If you need a safe place to park your money now, you have a lot of options — as long as you don't expect much in the way of yield, now or in the near term. In response to the still-sluggish economy and high unemployment rate, the Federal Reserve expects to keep short-term rates near zero until at least mid 2015.
We've listed the top spots for eking out interest on your savings, depending on your tolerance for risk and how long you can tie up your money. A few of these recommendations have a feel-good component, such as lending money to charitable organizations.
For deposit accounts, you can check sites such as Bankrate.com and DepositAccounts.com to find top interest rates at banks and credit unions in your area, which may be higher than the nationally available ones listed here.
10 Best Ways to Earn More Interest on Your Savings
For your emergency fund — at least six months' worth of living expenses — and any other savings that need to be safe and immediately available, look to accounts insured by the Federal Deposit Insurance Corp., such as money market deposit accounts. (Stay away from money-market mutual funds, which pay practically nothing and aren't insured by FDIC.) The FDIC insures up to $250,000 per person per bank. That means combined deposit-account balances, including MMDAs as well as checking accounts, savings accounts and certificates of deposit, at a single qualifying institution for an individual account owner are insured for up to $250,000. Co-owners of joint accounts are insured up to $250,000 per person. (Credit union deposits are insured up to $250,000 by the National Credit Union Share Insurance Fund.) To see whether your money is fully covered by the FDIC, use the estimator at www.fdic.gov/EDIE.
Money market deposit accounts often provide checks or an ATM card for withdrawing cash or to use for purchases. You can also transfer funds electronically to or from a linked checking or savings account. You are limited to six transfers per month, not including cash withdrawals at an ATM.
You can earn 1.00% with no monthly fee through the Union Federal Savings Bank Money Market Account ($2,500 minimum deposit; check-writing is not an option). The Citizens State Bank Personal Money Market, which includes check writing, yields 1.05% on balances of $10,000 or more (0.50% on balances of $2,500 to $9,999.99; balances below $2,500 don't earn interest and incur a $10 monthly fee). AbleBanking adds a twist: Beyond the 0.92% yield you'll earn on its free money market account ($1,000 minimum deposit; checks included), the bank donates $25 to a charity when you sign up as a new customer and an extra 0.25% of your average balance annually to a charity of your choice.Money Market Deposit Accounts
Like a money market deposit account, a savings account can be a good place to let your cash sit in case of an emergency (check whether your MMDA or savings account charges a dormancy fee). You can't write checks from savings accounts, but you are allowed to make up to six withdrawals or transfers per month. To transfer funds, you can link a savings account to a checking account.
The no-fee Barclays Online Savings account yields 1% and has no minimum balance. Ally Bank's Online Savings Account, which is also free and without a minimum balance requirement, yields 0.90%. Saving up to go on a big trip or meet some other goal? Check out SmartyPig. You set the amount you'd like to save and contribute to a free account that yields 1%. When you reach your goal, have the money transferred back to the funding source, load the money onto SmartyPig's prepaid card, get retailer gift cards with cash-back rewards, or choose some combination of the three.Savings Accounts
If you can meet a few qualifications — which usually include banking online and using a debit card for purchases — think about getting a high-yield checking account. The amount eligible to earn the highest rate is usually limited to $25,000 or less, and some of the best rates are available only to residents of the states where the bank does business. But a few banks open their accounts to residents of the entire U.S. Many credit unions require applicants outside their jurisdictions to make a donation to an affiliated charity. You can find insured high-yield accounts offered by community banks and credit unions at CheckingFinder.com.
Earn 3.01% on balances up to $10,000 (0.51% for a balance that exceeds $10,000) with the Kasasa Cash checking account at Money One Federal Credit Union. The free account requires no minimum balance to earn the rate, has a $50 minimum deposit and refunds up to $30 per month in ATM surcharges. Lake Michigan Credit Union's Max Checking account yields 3% on up to $15,000, with no minimum balance, and it refunds up to $15 a month in surcharges from non-LMCU ATMs.High-Yield Checking Accounts
For money you can tie up for a few months or more — say, a portion of your emergency fund that you wouldn't need for at least three months, or money earmarked for tuition or retirement income — consider certificates of deposit. CDs come with maturities that typically range from three months to five years, with longer maturities offering higher yields.
