It may be hard to believe, but some banks are currently advertising rates that come close to or even exceed the 7% benchmark. However, these sky-high rates don’t come without caveats.
Here, we explain the fine print of these offers to help determine whether a 7% interest savings account is too good to be true.
Understanding 7% interest savings accounts
A vital feature of any savings account is its interest rate. This rate, typically advertised as annual percentage yield (APY), determines how much the bank will pay you in interest as a percentage of your account balance.
For example, a savings account with a $1,000 balance that earns interest at a rate of 7.00% APY would receive $70 in interest per year.
While the potential earnings of a 7% interest rate may sound enticing, it’s far from common. Most savings accounts, even high-yield options, pay interest at a much lower rate. However, recent economic changes have led to higher rates than we’ve seen in decades, and some banks may advertise rates near the 7% range.
If you have your sights set on a savings account earning 7% interest, the most important thing to understand is that savings rates fluctuate. Even if a bank advertises a savings account with a rate at or near 7%, this rate will likely change as the market changes.
Banks that offer 7% interest on savings accounts
While no financial institutions currently offer savings accounts with 7% interest, a few accounts that meet similar criteria are available. These include one high-yield checking account with an APY that exceeds 7.00% and several high-yield savings accounts.
Landmark Credit Union Premium Checking (7.50% APY)
The only financial institution account currently advertising interest payments above 7% is available from Landmark Credit Union, a credit union with more than 30 locations in Wisconsin that also offers its services online. The credit union’s Premium Checking account lists potential interest earnings up to 7.50% APY.
To qualify for the maximum rate, account holders must opt into electronic statements and receive at least $250 in direct deposits each month. There’s just one catch: the 7.50% APY only applies to balances up to $500. Balances over $500, meanwhile, earn 0.06% APY.
You also have to qualify for membership to the credit union, meaning you (or a relative) need to live or work in certain counties in Wisconsin or Illinois.
When asked to comment on how Landmark Credit Union can offer such drastically high rates compared to competitors, a spokesperson explained that it all comes down to the difference between credit unions and for-profit banks.
“One key advantage of credit unions is their structure,” said Brian Melter, chief experience officer at Landmark Credit Union. “Unlike online financial institutions, credit unions are member-owned cooperatives, not-for-profit entities that exist to serve their members rather than generate profits for shareholders. This structure allows credit unions to offer products designed with the needs of the members at their focus.”
Digital Credit Union Primary Savings (6.17% APY)
Falling short of a 7% interest rate, Digital Federal Credit Union offers an APY of up to 6.17% on its Primary Savings account. With no monthly fee and a minimum deposit of just $5 to open an account, customers will find relatively few hurdles compared to stricter requirements to earn interest with some competing institutions.
Unfortunately, the 6.17% APY only applies to Primary Savings balances up to $1,000. Balances that exceed this limit earn interest at a much lower rate of 0.15%.
If you don’t live or work somewhere that makes you eligible for membership, you can qualify by becoming a member of one of many participating organizations for as little as $10.
Popular Direct High-Yield Savings (5.20% APY)
Popular Direct offers one of the best high-yield savings rates at 5.20% APY. Aside from a minimum opening deposit of $100, the account has relatively few limits or drawbacks. There is no monthly fee, and the maximum advertised APY applies to all balances with no limit.
However, the account must remain open for at least 180 days to avoid an early account closing fee of $25.
TAB Bank High Yield Savings (5.27% APY)
Another great high-yield savings option with an industry-leading rate, TAB Bank offers customers a generous 5.27% APY. The account has virtually no barriers; there’s no monthly fee, no minimum deposit to open and no limit to the balance eligible for maximum interest earnings.
Opening a 7% interest savings account
No matter what interest rate your chosen savings account earns, the process to open the account will be the same.
Research rates: Compare the best savings rates currently available to find the best returns.
Look at limits and fees: Many savings accounts with advertised rates near 7% impose a limit on the balance eligible for the maximum APY, only to pay interest at a much lower rate on balances that exceed this limit. Hidden account fees can quickly eat away at any interest earnings.
Choosing an account that pays a slightly lower APY on your entire balance might be more advantageous than a high APY on just a tiny portion.
Apply for an account: Depending on the institution, you’ll either be able to open an account online or in person. You’ll need to provide personal information, including your social security number and current address.
Transfer your funds: Move funds from your existing account by writing a check or making an electronic transfer. Make sure you’re aware of any minimum balance requirements associated with the new account.
Exploring alternatives to 7% interest savings accounts:
High-yield savings accounts
Savings accounts that earn interest in the neighborhood of 7% are considered high-yield savings accounts. These accounts are often found at online banks and smaller credit unions.
Certificates of deposit (CDs)
Certificates of deposit, or CDs, are a type of savings account that earn a fixed interest rate for a specific period of time. CD rates fluctuate with the economy and may offer better returns than other savings options.
If you don’t need immediate access to the funds you intend to put in a high-yield savings account, you may want to compare CD rates to see which offers a better return.
Money market accounts (MMAs)
Money market accounts are another great option for maximizing interest earnings on your savings. These accounts function similarly to high-yield savings accounts but may have higher minimum balances or other requirements. Current money market rates are comparable to top high-yield savings rates.
Frequently asked questions (FAQs)
Landmark Credit Union is currently offering interest rates above 7%. However, this rate is only available for checking balances up to $500.
While 7% interest rates aren’t currently available for any savings accounts we could find, many high-yield options offer impressive APYs, some exceeding 5.00%.
CDs may pay higher rates than standard savings accounts but are somewhat limiting because funds cannot be withdrawn until the CD matures at the end of its term. CD terms can range anywhere from a few months to several years.
Money market accounts tend to have higher minimum balance requirements than standard savings accounts. Money market accounts may also have additional fees and features, such as excess transaction fees and the ability to write checks from the account.
