On Tuesday and Wednesday, the Federal Reserve, the U.S. central bank that determines interest rates, plans to meet in Washington. Unless something goes off the rails, chances are the Fed will approve another quarter-point hike in interest rates. You may not think that affects you, but chances are it will. We spoke with a couple of financial advisers to find out what the Fed’s new benchmark rate could mean for your money.
Though lenders have begun offering variable-rate loans, most car buyers take out fixed-rate loans. Since the loan is fixed, the Fed’s interest hike probably won’t have a direct impact on your loan, said Robert Dowling, a financial planner with Modera Wealth Management in Westwood, New Jersey. However, if you’re in the market for a new set of wheels, prepare to face higher interest rates for the new loan.
Credit cards, which typically come with variable interest rates, will definitely be affected by the Fed’s rate hike, said Dowling. If you maintain a balance, as many consumers do, expect to see your monthly payments go up — and your balance balloon if you aren’t careful.
With interest rates expected to rise, prepare for your monthly mortgage payment to rise along with them if your loan has a variable rate, said Jude Boudreaux, a financial planner based in New Orleans. “The higher the interest rate and more variable the debt, the more of an issue [the Fed rate hike] certainly is.”
Higher rates also put pressure on the sale of homes, though you shouldn’t rush to buy one if you aren’t financially ready. “People never go to the bank and say, ‘I want to spend $300,000 on a house,'” said Boudreaux. “They go to a lender and say, ‘Here’s my income and my debts, what can I afford?’ So when interest rates rise, what they can afford is less.” You can see how much home you can reasonably buy here.
Savings Accounts & Certificates of Deposit
At times, major banks quickly respond to Fed rate hikes by paying higher interest on savings accounts. That isn’t always the case, but it doesn’t hurt to shop around if you want better rates. According to experts, online banks, community banks and credit unions may raise their rates faster as they attempt to lure customers away from major banks.
“The Fed has made it clear that they would like to raise rates this year, so in general, what that means for us is if we have debt that we can lock in at lower interest rates, great,” said Boudreaux. If refinancing your home is on the agenda, “take a hard look at those numbers.”
Likewise, if you’re burdened by student loan debt and looking to move from a federal to private lender, “that would be a high priority too,” said Boudreaux, who’s seen interest rates soar in response to the Fed. Doing what you can now to offset higher costs in the future could be a boon for your savings.
Keep your eye out Wednesday to see what happens next.
If you have a monthly credit card payment you could do without, you aren’t alone. The average American between 18 and 65 has more than $4,000 in credit card debt, and if you carry a balance from month to month, you’re automatically making a larger credit card payment than necessary.
Here are nine common-sense ways to shrink your credit card payment.
1. Make Larger Payments Now
While it may sound counterproductive, making larger credit card payments now will reduce future payments — provided you aren’t racking up too many charges and undoing your progress. By making more than the minimum payment, you can reduce your overall balance — and the amount of interest you’re accruing.
If you have disposable income, this should be an easy step. If you don’t, some budget tightening can help free up cash for a larger payment.
2. Reduce Credit Card Spending
If your purchases are affecting your ability to manage your credit card payments, it could be time to curb your spending. You can analyze your monthly credit card statement to determine what types of purchases are costing the most. For instance, if restaurants and bars make up a large portion of your credit card bill, you may want to start cooking more meals at home.
3. Stop Using Your Card Entirely
If your balance is out of control or way over the recommended credit-utilization rate, you may want to eliminate credit card spending altogether. Instead, you can use only your available funds for expenses as you work to pay down your debt. This way, you won’t add to your balance and over time your minimum payment will drop.
“For many people, the problem isn’t that they aren’t paying money toward their balance but that they keep charging more to it,” said Brian Davis, cofounder of SparkRental.com. “In that case, they should leave their credit card at home, in a drawer, and only spend cash until they’ve paid off their credit card debt. Spending cash feels quite different than swiping plastic — people intuitively track their spending and how much cash is left in their wallet, because it’s real and tangible.”
4. Negotiate Lower Interest Rates
One of the simplest ways to reduce your monthly credit card payment a bit is to lower your interest rate. You can call your credit card company and ask them to adjust your annual percentage APR (more about lowering your interest rate here). If you have a long history of timely payments, they may comply without much fuss. Even if you don’t have success at first, you can keep calling to reach other representatives or ask to speak with a manager.
