Will Savings Accounts Ever See Higher Interest Rates?

Most big banks don't need your deposit, but experts say it pays to shop around
By Mike L. Ford,  Newser Staff
Posted Oct 4, 2022 4:28 PM CDT
Why Haven't Interest Rates Risen on Savings Accounts?
   (Getty - marchmeena29)

Since 2009, anyone with a savings account has gotten used to paltry returns of roughly 0%. That’s largely because the Fed funds rate has been so low, but that’s no longer the case, as the Fed has raised rates multiple times this year. Rates for mortgages and credit cards have followed suit, but savings accounts have "barely budged," per the Wall Street Journal. The issue of concern for at least one person on Capitol Hill, Rep. Michael San Nicolas, a Democrat from Guam, who asked mega-bank CEOs in a recent hearing why their companies are still paying just 0.01% on savings accounts. "One of the only silver linings in a rising interest rate environment is that savers are supposed to be rewarded for their savings," San Nicolas said.

The bankers all responded that they expect interest on savings accounts to rise in the future, depending on the Fed’s actions and—perhaps more importantly—what their competitors do. Right now, however, many banks are flush with cash for lending. As Bankrate's Chief Financial Analyst Greg McBride told CNET, "Some big banks are swimming in deposits and they don't need to pay up to bring in more." McBride advises consumers to shop around, because smaller banks and online-only institutions are offering much higher rates. For example, Ally Bank was paying 2.1% last month, and UFB Direct leads the pack at 3.01%.

As the WSJ also notes, many banks don’t feel pressure because consumers often don’t bother to shop around, or they think switching banks will be too much hassle. That is true for all kinds of consumers, including those with large savings accounts, according to one UK study, whose authors noted that switching banks generally only takes about 15 minutes and can bring the average consumer about $190 extra per year. Speaking of high interest, Forbes reports that Series I Bonds have garnered a lot of attention lately because they yield a "stunning" 9.62%. The main catch with I Bonds is that depositors are limited to $10,000 per year. (Read more savings account stories.)

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