High-Yield Savings Accounts are Starting to Live Up to Their Name Again
In case you hadn’t heard, the Federal Reserve has been hiking interest rates pretty aggressively as of late. And while that’s bad news for those with credit card debt or who planned on getting a mortgage, it is potentially good news for your savings accounts — provided that you have the right one, that is. Basically, after two years of pretty much nominal APYs, high-yield savings accounts are once again living up to their names.
For a while there, 1% APY was really the best you could hope for, even from FinTech neobanks. What’s more, earning that whole number in interest often came with conditions, such as utilizing direct deposit, making a certain number of debit card transactions, etc. However, in just the past few weeks, the number of options consumers have to earn 1% APY or more without any hoop jumping has grown.
Starting with some more traditional banks, Discover‘s online savings account currently offers 1.20% APY, as do Marcus by Goldman Sachs and Varo Bank. Meanwhile, Ally’s is slightly higher at 1.25% APY. Lastly, Synchrony — which, in my experience, typically edges its comparable rivals — appears to be at 1.40% APY.
Turning to FinTechs and other options, Credit Karma Money Save will be increasing its rate to 1.38% on July 18th. Elsewhere, SoFi’s recently-renamed Checking and Savings now has a base rate of 0.90% APY. And while I promised no hoop jumping, I should note that this increases to 1.50% if you have a direct deposit of any amount. On that note, T-Mobile Money has raised the APY for all Checking and Savings customers to 1.50% by default. However, eligible T-Mobile customers who make at least 10 purchases per month with their debit card continue to be able to earn 4% APY on up to $3,000 in funds.
Speaking of hoop jumping that might be worth it, the previously mentioned 1.20% rate from Varo Bank can turn into a hefty 5% if you receive a qualifying direct deposit of $1,000 or more in a month and keep your total balance below $5,000 at the end of business each day of the month. If you go over $5,000 your rate will revert to the base 1.20%. Although it seems counterintuitive that a bank wants you to cap your savings, the 5% interest rate you can earn on every dollar of savings up to $5,000 might make the effort to meet those requirements worthwhile.
Finally, another option that I’ve been making great use of comes from Current. Although the app’s main account doesn’t offer any interest, the company did roll out its Savings Pods feature earlier this year, allowing customers to earn 4% APY on up to $2,000 per Pod. Previously, Basic users were limited to one Pod but, even more recently, the company axed the monthly fee for Premium, thus allowing all users to create up to three Savings Pods (and earning 4% APY on up to a combined $6,000). What’s also kind of cool is that this interest is paid out daily.
While there definitely downsides to rising interest rates, let us focus a bit on the positives — namely that your savings account may finally be earning measurable interest once again. Alas, even with the generous 4-5% offered by some of these options, you’ll still be falling behind inflation, which we just learned grew 9.1% between June 2021 and June 2022. In any case, with the Fed expected to continue raising rates shortly, it may be worth keeping an eye on your online savings accounts going forward.