When Will My Savings Interest Rates Go Up?

Waiting for your bank or credit union to raise the interest rate they pay you on your savings or money market accounts? Don’t hold your breath.

Better Savings Interest Rates

While the Fed kept interest rates at zero, most banks followed suit with their basic interest-bearing accounts, getting as close as their computer software allowed, 0.01% interest or APY if you prefer. A quick search of big bank websites shows mostly the same. Sure, you can grab a little bit more interest on a little bit more money if you meet certain terms and conditions, but the basic savings accounts all look like this.

You get the idea. Most of these banks have a way to earn more interest if you perform certain steps like setting up direct deposit or keeping a minimum balance, but even then, the rates are nothing to write home about.

The best high-yield savings accounts online do a little better.

Marcus online savings account by Goldman Sachs pays 0.50%, as does American Express High-Yield Savings account. Some of the new fintechs try and get traction with higher rates. You can earn 0.50% with Chime High Yield Savings. LendingClub savings account interest rate is 0.65%.

Don’t expect any of these rates to go up after the Fed raised the Federal Funds rate earlier this week.

When Can I Get Higher Interest Rates?

The increase of the Fed Funds Rate to 0.25% from 0.00%, is, for normal consumers, a matter of semantics. If you shopped for a mortgage on Tuesday and they quoted you 3.25% and on Wednesday they quoted you 3.385%, it might have been because of the Fed, or it might be coincidence. While the Fed influences mortgage interest rates, mortgages are based on the 10-year Treasury rate which is publicly traded and was already pricing in the 0.25% increase, and maybe a bit more.

Your credit card interest rate will automatically adjust up by 0.25% because the Prime Rate will move up 0.25%. However, unless you have a very large balance, the difference between 18.95% and 19.20% isn’t a lot in real dollars.

$3,000 balance, 18.95% / 12 = monthly interest (approx) of 1.58% = $47.40 interest -- compared to -- $3,000 balance 19.20% / 12 = 1.60% = $48 == 60 cents difference each month.

Sure, that adds up over time, and the difference is much higher on higher balances, but you get the idea.

Basically, 0.25% isn’t enough to move personal level interest rates. Sure, big banking, and big bond auctions, and corporate-sized accounts, that quarter-point makes a difference, a BIG difference, and that’s why raising the Fed’s interest rate like this slows down the overall economy.

Next Fed meeting occurs in May (May 3rd thru 4th). Smart money anticipates another 0.25% increase unless the economy craters due to unforeseen circumstances (Ukraine?). With the Fed Funds rate at 0.50% you might see a bump in your savings account interest rate. It might be as small as 0.01% to 0.025% or something like that, but it will be there.

The Fed meets again in June, July, and September. If there is a 0.25% increase at each of those (a total of 0.75%) added to the 0.50% anticipated from the May meeting, we at long last get a Fed Funds Rate over 1.0% at 1.25%, THEN you can probably see a real change in your savings rate.