Banks Hike Rates, Here's How to Squeeze More Money from Your Stash

As part of its continued attempt to curb the speed of inflation, the Federal Reserve has raised its main interest rate five times this year, most recently on Wednesday.

The theory goes that as a result of the US central bank raising the cost of borrowing money, there would be a decrease in demand for products and services, which will drive down prices.

The Relationship Between Interest Rates and Savings Accounts

Banks may be able to pay customers more for putting part of their money into savings accounts as a result of those higher interest rates. Banks are able to provide their clients with better returns because they make more money on the money they lend.

Consider it as the mutually beneficial cycle of loans and savings that banks provide to their clientele. However, savings account interest hasn't been all that great until recently.

According to McBride, interest rates have been falling over the past forty years, along with the amount of money banks deposit into such accounts, until this year. Money costs more money now that these rates are growing once more.

However, this implies that there's a chance to receive better returns on deposits. To get the maximum value out of their savings, McBride suggests that consumers compare prices.

Not every bank has raised the interest rates on savings accounts by a large amount. The Federal Deposit Insurance Corp. reports that the average interest rate on savings accounts across the country is 0.17%.

Legislators on Capitol Hill have been observing the low interest rates on savings account deposits, and last week they questioned CEOs of large banks about why the rates weren't higher.

Exploring High-Yield Savings Accounts: Where to Find the Best Returns

Certain financial organizations have historically touted greater interest rates with their high-yield savings account products, particularly those that are online-only and have no physical presence. According to NerdWallet spokesperson Chanelle Bessette, some of these institutions provide savings account interest rates of more than 1%, 2%, and in certain rare instances, more than 3%.

Lists of the institutions that are now giving the best returns may be found on Bankrate and NerdWallet. Marcus by Goldman Sachs, American Express Savings, Capital One, and Discover are a few of them.

Greg McBride, the chief financial analyst at Bankrate.com, emphasized the ease of enrolling in online savings accounts, even for individuals who primarily bank elsewhere.

"Opening an online savings account takes just a few minutes of your time," he explained, "and you can easily link it to your current checking account to transfer money seamlessly." McBride suggested that if one's bank introduces a new savings account with a higher yield, customers can simply request to transfer their funds into the new, more lucrative account.

However, McBride highlighted that some banks may not be transparent with existing customers about the availability of higher-yield savings accounts. "We are seeing some cases where banks roll out new savings accounts offering attractive yields, while existing account holders remain in their original accounts with the original rates," he noted in an email statement.