What Is the Average Interest Rate on a Savings Account?
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What Are Savings Accounts?
How Savings Account Interest Works
Pros and Cons of Using Savings Accounts
Interest. The money you keep in a savings account earns interest and compounds, meaning you earn interest on the interest that’s added to the account, helping your money grow over time. Funds are accessible. Unlike some other savings vehicles, it’s easy to access your money or transfer it to your checking account when you need it. There are no holding or waiting periods, and you don’t have to sell investments in order to get your money out. Ideal for short-term goals. Savings accounts can be a good way to save for things you want to pay for the next few months to a year, such as a vacation or wedding. If you were to put this money into a risky investment like stocks, there’s a chance you could lose money in the short-term. Safety. The money you put in a savings account is typically insured by either the Federal Deposit Insurance Corp (FDIC) or the National Credit Union Administration (NCUA). This means you can’t lose your money (up to $250,000) should the bank or credit union fail.
Low interest. The average savings account interest rate isn’t very high. Though high-yield savings accounts pay considerably more, even these accounts typically don’t pay enough to meet longer-term savings goals, like retirement or a child’s college education Bank fees. Some banks charge monthly maintenance fees and/or other fees, which can eat away at your earnings. Account minimums. Some savings accounts require a minimum initial deposit to open the account, as well as ongoing minimum balance requirements to avoid fees or get the expected interest rate. Withdrawal limits. Savings accounts typically have restrictions on how often you can make withdrawals or transfers and charge fees if you exceed the max.
Average Interest Rates on Savings Accounts in the U.S.
Interest on Saving Accounts
Interest on Checking Accounts
Interest on Money Market Accounts
Savings Account APYs by Bank
Finding the Right Savings Account for You
APY. To compare rates offered by different banks, you’ll want to look at APYs (which include the effect of compounding interest) rather than interest rates. Fees. Some savings accounts come with fees that can eat away at any interest you earn. Some to watch for include: monthly maintenance fees, excess withdrawal fees, and inactivity fees. Minimums. In some cases, a savings account will require a minimum initial deposit and/or an ongoing balance requirement in order to get the expected rate or avoid a fee. You’ll want to be sure you can meet any balance requirements.
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