How Does The Amount In Savings Affect Someone's Interest Rate?

How does the amount in savings affect someone's interest rate? While the amount of money you have in savings will affect your interest rate, rest assured a shaky credit history will not. Savings accounts...

Savings accounts can be used for a variety of great things. Some people save for college or a new car, while others use it as a safe place to keep their extra money. Savings accounts are even useful as overdraft protection for your checking account. One of the best features of a savings account is they are eligible to earn interest.


Savings accounts earn interest on a set rate. Your bank determines this rate.

"For a basic savings account, it's a flat amount. There are other savings programs where the rate is tiered based on the balance in the account," says Steve Twirago, personal banker with Chase Bank.

While the amount of money you have in savings will affect your interest rate, rest assured a shaky credit history will not.

"Your interest rate is not impacted by your credit history, but if another bank has reported you to a consumer reporting agency like Chex Systems or TransUnion, then you might not be allowed to open an account at all," says Twirago.




If you want to earn more interest on your savings, you have a few options available to you.

Twirago says, "In addition (to regular savings accounts), there are special savings accounts with even better interest rates for customers who retain higher balances."

One such account is known as a Money Market account.

"A Money Market account is a savings account that requires a higher minimum balance and will give higher interest rates," says Twirago. "The more money you have in one of these accounts, the higher the interest rates."

Another option you may not be aware of is Certificates of Deposit. These are commonly referred to as 'CDs'. These work somewhat like a traditional savings account, but there are differences. Much like savings, the higher your balance, the higher the interest rate you are eligible to receive, but you won't have easy access to your money.

Twirago says, "CDs usually do yield better interest rates than a savings account. Although with a CD, your money is locked in for a certain amount of time, whereas a savings account will let you have access to your money whenever you choose."

If you are saving for the long-term, you can also sign up with an Individual Retirement account. These can be a bit tricky and a lot more risky in terms of the security of your money.

"A retirement account is not FDIC insured," explains Twirago. " It's not guaranteed by the bank, may lose value, and has volatility."

Twirago goes on to say, "You can have an IRA on the banking side or the brokerage side. If it's on the brokerage side, the rates will be based on what the portfolio does and there are no guarantees of what the rate will be."

It will be up to you to decide if the chances for a higher return on your money are worth the risk of a retirement account.

"In the long term (at least in a 5-year time frame) historically, the rates are higher than what you'd get on a regular banking account. However, past performance does not guarantee future returns," warns Twirago.

If the amount in your savings has risen and you aren't sure what the best option would be for you and your family, talk to your personal banker. The more money you have in any type of savings, the more interest you should be earning.

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