5. Transfer Your Balance
Balance transfers are another common way to lower interest rates. Many credit cards offer introductory periods of a 0% APR for balance transfers, which gives you an interest-free timeframe to pay down your balance. The APR will kick in when that timeframe is up, so you’ll want to choose a card with a lower APR than you currently have and/or do your very best to pay off the balance before that window is up. Keep in mind you’ll likely have to pay a one-time fee per balance transfer, which usually amounts to $5 or 3 to 5% of the transfer amount, though there are one or two cards out there that will let you avoid that fee.
“One way to lower your monthly credit card bill is to open a new card with a 0% APR for an introductory period, and transfer your existing credit card balances to it,” said Davis. “That will buy you some breathing room to pay down the balance without huge portions of the payment going toward interest.”
6. Prioritize Payments
If you’ve got multiple balances, some strategic resource allocation can help you pay them down more quickly — and ultimately lower your monthly obligations. Make sure you’re making all your minimum payments on-time, but put the most money you can toward the balance with the highest interest rate. That’ll keep that balance from burgeoning and save you more dough in the long run.
7. Ask Your Card Issuer for a Payment Plan
If you’re in serious financial trouble, you could talk to your credit card issuer about a long-term repayment plan. That’s not going to go a long-way to lowering your credit card bill in the short-term, but it can help you avoid late fees, default and bigger money woes while you work to improve your financial health.
Credit card companies sometimes offer alternative payment plans to customers experiencing financial hardship. Keep in mind these plans will differ from company to company and may require you to close your account.
Paying off your balance each month is the ideal way to use a credit card. It eliminates interest and keeps you from accruing debt. No matter your financial standing, paying off your balance in full each month should be the ultimate goal.
Trying to lower all your monthly bills? You can find a full 13 ways to lower your car insurance premium here. And if there’s a bill you just can’t seem to get down, let us know in the comments section below and we’ll get an expert to provide some suggestions!
Interest rates are likely going up again, and soon, Federal Reserve Chair Janet Yellen told Congress Tuesday, sending up a clear flare for anyone paying attention.
“Waiting too long … would be unwise,” she said. This, after the Fed telegraphed in December that 2017 might bring three separate rate hikes.
That’s bad news for all kinds of borrowers because interest rates on many different credit vehicles will likely follow suit. It should be good news for savers with money in old-fashioned deposit accounts and those who like certificates of deposit (explained here), and money market account holders for the very same reason. But that remains to be seen.
When the Fed raised its key funds rate in December — for only the second time in 10 years— that triggered increases across the entire financial world. Auto loan rates went up. Mortgage rates went up. Credit card rates went up. So why didn’t savings rates follow suit?
Well, they did. A little. A very little.
The average savings account annual percentage rate increased from 0.180% in January to 0.181% in February. That’s up from 0.179% in December of last year, according to DepositAccounts.com. So, in two months, that’s an extra two pennies per year per $1,000 saved. Don’t spend it all in one place!
“The banks are being very cautious,” said Ken Tumin, DepositAccounts.com founder. “There has been no mass movement in deposit rates.”
Keep in mind, mortgage rates are — predictably— up about half a percent during the past year, according to Freddie Mac. So are auto loans, according to the Federal Reserve. So what gives? Why are consumers seemingly being punished on both sides of the equation?
Well, there’s plenty of speculation as to why. Recall the basic concept that banks accept deposits — and give depositors interest— so they can lend that money out at a higher rate to borrowers, and profit from the difference.
One possible reason is something known as “asynchronous price adjustment.” It’s the same phenomenon often observed when there are price shocks in the oil market. Gas prices go up quickly, but drop slowly when oil returns to its normal price. There are many mechanical market reasons for this, but suffice to say that corporations adjust more quickly than consumers to price movements, so they are good at making a little extra cash when big turnarounds take place. So, like gas prices, savings rates will bend pro-consumer eventually, but not before banks enjoy a bit of time with the extra “spread” between the savings rate they pay and the interest rates they charge.
Skepticism Remains About Rate Increases
A more direct reason, Tumin said, is that banks are still unconvinced that rates are going up more. Back in 2015, the Fed raised rates once and indicated that 2016 might include a series of hikes. Those never materialized, as questions about a sluggish economic recovery remained. So banks might be scared of a similar head fake this year, Tumin said. No bank wants to lead the pack with higher savings rates.
