2 savings accounts to consider if the Fed raises rates this September (and one to avoid)
Summary
The Federal Reserve is likely to raise interest rates soon, which will increase the returns on some types of savings accounts. Savers should consider high-yield savings accounts and money market accounts to earn better interest, while avoiding traditional savings accounts that pay very low rates.Key Facts
- The Fed may raise interest rates in September, possibly by 0.25 percentage points.
- Higher Fed rates usually lead to higher interest rates on certain savings accounts.
- High-yield savings accounts currently offer around 4.10% interest and can increase if rates go up.
- Money market accounts pay about 4.00% interest and allow check writing, which some savers find useful.
- Traditional savings accounts only pay around 0.38%, which is much lower and may not keep up with inflation.
- Inflation is over 3%, so low-rate accounts can cause savers to lose money in real terms.
- Online platforms can help shoppers compare high-yield and money market accounts before deciding.
- Choosing the right savings account can help improve returns as interest rates rise.
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