Banking (MP) Most banks don’t pay high-yield interest rates, but a few offer generous returns if you find them. If you’ve got cash to save in a bank, can play by a few rules, you can earn high interest rates. And you need not be a millionaire today to get good rates. There are actually low-risk instruments you can take advantage of, including rewards checking, low-penalty certificates of deposit and bank incentives. It might take some investigation, yet it’s all doable.
Word to the wise: Don’t choose high rates over safety. Ensure that your money is insured. Banks are covered by the Federal Deposit Insurance Corp. and most credit unions by the National Credit Union Administration. And higher-yielding accounts require that you leave funds alone for a set period or make specific transactions regularly, such as debit card purchases or direct deposits. If you don’t meet these terms the yield shrinks. But even this can be overcome.
Find Banks with High-Yield Interest Rates
Here’s the lowdown on some low-risk tips to maximize your rates
1. Online banks: A good place to start if you’re looking for higher yields is online banks. Online banks don’t come with minimum balances and do have online transfer features. They’re covered by the FDIC, so your money is insured up to $250,000 per account.
Banks like American Express offers an FDIC-insured, high-yield savings account online that paid 1.15 percent APY in mid-March. There are no fees or minimum balances. And take a look at Sallie Mae created a similar online account with a 1.1 percent APR rate. Though much banking is performed in physical branches, online banks such as Sallie Mae are equally as good. SmartyPig, a free online piggy bank for people with specific goals, is another option. It recently paid a high 1.35 percent APY rate. But you must set a savings goal and deal with a little restrictions. For example, partial or periodic savings account withdrawals aren’t allowed. You have to withdraw the full amount.
2. Credit Unions: Credit unions or community banks can offer high-yield interest rates worth leaving the big banks. The cash kept in low-yielding money market funds are phenomenal. But there’s a good amount of competition for this money, which may be easily moved out of a savings account. Some high-yield interest rates products offered at regional banks and credit unions pay as much as 5%. One great deal related to its requirements is Max Checking at Lake Michigan Credit Union. It yields 3% on balances of up to $15,000. To qualify, each month you need to make at least one direct deposit and 10 debit-card purchases, and you must log in to online banking four times. Some FDIC-insured banks recently paid much more, such as Southern Bank, which is based in Missouri and paid an annual percentage yield of 5.01 percent. The trick is clearing the checking account hurdles, which can include: meeting monthly minimums toward the number of transactions, using online and not paper statements and switching to direct deposit. To find local deals, go to DepositAccounts.com.
“Big banks usually don’t offer big rates anymore. You’ll get better deals at community banks and credit unions,” says Mitchell English, a financial analyst. For instance, two-thirds of the banks offering high rewards checking are community-based, she says.
3. High-yielding CDs: These need that you commit your money for five years and typically charge a six- to 12-month interest penalty if you cash out early. But Allan Roth, a financial planner in Colorado Springs, Colo., says a five-year CD could make sense whether or not stay put for just a year. Barclay’s, for instance recently offered a five-year CD that yielded 2.25%, with a six-month early-withdrawal penalty. If you cash out after one year, your effective annual yield is still 1.13%. After two years, the payout climbs to 1.69% and continues to rise every one of the remaining three years. Think of it as a one-year CD that gives you a bonus if rates don’t rise.
4. Low Penalty Certificates of Deposits (CDs): In the past few years, some banks began offering CDs with no lockup time. They include taking money out at any time without a large penalty, earning higher interest than a savings account and having FDIC insurance. For example, Ally Bank offers no-penalty, 11-month CDs paying 1.15 percent APY with no withdrawal penalties as of mid-March. There’s also no minimum investment.
5. Bank Incentives: In case you are opening a new account, check out the banks incentives first.For instance, JPMorgan Chase recently offered $125 bonuses on its new accounts with some restrictions. Some other banks offer incentives for adding direct deposit or online bill payment to existing accounts. Credit unions and Internet banks also offer bonuses. Most bonuses are applied to high-yield interest rates checking accounts, and it’s very typical they’ll require direct deposit.