Also, like any business, banks only pay more for raw materials (money, in this case) when they have to— because of competition, or because they need cash because the lending business is going great guns.
“Rates are determined by banks needing to raise capital, to improve what’s called their loan-to-deposit ratio,” Tumin said. That’s not happening at the moment.
It wasn’t always this way. As recently as the housing bubble years, high-yield, Internet-based savings accounts paid 3-4%, and CD rates persisted into the 5% range. Today, the very best passbook rates hover around 1%, and CDs aren’t much better, though some banks offer teaser (temporary) rates that are a smidgen higher.
You Still Have Options … Though Not Great Ones
Consumers sitting on cash with a very low risk tolerance do have some options, though none of them are great. Tumin says savers should keep their eyes on CD rates: When banks have short-term needs to raise capital, they are more likely to temporarily offer higher CD rates. That’s because it’s much easier to lower CD rates after the capital is raised than to lower passbook savings rates.
One-year CD rates had the largest increase last month, DepositAccounts says, with the average annual percentage yield (APY) increasing from 0.496% in January to 0.505% in February. The average 1-year CD rate among the top 10% of the most competitive banks nationwide increased from 0.880% to 0.910%.
CD rates can fluctuate quickly. Capital One 360’s 60-month rates have vacillated between 1 and 2% during the past year, for example. (They sit at 2% right now).
CDs come with a big “but,” however.
“In a rising rate environment … no one wants to get stuck in a CD,” he said. A 2% rate that looks good today might look bad 18 months from now, when it’s possible the Fed will have raised its rate five or six times.
Recall that CDs require time commitments, and often have hefty penalties for early withdrawal. Consumers considering this route should carefully weigh the withdrawal penalties (Some are less onerous— 6 months’ interest, for example— which might make them a decent risk).
Of course, savers frustrated by low yields can consider more risky, non-guaranteed investments in the stock market. But who can blame a saver for thinking the market, and the economy, seems a bit volatile right now?
Your Best Bet? Pay Down Debt
The best course of action is to pay down debt, which is very nearly the same thing as earning interest on your money. Pay your highest APR credit card debt, of course. But making a few extra payments on a car loan or, better, a mortgage, is a good way to earn a “return” on cash that’s otherwise sitting idle.
Keeping your credit in good shape is also helpful. A good credit score can help you get the best terms and rates available. If you don’t know where your credit stands, you can check your two free credit scores, updated every 14 days, right here on Credit.com. You’ll also get personalized details about ways you can improve your credit scores in five key areas. (If you’re not sure where to start, you can check out these tips for how to quickly improve your credit score.)
Meanwhile, pay attention to what the Fed says in the coming weeks and months. Tumin is pretty sure Yellen isn’t crying wolf this time.
“A March increase is still on the table,” he said. “Most analysts think the Fed will probably skip March, and that the next (increase) comes in June. Unless the economy turns around and goes down I don’t think there will be a repeat of last year with only one hike. There should be at least two, and if savers are lucky maybe three.”
They’ll be lucky if banks pass along the higher rates to both mortgage borrowers and savers. Meanwhile, you can take luck out of the equation by continuing to watch published rates and consider switching to a bank when it raises rates. After all, someone’s got to be first.
When applying for a new credit card, most people will pay close attention to several different things. It could be the signup bonus or the rewards they can earn. But the one thing that should always be on your radar is the effective annual percentage rate, or APR, on the card.
On the surface, you might think you have a good understanding about what an APR is and how it’s calculated. However, it can be confusing and you can easily be left uninformed. To help you become a more empowered consumer, we’ll walk you through the basics: When interest is charged on accounts, how the interest is actually calculated, and what can affect the APR you receive.
When Will Interest Be Charged?
A little-known perk of most credit cards is that they come with a grace period. This is the period of time from when your credit card statement closes to its actual due date. The number of days depends on the card issuer, but it’s typically at least 21 days. With most cards, if you pay your entire statement balance before the grace period ends, then no interest will be charged. However, if you only pay a portion of your balance before the due date, then interest will begin to accrue on the purchases you made. (Remember, credit cards don’t have to offer a grace period so be sure to read the fine print of a card you’re considering to see if it offers one.)
How Do You Calculate Interest?
