This week’s news The Federal Reserve raised interest rates once again, it might have been expected, but it wasn’t particularly welcome. The Fed’s move to raise rates to a range of 5% to 5.25% will push mortgage and remortgage rates even higher. Interest rates on credit cards and personal loans are also likely to suffer. All this will be done in order to continue the fight against the still high (albeit lower) inflation.
Still, there are good benefits to the rate hike, especially for those who have been diligently saving their money. When the Fed raises rates, they usually go up, which means interest rates on deposit instruments such as high yield savings and certificates of deposit (CD) bills will also go up.
So, if you don’t have money in one or both of these accounts, you can reconsider. You can start by exploring your High Yield Savings Account options here now to see how much more you could be earning.
How to use rising interest rates to your advantage
There are several ways to take advantage of today’s rates. Here are two main ones:
Open a high-yield savings account
Even with the latest rates, interest rates on regular savings accounts are currently around 0.39%. But interest rates for high-yield savings accounts – which one to operate in the same way as regular bills – exponentially higher. Rates on these types of accounts range from 3.5% to 4.5% or higher, depending on the bank and other factors. And that’s before this week’s rate hike, which means rates on those accounts are still going up.
If you don’t have a high-profit account, chances are you are loss of money leaving it where it is. For example, using a $5,000 deposit, you’ll grow your savings fund to $5,019.50 in just one year (at a rate of 0.39%). But if you simply transferred that to a high-yield account at 3.5%, you’d easily increase your income to $5,175.00 – a difference of $155! And that’s at 3.5% – you can easily find an account with a higher rate, especially after the Fed’s latest hike.
So don’t hesitate. Start learning about today’s high-yield savings accounts and start taking advantage of today’s interest rate hike.
Open a Certificate of Deposit (CD) account.
Disc prices have also jumped in recent months. It’s not uncommon to find CDs in the 3.5% to 4.5% range, though even these are likely to rise in light of recent activity.
CDs are a smart way to protect and grow your money. But you won’t be able to access it like a high-yield savings account. CDs come in a variety of options terms (or lengths), at which point you lock up your money to earn interest at that higher rate. If you try to withdraw it early, you will be penalized, possibly heavily (you may lose all or most of the accrued interest). However, it could be a useful alternative, especially if the Fed stops raising rates as indicated in the latest announcement. Account holders potentially can too “ladder” their CD accounts so that they have access to portions of their funds at different times.
As with most financial products and services, it’s worth shopping around to find the CD account with the best rates and terms. You can start your search here now or by using the table below.
Yes, a rise in interest rates is not a good thing, especially when it comes amid high inflation and higher prices for food and services. But savvy investors can still take advantage of the environment by moving their money into high-yield savings accounts or CD accounts, or both. Just be sure to read the rates and terms before you sign up on the dotted line.
You can explore high yield savings account options here!