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Higher Bank Yields

YIELDS ON SAVINGS accounts, money market deposit accounts and certificates of deposit were so modest for so many years that it was tempting to opt for the convenience of the local bank, even if you knew you could do better elsewhere. But today, yields are much higher—and a little effort could be richly rewarded.

Suppose that, by shopping around for an online savings account, you can earn perhaps 4%, rather than settling for 1% at the nearby bank you already use. If you’ll keep $10,000 in the account, those three extra percentage points of interest would be worth $300 a year. If you saw $300 on the sidewalk, you’d undoubtedly bend over and pick it up. Finding higher-yielding savings accounts and CDs doesn’t involve that much more effort.

To find the best rates, spend some time scouring the internet or check out Bankrate.com. The banks that offer the best rates can vary from one month to the next, depending on which institutions are most aggressively seeking new customers. Still, the top yields can frequently be found at banks such as Ally Bank, Capital One, CIT Bank, Discover Bank, EverBank, Marcus by Goldman Sachs and Synchrony Bank. Most of these banks can offer higher yields because they’re largely or entirely online, so they don’t have to pay the overhead incurred by traditional banks with their hundreds, and sometimes thousands, of brick-and-mortar branches.

Money market deposit accounts often pay slightly more interest than savings accounts, but may require a larger minimum balance. Both typically limit withdrawals to six per month. Certificates of deposit usually pay even more, but your money is typically locked up until the CD’s maturity date, unless you’re willing to pay the early withdrawal penalty. CDs, money market deposit accounts and savings accounts are all backed by the FDIC—unlike money market mutual funds, where there is a small risk that you could lose money.

Next: FDIC Insurance

Previous: Asset No. 3: Cash

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