As of February 2024, here is a breakdown of the best interest rates available on cash investments, ranging from short-term to long-term maturities. Banks are keen on utilizing idle cash, and transferring to a different FDIC-insured bank or NCUA-insured credit union can often yield higher returns while maintaining a similar level of safety.
Utilize the Ultimate Rate-Chaser Calculator to estimate the additional interest you could earn by switching. The listed rates are accessible nationwide and were last verified on 2/9/2024.
High-Yield Savings Accounts
High-yield savings accounts serve as a viable option since major banks typically offer minimal interest rates. It is advisable for everyone to have a fee-free online savings account alongside their existing checking account to capitalize on better interest rates. These rates can fluctuate, so it's essential to monitor both the top rates and competitive rates from banks known for their consistent competitive offerings.
Short-Term Guaranteed Rates (1 Year and Under)
When dealing with a substantial cash sum that you intend to utilize shortly, such as for a house purchase or other imminent financial plans, it's wise to opt for a simple approach. Placing the money in a flexible short-term CD within FDIC limits until you solidify your plans is a prudent move.
Money Market Mutual Funds
Brokerage firms often provide minimal interest on default cash sweep funds, retaining the excess for themselves. While money market mutual funds are regulated, they lack FDIC insurance, necessitating a preference for reputable firms.
Treasury Bills and Ultra-Short Treasury ETFs
Investing in Treasury bills of varying maturities or ETFs holding short-term Treasury Bills can be a secure option, as they are fully backed by the US government. These investments offer tax advantages and can contribute significantly to your effective yield.
US Savings Bonds
Series I Savings Bonds are inflation-linked and government-backed investments that come with certain holding requirements and penalties for early redemption. They offer an annual purchase limit and tax benefits, making them a viable long-term investment option.
Rewards Checking Accounts
Rewarding checking accounts provide above-average interest rates but involve specific requirements that need to be met monthly. Failure to comply may result in zero interest for that period, and rates are subject to sudden drops.
Certificates of Deposit (Greater Than 1 Year)
Certificates of Deposit offer higher rates with an early withdrawal penalty. By selecting a CD with a reasonable penalty, you can earn higher rates while retaining access to funds in emergencies. Building a CD ladder with different maturity lengths is another strategy to consider.
Longer-Term Instruments
Long-term CDs can be purchased through brokerage firms, offering FDIC insurance but without fixed early withdrawal penalties. While they pose interest rate risks, they can potentially yield higher returns than other cash and Treasury options.
All rates mentioned were verified as of 2/9/25.
