About $4 trillion in wealth is currently idling in U.S. money market accounts earning an average of 0.33%. Such puny rates are encouraging some intrepid souls, reassured by the FDIC’s deposit insurance of up to $250,000 per account, to venture into higher-yield savings and checking accounts. But these deals come with strings attached and a variety of risks. You may find yourself banking with institutions that are less than rock-solid, with teaser rates that drop almost immediately, or with rigid qualifications that void the rate if you don’t measure up.
That said, the math is hard to resist. On a $25,000 deposit, raising the interest rate 2 percentage points yields an additional $500 a year. “If you’re going to work hard to squirrel away money for a rainy day, do yourself a favor and make sure you’re getting a competitive return,” says Bankrate.com (RATE) analyst Greg McBride.
Some of the best deals are available only on a limited basis. With some community banks, you have to walk into the branch to open an account. And credit unions may require that you live in a certain state or work for a particular company.
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