5 Ways to Get More Yield on Your Cash
by Dan Caplinger | Feb. 20, 2019
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When it comes to your savings, interest rates are everything. The higher the yield you can get on your cash, the more income you'll generate to help you supplement your savings. But it takes effort to find the highest yields available, and you'll also have to make some decisions in order to squeeze the most income from your savings.
Whether you use bank accounts or other savings vehicles to stash your cash, there are some tips to help you earn more income. Here are five things to consider in order to boost your yield.
1. Be smart with the bank accounts you already have
Most banks offer a wide range of different accounts for their customers. Checking accounts let you write checks and get instant access to your cash, while savings accounts are designed more for keeping money readily available but not necessarily at a moment's notice. Many banks offer money market accounts that combine the features of checking accounts and savings accounts, including higher yields and some limited abilities to write checks.
At most banks, the yields on these accounts vary greatly. Checking accounts usually pay little or no interest, but savings and money market accounts often pay a lot more.
These days, most banks give you online access to move money across your bank accounts, and the smartest way to maximize your overall yield is to keep as much money as practical in the higher-yielding money market and savings options. Then, when you need to write checks, you can move money into your checking account to cover them. It takes a little extra effort, but this strategy will produce more interest than just leaving all your money in a low-interest checking account all the time.
2. Shop around
There's a lot of competition across banks, and yield is one of the most important ways banks try to differentiate themselves. Special offers abound, and some institutions are noteworthy for consistently being on the top end of the interest rate scale.
It's not necessarily worth it to upend your entire banking relationship just to get a tiny interest rate bump. But if your current bank is really stingy with interest, look at the alternatives and see if you can get a respectable rate. The difference it makes might surprise you.
3. Look at locking up your money
Accounts that give you access to your money at all times tend to offer relatively low rates. By contrast, if you're willing to commit to keeping your cash in your account for a fixed period of time, you can get better yields. Both bank certificates of deposit and Treasury bills are designed for the account holder to choose a length of time to keep money in the account, with interest rates typically determined in advance.
The rates on CDs and Treasury bills can be a lot higher than what you'll find on typical bank accounts. That's why it's worth adding them to your savings arsenal, as the extra yield can boost your income substantially on money that you wouldn't have needed to use anyway.
4. Go jumbo
Some banks give you extra interest if you commit to making a large deposit. These jumbo accounts are lucrative for banks, and so it's worth their while to attract them.
What constitutes a jumbo account differs from bank to bank, but $100,000 is a common amount. You won't necessarily get a huge bump to your rate -- 0.05 to 0.10 percentage points is pretty typical -- but if you have that much money anyway, it's silly to leave it on the table.
5. Broaden your banking relationship
Finally, some banks give their best customers higher rates when they sign up for multiple services. For instance, if you open a savings or money market account with the bank that handles your mortgage or where you have a credit card, you might qualify for a relationship-based banking package that includes more attractive yields.
Not all banks have these deals, and even those that do don't always match up with everyone's needs. But if you need the services your bank wants to provide anyway, then a bonus rate is just icing on the cake.
Be smart with your savings
As interest rates rise, it'll be more important than ever to get as much income from your cash as you can. These five ideas will help you boost your yield and make your money work as hard as it can for you.
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About the Author
Dan is a lawyer and financial planner. He has been writing since 2006 and covers topics ranging from investing and tax planning to personal finance.
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