Here is a monthly summary of the best interest rates on cash as of July 2024. They are roughly categorized by maturity date from short to long. There is a little-known opportunity for individual investors to make more money while staying safe by switching to another FDIC-insured bank or NCUA-insured credit union. To see how much extra interest you could get by switching, check out my Ultimate Rate-Chaser Calculator. The rates listed are available to everyone nationwide. Rates verified as of July 9, 2024.
TL;DR: Negligible change from last month. Savings accounts and short-term CDs are still above 5%, while long-term CD rates are roughly flat from last month. Compare with Treasury bills and bonds at all maturities, taking into account state tax exemptions. We no longer recommend fintech companies due to the possibility of permanent capital loss or inability to access cash for at least several months if the company or intermediary goes bankrupt.
High Yield Savings Account
The big megabanks still offer effectively no interest, so you should have a separate, fee-free online savings account that you can piggyback off of your existing checking account. Savings account interest rates can fall at any time, which is why I list not just the highest interest rates, but also competitive rates from banks with a track record of competitive rates and a solid user experience. Some banks lure you in with their highest interest rates temporarily, then lower them because they think you'll be too lazy to quit.
The best interest rate at the moment is My Banking Direct at 5.55% APR. Poppy is at 5.50% APR (3 months interest guaranteed). I haven't used them personally, but they are the best interest rates at the moment. CIT Platinum Savings is at 5.00% APR on balances over $5,000. SoFi Bank is at 4.60% APR + up to $325 new account bonus on direct deposits. To get the higher APR, you need to keep direct deposits of any amount each month. SoFi has historically competitive interest rates and full banking features. For more information, see $25 + $300 SoFi Money New Account and Deposit Bonus. This is a limited look at high-yield savings accounts. While not the best interest rate, this is a group that has historically had relatively competitive rates, so I like to track the history. It would be a shame to see Ally Bank fall further behind.
Short-term guaranteed interest rates (1 year or less)
A common question is what to do with a lump sum of cash that you plan to use soon (buying a home soon, just sold a home, just sold a business, legal settlement, inheritance). My usual advice is to keep things simple and take your time. If it's not in a savings account, put it in a flexible short-term CD within FDIC limits until you have a plan.
No-penalty CDs offer a fixed interest rate that never goes down, but you can withdraw your money (once) without a fee if you want to use it for other purposes. Marcus has a 13-month no-penalty CD with a minimum deposit of $500 and a 4.70% annual interest rate. They also offer 7-month and 11-month ones. Consider opening multiple CDs over time for more flexibility. NexBank has a 1-year certificate with a 5.40% annual interest rate (minimum $25,000). If you withdraw the CD funds before maturity, there is a 180-day interest penalty. CFG Bank has a 12-month CD with a 5.36% annual interest rate (minimum $500). If you withdraw the CD funds before maturity, there is a 90-day interest penalty.
Money Market Mutual Funds + Ultra Short Term Bond ETFs
Many brokerages pay very little interest on the default cash sweep funds (keeping the difference in-house), and note: money market mutual funds are heavily regulated but ultimately not FDIC insured, so I still stick to reputable companies. I've included some ultra-short term bond ETFs, which can be the best cash alternative in your brokerage account, but can also result in losses.
Vanguard Federal Money Market Fund is the default sweep option for Vanguard brokerage accounts and has an SEC yield of 5.27% (it changes daily, but the compounded yield can be as high as 5.40%, making it a good place to compare APY), which is likely much higher than your broker's default cash sweep interest rate. PIMCO Enhanced Short Maturity Active Bond ETF (MINT) has an SEC yield of 5.33%, and iShares Short Maturity Bond ETF (NEAR) has an SEC yield of 5.09%, and they hold a portfolio of investment-grade bonds with an average maturity of about six months.
Treasury Bills and Very Short Term Bond ETFs
Another option is to buy individual Treasury bills, which come in a variety of maturities ranging from four to 52 weeks and are fully guaranteed by the U.S. government. You can also invest in ETFs that hold a rotating basket of short-term Treasury bills, which have a small management fee. Interest on Treasury bills is exempt from state and local income taxes, which can make a big difference in your effective yield.
You can build a T-Bill ladder yourself through TreasuryDirect.gov or a brokerage account with a bond desk like Vanguard or Fidelity. Current Treasury bill interest rates are as follows: As of July 9, 2024, new 4-week Treasury bills are worth 5.37% annual interest and 52-week Treasury bills are worth 5.02% annual interest. iShares 0-3 Month Treasury Bond ETF (SGOV) has an SEC yield of 5.27% and an effective term of 0.10 years. SPDR Bloomberg Barclays 1-3 Month T-Bill ETF (BIL) has an SEC yield of 5.22% and an effective term of 0.08 years.
US Savings Bonds
Series I Savings Bonds offer an inflation-linked interest rate and are guaranteed by the U.S. government. They must be held for at least one year. If redeemed within five years, the penalty is the last three months of interest. The annual purchase limit for electronic I-Bonds is $10,000 per Social Security number and can be viewed online at TreasuryDirect.gov. You can also use your tax refund on IRS Form 8888 to purchase an additional $5,000 in paper I-Bonds.
“I Bonds” purchased between May 2024 and October 2024 will pay 4.28% interest for the first six months. Interest rates for the six months thereafter will again be based on inflation. More information on savings bonds can be found here. The CPI will be released in mid-October 2024, giving us a short window in which we can very accurately estimate interest rates for the next 12 months. We will have another post up at that time.
