no limit to the number of withdrawals or transfers you can make from your online savings account

  • Excessive transactions fee

    None

  • Overdraft fee

    None

  • Offer checking account?

    No

  • Offer ATM card?

    No

Terms apply.

Pros

  • Strong APY
  • No minimum balance or deposit
  • No monthly fees
  • No limit on withdrawals or transfers
  • Easy-to-use mobile banking app
  • Offers no-fee personal loans

Cons

  • Higher APYs offered elsewhere
  • No option to add a checking account
  • No ATM access

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:

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

Bottom line

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.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
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