Find Higher Yields for Your Cash
Kiplinger's Personal Finance|January 2021
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.

Despite the dim outlook, seeking accounts with above-average rates is worthwhile. If you put $50,000 in a savings account yielding 0.75% (compounded monthly) and maintain that rate for a year, you’ll pocket $376 in interest earnings. If you instead use an account yielding 0.09%—the recent national average, according to Bankrate—you’ll have only $45 in interest after a year.

Here, we’ve highlighted several ways to earn a relatively strong yield without sacrificing safety. All the deposit accounts come with protection against bank failure, with up to $250,000 insured per depositor at each bank or credit union. (To calculate whether your balances are covered, use the tools at https://edie .fdic.gov and www.mycreditunion .gov/insurance-estimator.) And savings bonds are backed by the full faith and credit of the U.S. government.

The accounts listed here are available to customers nationwide. Rates are as of November 6 and are subject to change, so be sure to confirm the current rate before you open an account. To see current top rates at institutions both near you and nationwide, visit DepositAccounts.com, where you can choose the type of account you’d like to open, then enter your deposit amount and zip code.

CHECKING ACCOUNTS

If you’re looking for a no-fuss checking account, you’ll likely have to settle for a rate well under 1%. One exception: The no-fee, online T-MOBILE MONEY checking account (www.t-mobilemoney.com) offers a 1% interest rate even to those who are not customers of the company’s wireless services. T-Mobile and Sprint wireless customers who deposit at least $200 monthly into the account get an impressive 4% rate on balances of up to $3,000 and 1% on the portion of the balance higher than $3,000.

DIGITAL FEDERAL CREDIT UNION (www .dcu.org) recently offered 0.5% on up to $100,000 in its free checking account if you activate the “Earn More” feature, which sweeps your funds into FDIC-insured accounts with partner institutions (you retain normal access to your money). The credit union is temporarily refunding all out-of-network ATM charges; typically, you must have a direct deposit and make five transactions per month to get $300 in fees reimbursed yearly. You can become eligible for Digital membership if you join a partner organization, such as Reach Out for Schools (the membership fee starts at $10), and deposit $5 into a savings account.

The free, online checking account from FNBO DIRECT (www.fnbodirect.com) yields 0.4%, but the account does not come with check writing. To move money out of the account, you can use a debit card, make online transfers or pay other people with peer-to-peer payment service PopMoney. TIAA BANK (www.tiaabank.com) offers a fixed 0.4% yield for the first year (0.12% thereafter) on up to $250,000 in its free Yield Pledge Checking account, and you get unlimited reimbursement of ATM withdrawal fees if you keep at least $5,000 in the account, or up to $15 in ATM fees refunded monthly if you have less than $5,000.

More-rewarding accounts. You can earn a considerably higher yield on your checking balance if you’re willing to jump through some hoops, such as making several monthly purchases with your debit card, having a direct deposit and using online banking features. The rates on high-yield checking are often better than what you can get with a savings account, so you may consider keeping some of your savings stash in one of these accounts, too.

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