Since the financial crisis, decent yields on cash have been hard to come by; however, that's slowly starting to change. Over the past few months, rates have been on the rise, led mostly by the online banks.
It makes sense that online banks would be the leaders in higher interest rates as they have fewer fixed costs than traditional banks due to fewer, if any, physical branches.
Yields are of course still low compared to pre-2007 rates. Currently, the National Average savings account interest rate is a measly .09%. So clearly, it pays to shop around.
Here is a sampling, and by no means a complete list, of what some of the online banks are paying as of this writing:
· 1.50% Marcus by Goldman Sachs
· 1.40% Barclays
· 1.35% American Express
· 1.25% Ally Bank
Most of these institutions offer attractive CD rates as well. However, CDs do not offer the same level of flexibility and liquidity that demand deposits do.
Typically opening an account with an online bank and linking it to your current bank account is easy and all done online. Once linked, you can move money between your traditional bank checking or savings account and your online higher interest savings account.
It's also very important, as with any bank account, to stay under the FDIC insurance limits. This way, even if the bank goes out of business, your principal is insured. For individual accounts that limit is generally $250,000, and for joint accounts it's $500,000.
You could also consider a service like Max Your Best Interest which will automatically move money among five online banks for you to get the highest yield and to make sure you're under the FDIC insurance limit. I've recently been testing this service. While it takes a while (and lots of work) to get it set up initially, after that it is very easy to manage. Max Your Best Interest charges .08% for this service.
As always, I'm here to help. If you'd like to discuss how rising yields could help your financial plan, please do not hesitate to contact me.
Thank you, Abe
Breakwater Financial, LLC is a registered investment advisor. The content of this blog post is for informational and educational purposes only and is not to be considered investment advice. If you have any questions regarding this Blog Post, please Contact Us.