If you are carrying a balance on your credit card, you’ll likely see the interest payment on your statement. But do you know how that figure was derived?
To start, it’s important to understand some terminology. We frequently see APR mentioned in credit card terms. Even though this means annual percentage rate, interest is not calculated on an annual basis. It’s actually calculated on a daily basis, which is more commonly known as the periodic interest rate.
So let’s assume your card has an APR of 16%. To figure out what the periodic interest rate would be, you would divide 16 by 365 days (some card issuers use 360). That means your periodic interest rate would be 0.044% per day. You’re probably thinking that doesn’t seem like a lot, but over a month or a year it can really add up, depending on your balance.
Once you know your periodic interest rate, you need to find out what the average daily balance on your card was. Let’s assume that you have a $2,000 balance at the beginning of the month, and you don’t pay any of it for the first 15 days. Then it’s payday and you are able to pay off $500 on the 16th. Then you pay off another $500 on the 25th of the month. That means your daily average balance would be ($2,000 x 15 + $1,500 x 9 + $1,000 x 6) / 30 = $1,650.
Now that you know what your periodic interest rate would be and you know your daily average balance, you can put them together to figure out what your monthly interest charge would be $1,650 x 0.044% x 30 = $21.78.
What Can Affect Your Credit Card APR?
Most credit cards will state they use a variable APR. This means that the rate can move up and down based on different factors. Some of these factors are directly in your control, while others are controlled by outside influences. Just keep in mind that any rate changes need to be communicated with you 45 days ahead of time, per the CARD Act.
Something that is in your control is your creditworthiness. When you apply for a credit card, the issuer is going to want to make sure you are going to be able to pay back the money you borrow. They also may look at your FICO score, among others. The higher your scores, the lower your APR will be. (Not sure where your finances stand? You can view two of your credit scores for free on Credit.com.)
However, another factor is something called the prime rate. This is defined as the lowest rate of interest at which people may borrow commercially. When the Federal Reserve moves rates (as it did very recently), it can either positively or negatively affect a credit card’s APR. If the Fed raises rates, your APR might go up. If the Fed lowers rates, you APR could go down.
By understanding how your credit card company calculates the interest on your card, you will become a more empowered consumer and have a better appreciation for paying off your statement balance in full each month.
Ah, September. That magical time of year when boots and open-toed shoes intermingle, mornings get crisper, people start lining up for those infernal pumpkin spice lattes and some retailers start hauling out their holiday cheer.
It seems every year, some store somewhere feels the need to make the holiday shopping season just a tad bit longer. In fact, I wouldn’t be surprised if roadside fireworks stands start selling Christmas trees in late June next year.
There’s one positive to be said about the ever-earlier start of the holiday shopping season, though: preparedness. That’s especially true when it comes to your credit and credit cards.
If you’re like most Americans, you’re carrying some credit card debt. In fact, revolving credit debt, made up mostly of credit cards, climbed 3.45% in July, compared to 11.5% the month prior, the Federal Reserve said last week. In fact, credit card debt is expected to top $1 trillion dollars this year, closing in on the all-time high of $1.02 trillion set in July 2008, just before the Great Recession.
If you’re worried what your holiday gift-giving, party going and other festivities might do to your credit card debt, now’s the time to make a plan.
1. Start by Checking Your Credit Scores
Whether your holiday spending plans involve opening up a new credit card or taking measures to protect your credit, the first thing you’ll want to do is see where your credit scores stand. You can get two free credit scores, updated every 14 days, on Credit.com, and, in your credit report summary, you’ll see what areas of your credit are helping (or hurting) them. For example, 30% of your score is based on the amount of debt you’re currently carrying in relation to your credit limits. This credit utilization ratio can bring your scores down quickly if you’re carrying a lot of credit card debt.
2. Ask for a Credit Limit Increase … No, Not So You Can Spend More
Another way to improve your credit utilization is to ask for a limit increase. To be clear, just because people tend to charge more during the holidays doesn’t mean it’s a good reason to spend more than you can afford. Given the high interest rates on credit cards, a little overspending can take months to repay and cost you hundreds — potentially thousands — of dollars in interest.
That being said, if you’ve budgeted for the increase in spending and plan to put it on credit cards, it’s important to be careful about how high you push your credit card balances. To keep your credit scores in good shape, many experts recommend using less than 10% of your available credit.
