How to Maximize Your Savings When Interest Rates Are Rising

Jun 26, 2017 | Be First to Comment!

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When the U.S. economy is showing signs of improvement, the Federal Reserve may opt to raise interest rates. The result is that borrowing rates increase, but savings rates also increase. The interest rates on savings accounts at big banks might not move much. However, the top online savings rates are likely to rise.

The main concerns now are, “When is the rate hike coming and how should I prepare for it?”

Head to Online Banks for Bigger Savings

We get your savings concerns. You don't like low savings rates. Meanwhile, you don’t want to be trapped with low CD rates when interest rates actually start to rise.

Instead, open an online savings account, which tend to offer the highest rates available nationwide.

Again, when rates do rise, savings rates at big banks will continue to pail in comparison to online banks. And, since savings rates move with the market, you're always going to be earning better-than-average interest returns with an online savings account.

Sure, even with the high savings rates offered by online banks, the interest earnings may struggle to keep up with inflation right now. But, it is better than nothing. Right? Don’t let your money sit there earning pennies of interest -- or even worse, nothing at all.

Open Certificates of Deposit (CDs) Without Fear

Interest-rate risk is a valid concern whenever CDs are involved. Since you’re locking your money at a certain rate for an extended period of time, you’re afraid that you’ll miss out on higher rates when rates begin to rise.

Therefore, go right ahead and open the CD with highest rate available now. It’s much better than letting your money sit around doing nothing. Compare CD rates to help you with that decision.

If you are truly wary about significant rate hikes, you should open a bump-up CD. This type of CD usually offers one rate-increase -- to be used you believe that the market rate is significantly higher.

One great strategy is to build a CD ladder, which help you earn high rates without locking yourself out of too much of your money.

Going Forward

Again, don’t let the fear of rate hikes deter you from saving now. Firstly, get that online savings account to maximize the interest return on your free cash. If do nothing else, at least do that.

If you want to earn a little more interest, open a CD without too much fear of rate hikes when you use the mentioned strategy to ensure that you're earning the highest CD rates at all times.

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