If you have a savings account, then savings rates matter to you. Whether you know it or not, they effect your life and your money, which means that the current state of economy impacts you more than you may realize as well. Interest rates are in a constant state of flux, and not all things are equal when it comes to giving and receiving.
EARNING INTEREST VS. OWING INTEREST
Money is not equal in the United States today. While it might seem like a negative cliché, the haves continue to earn money and the have-nots continue to lose it. The richest people in the country are steadily getting richer, while the remainder, who generally fall into the middle, are making a little more money—if any. You see the main effect of that in your current savings interest rates, which aren’t as high as they once were. On the other hand, you probably notice that you’re paying out more interest on loans, taxes, credit cards, and other bills.
SUPPLY AND DEMAND AS THEY APPLY TO SAVINGS
The rule of supply and demand holds true anywhere, whether you’re talking about popular sweaters at your favourite retailer, the price of the current must-have super-food, or money. More people need it, so less is available. More people need affordable interest rates on loans and other debts, so the interest rates are higher. Similarly, more people need higher interest rates on the money they have in their savings accounts, but they’re receiving less money on interest bearing accounts. In many banks, for instance, a sum of $1000 left in an account for three years will barely earn $100 in interest.
THE UPS AND DOWNS OF THE ECONOMY
Although financial experts agree that the Recession is officially over, it’s still affecting finances, especially for interest rates. Due to big bail-outs, the fluctuating value of the U.S. dollar, and lingering uncertainty, there’s simply less money available. Banks generally set their own interest rates, but remember that banks are businesses as well. Banks could offer higher interest rates on savings accounts, but they’d make less money themselves. As a result, the money in your account yields a low return, yet banks make money on high rates given on financial loans.
GETTING BETTER INTEREST RATES
So is there any way you can get better interest rates? Of course. If you have a savings account of any kind, think about investing in stocks, which often yield higher rates (it should be noted that this comes with a work of caution: investments can go both up and down. It’s best to analyse your position and seek some professional advice if possible). Shop around for a different bank as well; spend time calling around to see if there are any banks or credit unions willing to offer you more interest on your accounts. If you’re looking to pay less interest on loans or debts, refinance to pay off your debt over a shorter period. When shopping around for the best savings rate, visit an online bank and ask about the benefits of their current savings interest rates.
As the economy continues getting stronger, interest rates will get better. Until then it’s just a question of making smart financial choices for your savings accounts and debts quick and easy to understand.