The very easy way to make 'free' money while interest rates remain high - but experts say you need to be quick
Two years of high interest rates have been a huge blow for Americans looking to take out a mortgage and get a car loan.
But those with big cash savings have benefitted from the past two years of high interest rates - if they were savvy.
And there is still time for Americans to earn 5-plus percent on savings with banks and credit unions.
The Federal Reserve raised rates last summer to a 23-year high of between 5.25 and 5.50 percent as it tried to tame inflation.
It kept them at that level on Wednesday, but it is expected to cut them in September. And that will cause savings rates to dip.
There is still time to act, and by moving $5,000 from a current or low-paying savings account to a high-yield one it would mean an extra $227.50 a year.
Moving money to high interest accounts can really pay off
Those who put money into high-yield accounts over the past year or so were earning 5-plus percent. That is a rate not undeard of in a generation.
But while many took advantage, tens of millions didn’t.
Americans have $17.5 trillion with banks but the average account only earns 0.45 percent, according to the Federal Deposit Insurance Corporation.
Having $5,000 in an account paying that, would earn only $22.50 over a year. But in one earning 5 per cent it would grow by $250.
One money manager said he sees clients admit ‘I’ve got way too much in my checking account’ - knowing they should move some to another account to earn interest.
‘But that doesn’t mean that they’ve done anything about it,” said Dann Ryan, managing partner at Sincerus Advisory, a wealth-management firm based in New York City, told the Wall Street Journal.
According to a Santander Bank survey published in May, 21 percent of Americans who save are unaware of the interest rate on their savings accounts.
Among those who knew their interest rate, the majority earned less than 3 percent.
Over the past year, less than a fifth of Americans moved money to a better-paying account.
Older people are most likely to be earning a better return, the survey also found.
What to do
First up, move emergency cash - that kept for when the car breaks down, for example - or money kept for tax payments into an online account that allows withdrawals but is high yield.
These won’t be as high as the best-paying ones that require you to lock money away, but they should be much better than a current account paying
For longer term, Americans can use so-called certificate of deposit accounts, or CDs. These pay a set interest rate for a set period of time.
These are still paying above 5 percent for those who lock in for three, six or nine months, according to Bankrate.
The other option is to put money into bonds, which can run for one to ten years.
