While this isn't good news for people in debt, it's a great time to have a savings account, says Ted Rothman, chief credit card analyst at Bankrate.
“The biggest benefit is to savers,” Rothman says. “Even a fully liquid, federally insured savings account can earn you yields in excess of 5 percent. The best one-year term deposits are also over 5 percent.”
After more than a decade of near-zero interest rates, savers are now being rewarded for putting their money in banks, and with rates remaining at multi-decade highs for longer, savers have an extended opportunity to take advantage of all that banks have to offer.
The average U.S. savings account earns just under 0.5%, according to data from the Federal Deposit Insurance Corp. That's almost eight times what it was three years ago, but it's nothing compared to what some high-yield accounts are now offering, Rothman said. And not enough people are taking advantage of them, he said.
“A recent survey found that very few people are even earning a 4% return on their savings,” Rothman says. “While the highest-yield savings accounts offer returns of 5.5% or more, two-thirds of savers are earning less than 4%.”
To get these great rates, consumers should shop around and consider opening a new account, even if it means switching banks.
“That's the inertia factor — you just stick with the same banks you've always used,” Rothman says, “but it's well worth the plunge to open one of these accounts and get a few extra percentage points of return on your emergency savings or other short-term funds.”
The same logic applies to term deposits: Many banks are offering promotions on high-yield term deposits if you can put your money away for a few months, and now is a great time to shop around for the best terms and lock in those rates while they're still available, says Rothman.
Higher interest rates are good for savers, but they also mean borrowing costs will remain high for the foreseeable future, with credit card interest rates in particular remaining at all-time highs.
While the average interest rate on U.S. credit cards has been above 20% since March 2023, many cards have rates much higher, Rothman said. “Some of these cards are over 30%. There are dozens of them, especially store credit cards, that are over 30%.”
These high interest rates are harsh on borrowers who carry balances, “leaving them in debt for years because of the high interest rates.”
For credit card users with large credit card bills, balance transfer cards remain a great option for paying down debt. Balance transfer cards are exactly what they sound like: they transfer the balance from one card to another, usually for a one-time fee, followed by a period during which you can pay off the balance interest-free.
Credit card issuers began offering balance transfer cards with very generous terms during the pandemic and, somewhat surprisingly, haven't stopped offering them, Rothman said.
“The fact that 0% balance transfer cards are still widely available is surprising at first glance,” Rothman says.
Many cards still offer long interest-free periods and low transfer fees, and while these terms are still around, consumers would be wise to take full advantage.
“A lot of banks expect you to get a card and get a bonus within a certain period of time, but then the customer doesn't pay it back on time, and then the interest rate goes up substantially,” Rothman says, “but I think if you use this to your advantage, it can really be to your advantage.”
Want to make some extra money outside of your day job? Enroll in CNBC's new online course, “How to Make Passive Income Online,” to learn about common passive income sources, tips for getting started, and real-life success stories.
Plus, sign up for the CNBC Make It newsletter to get tips and tricks to succeed in work, money and life.