To help aid in the stabilization of the current economy, the Federal Reserve has severely reduced the interest rate. The federal interest rate (the rate at which banks are charged to borrow money from reserves) is down to a paltry 0.00-0.25 percent. This number directly affects the interest rate you can earn on your savings account, as the bank still needs to maintain a profit margin even in trying economic times.
U.S. Average Savings Account Interest Rate
The interest rate that banks offer is their choice. Historically, online banks have offered their customers a higher interest rate because they have lower overhead costs due to the fact they do not have to pay rent on their local branches. Throughout the entire industry, the national average savings account interest rate is only .21 percent. The best savings rates range from a high of 2.52% APY from Nuvo Bank & Trust Company to 1.40% APY from online favorite Sallie Mae Bank.
For the security of knowing your money is safe from bank closures, you will earn less interest on your deposit. However, it is worth keeping your cash liquid, especially with the current state of the economy. For most investing novices, any higher risk investment may feel a bit too intimidating at this time.
How to Find the Best Savings Interest Rates
The best way to help ensure that your money is in a savings account with the best possible interest rate is to comparison shop online for all the rates available. However, do not be lured in by a high interest rate only. You must fully read all the terms and requirements needed to qualify for the proposed annual percentage yield. Many times, in order to earn the highest interest rates available from a savings account, there are minimum deposits and time requirements for the investment.
Savings accounts are a safe and effective way to invest your money for future use. The FDIC insures the balance up to $250,000 and you are guaranteed a rate of return on your investment. Savings accounts are an extremely low risk investment – therefore, expect the average savings account interest rate is conservative at best.
