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As the U.S. economy continues to try to ease inflation, money expert Clark Howard says a notable rise in interest rates points toward a promising trend:
“You can actually earn money on your money again,” Clark says.
Savings rates have been in the dumps for the past several years, but things are starting to change. Clark says that one of the best ways to earn a higher rate of interest on your money right now is to park it in a certificate of deposit (CD). These are deposits that you have to leave in the bank for a fixed term, anywhere from one month to five years. Your money will make more than it would sitting in a savings account, usually at a fixed rate but sometimes at a variable rate.
If you want a return on your hard-earned money, Clark suggests you take action: “Don’t let inertia be your enemy. Move that money!”
This article will tell you about CDs and other savings vehicles where you can earn a decent return right now.
Clark says he was recently at his credit union when the teller said, “You know, we have a special coming next week. We’re paying 3.3% on CDs up to 33 months.” “I was like, ‘Really?'” says Clark. “And so I put some money into a CD there.”
Team Clark member Anthony Hazzard has a 3.20% CD with American Airlines Federal Credit Union (AAFCU).
Below we’ve included some CDs with current annual percentage yields (APYs) that are 3% or better.
Each of these institutions makes Team Clark’s list of best online banks. But just as Clark and Anthony found, your local credit union may have even better interest rates.
One of the major distinguishing factors of a CD is that it takes time to “mature,” or come to tern. Without being penalized, you typically won’t be able to touch your money for one to five years depending on a CD.
So, is a 3% CD worth it right now?
Clark’s general rule is that when a CD is earning substantially more interest than a savings account or when interest rates are falling and it looks like they’re going to continue to fall, then it makes sense to put your money in a CD.
The average interest rate for savings accounts is 0.13%, according to Bankrate’s Aug. 17 weekly survey. Sounds like a CD makes perfect sense right about now.
Before you open a CD, make sure that you understand the varieties and what they offer at your respective financial institution. Pay particular attention to:
Higher rates are not just limited to CDs. Savings accounts, money market accounts and Series I savings bonds, which Clark has been talking about for a while now, are all giving decent returns.
The initial interest rate on new Series I savings bonds is 9.62% and can be purchased at that rate through October 2022.
Clark says that he has owned Series I savings bonds for around 25 years. He plans to hold them for all 30 years which is the amount of time it takes for a bond to fully mature.
Read our guide on Series I savings bonds.
“If you do business with Fidelity Investments or Charles Schwab, they’re both paying over 2% right now on money market,” Clark says. “They’ve got a ton of different ones you’ll see,” he says.
Read our review of Charles Schwab.
Read our review on Fidelity Investments.
Many online banks currently have competitive rates on their savings accounts. For example, Ally Bank, one of Clark.com’s best online banks, is offering 1.75% on its savings account as of August 22, 2022.
Clark recommends keeping your money in an online bank because they typically:
It’s that last point that Clark really loves. “Because they’re online only, they don’t have all the normal bank overhead, so they can pay you much better deals,” he says.
Read our guide on the best high-yield savings accounts.
The current market offers a great opportunity to capitalize on some great interest rates that typically beat traditional banks. Clark says he expects us to continue to see decent rates of earnings on the Series I savings and more for a while to come.
How can you take advantage? You’ve got to leave that “giant monster mega-bank,” as Clark calls them.
“The most important thing is to do not. Do not. Do not. Let your money sit and rot at a traditional bricks-and-mortar bank, again, unless you don’t like your money,” he says.
This post was last modified on August 26, 2022 8:24 am
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