Tired of regular passbook savings accounts paying little interest rates, more and more customers are looking for better-paying alternatives. These are some of the alternatives to Bank savings accounts.
Higher-Yield Money Market Accounts
Securing a money market account is one of the easiest alternatives to a traditional passbook savings account. Money market accounts are insured by the Federal Deposit Insurance Corporation (FDIC).
Money market accounts offer limited checking account services besides paying higher interest rates than traditional savings accounts. There is comparatively a low maximum number of cheques a customer can write on their account per month. It is usually between five and 10. Money market account holders get a higher interest rate, to make up for this limited withdrawal rule. FOr example, if a bank offers only a 0.10% interest rate on traditional saving accounts, it might offer added 15% interest rate on a money market account. That is 0.25%.
Certificates of Deposit
Certificate of deposits is for people who do not need to access their savings for at least two years. The longer the customers wish to have their money hold, the higher the interest rate. One year and two-year deposits offer higher interest rates than normal savings accounts. But the thing is your money will be held for the duration of the CD. It is usually a few months, at maximum, a few years. If you take the money before that, you might be fined or penalized.
Credit Unions and Online Banks
You can easily secure a higher interest rate just by moving your savings account to a different bank. It can be the one across your home or the one accessed online. Credit unions operate similar to the banks, though they usually offer fewer financial services. The National Credit Union Share Insurance Fund (NCUSIF) federally insures the credit union accounts.
High-Yield Checking Accounts
They offer higher interest rates than traditional savings accounts. Some of them offer up to 2.00% annual percentage yield, opposite to lower savings account rates.
To secure the higher interest rates, clients typically have to meet certain criteria, such as a minimum balance, setting direct deposit or bill pay, or carrying a minimum number of monthly debit card transactions. If they fail to meet the criteria for receiving the higher rates, there’s usually no fine. They are often just charged the bank’s usual lower rate for checking accounts.
There are many alternatives to the passbook savings account providing higher interest rates. They may not offer the fluidity of a savings account and they do come with criteria ranging from minimum balances and monthly limits on transactions to lack of federal insurance. Still, they could be useful. It all depends on your financial requirement.