Bank Savings Rates

Interest is not only paid when you borrow money, but you can also earn interest by depositing your money in a bank or financial institution, most notably various savings accounts and certificates of deposit, or CDs, which may or may not be fixed-term (certificates of deposit generally are). In this case, you are lending your money to the bank, which puts it into circulation through its other transactions (e.g., giving others loans) and promises to return it to you with interest earned for your deferred use of the funds.

Savings accounts are very common ways of earning interest on deposited money, and the interest earned is known as the annual percentage yield, or APY (similar to APR). Savings accounts often have certain limitations on them, such as a minimum account balance, or restrictions on the number of times the owners can withdraw money from their savings accounts without having to pay high fees to do so. Virtually all banks offer some kind of savings plan, and there are usually many options from which to choose. Most savings accounts are “traditional,” i.e. they are operated by traditional banks, but there is a new trend in today’s Internet age to move banks fully online. There are all-online banks that offer online savings accounts with significantly higher annual percentage yield since there are no overhead fees or other added costs associated with running a “traditional” business. The downside to these is that there is no physical bank branch location that the customer can visit, and support is usually online only, or via phone occasionally.

Another form of savings is the certificate of deposit, or CD, which is a fixed term account offered by most banks, credit unions, and similar financial institutions to individuals and businesses. CDs typically have fixed interest rates, and they are, just like regular savings accounts, insured by the FDIC (Federal Deposit Insurance Corporation) in the United States. The terms after which certificates of deposit “mature” are diverse; they can range anywhere from three months until up to five years, after which the owner will get his or her money back, plus the fixed interest earned on it.