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How to get the maximum variable rate on your savings for balances higher than $250,000
A higher deposit qualifies you for better interest rates — but it also means higher risks.
Depositing $250,000 or more in a single CD or savings account can help you qualify for the best interest rates and terms, but you could also pay higher penalties for withdrawing from a CD early or lose some of your money if the bank fails.
Compare savings accounts for balances of $250,000+
How do these accounts work?
Competitive savings accounts and certificates of deposit, or CDs, often use tiered interest rates — the higher your balance, the higher your rate. Setting aside $250,000 or more in a single account can help you qualify for the highest interest rate.
How do I compare accounts?
When choosing an account to park your savings, look at:
- Interest rate. For deposits over $250,000, even a fraction of a percentage can add up to a big difference.
- Interest calculation and payment. The more often interest compounds, the more money you’ll earn. You can grow your interest exponentially if you find an account that calculates daily and pays monthly into the same account.
- Account type. A CD will likely provide the best interest rate, but it will also restrict your access to your savings. If you need access to your money in an emergency, a savings account is a better fit.
- Fees. Read the fine print to ensure that no monthly fees will be charged towards your balance.
- Penalties. If you’re opening a CD, check what penalties you’ll need to pay if you withdraw your money early. And if you’re opening a savings account, check if there’s a penalty for making too many withdrawals or letting your account dip below a specified minimum.
What are the pros and cons to these account types?
Pros
- Interest earned. With an account where the maximum rate applies over $250,000, you have the opportunity to increase your wealth just for saving your investment money.
- Flexibility. If you choose a CD, you’ll have the flexibility to choose a term length you’re comfortable with. And with a savings account, you can access your money whenever you need to.
- Low risk. Unlike investments in stocks, bonds or even real estate, savings accounts and CDs provide a low-risk way to grow your money.
Cons
- Security. Any amount over $250,000 is not insured by the FDIC.
- Low reward. While avoiding high-risk investments keeps your money safer, it also doesn’t let your money grow at the same rate. Successful investments in stocks, bonds or real estate have a higher potential for returns.
What are the risks?
Keeping over $250,000 in one account comes with risks, including:
- Picking CD terms that are too short or long. Choosing a shorter term means you won’t be able to take advantage of the most competitive interest rates, but you’ll face penalty fines if you choose a longer term and need to withdraw your funds early.
- Not insured by the FDIC. Any amount over $250,000 isn’t insured by the FDIC, which means you could lose money if the bank fails.
- Account maximums. CD accounts often have maximum deposits, which means that you’ll need to check if it’s possible to open an account with $250,000 or more.
Bottom line
Putting $250,000 or more into a single account lets you take advantage of the highest interest rates — but it also limits which accounts you’re eligible for and could put some of your money at risk if the bank fails.
It also means that even small differences in interest rates and account terms can have a huge impact on how much you earn, so take the time to compare savings accounts and CDs before choosing.
FAQs
How will I be obligated to pay taxes on the interest earned?
Interest income is calculated as a part of your income on your tax forms. Read our guide on savings account taxes to learn more about how much you’ll need to pay.
How to pay taxes on CD interest
How safe is a savings account to store my retirement money?
Savings accounts are a safe way to store up to $250,000 of your retirement money. Deposits over $250,000 are considered slightly higher risk because they’re no longer insured by the FDIC.
Is my money over $250,000 insured by the FDIC if I put it in a different account?
Yes, but only if that account’s at a different bank or is in a different ownership category. For example, a single account and a certain retirement account are considered different ownership categories by the FDIC, so you’d be insured up to $250,000 for each account.
Picture: Shutterstock
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