Savings interest rates may rise slowly

When you open a savings account, you are, in effect, lending money to your bank, and in return, you get a very safe investment and a little interest.

For the past several years, the Federal Reserve kept interest rates low. This meant cheaper mortgages, but also microscopic earnings on savings deposits. In fact, the Federal Deposit Insurance Corporation reports that the national savings interest rate was a tiny .07 as of May 2022, up from .06 percent in December 2021. Go back to 2010 and rates averaged .2 percent. Peek further back in time, however, and you can find rates in excess of 7 percent.

So with Fed interest rates on the rise, will you see interest paid on savings accounts increase? Probably, but only marginally. As the Fed rates tick up, so too will savings account rates. But even optimistic experts are predicting that rates will rise to 2 percent or thereabouts in late 2022. Rates will rise as banks compete for deposits, but the increase will probably be slow and incremental.

Large, historically-established banks have been slow to increase rates. Less well-known online banks, however, are courting customers more aggressively and even offering rates in excess of 1 percent.