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Savings rates are rising, but this is a fairly recent development. Throughout the 2000s and 2010s, rates trended low\u2014nosediving after the 1980s and 1990s, decades during which savings interest rates were even higher than they are now.<\/p>\n
Looking at historical savings rates can help you predict where rates may go in the future and determine where to keep your savings. Here\u2019s what you need to know about the history of savings account interest rates.<\/p>\n
During the 1980s, savings rates climbed as high as 8%. Deregulation caused deposit interest rates to stay higher than financial institutions could sustainably support, which contributed to banking failures during that decade. In the 1990s, savings account rates decreased significantly, typically sitting between 4% and 5%.<\/p>\n
The 2000s kicked off with a recession, and savings rates fell to between 1% and 2%. Following the financial crisis of 2008, savings account interest rates fell to historic lows\u2014below 0.25%.<\/p>\n
In the years following the Great Recession, saving rates continued to fall to historic lows. In 2009, savings rates averaged 0.21% APY but fell to 0.17% in 2010 and 0.11% in 2011. Interest declined year over year until 2013, then remained steady at 0.06% APY through 2017.<\/p>\n
From 2018 and 2021, national average savings rates fluctuated between 0.01% to 0.10%, making savings a guaranteed financial loss. Even with the 2010s\u2019 relatively low inflation rates of 1% to 2%, money held in savings was a depreciating asset. In 2021, inflation jumped to 4.7%, while savings account interest rates hovered between 0.06% and 0.07%.<\/p>\n
Because the Federal Reserve kept interest rates low to stimulate growth, savings rates remained at historical lows for over a decade.<\/p>\n
In 2022, the Federal Reserve issued seven consecutive federal funds rate increases to combat inflation. Between March and December, the federal funds rate increased from 0.25% to 4.25%. But banks were slow to raise savings account interest rates. In fact, savings accounts sat at an average national rate of 0.10% or below through July despite a rapidly increasing federal funds rate. National average savings rates hit 0.30% in late December.<\/p>\n
However, many credit unions and online banks<\/a> offered savings rates closer to the federal funds rate in 2022. Rates on some of the best high-yield savings accounts<\/a> surpassed 4% by the end of the year.<\/p>\n Savings rates are currently going up, and experts believe savings rates will continue to rise in 2023<\/a>. Beginning in April 2022, online banks began regularly increasing savings rates. With lower overhead and a focus on increasing their market share, these challenger banks have offered higher savings rates since 2018.<\/p>\n Savings account rates also increase due to competition among banks. Banks are once again advertising higher interest rates to attract customers and gain market share, and this should continue to push rates upward as long as the federal funds rate doesn\u2019t fall.<\/p>\n If your bank is still only offering 0.01% APY on savings, you\u2019re missing out on significant interest earnings. You can easily find banks offering 3.00% APY or above on the best savings accounts<\/a>. If you have $2,500 in savings at a national bank offering 0.01% APY, you would only earn $0.25 in interest during the first year. Compare that to an online account paying 3.00%, which would net you $75 in interest earnings during the first year.<\/p>\n Savings account rates are primarily impacted by Federal Reserve policy. The Federal Reserve\u2019s monetary policies attempt to ensure strong economic growth and keep inflation around 2%. When the Federal Reserve lowers interest rates, savings rates tend to fall as well. When the Federal Reserve raises interest rates, banks typically offer savings rate increases shortly thereafter.<\/p>\n In a high-rate environment, banks can lend for a greater profit, so they\u2019re more willing to incentivize savings. By offering higher savings interest rates, banks and credit unions gain access to more money they can then lend. This strategy also ensures banks meet reserve requirements put in place by the Federal Reserve to promote appropriate liquidity.<\/p>\n Savings account rates can also be impacted by competition among banks. New or smaller banks may offer higher interest rates to attract customers and increase their market share.<\/p>\n You can get the best rates on savings accounts by shopping around and comparing rates at different banks and credit unions. Consider high-yield savings accounts<\/a>, which offer above-average rates. Look for banks that don\u2019t require an opening deposit or minimum balance, and avoid savings accounts with monthly fees that can eat into your interest earnings. Think about setting up regular contributions to grow your savings even faster.<\/p>\n If your current bank isn\u2019t offering competitive rates, it\u2019s easy to open a new savings account.<\/a><\/p>\nWhen Will Savings Rates Go Up?<\/h3>\n
What Affects Savings Account Interest Rates?<\/h2>\n
How To Get the Best Savings Interest Rates<\/h2>\n