To all savings account holders out there, there is valid information you need to hear and know. The FED rate has increased by 0.75% and there are a lot of things that will be greatly affected. Savings accounts are no exception. So, if you are curious and wondering what the FED rate increase means for a savings account, then keep reading. It is also said that citizens should now begin to expect higher rates on CDs and savings as well. So, you can say that your savings account rate may turn around for the better. Furthermore, the recent change in the rate makes it the sixth time the Federal Reserve is increasing it.
Due to the increase in the FED rate, credit unions and banks might raise the rates on certificates of deposit and savings accounts. However, do not set your mind on this because the changes will be different by institutions. But the change in the rate will work in the favor of some people and won’t work for other people like borrowers. So, if you are looking to borrow money, it will cost you more. On the bright side, the annual percentage yield rate of your savings account will rise.
What Happens When FED Fund Rates Increase?
When the FED inflates the rate, banks and other financial institutions will respond to this action by inflating the amount that you make from your deposit accounts. In other words, your APYs on your money market accounts, certificate of deposit, checking accounts, and saving accounts will increase higher.
Is It Better To Have Higher Or Lower Interest Rates On A Savings Account?
Your savings account’s APY (Annual percentage yield) will control and decide on the amount of interest that you make or receive in a year. So, whenever, you are looking to open a savings account, that number (amount of interest) is something that you need to look out for. Therefore, the higher your account’s annual percentage yield, the faster and more speedily your saving will grow and fatten.
Will Savings Rates Go Up If FED Raises Rates?
For money market account holders, if the FED increases the rates again, you can as well say that your savings rate will rise as well. So, the increase is good for you and is working in your favor as well.
How Does FED Rate Increase Affect My Savings Account?
If or when the FED rate increase, savings account holders are in luck. In other words, they are not among those who will be negatively affected by this hike. Whenever there is a hike in the rate, borrowers are not in a good condition as it makes borrowing expensive.
The FED Rate increase works for people with savings accounts because it is a guiding spirit for deposit account annual percentage yields. So, when there is a rise or hike in rates, your bank will increase the amount you make from deposit accounts. Therefore, the annual percentage yields that you make on your money market accounts, checking accounts, and CDs will inflate as well.
In addition, savings accounts also provide customers with excellent rates. What’s more, financial institutions or banks do not usually have extravagant branches so they will move the savings to clients. These savings are also in form of low or no fees as well as higher rates.
So, the higher your APY, the more you earn per year, and the more your account balance increases. For example, if you have $10,000 already in your savings account that is making you 0.01% APY. After one year, the balance you have will make you only a single dollar in interest. Note that it is for larger banks.
But if you put or transfer $10,000 to your savings account that will earn you a 2% annual percentage yield, and after one year, you will make over $200. In conclusion, with a savings account and a FED rate increase, you can make more but making you rich is under probability.
Best Savings Accounts & Rates
Below are some of the best institutions where you can open a savings account and enjoy the best rates as a customer:
|Banks||Estimated Earnings Per Year||APY||Minimal Balance of APY|
|UFB Direct Money Market Account||$958||3.83%||$5,000|
|Bank of America||$3||0.01%||$100|
|UFB Direct Savings Account||$958||3.83%||$0|
Will There Be More FED Rate Increase?
Yes, likely. According to the meeting held in September 2022, The Federal Reserve predicts and forecast that there will be more increase in the rates. Moreover, they are also expected to choose the increase date during its December 13 and 14 meeting.