7 ways to earn more interest

These differing account types can help earn more while risking less
An undated image of $100 notes. — iStock/file
An undated image of $100 notes. — iStock/file

Money doesn’t have to be pooled into risky investments to be earned from, in fact, with the right kind of financial literacy, a lump sum of interest can be generated.

Opening a high-yield savings account or seizing a bank bonus to open a certificate of deposit (CD) are tried and tested ways of increasing yields.

Here are a few other, less risky alternatives to consider,

1. High-yield savings account

Instead of settling for a traditional savings account where returns measure around 0.3 %, high-yield savings accounts should be considered, they offer far better returns of up to 2% or more. The higher the annual percentage yield (APY), the greater the compounding interest.

Often, local banks or credit unions offer high-yielding savings accounts with higher APYs.

2. Money Market Account

Money Market Accounts (MMAs), are a hybrid account type, combing the features of both a savings and checking account, consequently featuring the benefits of both.

Customers get higher yields along with checking-writing privileges, besides a debit card for withdrawals. Such an arrangement is ideal for short-term financial planning, although, the yields may be steeper, the interest rate is subject to change based on market forces. However, in high-yield season, returns can go as high as 3%.

3. Certificate of deposit

A CD locks the initial deposit for a predetermined time whilst offering a fixed rate of return. The period could range between six months to five years, during which the initial deposit is inaccessible in exchange for a healthy rate of return, usually 3% to 4%. The longer the duration, the higher the yield.

4. CD ladder

Using a CD ladder strategy is a way of reaping the benefits of a traditional CD whilst avoiding lost access.

This entails distributing the deposit among differing credit deposit accounts, that too, along with differing terms. Essentially, distributing the deposit into different accounts for a shorter duration while depositing the rest into a long-term account. In this order, all deposits would earn returns, yet not all would be inaccessible.

Deposits will continue becoming accessible while leading to a greater return.

5. Finding a bank bonus

Maintaining several accounts in different banks can also offer a healthy bonus. There is no reason multiple accounts cannot be maintained, especially in light of multiple financial goals.

Many banks offer bonuses to new customers as part of an incentivising campaign. However, policies may differ in regards to pre-scheduled conditions, etc.

6. Rewards checking account

A reward checking account provides depositors with a bonus when opening an account. This could be a cash bonus or a higher APY, granted all requirements have been met.

7. Investing in I-bonds

I-bonds are suited best for long-term planning, they offer fixed interest and inflation rates. Right now, Series I Saving bonds are earning 9.62% interest.

Purchases can be made for as little as $25 or as high as $10,000. Bonds can be maintained for 30 years, they can be cashed out within a year though in that case, three months' worth of earnings would be deducted if under five years. Rates change twice a year starting in May and November.

Determining what is right

Deciding what suits you best is a matter of contemplating but ultimately it comes down to the following:

  • Cash on hand
  • Access to funds
  • Objectives