Find Higher Yields for Your Cash

Interest rates are scraping bottom, but here’s a road map to accounts that will help your money grow.

- LISA GERSTNER

There’s no way to sugarcoat it: Yields on savings accounts, certificates of deposit and other safe places to park your cash are disappointingly low, and interest rates will remain in the dumps for a while. In response to the coronavirus crisis, last spring the Federal Reserve slashed short-term rates back to the near-zero levels at which they had hovered from late 2008 through most of 2015. “It’s pretty much ‘back to the future.’ We’re revisiting the territory that became all too familiar after the Great Recession,” says Greg McBride, chief financial analyst for Bankrate.com. Kiplinger expects rates to remain near zero through 2024.

Even keeping pace with inflation on your cash holdings is a tough prospect. Annual inflation recently ran at 1.4%, and nearly all the top-yielding savings accounts and money market deposit accounts offer less than 1%. The Fed has stated that with inflation running persistently lower than its long-term goal of 2%, it will aim to achieve inflation “moderately above 2% for some time.” That means that at least for a while, the Fed doesn’t expect to raise interest rates even if inflation starts to accelerate.

Savers who struggled to scrounge up a respectable yield during the last low-rate period may notice that the pickings are even slimmer this time around. Ken Tumin, founder of DepositAccounts .com, notes that rates for several savings accounts and certificates of deposit from online banks and credit unions have fallen to lower levels in the past several months than they did when account rates last bottomed out, around 2012 and 2013. Many banks saw a surge in deposits in 2020 as consumers stepped up their savings rate, reducing the banks’ desire to lure savers with competitive interest rates, says Tumin.