Rewards Checking Account
These unique checking accounts pay above-average interest rates but come with their own risks. You usually have to jump through several hurdles, such as making 10 or more debit card purchases per cycle, a certain number of ACH/direct deposits, and/or a certain number of logins per month. If you make a mistake (or are deemed to have made a mistake), you risk paying zero interest for that month. Some people don't mind the extra work and attention required, but others just don't want to go through the hassle. Interest rates can also suddenly drop, giving the impression of a “bait-and-switch” scheme.
OnPath Federal Credit Union pays 7.00% APY on up to $10,000 when you make 15 debit card purchases, enable online statements, and log in to online or mobile banking once per statement cycle. Anyone can join the credit union and join its partner organizations by paying a $5 membership fee. You can also get a $50 Visa Rewards card when you open a new account and make a qualifying transaction. Genisys Credit Union pays 6.75% APY on up to $7,500 when you make 10 debit card purchases of $5 or more per statement cycle and enable online statements. Anyone can join the credit union and join its partner organizations by paying a $5 membership fee. Credit Union of New Jersey pays 6.00% APY on up to $25,000 if you make 12 debit card purchases, enable online statements, and make at least one direct deposit, online bill payment, or automatic payment (ACH) per statement cycle. Anyone can join the credit union and participate in a partner organization for a $5 membership fee. Andrews Federal Credit Union pays 6.00% APY on up to $25,000 if you make 15 debit card purchases, enable online statements, and make at least one direct deposit or ACH transaction per statement cycle. Anyone can join the credit union through a partner organization. Pelican State Credit Union pays 6.05% APY on up to $20,000 if you make 15 debit card purchases, activate online statements, log into your account at least once, and make at least one direct deposit, online bill pay, or automatic payment (ACH) per statement cycle. Anyone can join this credit union through a membership in a partner organization. Orion Federal Credit Union pays 6.00% APY on up to $10,000 if you make at least $500 electronic deposits (ACH transfers count) per month and spend at least $500 per month with your Orion debit or credit card. Anyone can join this credit union by paying a $10 membership fee for a partner organization membership. All America/Redneck Bank pays 5.00% APR on up to $15,000 if you make 10 debit card purchases per month with online statements. Find local rewards checking accounts at DepositAccounts.
Fixed term deposits (1 year or more)
CDs have high interest rates but penalties for early withdrawal. Finding a bank CD with a reasonable early withdrawal penalty can help you keep your interest rate high while still maintaining access in case of a real emergency. Alternatively, consider building a CD ladder with different maturity dates (e.g. 1/2/3/4/5 years). That way you can access part of the ladder each year and the blended interest rate will be higher than a savings account. When one CD matures, use the money to buy another 5-year CD to maintain the ladder. Some CDs also offer “add-ons” that allow you to deposit additional funds if interest rates fall.
Grow Financial FCU has a 5-year CD with a 4.75% APR. The 4-year CD has a 4.02% APR, the 3-year CD has a 4.02% APR, the 2-year CD has a 4.33% APR, and the 1-year CD has a 4.75% APR. There is a $500 minimum. The early withdrawal penalty (EWP) for CD maturities of 12 months or more is 180 days of interest. Membership in this credit union is open to members of Friends of US Military Families ($5). Credit Human has a 59-month CD with a 4.65% APR. The 48-month CD has a 4.65% APR, the 35-month CD has a 4.75% APR, the 23-month CD has a 5.10% APR, and the 1-year CD has a 4.95% APR. Minimum $500. The early withdrawal penalty (EWP) for CDs with maturities of 36 months or more is 365 days of interest. For CDs with maturities of 1 year, the EWP is 270 days of interest. This is actually a credit union, but it is a national member of the Consumer Council of America (ACC). Try promo code “consumer” when signing up with ACC for free membership. First Internet Bank has a 5-year CD with an annual interest rate of 4.50%. The 4-year CD is 4.45%, the 3-year CD is 4.61%, the 2-year CD is 4.76%, and the 1-year CD is 5.26%. Minimum $1,000. The early withdrawal penalty (EWP) for CDs with maturities of 2 years or more is 360 days of interest. For CDs with a maturity of 1 year, the EWP is 180 days of interest. BMO Alto has a 5-year CD with an APR of 4.80%. 4-year CDs have an APR of 4.70%, 3-year CDs have an APR of 4.60%, 2-year CDs have an APR of 4.65%, and 1-year CDs have an APR of 5.05%. There is no minimum. For CDs with a maturity of 1 year or more, the Early Withdrawal Fee (EWP) is 180 days of interest. For CDs with a maturity of 11 months or less, the EWP is 90 days of interest. Please note that they reserve the right to prohibit early withdrawals entirely(!). An online-only subsidiary of BMO Bank. You can purchase fixed-term deposits through Vanguard and Fidelity's bond desks. You may need an account to see the interest rates. These “brokered CDs” offer FDIC insurance and easy laddering, but don't come with predictable early withdrawal fees. Currently, five-year non-callable CDs are listed at 4.45% annual interest (callable: no, call protection: yes). Be aware, however, that both Vanguard and Fidelity will soon be listing higher rates for their callable CDs, which means you can call the CD back later if interest rates fall.
Long-term measures
I use these with caution due to the increased interest rate risk (to be honest, I don't use them at all), but I do track them to see where the rest of the yield curve is currently at.
Are you prepared to put your money away for 10 years? You can buy long-term fixed-term deposits at Vanguard or Fidelity's bond desks. These “broker CDs” are FDIC insured, but don't have the early-withdrawal penalties you might expect. You might even find some that offer higher yields than cash or Treasury options at other brokerages. Currently, 10-year CDs are [n/a] (Callable: No, Call Protected: Yes) vs. 4.30% on the 10-year Treasury. Note the higher interest rate on a callable CD, which allows you to call the CD back if interest rates fall.
All rates verified as of 07/09/2024.
Photo by micheile henderson on Unsplash