Interest rates increased by Fed, but now rates also increased on saving accounts
HOUSTON - The Fed just raised interest rates again this week to help slow inflation. One benefit is that it raises interest rates on savings accounts.
Since Apple launched its new high-yield savings account two weeks ago, Forbes reports people deposited more than $1 billion in the first four days.
Apple's new high-yield savings account offers a 4.15 Annual Percentage Yield (APY). The accounts are managed through Goldman Sachs. There is no minimum deposit required, and you can take money out when you need it. But you must have an Apple credit card and an iPhone to access the account through Apple Wallet.
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"It’s going to get people to save or get people to save in an account that pays a better return, relative to what people had been doing, but there are higher paying accounts that are out there," said Greg McBride, Chief Financial Analyst for Bankrate.
The APY 4.15% is competitive, but some high-yield savings accounts offer rates at 4.5% or even as high as 4.75% percent. Some of them require a minimum deposit, some do not.
"Emergency savings is something every household needs and one of those accounts is literally within reach," said McBride.
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You can also buy I bonds from the U.S. Treasury. The rate of return is set every six months based on the rate of inflation. It was just set at 4.3% on May 1. The bonds mature in 30 years. Investors can purchase up to $10,000 in I bonds each year, plus $5,000 if using a federal tax refund.
"You can’t cash it at all in the first year. And if you cash it in the first five years, you do forfeit the first three months worth of interest," explains McBride.
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You can also get a Certificate of Deposit, or CD, which earns interest for a fixed period of time. The national average APY is 1.54%, but some pay more than 5% depending on the amount invested and the term.
"There are penalties for early withdrawal, so you want to be careful about making sure whatever money you put in a CD is money you can live without for the term of that CD," said McBride.
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Be sure to choose a bank that is FDIC insured to protect your investment.