5 Types of Accounts With Better Interest than Your Local Bank's
July 16, 2018 (Investorideas.com Newswire) If your money has been lying (nearly) dormant in a savings account at your local bank for any amount of time, you might be wondering if there's something better out there, an account that really makes a return on your investment.
The answer to your cash query is a resounding yes.
Traditional bank savings are fading into the background of benefits with interest rates that can't keep up.
So whether you are investing $5,000 or $5, here are the 5 accounts whose interest is better than your bank's.
CDs, like traditional savings accounts, are a guaranteed safe space for storing your savings.
Popular to traditional savers and investors alike, CDs offer some promising benefits.
First, they're based on a fixed interest rate, so you never have to worry about fluctuations in the stock market touching your investment.
Second, they're based on your terms.
You know from the onset of establishing the account what it's maturity date will be. (The maturity date is the time when you can access your funds penalty free).
While there are some CDs outside the typical range, most fall between 1 and 5-year terms.
The only downfall in comparison to traditional savings, if you consider it one, is that your funds aren't always accessible.
If you're financially secure though, and can bear to part ways with your money for a few years (isn't that the point with a savings account?), the interest is well worth it.
With rates usually falling between 2-3%, CDs might not have the biggest potential return in the investment world. Low risk tends to mean lower reward, after all.
But CD rates beat out traditional savings by a long shot, especially when you do your research to find the best ones.
And if you're inclined to capitalize on your CD investing, you can ladder your CDs.
If you choose to ladder, you open a series of CDs, dividing all your savings between them.
You set them to mature at different years, then invest each of them in separate long-term CDs for higher interest.
With stacking, you invest the same amount of money, but by diversifying it and staggering maturity dates, you're able to make more on interest.
#2 Online Checking and Savings
Online banking is on the rise, and it's easy to see why.
Whereas traditional banks have to sink money into constructing and operating actual buildings, online banks have no such obligations.
That means they can offer you incredibly competitive rates.
And most of them provide checking, savings, CDs, and most of your favorite services and benefits offered by a brick and mortar bank (but with better rates).
If you prefer a traditional savings account you can access anytime to a certificate of deposit, going through an online bank provides you with rewarding interest rates.
#3 High Yield Checking
We're taking it back to the brick and mortar bank with this one.
While traditional savings interest may climb again, you might want to consider a high yield checking account in the meantime.
Here's the gist. With a traditional checking account, putting your money in the account is the equivalent of keeping it in a box at home. You get more security, a debit card, and some convenient tools, but the concept is still the same.
Why? Because there's no return.
Enter high yield checking. With these accounts, banks offer higher interest rates than traditional savings accounts and some CDs do.
Most banks do have requirements for earning that interest, though, like a minimum number of debit card transactions a month, direct deposit enrollment, minimum amounts in the bank (most range from $10,000-$25,000) to earn max interest, and online banking.
If those requirements fit well with your financial habits, you might benefit from these high-interest accounts.
#4 Money Markets
If you're reading this list, it's probably because you're disillusioned with the interest on your savings account, or on all savings accounts for that matter.
Have rates always been this low? You wonder.
No. Interest rates have taken a dive in recent years, and in response, banks are trying to keep up by offering some competitive alternatives.
High yield savings accounts are great, but what about a high yield checking account?
If you want the security of a savings account at a traditional bank with easy access to your money and reasonable interest, you should check out MMAs.
With a money market account, you can store your savings, emergency fund, or investment with peace of mind and yield a profit.
And money market accounts stand out from savings accounts with a few checking characteristics.
With most MMAs, you can write a number of checks or debit purchases each month without penalty.
That paired with the higher interest makes it a fierce competitor.
Money markets also have some specific requirements, though.
As you shop around, make sure you look for low minimums, high APY, and no monthly fees.
#5 Peer-to-Peer Investing
Peer-to-peer lending might be new to you, but it's growing steadily in popularity.
Here's what you need to know about this rewarding alternative to a savings account.
In a sense, peer-to-peer investing puts you in the shoes of the banker or borrower.
On peer-to-peer lending sites, individuals seek out loans for their projects and expenses. As an investor, you can put your savings towards lending to that individual.
While your money isn't backed by the FDIC like it is when you operate through a bank, the risk is minimal.
Because with crowdfunded ventures like peer-to-peer lending, you are only responsible for a small amount of the loan amount.
Several investors partner with you, making your share in the loan small. And you can choose which loan requests to invest in.
It's an innovative approach that brings personality to providing loans, featuring profiles on the entrepreneurs and business seeking loans.
And the potential for return is huge.
On peer-to-peer lending sites, you can easily yield 10% interest on your investment, often more.
Peer-to-peer lending is a creative investment alternative that comes with a little risk and a lot of reward.
Choosing where to put your money is tricky. A savings account can offer you so much more than assurance your money is in safe hands.
While it might require you to put some hours into research and try something new, placing your hard-earned savings outside of a traditional account can be an unbelievably rewarding endeavor.
Get the interest you deserve by trying out one of these alternative accounts today!
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