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Will the Fed’s interest rate hike boost savings account returns? A ‘slow as treacle’ bump is likely, expert says

6 days ago Heather K. Leach
Bank / Savings Account

fizkes/Getty Images/iStockphoto

Americans are experiencing interest rate hikes on variable mortgages, revolving credit card debt and new home loans. But – aside from the intended consequence of Fed interest rate hikes helping to stem inflation – there’s another little silver lining: your money in the bank may earn more interest.

Discover: the best high-yield savings accounts
More: IRS Raises Interest Rates July 1 – What Does This Mean For You?

High-yield savings accounts and certificates of deposit may see interest rates increase, but not immediately. Fortunately, any potential interest rate hikes on your credit card debt will also take time to show up, as companies must provide 45 days notice before raising rates or fees.

Best Savings Accounts: Choose a high interest savings account from our top banks with rates 5 to 10 times the national average and start saving today.

Peter Tanous, founder and chairman of Lynx Investment Advisory, told Forbes that banks react to changes in interest rates in different ways. “They’re slow as molasses to raise the rates they pay on deposits,” he said.

Currently, the national average interest rate for savings accounts sits at just 0.07%, according to GOBankingRates.

You may be able to earn more on your savings by choosing an online savings account with higher returns. Don’t forget to factor in bank charges, which could offset your interest income. GOBankingRates highlighted Sallie Mae Bank’s SmartyPig account with an APY of 0.70% as one of the best savings accounts for its high returns and no monthly fees.

See: A Bear Market Can Benefit Investing Newbies – Here’s How
Find: What is the longest bear market in US history?

However, the extra interest you’ll collect on a savings account is unlikely to keep pace with double-digit inflation – or even offset the rise in credit card interest rates you might experience if you have a balance. Yet every extra dollar in your pocket counts when you’re saving for a rainy day, which is really the point of keeping money in an easy-to-access bank savings account.

More from GOBankingRates

About the Author

Dawn Allcot is a full-time freelance writer and content marketer with interests in finance, e-commerce, technology, and real estate. His long list of publishing credits includes Bankrate, Lending Tree and Chase Bank. She is the founder and owner of GeekTravelGuide.net, a travel, technology and entertainment website. She lives in Long Island, New York, with a veritable menagerie that includes 2 cats, a rambunctious kitten and three lizards of different sizes and personalities – plus her two children and her husband. Find her on Twitter, @DawnAllcot.

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