Am I getting the best interest rates on my savings accounts?

This is a question I ask myself frequently because you CAN shop around with banks.

Since the federal interest rates have decreased, savings rates are not immune. Interest rates on savings accounts are also decreasing. I’ve seen my interest rate on one of my high-yield savings account go down from 1.90% to 0.8% over the course of 2020.

That’s because rates on regular savings accounts, high-yield savings accounts, and even money market accounts are typically variable—they fluctuate over time.

Types of Savings Accounts

Disclaimer: I am not a licensed financial professional. Make money moves at your own risk.

You might know about regular savings accounts and high-yield savings account, but there’s also CD’s (Certificate of Deposit) and money market accounts. We won’t go into money market mutual funds because I’m still trying to wrap my head around those. We also won’t cover special savings accounts, like college funds or health savings accounts, here.

Regular Savings Accounts

You earn interest with rates averaging less than a percent (0.06% annual percentage yield according to the FDIC), but you’re able to access your funds more quickly.

Things to Note:

• There may be a minimum balance on the account, but the minimum balance is usually less than the amount money markets, CD’s, and even high-yield accounts might require.

• Regular savings accounts are also subject to transfer limits per month or statement period, but the Federal Reserve suspended this rule due to COVID-19 in case customers need to access their savings more regularly.

High-Yield Savings Accounts

Think: a regular savings account, but with a boost on the interest rate. While regular savings accounts have interest rates less than a percent on average, high-yield savings accounts have an average APY of 1%.

It might not sound like a big boost, but if you had $1,000 in a high-yield account with a 1% APY you would gain $10 in interest compared to 60¢ interest earned through a regular savings account with a 0.06% APY.

One of my favorite financial websites, NerdWallet, has a great article on the best high-yield savings accounts, and other things to consider when looking to open an account.

Money Market Accounts

You can score even higher interest rates with a money market account, but there’s more things to consider, like higher minimum balances.

Things to Note:

• Minimum balances on money market accounts can range anywhere from $0 to over $1,000.

• Some accounts offer debit cards and/or checkbooks. There might be limits to how many times you can use the card and checks, in addition to transfer limits like savings accounts.

• There are even money market accounts that offer blended APY’s with account balance tiers, like Patelco Credit Union offers in their money market savings account. (Friends, this is how I’m scoring 2% up to $2,000 on one of my accounts which you might notice in my Reset Routine + Financial Check-In video below.)

Certificate of Deposit

CD’s have some of the highest interest rates, but even stricter requirements. CD’s are typically less liquid, i.e. you have limited access to your funds, than money market, high-yield, and regular savings accounts.

Things to Note:

• CD’s have fixed interest rates based on a set term or period of time. Locking in a fixed interest rate can protect you from decreasing rates, like what’s happening during COVID-19. However, you might lose out on potential earnings if rates increase.

• CD’s are also subject to early withdrawal penalty fees. If you need access to funds in a CD before your term is completed, you’ll need to pay up.

• Some CD’s don’t have penalty fees, like some short-term CD’s offered by Marcus by Goldman Sachs.

I don’t personally have a CD because I worry if a) I’ll need access to my funds or b) interest rates might rise and I’ll miss out on potential earnings. However, seeing interest rates decrease month after month is seriously making me reconsider opening a CD.

Q: Do you feel the same way? Are you considering switching banks and opening up a new account or CD?

Let’s chat in the comments below!

Want to keep learning about money? Read these posts next:

Talking Money With My Boyfriend
Financial Check-Ins and Budgeting
Financial Health: Basic Money Management Tips 1, 2, and 3

Disclaimer: All thoughts and opinions are my own. Links to external sources in this post are not affiliated with this site unless noted.