Savings accounts have had a great year.
As the Fed continues its streak of interest rate hikes — leading to higher rates for borrowers on mortgages, credit cards, and other loans — savers can benefit. Over the past several months, high-yield savings account interest rates have risen from an average of about 0.50% to nearly 2.00% APY. And average rates continued upward this week — the banks on our list of best savings accounts rose from an average 1.77% to 1.80% APY.
Here’s all you need to know about this week’s savings account increases, and expert advice for how to best take advantage of rising savings rates:
What Is the Average Savings Account Rate Right Now?
Average savings account rates are still on the rise, and more banks continue to raise rates regularly to keep up with the competition. While they’re not rising as quickly as they were after July’s Federal Reserve meeting, experts predict more increases after the next Fed meeting, scheduled for Sept. 20-21.
“If the federal funds rate continues to increase, high yield savings account interest rates are likely to trend higher as well,” says Natalie Taylor, CFP and head of financial advice at Monarch Money, a digital tool for money management. “Given that inflation is still well over the Fed’s long-term target of 2.00%, it’s likely that the Fed will continue to raise rates.”
Here are the average savings account interest rates for this week:
How NextAdvisor Determines These Average Rates
We compare three different averages in our average savings rate analysis. First, we review national deposit rates from the Federal Deposit Insurance Corporation (FDIC) and Bankrate’s national index of deposit accounts based on a weekly survey (like NextAdvisor, Bankrate is owned by Red Ventures). We also calculate the current average rate of each bank on our list of best savings rates.
The differences between national average savings rates and NextAdvisor’s analysis of interest rates is largely due to these much higher APYs that online banks pay.
National surveys from the FDIC and Bankrate include many different types of financial institutions, including large national banks that charge as little as 0.01% APY. Our list, on the other hand, is made up of online or hybrid banks with fewer overhead costs, which allows them to pass on savings in the form of interest to customers.
|FDIC National Deposit Rate||Bankrate National Index||NextAdvisor Average APY|
Some of the banks on our list of best savings account rates offer even higher APYs on savings. Here are a few of the top savings rates this week:
- UFB Direct: 2.21%
- Bread Savings: 2.15%
- CIT Bank: 2.10%
- LendingClub Bank: 2.07%
- Prime Alliance Bank: 2.05%
Average Savings Rates Compared to Last Week
Savings rates only increased marginally since last week. Growth has been steady since the last Fed rate hike in July, but it has slowed a bit in recent weeks.
Though the FDIC’s national rate recently increased from 0.10% to 0.13% in mid-August, it was flat week over week, along with Bankrate’s national survey of banks at 0.13%. A few of the banks we track rates for did increase this week, though. That brought NextAdvisor’s weekly average up to 1.80% from last week’s 1.77%.
One trend we’re seeing is more banks passing over the 2% APY threshold. CIT Bank joined LendingClub Bank, Prime Alliance Bank, Bread Savings, and UFB Direct this as the banks on our best rates list offering 2% or higher.
Do I Need a High-Yield Savings Account?
A high-yield savings account can be a valuable piece of your financial plan. While a 1%-2% return isn’t going to do much to secure your retirement or reach financial freedom, it can help you earn a consistent return on money you may need to access quickly, such as funds set aside as an emergency fund.
“For my clients, high yield savings accounts tend to be a great fit for their emergency fund as well as cash set aside to be used in the next 12 months,” Taylor says. She gives the example of a 1.75% APY, which is the amount currently offered by banks such as Capital One and Live Oak Bank. “At 1.75%, clients earn $175 annually on every $10,000 they have in savings, and that adds up quickly.”
Even with inflation rates still soaring, keeping a few months’ worth of expenses in a savings account that’s not subject to market fluctuations can give you peace of mind during times of financial hardship or when you take on an unexpected expense.
“I’ve heard a lot of complaints lately about cash in checking and savings accounts ‘losing money’ due to inflation,” Taylor says. “It’s true that inflation means that your dollars won’t stretch as far as they would have a year ago, but keeping a well-stocked emergency fund is still a key component of a strong financial foundation.”
Here’s a look at all of the top high-yield savings rates available today:
Best Savings Account Rates
|Prime Alliance Bank||2.70%|
|Lending Club Bank||2.65%|
|Goldman Sachs Bank USA||2.15%|
|American Express National Bank||2.00%|
|Live Oak Bank||2.00%|
|Salem Five Direct||1.65%|
How to Open a High-Yield Savings Account
Opening a new savings account, especially online, is simple.
First, you should make sure you choose the right account for your savings goal. A high-yield savings account can be a great option for money you want easy access to but also want to earn a small amount of interest. But while the interest rate is important, it’s not the only detail to look for.
You should also make sure your account has a minimum deposit and minimum balance requirement that aligns with what you already have saved, and that there are no fees that can eat into your savings over time. Before you open any new account, read the account details and terms to ensure it’s the right fit.
Once you’re ready to open your account, you can sign up through the bank’s website. Be prepared to provide details like your name, address, and other contact information, as well as bank account information for another account, which you’ll use to fund your new account via transfer.