How Interest Rates and APY Work? How to Earn More Interest On Your Money?
Trying to understand how much interest you can earn with a bank account? You’re not alone. And, the answer depends on a lot of different factors, namely the kind of bank account you’ve got. Do you know the differences between apy and interest rate? APY indicates the total amount of interest you earn on a deposit account over one year. While APY is based on the interest rate, APY gives you the most accurate idea of what you'll earn in a year.
According to recent studies, the average bank interest rate for checking accounts in the United States is 0.06% and the average bank savings rate is currently 0.09%. So, you see, depending on the kind of bank account you have and how much money you’re putting into it each year, your overall interest rate savings will change.
Need to dive a bit deeper? We’ve got you covered. Check out our complete guide to understanding your bank account’s interest rate and how you can begin to earn more.
What Is An Interest Rate?
Okay, let’s start with the basics. What is an interest rate? It’s a great question, actually, as it seems that most people aren’t even quite sure what they’re supposed to be looking for, to begin with. An interest rate is the amount of money that someone earns on interest-bearing deposits. Generally, whoever is borrowing money has to pay a percentage interest on it.
In most cases, when you deposit money into a checking or savings bank account, you’re loaning money to the bank. And, in return, they’ll pay you a percentage of interest on that amount. You’ll find that you earn different interest rates based on the type of deposit account you have and the banking institution you do business with.
What is APY?
What does APY stand for? Annual percentage yield. It’s another abbreviation or phrase you’ll see thrown around a lot if you’re looking to open up a new bank account. Nearly every savings account nowadays, and even some checking accounts, have them. And, to put it simply, the higher your APY is, the faster your money will grow.
It’s the amount of interest you earn on your bank account in a year. So, if your account has a 3% APY, you’ll earn an annual percentage yield of 3% for whatever amount of money you’ve got in that account. The national average is currently at about .09%, but you’ll find that certain bank accounts like Cheese over rates between 1 and 3%.
What Type of Bank Account Has the Highest Interest Rate?
Online savings accounts usually offer higher interest rates than traditional banks because they don’t have to worry about paying overhead fees for physical branches. However, when figuring out which bank account is going to yield the highest interest rates and overall growth, you’ll also want to factor in other fees such as overdraft and ATM fees.
To give you a general idea of traditional savings account APYs, however, you can take a look at traditional banks such as Chase Banks and Bank of America. The Chase Savings account interest rate is currently 0.01% APY while the BoA Advantage Savings account has a 0.03% APY. Rates are similarly low for other banks such as Citibank, Wells Fargo and U.S. Bank. But, why?
They’re normal savings accounts, not high-yield savings accounts. And, the same is true for non-traditional, online-only banks such as Varo as well, where you can expect to earn about 2.8% APY with their savings account. If you’re really looking to earn more interest on your money, you’re going to have to find a better way.
How You Can Earn More Interest On Your Money?
At Cheese, we’re not only interested in providing comprehensive solutions to immigrants, but we’re also in the game of ensuring you get more out of your hard-earned money. It’s why we offer $0 in annual fees, $0 in overdraft fees, $0 in international wire fees and free access to 55,000 ATMs worldwide.
We believe that you shouldn’t have to pay to access your own money. And, we also believe that just for banking with us, you should get a bigger slice of the cheese. That’s why we offer between saving bonus and cashback. Sound like a good deal? Start to earn more cheese today and sign up to join us.
