Dec 13, 2024 | 5 min read
Top Line Summary
Historical Trends: Checking and savings account rates remained exceptionally low for over a decade due to post-2008 monetary policies.
Recent Rate Surge: Savings account rates climbed sharply since late 2021, while checking accounts saw modest yet meaningful increases.
Key Consumer Insight: Higher rates offer opportunities to optimize cash strategies, making it vital to reassess savings and account choices.
A Fresh Look at Checking and Savings Account Rates: What’s Changed?
For years, checking and savings accounts have been the go-to solution for stashing cash safely. But let’s be honest—their appeal has always come with a big downside: painfully low interest rates. For much of the last decade, these accounts barely offered enough yield to keep pace with inflation. Yet, as recent trends show, the tide has turned. The data tells a fascinating story, one that opens the door to better opportunities for savvy consumers to make the most of their cash reserves.
How We Got Here: The Long Stretch of Low Rates
Source: Federal Deposit Insurance Corporation
Units: Percent, Not Seasonally Adjusted
Take a look at the chart above. From 2009 to 2022, savings and interest-bearing checking accounts trudged through an era of rock-bottom interest rates. Savings accounts held a slight edge over their checking counterparts, but let’s not sugarcoat it—the difference was trivial. Rates for both hovered at or below 0.10%, leaving little motivation for people to park anything more than emergency funds in these accounts.
Why were rates so dismal? Blame it on macroeconomic policy. After the 2008 financial crisis, the Federal Reserve slashed interest rates to near-zero levels to prop up the economy. While this strategy fueled borrowing and economic growth, it left depositors with scraps. For over a decade, savings accounts were more about safety than growth.
The Rise: A Turning Point in 2022
Fast forward to late 2021. Something shifted. By 2022, the second chart below shows a sharp upward climb in rates—a direct result of the Federal Reserve’s aggressive push to combat inflation. Suddenly, savings accounts started looking much more appealing, with average rates surging past 0.40% by 2024.
Source: Federal Deposit Insurance Corporation Units: Percent, Not Seasonally Adjusted
And what about interest-bearing checking accounts? While their improvement was more muted, even these saw a modest boost. For accounts that historically lingered below 0.10%, this marked a significant shift. It’s proof that even checking accounts can play a bigger role in a rising-rate environment.
The Recent Surge in Rates
However, beginning in late 2021 and accelerating into 2022, a sharp increase in interest rates is evident. This trend, highlighted in the second chart, reflects the Federal Reserve’s response to rising inflation. The central bank began aggressively raising benchmark interest rates, which subsequently led to higher yields on deposit accounts.
For a broader look at current checking and savings account rates, this article from SuperMoney provides valuable insights into how rates vary across different institutions and account types. Savings accounts, for example, have seen average rates climb to over 0.40% by 2024, offering a notable improvement for consumers seeking higher returns on their cash.
What This Means for You
This new era of higher rates is a game-changer, but it comes with its own set of considerations.
Rethink Your Cash Strategy: For the first time in years, savings accounts can deliver meaningful returns. Is your cash working hard enough for you?
Check Up on Interest Checking: While these accounts still lag behind savings in yield, they’re not useless. Their flexibility and liquidity make them ideal for everyday expenses while earning a little extra on the side.
Don’t Settle—Shop Around: Not all banks are created equal. Online institutions, in particular, are offering rates that leave the national averages in the dust. Why leave money on the table?
The Bottom Line
We’re in a new chapter for checking and savings accounts. The era of rates so low they were barely worth mentioning? It might finally be over. Savings accounts are leading the charge, but even interest-checking accounts are showing some life.
Now is the time to revisit your banking strategy. Are your accounts helping you build wealth, or are they just placeholders for your cash? The answer might just surprise you.
Whether it’s setting aside money for emergencies or optimizing short-term goals, today’s deposit accounts can do more than ever before. All you need to do is take a closer look.
If you’re unsure where to start, I’d be happy to help you evaluate your options. Let’s make sure your savings are working as hard as you are.
At Israilov Financial, we specialize in creating personalized, total return-focused investment strategies. If you're interested in learning how we can optimize your investment approach for long-term growth, schedule your free discovery meeting.
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