3. Pay Down Your Debt
Once you know where your credit stands and how your current debt is affecting it, it’s a good idea to put together a plan pay it off. If your credit card interest rates are high, you could benefit from taking a personal loan at a lower interest rate and using that money to pay off your credit card debt. That also can potentially help your credit scores in the long-term, since the mix of credit accounts you have (mortgage, auto loan, personal loan, credit cards, for example) also affects your credit scores. You can see how long it will take you to pay off your debt using this credit card payoff calculator.
4. Make a Holiday Spending Budget
Yes, part of the joy of the holidays is gift-giving; seeing that look of excitement on your loved one’s face is priceless —until you look at your credit card statement the following month. Ouch. It’s a good idea to set a budget for what you’ll spend on presents, parties, outings and even decorations. The important thing with any budget is to be realistic, so if you know you’re going to end up buying that iPhone 7 Plus for your girlfriend, just put it in your budget and figure out how you can save in other areas (like eating peanut butter for dinner for the next three months, or buying your dad a tie).
Just remember, the holidays will be more fun if you plan ahead a little and aren’t stressed about how much you’ve spent and how much extra you might end up paying in interest. ‘Tis the season to be jolly, after all, but seriously, stay away from the pumpkin spice lattes.
It’s no secret interest rates are the main driver of the nation’s loan volume. In the first quarter of 2016, mortgage refinances were 23.5% higher than the same quarter the year before (an eight-year high for an opening quarter). First mortgages also were about 10.3% higher than the year before, thanks to continued low interest rates.
Fixed-rate mortgages are currently below 4%. Here is why waiting for a better rate could be a risky could move.
The Markets Will Continue to Move
The pricing associated with interest rates moves daily, in some cases multiple times per day. It is normal for a lender to be pricing out with a certain interest rate at 10 a.m., and then have a change that same day at 2 p.m., resulting in a different fee and cost structure just hours apart. The market is always moving whether you pull the trigger on a new mortgage or not. The takeaway here is to not get fixated on a particular interest rate in order to justify the entire transaction. Focus on the big picture.
Let’s say you’re eyeing a 3.625%, 30-year, fixed-rate mortgage and, for whatever reason, it takes you a couple of weeks to put together your financials to lock in an interest rate. The market moved and you end up with a 3.875% rate on a 30-year term instead. This is still considered a win.
(Mortgage tip: For every .125 of a percent on every $100,000 borrowed that changes the payment $7.25 per month. For example, the difference between 3.625% versus 3.875% on a $417,000 is $58 in payment difference.)
The Cost of Procrastination
The cost of procrastination can add up quickly.
When refinancing: Let’s say you stand to save $200 per month by pulling the trigger now using our example at 3.625%. Each month you don’t refinance, you are literally stepping over dollars. Six months of procrastination is equivalent to a cost of $600 just by waiting, and that’s if the move is in the direction you want.
When buying: Using our $417,000 example using a rate range between 3.625 to 3.875% the difference in rate over the term of the loan is $21,294 in interest. Moreover, when buying a home, the cost can add up as a difference in purchase price can sway buying power, which can result in property payment change.
What are rates going to do in the future? No lender has a crystal ball. If you are debating whether to buy or refinance a home, first thing to ask is “can I afford this new payment?” The second question to ask is “is this new loan truly helping me accomplish my larger financial goals?” Interest rate is important to both questions undoubtedly, but big picture should be the target.
The best time to take out a mortgage is whatever time you are in a place that you can justify the expense for the net tangible benefit. It is always the right time as long as you can afford the mortgage and you’re not throwing good money after bad. Let interest rates be a guiding factor only.
A final thought: Your lender cannot control the time frame for how long you take in putting together your supporting documentation, or what your house appraises for. At the end of the day, ask yourself if the rate and cost structure you end up with still allow you to accomplish your goals. Let that be your guide to obtaining a great mortgage.
Are you a super saver? Sure, anyone can save money in a typical savings account. A typical savings account often comes packaged or suggested with your checking account from a local bank branch and only pays 0.01%. These savings accounts usually don’t offer the best terms or interest rates, which is why it’s best to keep shopping around.
The best accounts offer perks like no minimum balance, ATM access and much higher interest rates than the average savings account. Here are the best online savings accounts so you can super charge your savings.
