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With eight Federal Reserve rate hikes in the past couple of years, banks are finally offering higher interest rates on savings accounts.
You might not have noticed this upward trend if you still use a traditional bank, however. While interest rates have risen at both brick-and-mortar and online institutions, they’re much higher at online banks. according to Ken Tumin, founder of DepositAccounts.com.
He writes in a CBS MoneyWatch report that in the past two years, the average annual percentage yield (APY) at:
Banks and credit unions — the vast majority of which are brick-and-mortar institutions — has only risen from 0.18 percent to 0.24 percent — an increase of 33 percent.
The average savings account yield at internet banks has risen from 0.72 percent to 1.33 percent, an increase of 85 percent.
“Many well-established internet banks have been raising yields above this average, with a few offering yields above 2 percent. Suffice to say, consumers are losing out if they stick with their long-time brick-and-mortar banks and don’t switch to an internet bank.”
After years in the wilderness, savers looking for great rates are finally seeing hints of a return to the Promised Land.
Several recent trends bode well for rising rates on savings. For starters, the Federal Reserve has been steadily raising rates, which benefits folks saving money in bank accounts or CDs.
In addition, rates are jumping especially high at online banks. In fact, earlier this year, a found that savers who choose an online savings account stand to earn 457 percent more in interest than they would by parking their cash in a savings account at a brick-and-mortar bank.
If you do a little research, you can gain even more. For help completing your interest-rate research in a matter of minutes, go to the Localpizzadeliverywalledlakemi.info Solutions Center and check out our savings account comparison tool.
It allows you to compare rates for interest-bearing checking accounts, savings accounts, and money market accounts and CDs.
Why online banks can offer more
Online banks are also referred to as internet banks. That’s because they don’t operate branches, which is key to the financial advantages they tend to offer customers.
As we note in “10 Tips for Finding a Bank With More Bang for Your Buck“:
They don’t need to maintain a network of brick-and-mortar branches, so their expenses are lower, which can mean they pay higher interest rates and charge lower fees.
Yet, a lot of people remain unaware of this simple way to dramatically boost their returns. More than 60 percent of people WalletHub surveyed did not know that online-only banks offer better rates and lower fees than their brick-and-mortar counterparts.
Do you have fears that online banks might not be as safe as a traditional bank? Put those worries to rest. As Localpizzadeliverywalledlakemi.info founder Stacy Johnson points out:
I get this type of question a lot: “Are online banks safe?” Short answer: Yes, online-only banks are safe, providing they have FDIC insurance. The Federal Deposit Insurance Corp. is what insures bank accounts. Taxpayer dollars support the FDIC. So if a bank has FDIC insurance, your accounts are insured up to $250,000.
Still, Stacy also urges you to remember that online banks do not make sense for everyone. For more on his insights, read “Ask Stacy: Are Online, Internet-Only Banks Safe?”
For more tips, check out:
- “Consumers Say These Are the 3 Best Online Banks“
- “How to Earn More on Your Savings for the Rest of 2018“
Have you ever used an online bank? Tell us about your experience below or on .
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