Rich People Are Dropping Banks With Low Interest Rates — Should You Do The Same?
The rich get richer in part because of how they do their banking. Generally, they store their cash in accounts that are high-yield-bearing so that their money grows as possible while sitting in the bank. But even rich people have only so much power. Like everyone else, they are at the mercy of the Fed, which sets and controls interest rates. And right now, the Fed is raising interest rates.
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CD Rates Today: Jan. 26 — Earn Up To 4.75% APY
So what are rich people doing? They’re moving their cash out of low-interest banks (as most of the big banks tout) and into accounts that sport high interest rates, the Wall Street Journal reported.
While this seems like a common sense move, and one that everyone should think about, there are a couple of caveats to consider.
The Highest APY Banks Are Online-Only
The banks that pay the highest interest now tend to be online only. They forego infrastructure and administration costs in order to be able to afford to offer such rates. So, for those who are tech-savvy and won’t miss physical branches, online banking is definitely the future — and the present for sky-high APYs which are as high as 6%.
To Get The Highest APY, You’ll Need To Lock Up Your Money In A CD
Some savings accounts out there (though not at the biggest banks, at least not right now) come with unusually high APYs — but not the highest. The accounts that will get you the highest APYs are certificate of deposit accounts, or CDs. A CD pays a fixed interest rate over a period of time (typically ranging from 30 days to 5 years), and generally the longer the terms, the higher the APY. Any early withdrawals of funds come at a price/penalty.
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SynchronyBank, another online-only institution, is an example of a bank that has a solid CD offering with a 14-month CD that has a 4.60% APY. Remember though, 14 months may be a long time to lock up one’s money and throw away the key. In general, one can expect the following terms with a CD account for January 2023.
This is where rich people do indeed have the upper hand. They can easily set aside hundreds of thousands of dollars and more in CD accounts all around town.
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This article originally appeared on GOBankingRates.com: Rich People Are Dropping Banks With Low Interest Rates — Should You Do The Same?