It’s all in the news these days – interest rates continue to rise.
Student loan borrowers with variable rates and borrowers with credit card debt will certainly feel the pinch. Potential homebuyers who waited through historically low interest rates for a down payment now face interest rates of 7% on 30-year fixed rate mortgages till September 2022.
With the economy on the verge of a recession (or already in one, depending on who you talk to), this is not good news.
However, not all is doom and gloom when it comes to rising interest rates.
On the bright side, savers who take advantage of certain investment and savings products will see better-than-normal growth in their accounts.
4 Ways You Can Take Advantage of Rising Interest Rates
Let us see how rising interest rates can positively affect people with these types of accounts.
1. High-Yield Savings Accounts
A high-yield savings account (HYSA) is simply a savings account that offers a higher interest rate than a typical savings account—which, according to the FDIC, pays a .17% interest rate.
Some of the best HYSAs on the market that currently offer interest rates of 2% or more have sprung up again in the past few weeks. Those rates can keep rising throughout the year.
Because of the higher returns, HYSAs can have strict guidelines, which include an initial deposit, minimum balance, and monthly maintenance fees. Although there are many free HYSAs with no minimum.
That said, if you’re in a position to deal with those rules, HYSA is a great opportunity to see your savings grow.
2. Money Market Accounts
Unlike traditional savings accounts, a money market account is a savings vehicle that also has check writing and debit card privileges. These accounts typically limit the amount of monthly transactions and transfers you can make.
They also have higher interest rates than traditional savings accounts, making them ideal for those who want quick access to savings that grow each month.
Some of the highest interest money market account rates are between 2% and 3% in September 2022. Bass Bank currently offers an account with 2.75% APY or the opportunity to earn 1.2 American Airlines miles for every dollar you spend annually.
3. Certificate of Deposit
A Certificate of Deposit (CD) is simply a savings instrument that earns interest over a specified period. The money remains untouched over that time period.
Due to the lack of liquidity, CDs usually have higher interest rates than standard savings accounts.
As of September 2022, the best interest rates on CDs were around 3%, with this Capital One account offering 3.25% for five-year CDs and zero minimum balances. Depositing $5,000 in this particular CD would yield a return of $867 over five years.
4. I Bond
The I bond, designed to hedge against inflation, became popular in 2022 due to historically high interest rates.
These instruments, also known as Series I savings bonds, use a fixed rate and an inflation rate to create the bond’s overall rate. The fixed rate does not change during the life of the bond, while the inflation rate changes in May and November.
I bonds are currently offering an overall rate of 9.62% as of October 2022. This is an unprecedented rate which is likely to go up or down after October.
If you redeem the bond before five years, you’ll lose some of the interest, and you’ll need to hold it for at least one year.
Robert Bruce is the senior author of The Penny Hoarder.
Ready to stop worrying about money?
Get the Penny Hoarder Daily