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The interest rates that banks pay on savings accounts are expected to rise in 2023, potentially as high as 5.83%. But will that trend mean you’re getting the best savings rates in 2023?
Not all savings accounts are created equal, and you’re missing out if you keep a hefty balance in a standard savings account that earns only a fraction of a percent in interest. Here’s how to get the best savings rates in 2023.
Rates Will Rise, But Innovation Will Be Flat
If you’re hoping savings account interest rates will go up in 2023, you’re probably in luck. Expect banks to continue increasing the interest rates paid on savings deposits as the federal funds rate rises to fight inflation.
The federal funds rate won’t be the only thing pushing interest rates up though. It’s now common to see interest rates above 3.00% APY on high-yield savings accounts, and interest rates on competing FDIC-insured investment options like certificates of deposit (CDs) are also on the rise.
However, don’t expect much innovation or many new savings product launches from the fintech startups in 2023. The dropoff in investment funding of fintechs in 2022 will result in a lack of innovation in 2023 and beyond, at least until VC investment picks up again.
Fintechs and Niche Banks Will Have the Top Rates
Fintech companies and smaller banks will likely have the edge in 2023 for customers who are seeking maximum savings rates, especially on smaller deposit amounts. These smaller players don’t have the marketing budgets of larger banks and generally try to entice new customers with better rates.
In the fintech space, the lack of VC-funded marketing budgets and product launches will limit the number of options younger fintechs have to acquire customers. The limited dollars invested in innovation in 2023 are much more likely to be spent on checking account-like products and person-to-person payment services than on savings products. However, even without the budget to hire engineers and marketers, one lever that the fintechs can pull is the interest rates they pay on deposit accounts.
Bread Savings from Bread Financial is typical of what you might expect from a fintech in 2023. The company’s high-yield savings account pays 3.50% APY as of November 2022. The product isn’t particularly innovative, but it is paying among the best rates on a savings account.
There Is Space To Innovate in Brand-Connected Banking
In the U.S., T-Mobile Money provides a great example of what brand-connected banking could be. This product offers both a compelling APY and a connection to a popular brand. As of November 2022, T-Mobile Money offers eligible T-Mobile and Metro by T-Mobile customers 4.00% APY on checking account balances up to $3,000 and 2.25% APY on balances above that, plus 2.25% APY on savings account balances. T-Mobile Money is also available to customers without T-Mobile phone service. Any customer who signs up for T-Mobile Money can earn 2.25% on both checking and savings account balances.
The brand-connected banking space isn’t yet saturated with copycat offerings by brands trying to expand their footprints and improve customer retention. Apple recently announced its savings account, which the company will launch in partnership with Goldman Sachs. Expect other brands to follow suit in 2023.
How To Find the Best Savings Account For You
If you want to get the best interest rate on a savings account in 2023, be prepared to move your money—your primary bank is likely not where you’ll find the best rates. A good first step in your search for the best savings account rates in 2023 is to visit our list of the best high-yield savings accounts. As you shop around for a savings account, here are a few things to consider.
Look to the smaller banks. In 2023, the best savings account interest rates likely aren’t going to be found at one of the large banks where you might have your primary checking account or hold a credit card. In fact, you’ll find only a handful of the biggest banks have rates compelling enough to be considered among the best high-yield accounts.
Consider how much you need in short-term savings. Keeping some cash in a savings account can help you pay unexpected bills in an emergency and give you peace of mind. But keeping too much in your savings account can rob you of the opportunity to earn greater returns by investing that cash elsewhere. Carefully consider how much money you need to keep in your savings account, and seek higher-return investments for any cash you accumulate beyond that amount.
Be aware of fees and withdrawal limits. While savings accounts typically come with fewer fees than checking accounts, make it a point to understand your account’s fee structure. Some savings accounts require you to maintain a minimum balance to avoid paying a monthly maintenance fee. Also, savings accounts often limit the number of withdrawals you can make from the account per statement cycle. Six transactions is a common limit, although some banks allow you to exceed this limit by paying an additional fee.
Savings account rates will be on the rise in 2023, but to get the best rates on your nest egg, you’ll have to shop around. Look to smaller banks with the best high-yield savings accounts for the highest rates. As you move your money to get the best rates on your savings deposits, pay attention to fees and limitations typical of savings accounts.
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