As stock market returns taper, you may want to consider an alternative home for some of your money.
Yields on certain certificates of deposits and savings accounts are on the ascent, a trend that is likely to pick up if the Federal Reserve acts as expected and raises rates next week.
“Everyone should start comparing what they can get risk-free to what they’re investing in,” Nick Clements, the co-founder of financial website MagnifyMoney, told CNBC in a previous interview.
(Remember, you’ll pay ordinary income tax rates on any earnings).
Certificates of deposit
MutualOne Bank, headquartered in Framingham, Massachusetts, offers a 19-month online CD with a 3.04 percent return. You’ll need to deposit at least $500.
Virtual Bank has a 2-year CD with a 3.06 percent annual return. The minimum deposit is $10,000.
Synchrony Bank offers a 2-year CD with a 2.8 percent return, and a minimum deposit of $2,000.
Capital One and American Express have 2-year CDs with no minimum deposit and a 2.7 percent interest rate.
People generally can withdraw their CD interest at any time, however there are penalties for digging into your principal. That can be useful, Patricia Seaman, senior director of marketing and communications at the National Endowment for Financial Education, told CNBC in a previous interview.
“If it helps you to think, ‘I can’t get that money,’ it’s worth it,” Seaman said.
Still, savers should look for CDs with the lowest penalties, said Allan Roth, founder of financial advisory firm Wealth Logic. That way, they can match the benefit of a high-interest savings account without the restrictions of a CD. “If you need the money, you break the CD,” Roth said.
Online bank My Savings Direct has a savings account with a 2.4 percent annual return. If you can deposit $25,000, or $100 a month, CIT bank offers a 2.25 percent interest rate.
Barclays and Marcus – the consumer bank of Goldman Sachs — are now offering a 2.05 percent annual return, too.
Stock trading app Robinhood announced today it’s offering checking and savings accounts with a 3 percent return. The company says you’ll have access to some 75,000 free ATMs and won’t be dinged any maintenance or overdraft fees. But an important note: Since Robinhood is a broker, the accounts are not protected by the Federal Deposit Insurance Corp., a government agency that provides insurance for up to $250,000 per depositor for most banks. Instead, the accounts are insured by the Securities Investor Protection Corporation, an industry-funded organization that says it covers a customer’s cash up to $250,000 if the firm fails.
Roth said to be wary of savings accounts unprotected by the government. “If a major brokerage firm went under, people would be lucky to get a few pennies on the dollar back,” he said.
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