0.01% APY Top 3 Places to Put Your Money Instead of Bank Accounts
After years of near-zero interest rates on bank savings accounts, Americans are becoming more savvy with their cash. Instead of leaving their money in accounts that pay little to no interest, more people are moving their money into certificates of deposit (CDs). According to a recent report from Bloomberg, the amount of money held in U.S. commercial bank “large CDs” ($100,000 or more CDs) will increase by $615 billion during 2023, reaching a total of $2.26 trillion.
The national average savings account is paying 0.46% interest as of April 15, 2024, according to FDIC data. And some major banks still offer savings accounts that only pay 0.01% APY. This is not enough! You no longer have to settle for zero interest, especially since the Federal Reserve has kept interest rates at 5% so far. You can make better choices about where to invest your savings and actually earn a return. And CDs aren’t the only game in town.
Let’s take a look at some places you can put your money instead of zero-yielding (or low-yielding) bank accounts.
1. Best savings account (up to 5.36% APY)
You don’t have to settle for a bank savings account that pays 1%, 0.46%, or (even!) 0.01% APY. The best savings accounts offer up to 5.36% APY (as of May 3, 2024). For example, if you have $10,000 in a savings account, you’ll earn $500 in interest after one year, and your money (up to $250,000) is FDIC insured so you can cash out at any time.
Some people may believe that opening a CD is the best and “only” way to get higher returns on their savings. This is not true. I don’t really like CDs. That’s because CDs require you to store your cash for a certain amount of time and impose an early withdrawal penalty if you need the money sooner than expected. Some of the best savings accounts offer the same returns as the best CDs (or better) and give you more flexibility in how you access and use your money.
2. Best money market account (up to 5.30% APY)
According to Bloomberg, U.S. depositors will move $1 trillion in cash into money market accounts during 2023. The best money market accounts are paying up to 5.30% APY (as of May 3, 2024).
Opening a money market account can be a great help in saving. This account works much the same way as a high-yield savings account. You can withdraw cash at any time, and your money is FDIC insured. However, money market accounts offer higher rates of return than regular bank accounts. That’s because your cash is invested in low-risk, short-term “money market” securities, such as government and corporate bonds.
Some money market accounts also offer check writing capabilities or debit card access. This gives you more flexibility in how you use your money. But don’t try to convert your everyday checking account into a money market account. There’s a good chance you won’t be able to pay your bills efficiently. That’s because money market accounts (such as savings accounts) typically have a limit on the number of withdrawals you can make per month.
3. Best CDs (up to 5.15% APY)
As of May 3, 2024, some of the best CD rates are offering up to 5.15% APY. The exact APY you can earn with a CD will depend on the latest offers from your bank or credit union, how long you are putting in your money, and sometimes the amount of cash you put in.
For example, jumbo CDs ($100,000 or more) can sometimes earn a higher APY than small deposits. A longer CD term (e.g. 3 or 5 years) can help you secure a higher APY if you can deploy cash over that period. Banks and credit unions sometimes offer special offers on CDs for a limited time only, where you can usually secure a higher APY than those offered by those institutions.
Unlike savings or money market accounts, CD interest rates are fixed. This means that if you promise to provide a deposit to a bank for a certain period of time, the bank promises to provide you with a guaranteed rate of return. If the Federal Reserve cuts interest rates in 2024, now could be a good time to secure a high APY on a long-term CD. But no one knows if or when the Fed will actually cut interest rates. So if you want to keep your options open, a savings account or money market account may be a better option.
conclusion
Don’t leave your money sitting in a bank account that pays almost no interest. Instead of making money for the bank, let your money make money for you. The best savings accounts, money market accounts, and CDs can provide higher returns on your cash with the safety of FDIC insurance.
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