The year 2017 is shaping up as one of rising interest rates. For some people, that will mean loans and credit cards will become costlier. But for some bank and credit union customers, there’s also a benefit: the potential to earn more money.
“If you’re willing to shop around for a higher yield now” on checking and savings accounts, says financial planner Eric Hutchinson, “you get the immediate benefit of earning more money. You’ll also be positioning yourself to take advantage of future rate hikes.”
The Federal Reserve raised its benchmark interest rate for banks from 0.50% to 0.75% in December. Rising rates provide incentives for banks to increase their annual percentage yields on deposit accounts to attract customers, says Hutchinson, who is based in Little Rock, Ark.
That’s no guarantee that a bank will increase annual percentage yields, or APYs. In fact, the national average interest rate on savings accounts is 0.06%, according to the Federal Deposit Insurance Corp. — the same as before the Fed’s December rate hike. But Hutchinson says financial experts believe that rates will gradually increase over the next year.
Suppose you started 2017 with $2,000 in a basics savings account that had an APY of 0.06%. If you left the money untouched for a year, it would earn a meager $1.20 in interest.
But if you put the cash in a savings account with a higher yield — say 1% — you would earn about $20 in interest by the end of the year.
Many people have cash parked in checking or savings accounts that earn next to no interest. Shop around so you’re prepared to take advantage of rising rates.
Here are some tips to score better rates.
Check the websites of nearby banks or credit unions for rates. You can also find more information and reviews about these institutions on comparison sites.
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