Boy does everyone get excited when the Federal Reserve starts to trim the short-term interest rates. In our debt ridden society, it is no surprise this news feels like money in the pocket to many. Still, there is a negative side most don’t immediately think of.
When interest rates drop, it affects both the borrowing and the saving rates. Therefore, while your debt may get cheaper, your ability to increase your savings will get harder. Finding a savings account that will pay you more than 2.5 percent currently is difficult. At 2.5 percent, it is impossible to get ahead as that amount is usually less than inflation.
Other investments do exist, but for the safer FDIC insured options, the ability to increase your money is almost gone. If you are trying to keep an emergency savings afloat or you are close to retirement and don’t want to throw your money into a risky investment, look hard to find your best rate options.
One good place to check is online. Many online banks can offer better rates than the brick and mortar versions. These accounts are still safe and with large organizations like ING or Emigrant. Their interest rates are a little higher, but still not much more than 3 percent these days.
The other option would be to check with a local credit union, as their smaller, member only structure will usually offer a better than average savings rate. You could also use cash deposits (CDs) as they are safe, but they do tie your money up for a short time. Some CDs are paying up to 3.5 percent for 1 year.
The best place to check online for savings rates is at Bankrate.com. They are a well-known go to place to find the best interest rates for those of us who still are looking to save for the future.
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