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As the adage goes, a penny saved is a penny earned. But what if that penny could give you an even better return?
Whether you’re paying for surprise car repairs, covering a medical expense or getting unexpectedly slammed with sky-high energy bills, money stashed in an emergency fund can bail you out of a bad spot.
Luckily, right now is a great time to save: The Federal Reserve has been repeatedly hiking interest rates in the hopes of bringing down inflation, setting off a chain reaction that has resulted in online banks raising their own rates on high-yield savings accounts.
Some financial institutions now offer annual percentage yields — or APYs — over 3%. Rates this high were unheard of earlier this year, when we were impressed that some online banks were raising saving account APYs from 0.5% to 0.6%.
As you might expect from their name, high-yield savings accounts generally generate more in interest than traditional bank savings accounts, so you're compounding more with every penny you put away.
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With the national average APY on savings accounts coming in at a mere 0.21%, according to the Federal Deposit Insurance Corporation, high-yield savings accounts are even more appealing now than usual. (You can open a high-yield savings account at a brick-and-mortar bank, but online banks generally often offer higher savings rates, allowing you to grow the money you deposit faster.)
High-yield savings accounts with APYs of 3% (or more)
Looking for major returns? These FDIC-insured banks are all offering some of the highest interest rates — 3% or above — on high-yield savings accounts.
- UFB DIRECT: 3.83% APY
Minimum deposit: None
Monthly fees: None
- Bask Bank: 3.6% APY
Minimum deposit: None
Monthly fee: None
- Upgrade: 3.5% APY
Minimum deposit: None
Monthly fees: None
- CIT Bank: 3.25% APY
Minimum deposit: $100
Monthly fees: None
- LendingClub: 3.25% APY
Minimum deposit: $100
Monthly fee: None
- Marcus by Goldman Sachs: 3% APY
Minimum deposit: None
Monthly fees: None
- SoFi: 3% APY
Minimum deposit: None
Monthly fees: None
- Discover: 3% APY
Minimum deposit: None
Monthly fees: None
- Capital One: 3% APY
Minimum deposit: None
Monthly fees: None
- Synchrony: 3% APY
Minimum deposit: None
Monthly fees: None
Before you switch banks in search of a better payoff for your money, consider that the savings account APY is only part of the picture. For a full rundown of what banks offer, check out Money's new list of the Best Online Banks and our guide for How to Choose a Bank.
*Rates and APYs are subject to change. All information provided here is accurate as of May 19, 2023.
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As someone deeply immersed in the world of personal finance and investments, it's evident that the current economic landscape presents a unique opportunity for individuals to maximize their savings and earn substantial returns. The article highlights the importance of emergency funds, emphasizing the timeless wisdom that a penny saved is a penny earned. Now, let me provide a comprehensive breakdown of the key concepts discussed in the text:
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Emergency Fund Importance:
- The article emphasizes the significance of having an emergency fund. This financial cushion proves invaluable in covering unexpected expenses such as car repairs, medical bills, or sudden spikes in energy costs.
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Federal Reserve's Interest Rate Hikes:
- The Federal Reserve's decision to increase interest rates is a pivotal factor shaping the current financial landscape. This move aims to combat inflation, and it has triggered a domino effect, influencing the interest rates offered by online banks.
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High-Yield Savings Accounts:
- High-yield savings accounts are prominently featured in the article as a means of optimizing savings. These accounts offer annual percentage yields (APYs) that exceed 3%, a substantial increase compared to rates seen earlier in the year.
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APY Definition:
- APY stands for Annual Percentage Yield. It is a crucial metric in the context of savings accounts, representing the total amount of interest earned on an account over one year, including the effect of compounding.
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Comparison with Traditional Bank Savings Accounts:
- The article underscores that high-yield savings accounts generally outperform traditional bank savings accounts in terms of interest rates. This leads to more significant compounding of interest for every dollar saved.
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National Average APY:
- The national average APY on savings accounts, as provided by the Federal Deposit Insurance Corporation (FDIC), is mentioned to be a mere 0.21%. This further accentuates the appeal of high-yield savings accounts.
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Online Banks vs. Brick-and-Mortar Banks:
- While it is noted that high-yield savings accounts can be opened at brick-and-mortar banks, the article suggests that online banks often offer higher savings rates, facilitating faster growth of deposited funds.
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List of Banks Offering High APYs:
- The article provides a list of FDIC-insured banks offering APYs of 3% or more on high-yield savings accounts. Notable institutions include UFB DIRECT, Bask Bank, Upgrade, CIT Bank, LendingClub, Marcus by Goldman Sachs, SoFi, Discover, Capital One, and Synchrony.
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Considerations Before Switching Banks:
- Before individuals decide to switch banks for higher APYs, the article advises considering other factors beyond the savings account APY. It directs readers to explore Money's list of the Best Online Banks and offers guidance on how to choose a bank.
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Disclaimer and Information Timestamp:
- The article includes a disclaimer that rates and APYs are subject to change, and all information provided is accurate as of May 19, 2023.
In conclusion, the article expertly navigates through the nuances of optimizing savings in the current economic climate, providing valuable insights for individuals seeking to make the most of their financial resources.
