Finally! Savings Rates Could Soon Beat Inflation
coronavirus pandemic. Since banks base the rates they pay out in part on the fed-funds rate, savers suffered. Over the past few years, spiking inflation has compounded the problem, with savers sacrificing significant spending power.
When inflation peaked at 9.1% last summer, the average payout for online savings accounts—which tend to be the most generous—was only 0.7%, according to DepositAccounts. The average for all accounts, including those offered by the nation’s largest banks, was less than 0.1% . A mismatch like that can take a big bite out of your wealth.
If inflation is, say, 5% and your savings account pays 1%, $1,000 in cash will be worth just $960 in a year. That means you’re faced with watching your purchasing power dwindle—or trying to make up the difference by taking on extra risk, investing in much riskier assets like stocks . Where to find inflation-beating interest rates You’ll need to shop around a bit to find a rate that beats inflation.
The average savings account interest rate is just .42% and the typical one-year CD pays 1.72%. Most banks don’t need deposits badly enough to pay up for them, so they’ve kept their interest rates low. However, there are plenty of options if you take a little time to look.
High-yield savings accounts The best rates usually aren’t found at the nation’s largest banks, with huge branch networks. While they offer convenience, customers often pay for that kind of customer service in terms of lower rates and higher fees. Capital One 360 Performance Savings is Buy Side from WSJ’s pick for best overall savings account , while the LendingClub High-Yield Savings is our favorite for savers focusing on getting the best interest rate.
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