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Whether you have $100 or $10,000 in your savings, chances are, you’re saving it in a regular savings account. While these accounts offer a safe place to store your money, you may miss out on earning a greater return.
If you want to earn a higher interest rate on your excess cash — without putting it at risk — here are seven options.
1. High-yield savings account
One of the easiest ways to earn more interest while keeping your money safe is to put it in a high-yield savings account. These savings accounts offer interest rates as high as 5%, more than eight times the average.
Generally, you can find high-yield savings accounts at online banks. They come with low or no minimum balances or fees and offer better interest rates. Since they’re FDIC-insured, your money remains safe while earning a more substantial return.
Many high-yield accounts make it difficult to deposit cash, so you’ll likely want to keep some money in a checking account.
2. Certificate of deposit (CD)
Another low-risk to boost your savings is through a CD. By depositing your money into a CD for a fixed period, you can earn a higher interest rate than a regular savings account. The longer the term, the higher the interest rate generally is.
Remember that CDs often come with penalties for early withdrawals, so choose the term wisely.
Because you’re committing the funds for a set period, CDs work best when saving for a specific future goal. They’re not great for an emergency fund, which you may need to access quickly.
3. Money market account
Money market accounts are a hybrid option, combining features of both savings and checking accounts. Like checking accounts, you’ll often get debit cards and check-writing abilities for easy access to your funds. Like savings accounts, money market accounts offer higher interest on your balance.
These accounts often have high minimum balance requirements, making them a better option for those with a large amount of cash.
Like high-yield savings accounts, money market accounts are FDIC insured, which means your money is protected up to $250,000 per person per account.
4. High-yield checking account
A high-interest checking account is a checking account that pays a higher rate of interest. Given that the typical checking account pays little (or no) interest, high-yield checking accounts only have to pay a small amount to be a better deal.
While you often find better rates with high-yield savings accounts, high-yield checking accounts are a good option if you want more liquidity. You need cash in a checking account for your day-to-day needs, so why not earn some return on the money?
With most of these accounts, you need to meet some requirements to earn the interest. For example, you might need to maintain a minimum balance or make a minimum number of debit card transactions each month.
5. CD ladder
CD laddering is a strategy that involves opening multiple CDs with staggered maturity dates. This lets you enjoy the higher interest rates CDs offer while still getting regular access to your money.
Imagine you have $10,000 you want to set aside. You could put all of it into one long-term CD. But what if you need some of that money before then? Or what if interest rates go up, and your money is stuck earning at a lower rate?
With a CD ladder, you could split your money into four chunks of $2,500 and open four CDs. The CDs will have a term of three, six, nine, and twelve months. When each CD matures, you can take the money out or roll it into a new twelve-month CD.
That way, you access some of your money every three months while benefiting from higher interest rates.
6. Bank bonus
Banks often look for ways to attract new customers. For example, some banks will give you a one-time bonus when you open a new account and meet a few requirements.
For example, you may earn a cash deposit once you’ve opened a savings account, deposited a minimum amount, and maintained that balance for a set amount of time. The best bank account bonuses could help you earn $200 or even $300.
If you have enough cash to meet the requirements, these bonuses can increase the return you earn from your money.
Just be sure to read the fine print and make sure you understand the requirements to earn the bonus, as well as any fees you might have to pay.
7. Bonds
When a government entity or other organization wants to borrow money, it sells bonds to investors. Bonds offer stable returns based on their interest rates and are generally safer than other investments like stocks.
However, bonds aren’t FDIC insured (like a savings account) and therefore aren’t risk-free. The bond issuer may default, meaning you lose the money you invested. Only buying high-quality bonds, like U.S. government bonds, can help limit this risk.
Investing in bonds also means giving up some flexibility. Many bonds have terms of five, ten, or even twenty years. This makes them better for people who want to stash their savings away for the long term.
The bottom line
If you have some extra cash set aside, it’s in your best interest to make that money work for you. If you don’t want to deal with the risk of investing, there are still options to increase the yield you earn on your savings. Consider your goals, keep things like fees and minimum balance requirements in mind, and use these tips to maximize your earnings.
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