1. High Rate: Synchrony Bank – 1.20% APY, No minimum balance (and ATM access)
Synchrony Bank pays a healthy 1.20% APY. There is no minimum balance requirement and no monthly fee. In addition to the great rate, you can get an ATM card. Most internet-only banks require you to transfer funds electronically, which can take a few days. If you ever need quick access to your funds, the ATM card makes access easy. You might not recognize the Synchrony brand, but it is a large, well-capitalized business. Synchrony used to be a part of General Electric (GE), and was spun out as a separate company. Unfortunately the digital experience is not the best, and there is no app.
2. High Rate: Goldman Sachs Bank USA – 1.20% APY, no minimum balance (but no ATM access)
Our advertiser Goldman Sachs Bank USA, the consumer bank of Wall Street giant Goldman Sachs, offers a 1.20% APY on deposits. There is no minimum balance and there are no transaction fees. Upon opening the account you can deposit funds via electronic transfer, wire transfer or deposit by check. You can get access to your funds via electronic transfer or wire transfer. Goldman has consistently been paying one of the highest rates in the market, and has a big appetite to keep growing the business. With a 1.20% APY, you can get one of the highest rates in the market from a well known brand.
The maximum deposit is $250,000 and deposits are FDIC insured.
3. Special Deal: Discover – up to $200 Bonus* + 1.15% APY
Discover Bank is famous for its credit cards. But it also has an online consumer bank. The savings account pays 1.15% APY. And now there is a special deal: if you deposit $15,000 into your first Discover online savings account, you will receive a $150 bonus.* And if you deposit at least $20,000 into your account, you will receive a $200 bonus.* During the first year, you would earn the bonus on top of the 1.15% APY, making this one of the most lucrative savings accounts on the market. The bonus offer is easy to get (no need to visit a branch), and you get all of the other benefits associated with Discover’s online bank on top.
Apply for your first Discover Online Savings Account by 10/2/17. Enter Offer Code MM817 when applying. Deposit a total of at least $15,000 into your account by 10/16/17 to earn a $150 Bonus or deposit a total of at least $20,000 into your account by 10/16/17 to earn a $200 Bonus. Maximum bonus eligibility is $200 per account.
What to know: Offer not valid for existing or prior Discover savings customers. Account must be open when bonus is credited. Bonus will be credited to the account by 10/31/17. Bonus is considered interest and will be reported on IRS Form 1099-INT. Offer may be modified/withdrawn without notice.
4. Top Rate: Barclays Bank – 1.20% APY, No minimum balance and no monthly fees
Barclays Bank is one of the largest banks in the world, and it is based in London. In the United States, Barclays operates a very large credit card business (Barclaycard). If you have an American Airlines credit card, you might have a Barclaycard. In order to fund its card business, Barclays raises deposits online. You can earn a 1.20% APY return, which is one of the best rates out there. You do not have to pay a monthly fee, there is no minimum deposit and Barclays has a great digital experience. Even though this is a British bank, your deposits are FDIC insured.
5. Top Choice: Ally Bank – 1.20% APY, no minimum balance and a free checking account
Ally is a bank without branches that has consistently been paying high interest rates on savings accounts. Ally has no minimum balance requirement and will pay 1.20% APY. Even better, you can open a free checking account (also with no minimum balance requirement). This makes access to your savings account incredibly easy – because you can transfer funds online (or via the app) and have immediate access via checks, debit cards and ATMs.
6. Highest Rate From A Credit Union: Alliant – 1.11%, $5 to open and ATM access.
People love credit unions. Because credit unions are owned by their members, you can get a higher interest rate on your savings (and lower interest rates when you borrow). Alliant is one of the best credit unions in the country, offering some of the best rates on your savings. In addition, Alliant has a great website and digital experience. Anyone can join the credit union and you only need $5 to open the account.
7. Highest Overall Rate: BankPurely – 1.30% APY, $1 to open
This account is a new entrant to our list and a newly launched bank. BankPurely is the online bank of Flushing Bank (a small bank in New York with 19 branches). The online bank is an attempt, in their words, to bring “banking back to its roots.” You only need $1 to open the account, and there is no minimum balance and no monthly fee. You do not need to be in New York to open the account. Clearly we like the rate (the highest rate we can find in the country). However – we have seen this trick before. A new bank launches. A very high interest rate is paid to attract customers, and then the rate drops. BankPurely makes it clear that the rate can change at any time. The banks at the top of our list (Synchrony, Ally, Goldman Sachs) have been consistently paying top-tier rates. If BankPurely consistently pays this rate beyond its launch, it will move up our list. But, for now – we are including it in the list with caution.