It's best not to lock up all your cash in a long-term CD. If interest rates go up, you want to be able to reinvest your money at a higher rate. Constructing a CD ladder — putting chunks of cash in CDs of varying maturities — allows you to reinvest cash from shorter-term CDs as they mature to take advantage of higher yields. Your longer-term CDs will continue to earn interest at today's highest rates. You can invest in a long-term CD even if you think you may cash out early or if you want to take advantage of rising rates — just be sure to check the interest penalty in advance to be sure it's not too onerous.
If you'd like to put more than $250,000 in CDs, the Certificate of Deposit Account Registry Service (CDARS) offers a convenient way to invest your funds. You deal with one participating bank, which sets the rate. A deposit-placement service that works with CDARS parcels out chunks of less than $250,000 (leaving wiggle room for accrued interest) to some of about 3,000 participating institutions.
Pentagon Federal Credit Union recently offered top rates on its one-, two- and three-year money market certificates, yielding 1.25%, 1.60% and 1.85%, respectively. Each requires a minimum investment of $1,000. At 1.59%, the yield on the five-year Ally Bank High Yield Certificate of Deposit isn't the highest you can get, but all of Ally's high-yield CDs charge only 60 days' worth of interest for withdrawing early.Certificates of Deposit
U.S. savings bonds are another supersafe investment for money you can tie up for a year. You can cash in savings bonds after 12 months, but if you redeem them before five years have passed, you forfeit the last three months' worth of interest. EE bonds pay a fixed rate; the I-bond's rate is composed of a fixed rate that lasts for the life of the bond and a semiannual inflation rate that changes every six months.
EE bonds pay a measly 0.20%, but I Bonds have a decent yield of 1.76% (even with the fixed-rate portion yielding 0%). An individual may purchase from $25 to $10,000 in I Bonds in an online Treasury Direct account, which you can set up at www.treasurydirect.gov.Savings Bonds
If you're willing to forgo FDIC insurance, explore ultra-short-term bond funds. Some of them suffered heavy losses during the downturn in 2008 and proved to be more risky than expected. And as with other bonds and bond funds, when interest rates go up, prices of short-term debt securities go down. But because of the bonds' short maturities, substantial losses aren't in the cards. Much of your gains will be eaten up if expenses are high, so shop carefully.
USAA Ultra Short-Term Bond (symbol UUSTX), an ultra-short fund with no sales charge and expenses of 0.6%, is yielding 1.18%. Wells Fargo Advantage Ultra Short-Term Income Fund (STADX), which also has no sales charge, is yielding 0.83%, with expenses of 0.73%.Short-Term Bond Funds
You can earn more than 3% in specialized WorldCurrency CDs from EverBank. The CDs, which have maturities of three to 12 months, invest in currencies of foreign markets — a three-month CD invested in the South African rand, for example, recently yielded 3.55% (there's a $10,000 minimum purchase). The CDs are FDIC-insured against bank failure, but you take on currency risk — you could lose principal if the U.S. dollar rises — so consider putting cash in a few different currencies to hedge against price fluctuations. The WorldCurrency Basket CD ($20,000 minimum purchase), with a maturity of three or six months, invests in a mix of three or more currencies.WorldCurrency CDs
Willing to take a little more risk? MicroPlace, which is owned by eBay, is an online broker for microfinance investments around the world that pay 0.5% to 4.5% interest quarterly. Terms range from three months to five years, and the minimum investment is only $20. Select the type of project and region of the world, the rate of return you want and the term of your investment, and you'll see a selection of projects in which you can invest. Since the site's 2007 launch, no issuer has defaulted.Microloans
Prosper.com has formalized the process of peer-to-peer lending. You can examine the credit quality of loans you purchase and create a diversified portfolio to minimize the risk. Although you can invest as little as $25, Ron Suber, Prosper's head of global institutional sales, recommends investing a minimum of $10,000 to create a well-diversified portfolio of at least 400 loans. There are seven loan grades. Top-quality AA loans, which Suber equates to Triple-B rated corporate loans, are yielding 5% to 6%; lower-quality loans pay higher rates. Residents of 29 states and the District of Columbia can invest in these loans, which have either a three- or five-year term.Peer-to-Peer Lending
At RSF Social Finance's Social Investment Fund, you earn only a 0.75% quarterly interest rate, but your money is lent to more than 80 nonprofit and socially responsible organizations, including schools, organic-food companies and environmental conservation groups. The fund operates like a revolving three-month CD that continually reinvests at maturity unless you direct it not to. Since 1984, the loans have had a 100% repayment rate to investors despite a loan default rate of about 2%. The minimum investment is $1,000.Socially Responsible Loans
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