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Banks have been increasing their savings rates for well over a year now. The average interest rate on a savings account is 0.42% APY (Annual Percentage Yield), but many institutions are paying significantly higher rates - and one is even paying over 7% APY.
Is a 7% interest rate worth it? Learn more about how a 7% APY savings account works, and whether you should bother opening an account with such a high rate.
When an account pays 7% APY, you'll earn 7% on your balance over a year. Most banks compound interest, which means they pay interest both on the amount you've deposited and the interest you've earned on top of it.
Banks can compound interest daily, monthly, quarterly, or annually - and the more often it compounds interest, the more you'll earn in the long run. It's common for banks to compound interest daily and pay it into your account monthly.
A 7% APY savings account may pay interest on all of the money in your account. Or you might earn 7% on just a portion of your balance, or only earn interest if you meet certain requirements. Before opening a savings account for its high interest rate, be sure you understand the bank's rules.
Right now, only one financial institution is paying at least 7% APY: Landmark Credit Union. Landmark pays 7.50% on its Premium Checking Account - however, there are some major caveats to consider.
First, keep in mind that this is a checking account, not a savings account. Second, you have to enroll in e-statements and receive $250 in direct deposits each month to qualify for the 7.50% interest rate.
Finally, you'll only earn 7.50% on balances up to $500. As Landmark compounds interest monthly, this means you'll only earn $9 on $500 in an entire year. Balances over $500 only earn 0.11% APY, well under the national average.
Overall, the 7.50% APY account with Landmark Credit Union probably isn't worth opening. You'll earn more with an account that pays a slightly lower rate, but on higher balances - maybe even on your entire account balance.
Although no savings accounts pay 7% right now, there are plenty that pay high rates on your entire balance. The following accounts are great alternatives to Landmark's checking account, and they don't make you meet requirements every month to earn their high rates.
Selecting a high-yield savings account is an important decision. Here are factors to consider when making your choice:
Can you get 7% interest on a savings account?
No, there is not a savings account that pays 7% APY right now. The Landmark Credit Union Premium Checking Account pays 7.50% APY, but only on balances up to $500. If you keep more than $500 in your account, you're better off opening a high-yield savings account that pays a slightly lower rate on your total balance.
Do CDs pay 7% APY?
No CDs pay 7% APY yet. The highest CD rate right now is with Old Point National Bank, which pays 6.02% APY on its 6-month CD for Virginia residents. If you live outside of Virginia, the highest rate is 5.65% APY a 9-month CD with NASA Federal Credit Union.
What savings account has the highest interest rate?
The CloudBank 24/7 High Yield Savings Account, powered by Raisin currently pays the highest savings account rate at 5.11% APY. Raisin is a digital marketplace that sets you up with high-interest accounts at partner banks.
Do I have to declare interest earned on my savings account when I pay taxes?
Yes, you must declare interest earned in any bank account when you file taxes.
Where can I get 10% interest on my money?
You won't earn 10% interest in any bank account. You might be able to earn 10% by investing in assets such as stocks or real estate, but the markets are unpredictable and there's no guarantee.