8. High Rate for Big Balances – up to 1.30% APY on balance of $25,000 and above
UFB Direct is a part of B of I (Bank of the Internet), a publicly traded FDIC-insured internet-only bank based in San Diego. This is a tiered offer. You will only earn 0.25% APY on balances below $25,000. However, on balances of $25,000 or more you will earn a very healthy 1.30% APY. This account is designed for people with big balances. This rate is only available for new funds – which includes other BofI brands (like Bank of Internet USA).
Runner-Up: Dollar Savings Direct – 1.40% APY, No minimum deposit
Dollar Savings Direct is a division of Emigrant Bank. At 1.40% APY with no minimum deposit, this is clearly a good deal. Just one warning: Emigrant has done this before. MySavingsDirect is also a division of Emigrant. For a few months, it paid the highest savings account rate in the market. It then reduced the rate (and is currently at 0.85% APY). Now, with a different name, Emigrant is paying the highest rate at Dollar Savings Direct to attract customers. Just remember: the rate can be lowered at any time, and there is no guarantee this rate will last. We add it to the list because 1.40% is hard to beat. But we have a suspicion (hopefully we are wrong) that once a lot of deposits are gathered, the rate could go down.
This account has a steep $10,000 minimum initial deposit. However, if you have at least $10,000 the 1.30% APY is a great deal. The account, like all others in this article, are FDIC-insured. There is no monthly fee on the account. Just make sure you keep at least $10,000 in the account. If your balance drops below $10,000 you will only earn 0.25% APY.
Take a moment to calculate how much you could earn using our free saving account comparison tool. Enter your zip code and how much you have to save and you’ll see the best savings accounts for you and save more this year. If you have a large balance, the tool might find better options than the no minimum balance options we’ve listed here.
If you are willing to lock your money into a longer term, consider a certificate of deposit. You can find the best CD rates here.
Your money deserves more than 0.01%. At that rate you’re basically giving a free loan to the bank, not a favor they’d return to you!
* We’ll receive a referral fee if you click on the “Apply Now” buttons for Synchrony Bank. This does not impact our rankings or recommendations You can learn more about how our site is financed here.
Here’s something you don’t hear every day: It’s a good time to be taking out student loans.
That’s because the interest rate on the most common student loans — undergraduate Federal Direct Loans — just dropped to 3.76% for loans disbursed between July 1 and June 30 of next year. Last year, the interest rate was 4.29%, and before that, it was 4.66%. Interest rates on federal student loans taken out by parents and graduate students also dropped, to 6.31% from 6.84%.
In 2013, a new student loan law tied federal student loan interest rates to the 10-year treasury note. President Barack Obama signed the law right before interest rates were set to jump to 6.8%, and now, every year, new student loan rates are set by the last 10-year treasury note auction before June 1. The rate is calculated by adding 2.05 percentage points to the high yield of the 10-year note at the time of the auction — 1.71% on May 11. (In writing the 2013 law, Congress added the 2.05 percentage points to cover the administrative costs of issuing these government-backed loans.)
Back in 2013, when this law was new, some student loan experts saw the move to a 10-year-note benchmark as a band-aid — that an improving economy would eventually drive up student loan interest rates to the high levels this method initially avoided.
“This interest rate can go pretty high,” Mitchell D. Weiss, a professor of finance at the University of Hartford, and a Credit.com contributor, said in a 2013 interview after Obama signed the law. Congress set a cap of 8.25% on undergraduate Direct loans and a 9.5% cap on graduate and parent PLUS loans.
That’s still the case but, for now, students taking out federal student loans in the coming academic year can enjoy their historically low interest rates. Between July 1, 2006 and June 30, 2010, Direct unsubsidized loans carried a 6.8% interest rate for undergraduate and graduate students. In the last decade, only borrowers who had Direct subsidized loans disbursed between July 1, 2011 and June 30, 2013 enjoyed an interest rate (3.4%) lower than the new 3.76%. (Subsidized loans, on which the government pays interest while the borrower is in school, are less common than unsubsidized loans.)
Whether you’re buying a big-ticket item on credit, taking out a loan or applying for a credit card, one little question can strike fear into the heart of even the most savvy of spenders: What will my interest rate be?
