Savings Interest Rates

If you’ve got some money that you want to tuck away for a rainy day, a savings account might just be your ticket. The problem is, how do you find the best savings account, one that’s going to give you a substantial interest rate?

The best place to begin to look is online. Not only is there a lot of research out there that will tell you what some of the best savings account rates are, depending on the bank or institution, but it’s also a great way to find some pretty obscure institutions that will nonetheless get you a great interest rate on your savings account; in fact, they’ll probably be quite a bit better at giving you some significant interest on that deposited money versus your local bank.

What to look for when you’re shopping for a savings account provider

Financial institutions want your business, so keep these things in mind when it comes to opening up a savings account.

Online, or “brick-and-mortar”?

Online savings accounts can give you some pretty significant interest, most especially because these institutions have significantly lower overhead costs, which means you get those savings passed on to you in the form of higher interest rates.

However, there are some drawbacks to online institutions. Number one, make absolutely sure that they are FDIC insured, so that you are protected for up to $250,000 worth of FDIC insurance-eligible deposits in the event there’s a bank failure.

Number two, it’s not as easy to get your money out if you need it from an online bank as compared to a local bank. With your local bank, you can likely walk right down to the branch, ask for a withdrawal, and get it.

With an online bank, you can still get your money, but it’s going to be several business days before you see it deposited in the destination account. Customer service, too, is not face-to-face and is mostly automated, with phone support available as needed. Online institutions vary in the quality of customer support they give, so make sure you research that, too.

One option you may want to consider is to have your savings account monies “broken up” between your local bank (for quick withdrawals as needed and good customer service, but with lower interest) and an online financial institution (for better interest rates but less available customer service and slower money transfer times from account to account).

How much money do you want to put in your savings account?

These days, even small-balance savings account can garner significant interest, especially with online banks. That’s because many of them offer a one-dollar minimum balance requirement, with no requirements for maintaining a minimum balance over one dollar. So if you have a relatively small amount of money and it’s going to need to be relatively liquid, go for a “no minimums, no fees” savings account, whether through an online bank and/or through a “brick-and-mortar” financial institution.

For better interest but with some limitations, you can opt for a savings account, whether online, “brick-and-mortar,” or both, that has some restrictions. Some savings accounts offer you significantly better interest than do “no minimum balance, no fees” interest accounts, but to get that better interest rate, you usually have to maintain a minimum daily balance or a minimum monthly balance, and the amount you have to have in that account as a minimum balance can be pretty significant, up to several thousand dollars.

That’s a great idea if, for example, you want to save money, get good interest, and be FDIC insured, as long as you’re not going to need to spend that money or have it be particularly liquid below a certain balance. If you do need your money to be entirely liquid, then it’s better to go with a lower interest but “no minimum balance, no fees” savings account, since the money you’ll spend on penalties will probably offset whatever benefits you get from a higher interest rate on a savings account with restrictions.

What is FDIC insurance and how does it protect your savings account? FDIC insurance came about as a result of the banking act that President Franklin Delano Roosevelt signed into law in 1933.

During the Great Depression, there was no such thing as FDIC insurance. The problem with that was that when the stock market crashed, banks lost customers’ deposits through ill-fated loans and other investments such that they could not give customers their money back when asked. This led to “runs” on banks by customers, whereby deposits were quickly withdrawn until there was no money left, and banks failed as a result. Additionally, the vast majority of customers were left “holding an empty bag,” so to speak, with their deposits completely gone and no recourse to get them back.

Why FDIC insurance protects you

FDIC insurance protects you from that because with FDIC insurance, your deposits within most (but not all) accounts are protected up to a limit of $250,000 per person, per institution. In other words, should that bank or financial institution fail, you will still have complete possession of that money, and you will not lose it simply because the bank itself has failed.

There’s one caveat here: One thing you should know is that if you have more than $250,000 in total FDIC insured-eligible deposits within one given institution, you are ONLY insured up to $250,000, but not more than that.

That said, that’s usually not a problem for most people, because should you have more than $250,000 in savings, you can simply open an FDIC-protected savings account at another institution. This will help ensure that your money stays protected. At its most practical level, this gives you peace of mind, because you know that your money is always protected up to a limit of $250,000 per individual, per institution.

What accounts are protected with FDIC insurance?

Not all accounts within a bank or financial institution are protected with FDIC insurance. Those that are protected include:

• Checking and savings accounts

• CDs

• Money market accounts (but NOT money market *funds*, which are a different type of accounts.

• What accounts are NOT protected with FDIC insurance?

As stated previously, not every type of account or product within a bank or financial institution is covered by FDIC insurance. Accounts, products or funds NOT covered with FDIC insurance include:

• Money market funds.

