- Bank account interest rates have risen slowly since the Fed began raising interest rates.
- Some banks increase savings rates faster than others, so you may earn more when you switch.
- It might also be worth considering purchasing savings bonds or building a ladder of CDs.
Savings interest rates have been creeping up in recent months, and the Federal Reserve has continued to raise interest rates to deal with inflation.
If you’re ready to take charge of your savings and find ways to earn more interest on your money, here are five options to explore.
1. Ask your bank for an increase in your savings rate
Although interest rates on savings have tentatively increased in recent months at various financial institutions, this does not necessarily mean that your savings account will experience a sudden rate increase.
If your bank hasn’t made an announcement yet, Maggie Gomez, CFP® Professional and owner of Money with Maggie, suggests asking your bank for an increase in the current rate you receive.
Gomez explains that some financial institutions won’t immediately offer a higher rate unless consumers are proactive.
“Later, to be more competitive, they will increase their rates more publicly, but I think it will be very slow,” adds Gómez.
2. Search online financial institutions for a high-yield savings account
According to the FDIC, the national average interest rate on savings accounts is 0.06% as of May 2022. However, many financial institutions pay much more than the national rate.
Jerel Butler, CFP® professional and founder of Millennial Financial Solutions, suggests checking online financial institutions for competitive interest rates on savings accounts.
“It’s a little tricky with inflation,” Butler says. “The best savings option for a typical savings account is an online savings account.”
How to Calculate Interest on a Savings Account
If you want to see how much interest you’ll earn over time on a specific account, you can use our
calculator to help you. By clicking “More Details”, you’ll get a breakdown of your initial investment, total contribution, and total interest earned.
Your balance after 5 years
Most banks earn interest compounded daily. In the meantime,
it usually earns interest compounded monthly. If you are unsure of the compound frequency of your account, please contact your bank’s customer service.
3. Consider switching banks if the rate is worth it
Butler says you should also take the time to explore other financial institutions and compare different savings accounts.
“This is a great opportunity to take advantage of rising interest rates in the market, and you may be able to take advantage of a welcome bonus at another bank,” Butler adds. “Many banks, as a result of higher interest rates, are also running special promotions.”
If you find a specific account that offers more attractive offers than your current bank, you might consider switching institutions.
4. Buy savings bonds
Savings bonds are debt securities issued by the federal government. Lindsey Bell, chief money and markets strategist at Ally, says federally issued bonds are a safe investment option, though there are a couple of things to keep in mind.
“There’s a limit to what you can invest in them. They’re also probably a little more volatile than a CD or savings account, so you have to keep that in mind,” explains Bell.
5. Build a CD ladder with short-term CDs if you find a competitive rate
Butler says building a CD ladder might be ideal if you find a competitive rate and are generally risk-averse. However, if you’re not risk averse, Butler adds that there are more options you should consider first.
CD ladders offer a way to take advantage of higher interest rates on CDs. Instead of putting all your money in one CD and locking your deposits for a set amount of time, you’ll split your savings over a combination of installments.
Bell suggests sticking to CDs in one- or two-year terms. If interest rates rise during the year, a CD ladder provides enough flexibility to purchase a new CD once your short-term accounts come due.