The same story is emerging all over financial media. Inflation in the United States is reaching levels many in the country haven’t lived through before. In response, the Federal Reserve has been consistently increasing interest rates.
After increasing rates yet again in December, Jay Powell, Federal Reserve Chair, announced that more rate hikes would be coming down the line in 2023. So, what does that mean for your money, and how can you take advantage of the changing monetary policy?
How the Federal Reserve’s Rates Affect Your Money
There are a few things that happen when the Federal Reserve increases its interest rate:
- Lending: As rates increase, lending looks different than it did before the pandemic. As a result, consumers are looking for the silver lining.
- Saving: On the other hand, when interest rates increase, saving rates tend to increase. That’s because higher interest rates give you the opportunity to earn more over time by letting your money sit in interest-bearing accounts.
- The Market: With consumers spending less and focusing on saving, corporate profitability begins to flatten, often leading to declines in the stock market.
How to Take Advantage of Higher Fed Interest Rates
The economy, financial markets, and the benefits of saving and spending are cyclical. As a result, it’s important to take advantage of the different cycles in your financial plan to improve your overall personal financial stability.
Though higher interest rates may be concerning from a borrowing and investing standpoint, they open the door to savings and earning opportunities that aren’t typically available. Two of the best ways to take advantage of rising federal interest rates are to open an interest-bearing checking account or purchase a CD. Learn more details about these options below.
Open an Interest-Bearing Checking Account
When you’re not spending the money in your checking account, consider an option that allows your money to work for you. As interest rates increase, it becomes more advantageous to put your money into an interest-bearing checking account.
Interest-bearing checking accounts from Western Bank work just like traditional checking accounts, with the following similar features:
- They offer you a safe place to deposit your day-use cash.
- They come with debit cards for easy access to your money.
- You can also write checks to make payments with your interest-bearing checking account.
The core difference between an interest-bearing account and a traditional account is the fact that you earn money on funds that are in an interest-bearing account.
Benefits of Interest-Bearing Checking Accounts
There are several benefits to opening an interest-bearing checking account with Western Bank. Some of the most exciting include:
- Potential to earn more interest as the Federal Reserve continues to increase interest rates.
- Freedom to use debit card for unlimited transactions.
- Access to our world-class customer support team.
Purchase a Certificate of Deposit (CD)
Another compelling way to take advantage of increasing interest rates in the United States is to purchase a certificate of deposit (CD). CDs are essentially an agreement between you and Western Bank that states:
- Your Obligation: You agree to deposit a specific amount of money and leave it with Western Bank for a predetermined period of time.
- Western Bank’s Obligation: In exchange, Western Bank provides you with an interest rate on the money you deposit.
There are a couple of things you should keep in mind when you purchase a CD:
- Terms: As mentioned above, CDs require you to leave money deposited for a predetermined period of time; this is called the term. Those terms can be as short as a few months or as long as several years.
- Interest: Most CDs come with a fixed interest rate. That means no matter what happens with the Federal Reserve’s rate in the future, your CD’s rate is locked in.
Benefits of CDs
As with interest-bearing checking accounts, there are several benefits of purchasing a CD with Western Bank. Some of the most exciting include:
- Competitive fixed interest rates.
- Returns can be higher than savings account returns.
- Access to our world-class customer service team.
Take Advantage of Rising Interest Rates Today
Although media headlines often lead to fear surrounding higher interest rates, when you understand what they mean for your finances you have the power to take advantage of them. Now is the time to take advantage of increasing rates by opening an interest-bearing checking account or purchasing a CD. Talk to one of our representatives to open your personal account today.
