If you are a saver and like to hold your savings in a savings account, you have probably been disappointed these past few years. The interest rates for savings in traditional savings accounts have been at record lows, often hovering below the pace of inflation. Even though there is little risk involved in holding your money in a savings account, you could be doing much better while still minimizing your risk. Here are some ways to get a better interest rate on your savings.
High Yield Checking Accounts
One alternative to the low interest rates offered by traditional savings accounts is to park your money in a high yield checking account. These accounts have FDIC insurance and include all of the benefits of standard checking accounts with the additional benefit of having higher interest rates on deposits. Many of these account have specific account requirements, such as direct deposits and frequent debit card usage, which must be met for the account to qualify for the advertised interest rate. Are YOU Getting the Best Rate? Compare at RateSupermarket.ca.
Money Market Accounts
Another good alternative for low yield savings accounts is to move your money to a money market account. Money market accounts offer interest rates that are higher than those of traditional savings accounts, but account holders must operate under more restrictions, such as higher account minimums and withdrawal penalties. Before choosing this type of account, you should take your spending habits into consideration and make sure that you will not incur a great deal of additional fees by using the money market account incorrectly.
Certificate Of Deposit
A third option that offers better interest rates than traditional savings accounts is a certificate of deposit, also known as a CD. CDs offer a fixed interest rate on the money held in the account as long as the money is held in the account for the entire agreed to term. CDs are available in term periods of three months to five years with interest rates that could be triple what could be earned with a traditional savings account. However, if the money is withdrawn early, it is subject to early withdrawal penalties levied by the bank holding the money. This penalty amount could be a set amount or a percentage of the total value of the CD. CDs are a great idea to earn higher returns on your savings if you are confident that you will not need to withdraw the money before the term has expired.
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