Whether you’ve got great credit and qualify for some of the best offers out there or your score could stand a little CPR and you can’t even think about how much you pay in interest on debts each month, there are probably at least a few facts about interest rates — and your interest rates, in particular — that you didn’t know.
Below are some of the biggest ones to be aware of, courtesy of MagnifyMoney co-founder and former banker, Nick Clements.
1. You have more than one credit card interest rate
In actuality, just one credit hard may hold multiple different rates for different things. For example, you’ll likely have different interest rates for purchases, cash advances and balance transfers, to start. “In addition, if you open a new credit card, you will likely have introductory purchase and introductory balance transfer interest rates,” says Clements. “Don’t assume that there is just one interest rate.”
Which the exception of introductory rates — which are usually (but not always) 0% — interest rates tend to be variable. This means that the rate is tied to the prime rate, so if the prime rate goes up, so will your interest rate.
3. Your purchase APR is usually based on your credit score
Yet another reason why your credit score is so valuable: The higher your credit score, the lower your risk to the credit card company, and the lower the interest rate you’ll pay. Your interest rate will be given to you when you open your account and will be based on your credit score at the time of your application, so it’s worth looking into your score before trying to open a card to get a feel for what you might be dealing with.
4. Your interest rate can go up for a myriad of reasons
An increase in the prime rate isn’t the only thing that will make your interest rate go up. “If you become 60 days or more delinquent, you can be charged a penalty interest rate,” says Clements. “That means your rate could become very high on your existing balances.” The bank can also arbitrarily decide to increase everyone’s interest rates. However, in this circumstance, if the bank wants to change the rate on your existing balance, you have the right to say no. “You would then close your card and just make payments on the existing balance until it’s paid in full,” explained Clements. “If you want to keep the credit line open, you would have to keep the higher rate.”
Toyota Motor Credit is the latest auto lender to settle allegations from federal authorities that its policies led to discrimination among minorities who borrowed through dealers when buying cars. The firm will pay up to $21.9 million in restitution to consumers, according to a settlement order made public Tuesday by the Consumer Financial Protection Bureau and the Department of Justice.
The CFPB says that Toyota Motor Credit’s system of allowing dealers to mark up interest rates led to African-Americans, Asians and Pacific Islanders paying higher interest rates than white borrowers. Thousands of minority borrowers paid $200 more than whites because of the policy, the bureau said.
Toyota did not admit any wrongdoing and described the agreement as voluntary. In addition to the commitment to “refund” overpayments, Toyota Motor Credit also agreed to limit the amount of markup it will allow dealers to earn. Previously, dealers could add up to 2.5% to an auto loan offered to consumers; that will now be capped at 1.25%.
“No consumer should be forced to pay more money for a loan because of their race or national origin,” said U.S. Attorney Eileen M. Decker of the Central District of California. “This settlement resolves our claims by providing compensation for affected consumers and seeking to ensure that future loans funded by Toyota reflect equal terms.”
The CFPB announcement made clear that its investigation did not find Toyota Motor Credit intentionally discriminated against its customers, but rather that its “discretionary pricing and compensation policies resulted in discriminatory outcomes.” The firm faces no penalties because of “proactive” steps it is taking to address fair lending risk, the CFPB said.
“(Toyota Motor Credit) does not tolerate discrimination of any kind, even perceived or unintentional, from its employees or business partners,” the firm said in a statement. “This principle extends to fair lending practices. While (Toyota Motor Credit) respectfully disagrees with the agencies’ methodologies to determine whether industry lending practices have been discriminatory, the company shares the agencies’ commitment to ensuring that consumers can count on competitive and fair auto financing options. The actions (Toyota Motor Credit) will take under this agreement are intended to further that commitment.”
The CFPB has aggressively pursued fair lending cases against auto lenders. Previously, it has settled similar cases with Ally Bank, American Honda Finance, and Fifth Third Bank.
The Ally case, settled in December 2013, has been in the news recently because some object to the method the CFPB required for distributing remuneration checks. Auto lenders generally do not collect ethnic data on borrowers, so the agency used statistical calculations to assess the probability that a consumer might be a minority. On Jan. 20, the Republican-led House Financial Services Committee released a report ringing the alarm bell that some non-minorities will receive payouts from the settlement fund.