Savers can earn more with the right bank
Savers rejoice – you can finally earn a little more on the money you’ve been setting aside.
To draw in customers, banks – particularly online institutions – have been getting more competitive with rates on savings, CDS and even checking accounts. That means a savvy consumer may be able to earn far beyond the norm if they are willing to shop around.
Take the humble savings account: The average interest rate in the U.S. is 0.09 percent, according to the FDIC. And that is just an average – some banks are offering rates as low as 0.01 percent, while many others are at or above 2 percent.
To someone with $5,000 sitting in an account, that means the difference between earning 50 cents a year in interest versus $100.
After the Great Recession, banks routinely paid little to nothing on many personal accounts. The Federal Reserve began to raise its rates in 2015, but traditional banks were slow to do the same for customers.
They had little incentive: Customers had grown complacent after years of low interest rates. And traditional banks were large enough that they had huge deposits and other business lines that served them well.
A number of online banks spotted an opportunity and began offering much higher rates to attract more customers. They could afford to because they didn’t have the cost of maintaining a storefront on every corner.
But not having the benefit of size, they needed to offer attractive rates to survive. Some bigger banks took notice and began to respond with higher rates.
Interest rates remain low, historically speaking, but they are on the upswing. Experts say more banks are getting into the rate race, and consumers should take note.
Lesser-known players, including Bank5 Connect, offer a 2.05 percent annual percentage yield, or APY, on a savings account, but bigger banks have some nice offerings as well. Marcus, the online bank of Goldman Sachs, has a 2.05 percent rate on its savings account, and HSBC Direct offers a 2.01 percent rate.