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Why you should open a high-yield savings account this March
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When it comes to financial products and services, timing is critical. If you buy an insurance policy or invest in an asset at the wrong time, for example, you could lose most (or all) of your money. But if you wait, the window of opportunity may close in the interim.
While millions of Americans have recently had to cope with higher borrowing costs thanks to inflation and high interest rates, the news hasn’t been all bad. Those who timed their savings accounts properly, for example, have earned exponentially more interest than they could have if they opened those same accounts in 2020 or 2021.
In particular, those with certificates of deposit (CDs) and high-yield savings accounts have seen their savings grow significantly. But with a new inflation report coming on March 12 and another Federal Reserve meeting set for March 19, many may be wondering if now is still a good time to open one of these account types. Below, we’ll detail three reasons why you should open a high-yield savings account this March.
Start earning high returns on your money with a top high-yield savings account here today.
Why you should open a high-yield savings account this March
Here are three compelling reasons why you should open a high-yield savings account this March.
Rates are still high
While you may have lost out on a few years of earnings without one of these accounts, the interest rates on high-yield savings accounts haven’t dropped. With a little research, it’s easy to find an account right now with a rate of 5.50%.
And if you’re willing to use an online bank, which tends to offer more competitive rates than banks with physical locations, you may be able to get a rate even higher than that. That could result in significant earnings over time, simply by moving your funds from a traditional account to a high-yield savings one.
Plus, many high-yield savings accounts come with ATM cards and other accessibility features, so your everyday banking needs can remain the same.
Get started with a top high-yield savings account now.
But they could fall soon
While rates on these accounts are high, it’s important to note that they are variable, meaning they’re subject to change daily depending on the larger rate environment. And with a cut to the Fed’s benchmark interest rate now expected sometime in May or June, the optimal time to open one of these accounts is likely coming to an end.
While a rate cut isn’t expected to dramatically reduce what one could earn with a high-yield savings account, it doesn’t make sense to wait for that to happen. By getting started in March you can immediately start earning high returns, which can then help buffer any expected rate cuts to come.
The alternatives have drawbacks
Sure, CDs generally have higher rates than high-yield savings accounts but the difference can be negligible (think less than 1 percentage point). And unlike CDs, which give you that higher rate in exchange for locking your money away for a set term, high-yield savings accounts will still provide big returns even if you make routine withdrawals and deposits.
Traditional savings accounts, on the other hand, may come with the greatest accessibility but the returns are barely existent. The average savings account interest rate right now is just 0.46%, according to the FDIC. That means you’re losing money by keeping your funds in a traditional account instead of a high-yield one.
Stop earning low returns on your savings and get started with a high-yield account online today.
The bottom line
With rates still high but predicted to fall later this spring, now could be one of the last great times in this economic cycle to open a high-yield savings account. And considering the locked nature of CDs and the minimal returns that traditional accounts come with, it’s wise to look to a high-yield savings account this month. By opening one now you’ll earn higher interest right away while maintaining most of the flexibility you’re used to with a regular account. Just don’t wait much longer because if inflation cools and the Fed cuts rates you’ll likely regret not being proactive this month.
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If you’re looking for an inexpensive way to access a large sum of money right now, you’d be hard-pressed to find a better alternative than a home equity line of credit (HELOC).
Compared to personal loans and credit cards, HELOC interest rates are many points lower (the average credit card rate now is nearly triple what a HELOC rate is). Unlike some other borrowing options, home equity loans and HELOCs also provide access to a substantial amount of funding. Right now, the average homeowner has around $330,000 worth of equity to tap into. And HELOC interest rates are variable, meaning that they’re well-positioned to decline as additional interest rate cuts are issued.
So, if you’re thinking a HELOC is your best way to access extra financing currently, you’re likely not wrong. To confirm this speculation, however, it’s critical to carefully calculate your potential monthly costs. No matter whether you’re looking to borrow $100,000 with a HELOC or just $30,000, you must understand your payments. But, how much does a $30,000 HELOC cost monthly now that rates are falling? That’s what we’ll calculate below.
See how low of a HELOC interest rate you could secure here.
How much does a $30,000 HELOC cost monthly now that rates are falling?
When calculating HELOC monthly payments it’s important to remember that these are just estimates. After all, variable interest rates are exactly that – variable. For HELOCs, borrowers can expect them to change monthly. But while that may have been an issue in recent years as rate hikes were continuous, it’s a timely benefit now in the face of what may be an extended rate-cutting campaign. Here, then, is what a $30,000 HELOC could cost monthly now, tied to two common repayment periods and the assumption that the rate will remain static:
- 10-year HELOC at 8.69%: $375.01 per month
- 15-year HELOC at 8.69%: $298.77 per month
So while you’ll save more each month by going with the longer option, you’ll pay more in interest to do so. But remember that these payments are only approximated. Here, then, is what they could become if rates fall by 25 basis points in November:
- 10-year HELOC at 8.44%: $371.00 per month
- 15-year HELOC at 8.44%: $294.37 per month
That noted, HELOC interest rates are unlikely to fall by the same precise amount that the federal funds rate does. So calculate on the assumption that it does, but understand that they don’t move by the same amount each month.
Get started with a low-rate HELOC online now.
Don’t forget about your credit score
Remember that the interest rates you see listed on lender websites are as low as they are on the assumption that borrowers are qualified – meaning that they have a high credit score and clean credit background. If you don’t have both, you won’t be eligible for the above rates and may have to pay significantly more, depending on your financial circumstances. If you have a low score – and can afford to delay the needs you were planning to cover with a HELOC – it may be worth improving your credit before applying. So, don’t apply for other credit in the interim, pay down (or off) all of your current debts and make sure to pay your current monthly payments on time (or, preferably, early).
The bottom line
A $30,000 HELOC comes with monthly payments between $299 and $375, approximately, right now. But those rates will change over the life of the line of credit. And you won’t be eligible for the best rates and terms if you don’t have a good credit score, so make sure to check that before applying. Finally, remember that your home is collateral in any home equity borrowing exchange, therefore it’s critical that you withdraw only an amount that you can afford to pay back or you’ll risk losing your home in the process.