Rising interest rates are not all bad news. Interest rates on savings accounts and money market accounts have been depressed for over a decade. Savings accounts have failed to keep pace with inflation. While rising interest rates on home loans, credit cards, auto loans, and student loans are bad for consumers; rising interest rates benefit individuals who invest in savings accounts, money market accounts, certificates of deposit, and bonds. Now is the time to finally earn some money in a savings account.
At MultiplyMyMoney, I am all about making sure you earn the best returns on your money. My motto is you are either making money or you are losing money. Your money has to be continually growing to try to keep pace with inflation. Every week I try to find the best place to invest my money whether it be stocks, bonds, exchange traded funds, gold, silver, metals, real estate investment trusts, etc. I am always searching for the best securities. This even applies to the money that I place in my savings accounts. Savings accounts can be a money maker or money loser depending upon where you place your savings.
Savings accounts are not just for overdraft protection. Too many people place money in savings accounts expecting no return on their money. A savings account is a poor investment if you aren’t earning interest of at least 1 percent. Anything less than 1 percent and you should just keep the money in a checking account. Savings accounts are pointless if they you a similar rate to your checking account. A savings account that pays 0.10%, 0.20%, 0.30% is basically useless. The purpose of a savings account is to reward you with interest for limiting your ability to withdraw your cash at will. You only get six withdrawals maximum in a month on a FDIC insured savings accounts.
A rocky economic outlook means it’s time to pump up your savings accounts. Now is the time to make sure your savings account is earning supercharged interest rates.
I don’t mind tying up my money as long as I am being rewarded for it.
Commercial banks are beneficial for the wealthy.
Online banks that are FDIC insured are the best place for the average investor to park their cash. Most of the big commercial banks are still paying interest well below 0.2%. You will never get the best rates on your savings cash at PNC Bank, Bank of America, Citibank, and JPMorgan Chase unless you are high net worth individual. I love big bank stocks as investments for dividend income but hate big banks as places to store your savings. You cannot even earn 1 percent on your money at a big bank right now unless you have a big bank balance. Online savings accounts pay better interest rates than traditional banks.
Online banks and credit unions are the best option for those looking to maximize their money. If you are a member of a local credit union, check out the rate that they will pay you on your savings first. If not, then check out an FDIC insured online bank. Make sure that the bank is FDIC insured!
These are three of my favorite online banks that I have trusted to store my own cash.
Ally Bank is offering interest rates of over 2 percent on all balance tiers of it’s money market accounts. You can earn 2 percent interest on balances as low as $1.
CiT Bank, which is now a part of Citizens Bank, is paying 2.10 percent on savings over $100.
Capital One Bank is paying 1.90 percent on its 360 Performance Savings Account with no minimum balance required.
Example:
If I placed $5,000 in a savings account at Bank of America, I would earn .01% interest which equates to .50. I would make 50 cents on $5,000 over the course of a year. That’s a horrible return on investment.
If I placed the same $5,000 in an CIT Bank Savings Connect account, I would earn 2.10% interest which equates to $105. I would make $105 on $5000 over the course of a year.
These calculations are based on using simple interest but you get the point. That is 210 times the amount of money made on a Bank of America savings account. As you can clearly see, storing your cash at a big bank is a bad financial decision since it costs you potential interest income.
