Here are 4 More Rewarding Alternatives to Savings Accounts
Even though it’s excellent news that consumer interest rates are low (hello, refinanced home loan!), interest rates are also at near zero for savings accounts, and that’s no good for you or your money.
Earlier this year, Smart Asset released data showing that the average interest rate for most savings account is currently at a measly 0.5% APY. Not only that, but that interest rate also applies to larger deposit accounts as well.
When savings account interest rates are this low, what do you do? You put your money elsewhere where it can earn more interest and ultimately benefit you and your wallet more. Here are four more rewarding alternatives to savings accounts.
Money Market Accounts
Money market accounts traditionally offer a higher interest rate than regular savings account rates. But, they also tend to have higher minimum balance requirements. Unlike savings accounts, however, money market accounts come with check-writing privileges, and you also receive a debit card to use for transactions.
Current money market account interest rates sit at about 0.99% APY or up to 2.02% APY. Affinity Plus offers one of the best money market accounts, and it’s reverse-tiered, which means that you earn higher rates on lower balances. However, to earn the highest rates, you’ll need to set up a direct deposit of at least $500.
Certificates of Deposit
CDs, or certificates of deposits, often come with a fixed interest rate over a set time. Simply put, interest rates on savings account change over time; CDs come with a fixed interest rate. The length of a CD ranges anywhere from three months to five years, all with their own interest rates and features.
You’ll have to be careful about putting money into a CD, though. If rates drop, you’ll be glad you invested when you did. However, if rates rise, you might lose out on extra cash because your interest was locked in at a lower rate. Usually, they’re a better bet interest-wise than savings accounts.
If you’re interested in opening a savings account but are looking for higher interest rates, you’ll want to ask about a high-yield savings account, which tend to come with better APYs. Compared to a CD, a high-yield savings account is a great idea for those who want to grow their savings over time and will need to access the cash at various points in the near future.
While interest rates for a high-yield savings account don’t quite reach the levels that you’ll see for money market accounts, they are much higher than traditional savings accounts. Currently, the best high-yield savings accounts offer around 1.00% APY. SmartyPig by Sallie Mae and Citi are two great options with high interest rates.
If you don’t want to deal with opening a new account and simply want to earn easy cashback, look for a cashback debit card with a high savings bonus. If you find yourself in that position, think about banking with an online bank. They tend to offer better APYs on general accounts without the hassle of even visiting a traditional bank or worrying about selecting the right CD.
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