This article was reprinted with permission from NerdWallet.
If your bank has cut the interest rates on your savings account, don't take them personally. It's not you, it's them. Interest rates have fallen across the board and are likely to stay low for a while.
Yes, your savings can result in decreased returns, but with a little time and attention, there are still ways to keep the growth going.
Why are the prices so low?
Banks tend to lower or raise interest rates in response to Federal Reserve action. The Fed, in turn, makes decisions based on economic conditions. Generally, when the economy needs an upswing, Fed movements cause interest rates to decline. Why? Interest rate cuts can encourage businesses and people to take out loans, increase spending, and stimulate the economy. (Interest rate hikes in a strong economy, on the other hand, can help slow inflation.)
With the pandemic continuing, the Fed has taken steps to stimulate the economy.
"The Federal Reserve's latest economic forecast suggests that interest rates will remain near zero at least until 2023," said Daniel Lee, a chartered financial analyst and certified financial planner in San Francisco.
Read: How You Can Be A Millionaire By Saving $ 1,000 A Year
This means that savings rates are likely to stay lower for a few years. However, this does not mean that your savings goals should be interrupted.
You can still make smart moves of money
Interest rates are only part of your personal financial picture. It's also important to put money away on a regular basis, regardless of the rate, so that your cash cushion can grow. Once you start saving, here are some things you can do to get the most of what you have.
Compare the savings rates of other banks
The national average interest rate on savings accounts is 0.05% APY. If your savings account is making more, you can consider it above average, even if it is making less than last year. However, you can still benefit from seeing what other financial institutions have to offer. And if your rate is below average, make sure to shop around. Some high-yield savings accounts and certificates of deposit, especially those only available online, earn more than ten times the average return.
According to Lee, these are the accounts that you should be putting your money in. “Not all savings are created equal,” he says. "You want to look for banks that offer the best rates because every dollar counts."
To see what other options are available, take a look at Current High Yield Savings Accounts or High Yield CDs.
Choosing a savings account or a CD will likely depend on how often you plan to withdraw. Typically, you can transfer money from savings accounts a few times a month with no penalty. For CDs, you usually agree to keep your deposit in the account for a set period of time – for example six months or up to five years. In return, you may earn a slightly higher interest rate than savings accounts.
Eliminate existing bank charges
You can't get your bank to pay more interest, but you can probably stop them from charging you money. If your checking or savings account has a monthly fee – often $ 5 or $ 10 per month – you should consider switching to an account that doesn't.
You can also look for ways to waive fees. For example, some banks allow customers to avoid maintenance fees by signing up for a direct deposit or by meeting a certain minimum balance, usually around $ 500.
You can also keep an eye on your balance. This will make it easier to overdraw your account. Many institutions charge fees of $ 35 or more for each overdraft. If you have three in a day, your bank could put a charge in excess of $ 100 on your account.
By avoiding fees, you can probably keep more money than you would ever earn in interest even if the interest rates were higher.
Consider account sign-up bonuses
Some banks offer promotions to new customers who open an account and meet certain conditions. Qualifying accounts can receive bonuses of $ 100 or more. Conditions may include signing up for a direct deposit, making a certain number of debit card purchases, or maintaining a minimum balance for a few weeks.
If you are thinking of switching banks because your bank charges one of the above fees, for example, you should switch to a bank that offers a bonus. If you qualify, the extra cash could more than make up for a relatively low interest rate.
Continue reading: Here are the average retirement savings by age: Is it enough?
Bank account interest rates are at all-time lows, and chances are they will remain relatively low for the next several years. However, if you can find the best possible prices and avoid high fees – and potentially get a promotional perk – you can still increase your bank balance and secure your financial future.