Will Savings Accounts Pay Even More Interest in 2023?

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KEY POINTS

  • Savings accounts are paying more interest these days than in the past.
  • Rates could climb even more in 2023. 
  • A high-yield savings account is a great place for your emergency fund, but if you have more cash saved, consider investing it for a better return over the long term. 

The quick answer? It's definitely possible.

For months on end, the Federal Reserve has been on a mission to fight inflation. To that end, it's been implementing aggressive interest rate hikes that are driving up the cost of borrowing. 

How does that help with inflation? One of the big reasons living costs are up is that the demand for goods exceeds the available supply. If it gets too expensive for consumers to borrow money, they're apt to cut their spending to some degree, thereby narrowing that supply-demand gap. 

Right now, anyone looking to lock in a personal loan, auto loan, or home equity loan is generally looking at paying more interest than they would have a year ago. And credit card interest rates, which are high to begin with, are also up.

That's the bad news. The good news, though, is that the Fed's recent string of rate hikes has made it so banks are paying more generously. These days, you're apt to score a higher interest rate in a savings account than you would have at the start of the year. And CD rates are up as well. 

Our Picks for the Best High-Yield Savings Accounts of 2024

APY
up to 4.60%
Rate info Circle with letter I in it. You can earn the maximum APY by having Direct Deposit (no minimum amount required) or by making $5,000 or more in Qualifying Deposits every 30 days. See SoFi Checking and Savings rate sheet at: https://www.sofi.com/legal/banking-rate-sheet.
Min. to earn
$0
APY
5.00%
Rate info Circle with letter I in it. 5.00% APY for balances of $5,000 or more; otherwise, 0.25% APY
Min. to earn
$5,000
APY
4.25%
Rate info Circle with letter I in it. See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of April 11, 2024. Rates are subject to change at any time before or after account opening.
Min. to earn
$0

But are savings account rates done climbing? Or will banks pay even more interest in 2023?

There may be even more upside for savers

Right now, most high-yield savings accounts are paying between 3% and 3.6% interest. But if the Fed keeps implementing interest rate hikes, those figures could climb in the new year.

In fact, at one point, the Fed predicted that interest rates on the best high-yield online savings accounts could reach between 4.77% and 5.83% in 2023. That's a sizable jump from where rates are sitting today.

Now before you get too excited, do realize it's possible that savings account rates won't rise that much in the new year. But could more banks start paying interest in the 4% range? Absolutely.

Should you put more money into savings?

It's a great idea to have plenty of cash reserves available for emergencies. And now, you can earn more interest on your emergency fund than you did in the past. 

That said, once your emergency fund is fully loaded and even padded, you may not want to stick too much extra money into savings. The reason? While earning somewhere in the ballpark of 3% or even 5% on your money might seem appealing, if you invest your money in a brokerage account, you might snag two to three times that return. 

Of course, investing your money means taking some risk. But if you're saving for a far-off goal, like retirement, you want your money to be able to outpace inflation. 

Generally speaking, a savings account rate of 4% or 5% allows you to do that. But given the way inflation has surged this year, you may be better off snagging a higher return on your money.

All told, it's not a bad idea to put more cash into your savings, especially if rates keep climbing. Just be mindful of not overfunding your savings, tempting as it may be to do so.

These savings accounts are FDIC insured and could earn you 11x your bank

Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts could earn you 11x the national average savings account rate. Click here to uncover the best-in-class accounts that landed a spot on our short list of the best savings accounts for 2024.

Two of our top online savings account picks:

Rates as of Jun 20, 2024 Ratings Methodology
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SoFi Checking and Savings Capital One 360 Performance Savings
Member FDIC. Member FDIC.
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= Best
= Excellent
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APY: up to 4.60%

APY: 4.25%

Min. to earn APY: $0

Min. to earn APY: $0

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