When you complain about savings accounts that pay next to nothing on your hard-earned cash, know that you are not alone — most Americans are in the same boat. However, it will be less of a struggle as the U.S. economy becomes more inviting of higher rates. Are you prepared to boost your savings as rates rise?

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U.S. Dept. of Agriculture / Flickr source

Last week, the Federal Reserve announced that it has stopped buying government securities to support the economy. It’s a sign that the U.S. economy no longer needs the continued assistance of the central bank. To common folk like us, it means higher interest rates on the horizon because the Fed has been purposefully kept rates low until the economy is ready for higher rates. The economy is ready, or at least close to it.

But, you don’t need the Fed to tell you rates are on the rise. Banks are already hiking up rates on their savings accounts to attract your money.

Several months ago, you’d be hard-pressed to find a savings account that paid more than 1.00% APY on your savings — equivalent to $1 in interest earnings per $100 held in the account per year.

Today, many banks are promoting rates higher than that. These are just some of the banks that are offering the highest savings rates:

  • UFB Direct (Savings Account): 1.25% APY on balances of $25,000 and up
  • Capital One Bank (Essential Savings): Promotional 1.25% APY on balances of $10,000 to $1 million for six months
  • CIT Bank (Savings Account): 1.00% APY on balances of $25,0000 and up
  • Synchrony Bank (High Yield Savings Account): 0.95% APY on all balances

Yes, if you haven’t noticed already, most of these savings accounts with high rates are available from online banks. Meanwhile, the majority of savings accounts from big banks pay just 0.01% APY — a mere penny in interest per $100 in your account per year!

That’s right, an online savings account can pay 100 times more than your big bank savings account. So, why haven’t you switched yet?

The right time to make your move

From the Fed board members to independent economists, the next rate hike is expected around mid-2015. But, if there was ever a time to persuade you to put your cash into an online savings account, it would be now.

Why now? Because banks are fighting to offer the best rates now, in anticipation of the rising rates. Savings rates tend to move together. So when one bank raises their rates, other banks feel the competition and raise their rates too.

Since savings accounts are not like certificates of deposit (CDs), which lock in the rates when you open the account, you should have a high-yield savings account now and just enjoy the ride. When the Fed announces a rate hike, rest assured the savings rate on your account will rise accordingly.

Many of you may have put your extra cash in riskier investments, such as stocks, to combat the low savings rates. With the rise in savings rates, you can cut back on some of that risk by moving some of the money into savings accounts that offer improved returns without that risk.

Picking a savings account for you

You don’t want to just sign up for any account with a high savings rate and then have it drop later. I’ve seen plenty of online banks boost their rates temporarily to attract new customers, only to disappoint them when they cannot sustain those high rates.

Capital One, for instance, is offering that stellar 1.25% APY for a promotional period, after which the savings rate can drop. (I do applaud Capital One for at least trying to provide more of an incentive to save with a big bank.)

In my time watching online banks grow to become the go-to destinations for savings accounts, I found that the biggest online banks tend to keep their savings rates at a competitive level on a consistent basis. I’m talking about the likes of Ally Bank and Capital One 360, both of which I’d recommend if you’re looking for a good online savings account.

If you’re the kind of person who doesn’t mind jumping from bank to bank in search of the highest savings rates, then you can certainly visit MyBankTracker’s savings tables on a regular basis to see the best savings rates around. Once you notice that there is enough of a rate difference, make the move.

Here are my recommendations, depending what you’re looking for in a savings account right now:

What are you looking for?Bank (Savings account)Rate (as of 11/7/14)
Highest rate on large balancesUFB Direct (Savings Account)1.25% APY on balances of $25,000 or more
Highest rate on any balanceSynchrony Bank (High Yield Savings Account)0.95% APY on all balances
Consistently high ratesAlly Bank (Online Savings Account)0.90% APY on all balances
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