26 June 2017

The Best Places to Stash Your Cash

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Americans are socking away record sums in bank accounts. But they are leaving money on the table.

Savings and money-market deposit accounts at U.S. financial institutions held $7.3 trillion at the end of March, according to an analysis of Federal Reserve data by Moebs Services, an economic research firm in Lake Bluff, Ill. Another $1.6 trillion was sitting in checking accounts. Both figures are all-time highs, though neither is adjusted for inflation.

The catch: The accounts often pay mere pennies in interest. Savings accounts carry an average annual yield of 0.08%, the lowest since at least 1984, according to Bankrate.com, a bank-account comparison website. Checking accounts yield an average of 0.06%, and many pay nothing at all.

Jittery depositors often favor savings and checking accounts and certificates of deposit because the Federal Deposit Insurance Corp. insures balances up to certain limits.

Yet there are ways to get the same protection while generating extra income. In some cases, that could mean hunting down accounts that pay higher interest. In other cases, that could mean considering alternatives, such as prepaid cards.

The cash buildup is in part a sign of caution on the part of individuals and businesses. Keeping cash close at hand can be wise, as many workers learned painfully as job losses spread during the financial crisis, and as many businesses learned when borrowing money became difficult. The amount in savings and money-market deposit accounts has been growing every quarter since the end of 2008, according to Moebs.

In addition, investors may be shifting into cash because of concern about potential losses in the stock market or other assets, having learned during the financial crisis that money that is invested in the market can start to evaporate just when you need it most.

There also are signs that individuals are curbing their consumption. Consumers spent 0.3% less in April than they did in March, based on the latest inflation-adjusted data from the U.S. Commerce Department, the third time in the past six months that spending was flat or down.

"The money that they would have spent, they're instead putting to the side," says Dan Geller, executive vice president at Market Rates Insight, a banking research-and-analysis company in San Anselmo, Calif.

Finding a better place to keep cash can be simple. Websites such as Bankrate.com, DepositAccounts.com and WalletHub.com track what banks offer. Those three provide information about yields as well as fees and account minimums or maximums. Typically, they also provide links that take you directly to financial institutions' websites.

The payoff can be significant. Some savings accounts offer an annual yield of just 0.01%, while one of the highest annual yields on a savings account available nationwide is 1%, according to DepositAccounts.com.

Someone who deposits $100,000 into the lower-interest account will earn $100.05 in interest over 10 years, if the interest rate remains unchanged. Someone who puts the same amount in the higher-interest account will earn $10,462.21.

Here's how to make the most while stashing your cash.

Click here for the full article in the Wall Street Journal.

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