Sunday, November 18, 2018
Savings Accounts Guide, Banking & Interest Rate Resource.

Getting Higher Interest on Savings Accounts

With ever-the-desire to find higher rates of return on savings, the following gears toward this (assumes compounding of interest, along with its benefits).

Comprehensive Research - first and foremost. It might be foolhardy to simply shop rates at one or two of the popular, bank raters. Besides, the fact that getting top rates are not the only factor for choosing an account (safety & risk issues, etc) the depositor is best served by spending some true diligent effort -- consulting with a financial planner/money market person in the quest. Moody's is a great place to start, for one. For another, Google "X bank rating" can reveal a surprising amount of feedback. Comparing savings account providers alongside one another with some accurately assessed financial health perspectives, can go a long ways.

But, getting back to increased returns alone:
  • Timing of Interest Payment - when will the accrued interest be paid? Only after the interest payment is made available will the funds be free and then possibly applied toward a yield that brings greater performance.

  • Fixed versus Variable Interest - when rising rates are expected, it might make sense to opt for the variable rate, assuming the rise actually happens. A tie-in with this is the required deposit term. And the greater the maturity (two years or five years for CD's - certificates of deposit - are not uncommon) the more difficult a play trying to foresee this becomes.

    A year or two out, the whole complexion of the interest bearing market can change substantially, not to mention 6 months. This is difficult enough even for the experts to get a fix on. On the other hand, a variable rate without a time commitment could give enough flexibility needed to determine the best move at a given future date.

  • Transferability of Funds - Depending on the account type, funds on deposit may or may not be transferable until the coming date of maturity. This might allow you to take advantage of other opportunities arising in the market. And this may apply to the minimum balance requirement in the account.

  • Beware of any advertised rates that seem too good to be true. A case in point is the 4.0% rate advertised September 22nd, 2008 by WaMu (prior to being bought by Chase on September 25, 2008) . Later, given the trouble WaMu had been experiencing at that time, it became evident that the high rate was set out merely to entice new depositors on to the bank. The Fed as since proposed regulation preventing a distraught bank, or those "less than well-capitalized institutions " from offering inflated rates to its customers.

    Even so, while national rates and caps might serve toward preventing the recurrence of this, while also possibly leveling down all savings account interest rates simultaneously, it's best to beware.

See also high interest savings sources as well as online high interest accounts.


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