• Investment accounts or products like stocks, bonds, mutual funds

• Insurance products, like annuity funds

• Safety deposit box contents

So as you can see, your money is certainly safe within a savings account, checking account, CD deposit or money market account up to a limit of $250,000 for that institution, UNLESS the bank or institution does not carry FDIC insurance.

Although relatively rare, it is possible that a bank, credit union, etc., may not carry FDIC insurance. Therefore, make sure you check to see whether or not an institution carries FDIC insurance before you open a savings account with that institution; if it does not carry FDIC insurance, then you are not properly insured, and you cannot be protected from loss should that institution fail.

So, make sure you take your hard-earned money and put it in a savings account with an institution that carries FDIC insurance; this will help you sleep well at night.

Selecting the right type of bank will depend largely on what you are looking for from your bank, as different banks have different options available. For those who are looking to save some money for the future, banks with high savings interest rates might be a good idea, since this type of account will allow your savings to grow over the years. Older people might be interested in accounts that will have more short term growth with less risk involved, since they will need their retirement money within the next few years. Luckily, whether you are interested in high savings interest rates or simply a safe place to keep your money, there are plenty of different options available.

If you have quite a bit of money saved up, you might want to look at a private banking service, as these banks will help you invest your money wisely and offer more than the traditional banking services. This is similar to an investment bank, as the investments are more of a long term venture, so you should not expect a quick return. In the end, however, your return could end up being much higher than through other banks, so it really depends on what you are looking for. Offshore banks are popular with companies that do not want to pay many of the taxes that one must pay in the United States. Keep in mind that you will have to make sure that you are not breaking any federal laws when you use this type of bank, as you will still have to pay taxes within the United States. None of these banks are particularly worried about savings interest rates, as the money is invested outside of the actual bank.

Commercial banks are primarily focused on loans, financial planning, credit cards, checking accounts, and debit cards, so they are used by a wide variety of people. These types of bank accounts are for everyday use, so they are probably the most popular. If you simply need a bank account to use to pay your bills and you withdrawal money whenever you wish, a commercial bank will be a good fit for you. The savings interest rates are usually quite low, however, unless you are able to keep a certain balance at all times.

Savings banks will allow you to invest your money in a safe place, even though it is usually a low yield type of account. Savings interest rates are not particularly high, although they are higher than with a checking account. You will also be able to avoid paying certain taxes if you leave a certain amount of money in your savings account, but that money has to stay in the bank for a predetermined period of time. Many savings banks will force you to pay a penalty if you withdrawal money before this term is up, which is meant to act as a deterrent to you, which will force you to save.

No matter which type of bank you decide to go with, make sure that you research it before agreeing to keep your money there. With the recent economic problems that have occurred, it is more important than ever before to find a bank that you can trust with your money.

If you need to open an account, what you are going to use that account for is going to matter, when it comes to the type of bank account you want to open. Your own spending and saving habits are also going to factor into the equation.

For example, if your financial situation is such that you spend most of what you make and don’t save a lot of it, something like “free checking” might do for you. But it’s likely that if you want to open a bank account, you’re going to want to save some of your money, and that’s where some pretty interesting choices open up for you.

Among the most popular of these are savings accounts, which are among the more basic types of accounts you can open at a bank. Savings interest rates fluctuate, but the good news about savings accounts is that your money is completely protected (up to $250,000 per person within a given institution) as long as the institution you have your savings account at is FDIC insured.

Within savings accounts, you have a couple of different options. For one, many online banks have recently gone to online savings account as a very attractive option for those interested in boosting their savings interest rates. That’s because online banking institutions have a much lower overhead cost than do your typical “brick-and-mortar” neighborhood banks, which means that they pass those savings on to you.

Now, these online savings accounts do have at least one major drawback, and that is that you have to have a computer to manage your finances, and it takes a couple of days (usually two to five business days) for money to transfer to and from your savings account. In other words, you are not simply going to be able to walk into your neighborhood bank and withdraw money, so your money isn’t as easy to get to. That could be a good thing too, of course, since “out of sight, out of mind” might mean that you can save more. The choice is up to you.

A good option if you want to have some ready money available but still want some savings interest rates’ advantages is to have some of your money in a local savings account, so that you can get to it quickly, and the rest of it tucked away into an online bank savings account, so that you get the better savings interest rates, and still have the money available to you within a few days as needed.

Finally, many of these banks have also gotten into money market accounts, which conceivably can make you more interest, but they are NOT FDIC insured and can fluctuate in value, which means that you can actually lose money on these accounts. They’re not savings accounts, in other words, and your money is in no way protected. So if you’re really interested in just savings interest rates, go with an online savings account, and/or a local bank savings account in addition, to have the convenience of ready money when you need it and better savings interest rates at the same time.